Grounds
Termination must be with just cause. Termination by the employer is usually on the grounds of misconduct, poor performance, redundancy, or closure of business.
Employees subject to termination laws
All employees (including probationers) are protected from unfair dismissal or unfair termination of employment.
Restricted or prohibited terminations
There are specific prohibitions restricting termination of an employee by reason of his joining a trade union, or a female employee while she is on maternity leave.
Third-party approval for termination/termination
No approval required, unless provided for in a collective agreement.
Mass layoff rules
When implementing a retrenchment exercise, employers are encouraged (but not required) to abide by the guidelines in the Code of Conduct for Industrial Harmony ("Code"). Note that there is no headcount threshold and these guidelines apply even if the retrenchment exercise involves only one employee. The employer must also inform the nearest Department of Labor at least 1 month before the retrenchment takes place. Employers must apply fair and objective selection criteria, and are generally required to abide by the "Last In, First Out" (LIFO) principle (departure from LIFO is acceptable, provided the employer can show that an alternative, fair and objective selection criteria was used instead) and any objective selection criteria set out in any collective agreement.
Notice
In the absence of contractual termination notice provisions, the EA provides that employees are entitled to the following minimum notice periods:
- 4 weeks' notice if the employee has been so employed for less than 2 years on the date on which the notice is given
- 6 weeks' notice if the employee has been so employed for 2 years or more, but less than 5 years on such date
- 8 weeks' notice if the employee has been so employed for 5 years or more on such date
In very limited circumstances, an employer may be entitled to summarily dismiss an employee, where it can be shown that the employee is guilty of a serious misconduct which is so serious that it renders the continuation of the employment relationship impossible. The burden of proving that the misconduct was serious enough to warrant summary dismissal lies with the employer.
Statutory right to pay in lieu of notice or garden leave
The EA provides for termination without notice with the making of a payment in lieu of notice. There is no statutory provision for garden leave.
Severance
An employee earning up to RM4,000/month who has been employed for 12 months or more is entitled to the following minimum severance payments pursuant to the Employment (Termination and Lay-Off Benefits) Regulations 1980:
- 10 days' wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for a period of less than 2 years
- 15 days' wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for 2 years or more but less than 5 years
- 20 days' wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for 5 years or more, and pro-rata in respect of an incomplete year, calculated to the nearest month
For employees earning more than RM4,000/month, the entitlement to severance payments depends on the employment contract.
