What Happens If an Employee Is Unfairly Dismissed in Malaysia? (2026): Industrial Court Claim, Reinstatement and Backwages

An employee who believes they have been unfairly dismissed can file a written representation under Section 20 of the Industrial Relations Act 1967, but only if they do so within 60 days of termination. Miss that window and the claim is barred — no matter how strong the case. The Industrial Court then decides whether the dismissal was with just cause or excuse.

The legal framework: Section 20 and who it covers

Section 20 of the Industrial Relations Act 1967 is the primary route for contesting unfair dismissal in Malaysia. The distinction between the two main statutes is important: the Employment Act 1955 governs basic employment terms (wages, leave, notice periods), while the Industrial Relations Act 1967 governs dismissal disputes and the Industrial Court's jurisdiction.

Any workman (as defined in the Industrial Relations Act) who is dismissed without just cause or excuse may refer the dispute to the Director General of Industrial Relations. Managers and executive-level employees earning above the defined threshold have historically faced jurisdictional challenges, though amendments to the Industrial Relations Act that took effect in January 2021 expanded access to the Industrial Court for most employees regardless of salary bracket.

Constructive dismissal — where an employer's conduct forces an employee to resign — is treated as dismissal for the purpose of Section 20 claims. The employee must show that the employer committed a significant breach going to the root of the contract, and that they resigned in response to that breach rather than for an unrelated reason.

The 60-day clock

Sixty days. That is the single most important number for any dismissed employee in Malaysia. The representation must be submitted to the nearest Industrial Relations Department (Jabatan Perhubungan Perusahaan) within 60 days of the last day of employment. Courts have consistently refused to extend this period save in exceptional circumstances, and such exceptions are rare.

If a domestic inquiry precedes the dismissal — which it typically should for misconduct cases — the 60 days runs from the date on which the employee is formally notified of termination, not from the date of the inquiry. Employees who receive a termination letter should treat that date as day one.

The claim is filed using Form A (Borang A) at the Industrial Relations Department. No filing fee is required. After submission, a conciliation session is scheduled between both parties. If conciliation fails, the Director General refers the matter to the Industrial Court.

What the Industrial Court examines

The Industrial Court applies a two-step test: first, whether there was a dismissal (or deemed dismissal), and second, whether the employer had just cause or excuse for it. The burden of proving just cause or excuse rests with the employer.

"Just cause or excuse" is not codified with a rigid definition. The Court looks at whether the employer conducted a fair domestic inquiry before terminating for misconduct, whether the punishment is proportionate to the proven misconduct, and whether there is sufficient evidence to support the ground relied upon. Procedural fairness matters: an employer who skips a domestic inquiry or fails to give the employee an opportunity to respond to allegations faces a harder task in court even if the substantive reason for dismissal was sound.

For retrenchment cases, the employer must show that the redundancy was genuine — a real reduction in the workforce driven by economic or operational reasons — and that proper selection criteria and statutory retrenchment benefits under the Employment (Termination and Lay-Off Benefits) Regulations 1980 were applied.

Award types: what the court can order

The Industrial Court has two primary remedies at its disposal: reinstatement and backwages. It may also award compensation in lieu of reinstatement where reinstatement is not practicable.

Reinstatement means the employee is restored to their former position, or to an equivalent one, without loss of seniority or benefits. The Court may order reinstatement where the employment relationship has not irreparably broken down. In practice, many claimants prefer — or are awarded — compensation in lieu, because returning to a workplace where relations have soured rarely works well for either party.

Backwages are wages the employee would have earned from the date of dismissal to the date of the award. The Industrial Court's established practice is to cap backwages at 24 months of the last-drawn salary. The actual quantum depends on factors including any contributory conduct by the employee, how long the proceedings took, and whether the employee mitigated their loss by finding alternative employment.

Compensation in lieu of reinstatement is calculated separately from backwages and is typically assessed at one month's salary for each year of completed service, though the Court retains discretion to adjust upward or downward.

So in a straightforward case where a monthly-rated employee earned RM 4,000, was dismissed after five years of service, and won the full award, the Industrial Court might order:

• Backwages: RM 4,000 × 24 months = RM 96,000
• Compensation in lieu: RM 4,000 × 5 years = RM 20,000
• Total: RM 116,000

That is a rough illustration only. Awards vary considerably. Where the employee contributed to the situation — for example, by engaging in minor misconduct even if the dismissal itself was disproportionate — the Court may reduce backwages by 20–50%.

Timeline from filing to award

From filing the Form A to receiving an Industrial Court award, the process typically runs 18 to 36 months, though the Industrial Court has been working to reduce backlogs since the 2021 amendments streamlined some procedural stages. The stages run roughly as follows:

1. Submission of Form A to Industrial Relations Department (within 60 days of dismissal).
2. Conciliation session(s) — usually one or two sessions held within the first few months.
3. If unresolved, referral by the Director General to the Industrial Court.
4. Filing of claimant's and respondent's statements of case.
5. Hearing — witnesses, documentary evidence, cross-examination.
6. Written award issued by the Industrial Court chairman.

There is a right of judicial review to the High Court on questions of law, which can extend proceedings further, but judicial review does not re-examine findings of fact made by the Industrial Court.

Practical steps for employees

An employee who suspects they have been unfairly dismissed should act on several fronts simultaneously.

Gather documentation early: the employment contract, offer letter, payslips, any show-cause letters or domestic inquiry notices received, and all correspondence with HR. Written warnings and performance appraisals — whether favourable or not — are all relevant. An employer who produces a domestic inquiry record in court that the employee never received is committing an evidentiary risk; having your own copies is protective.

Consider representation. Employees may represent themselves before the Industrial Court or be represented by a trade union (if they belong to one) or by a lawyer. The Rules of the Industrial Court 1967 permit legal representation on both sides, and in cases involving senior employees or complex facts, legal counsel is worth the cost.

Check the limitation period above anything else. Fifty-nine days after dismissal is still within time. Day 61 is not.

When the employer holds the show-cause letter

A domestic inquiry is not a criminal trial. The standard of proof is not "beyond reasonable doubt" but the balance of probabilities. Employees who receive a show-cause letter before a domestic inquiry should respond in writing, specifically and factually — a vague or emotional response rarely helps. The show-cause response and the domestic inquiry record will both be produced before the Industrial Court and examined closely.

Where an employer terminated without any domestic inquiry at all — particularly for misconduct — the Court views this as a procedural failure. It does not automatically mean the employee wins, but it shifts the burden considerably. Some Industrial Court decisions have found that dismissal without a domestic inquiry, even where the misconduct was eventually proven, justifies reduced backwages or a substituted penalty.

Key statutes to know

The three statutes most directly relevant to unfair dismissal in Malaysia are the Industrial Relations Act 1967, the Employment Act 1955, and the Employment (Termination and Lay-Off Benefits) Regulations 1980. The Code of Conduct for Industrial Harmony 1975, though not legally binding, is regularly cited by the Industrial Court as a benchmark for procedural fairness.

Forms-legal.com maintains a library of Malaysian employment templates — from termination letters to show-cause and domestic inquiry documents — that reflect current Malaysian HR practice and can be adapted for your specific situation.

The Industrial Court's jurisdiction, the 60-day filing rule, and the backwages cap of 24 months are not recent innovations; they have been part of Malaysian industrial law for decades. What changed in 2021 was the removal of the salary threshold that had historically excluded higher-earning employees from the Industrial Court's jurisdiction — a reform that significantly expanded access to redress for workers who previously had only the civil courts as an alternative.