GUIDELINE PERTAINING TO LEGAL / HUMAN RESOURCE PRINCIPLES AND PROCEDURES TO BE ENGAGED IN RELATION TO CONTEMPLATED TERMINATION OF EMPLOYMENT OF AN EMPLOYEE ON THE GROUNDS OF MEDICAL UNFITNESS FOR CONTINUED ENGAGEMENT IN EMPLOYMENT
A) INTRODUCTORY REMARKS
The aim of this guideline is to create awareness in the Human Resource Department of a company / corporation operating in Malaysia about the principles and procedures pertaining to Malaysian labour laws as well as industrial relations matters and the impact of these policies upon proposed / contemplated actions instituted by the Company against its employees.
It is hoped that this guideline will assist to allay the concerns of the Human Resource Department of such companies / corporations when acting on behalf of / in the best interest of such entities in these matters.
B) DISCLAIMER
This is merely a guideline and should be approached / treated as such wherein the application of the principles conveyed should be in a discretionary manner based upon the unique scenario presented by each case / situation.
This guideline should not be treated / deemed to be all encompassing or as a standard rule to be applicable in each and every scenario.
C) SOME BRIEF / GENERAL COMMENTS
The manner in which to handle employee matters would very much depend upon the type of contract of employment under which the employee is employed i.e. whether the employee falls within the definition and protection of the Employment Act or the terms of his or her contract of employment.
However, even where the terms of the contract of employment are solely concerned, nevertheless, some of the principles under the Employment Act may still apply where the terms of the contract of employment is ambiguous. Some of the notable provisions under the Employment Act which would apply as a general rule are the provisions pertaining to entitlement to hospitalization benefits, deduction of wages and unfitness for employment etc..
D) RATIONALE FOR PRINCIPLES UNDER THE MALAYSIAN EMPLOYMENT ACT 1955
It may be speculated that the rationale for some of the principles under the Malaysian Employment Act 1955 applying to contracts of employment not within the governance of the Act is for the application of basic principles / tenets of natural justice. The scope or extent of which these principles would apply to other contracts of employment is unclear.
E) PRECAUTIONARY CAUTION
To be safe / as a defence against any legal action / suits initiated by employees / former employees aggrieved by the conduct of the Company, it would be advisable at all times for the Company to act in a manner which is reasonable, fair and equitable to employees.
F) SITUATION WHERE AN EMPLOYEE IS EXHIBITING SYMPTOMS OF MEDICAL UNFITNESS TO CONTINUE EMPLOYMENT
Where an employee is observed to be frequently on medical leave, the Company may seek verification of the condition from the doctor.
In the event of a situation where all entitlements to medical leave as well as hospitalization benefits have been exhausted, the Company may consider / review the status of employment of the employee. If the Company decides that it would no longer be in its interests to continue to engage the employee due to issues pertaining to medical unfitness, it may consider / explore a voluntary separation with a nominal severance benefit (if this is desired / contemplated). Prior to doing this, it would be prudent for the Company to cover the cost of a thorough medical check-up for the employee. For cost effectiveness, a specialist need not necessarily be engaged. A general practitioner may be consulted, however, he or she would need to have expertise in treating the particular illness or symptoms peculiar to the employee. The findings / report by the doctor suggesting medical unfitness for continued employment may be used to support the case in defence of the employee's allegations.
G) DEFAULT IN WORK DUTIES OF EMPLOYEE AS A RESULT OF MEDICAL UNFITNESS
Where the absence of an employee at work is cited to be as a result of medical unfitness resulting in default in work duties consequently affecting the work processes / workflow in his / her department, it would be advisable to send internal communications via e-mail between the Human Resource Department and the Department Head / Superior of the employee, discussing the impact of the default upon the employee's department / the Company. This should be retained in the file of the employee / Human Resource records as evidence of the conduct of the employee / impact upon the Company in any contemplated future disciplinary action affecting the employment of the employee.
H) NOTE OF CAUTION WITH REGARDS TO TERMINATION OF AN EMPLOYEE'S SERVICES WITH THE COMPANY
The matter with regards to termination of an employee's services with the Company is a sensitive matter and if not tackled cautiously, may result in detrimental consequences ensuing to the Company. Regardless of whether an employee is engaged in employment with the Company on the basis of contract for a stipulated period or on a permanent basis, the matter pertaining to termination of employment must be tackled cautiously as under the laws of Malaysia, the matter pertaining to termination of employment is treated very seriously. It would be advisable that the Company refrain from attempting to entrap an employee to justify termination of his or her service of employment with the Company. Examples of such conduct tantamounting to entrapment would be for example, deliberately finding fault with the employee; unreasonable accusations of negative conduct unsupported by proof or evidence; coercing admission to negative conduct or acts; unsupported accusations of criminal conduct etc.. It is advisable that an employee not be dismissed based upon trivial / insignificant violations of Company rules.
I) PROCEDURES WHICH MAY BE ENGAGED IN THE CONTEMPLATED TERMINATION OF AN EMPLOYEE ON THE BASIS OF CITED MEDICAL UNFITNESS TO CONTINUE WORK / DUTIES IN THE EMPLOYMENT OF THE COMPANY
In a scenario where an employee has been admitted to hospital for surgery for a cited medical condition / illness wherein the period of hospitalization as accorded under the Employment Act 1955 is fully utilized and thereafter, medical leave is also fully utilized during the period of recuperation at home, the Company may desire to consider termination of the services of the employee. This is especially in a situation where full recovery from the illness / treatment of the illness is undetermined and may be very long.
In such a scenario, the Company may take steps / action in contemplation of terminating the services of such an employee. These steps would be, for example, the following:
1) If the employee is recuperating at home after surgery and has not reported for work since, where all entitlement to medical leave under the labour laws of Malaysia have been fully utilized, the Company, curious to ascertain the actual physical health condition of the employee, may decide to instruct Human Resource personnel or the superior of the employee to visit the employee at home and thereafter inform the Company of his or her physical observation of the employee. It should be noted however, in a situation where medical leave entitlement has not been fully utilized, the doctor's certification that the employee is unfit for work may not be challenged easily;
2) The Company may instruct the employee to attend a complete medical screening test (costs to be borne by the Company) with specific emphasis on the ailment complained of to ascertain if the employee will be fit for duty / if the illness may recur etc.. In a situation where termination of employment based upon an employee's cited unfitness for continued work is concerned, it would seem mandatory for the Company to initiate this action to safeguard its justification / reasons for terminating the services of the concerned employee;
3) It would seem to be imperative for the Company to prepare an Internal Report, with full details incorporated on the chronology or sequence of events concerning the employee, leading up to the Company's decision to terminate and the said report must justify the actions of the Company in doing so. The report must be legalistic in nature, neutral and reflecting all the facts with supporting evidences attached as documentary evidence;
4) The Internal Report may contain the following headings / contents in chronological order:
a) Title of Report:
For example: Evaluation of Employment Position / Status of............Deemed To Be Medically Unfit / Incapacitated And Hence Unable To Continue Work. (Report to be prepared as a ‘Private & Confidential' document).
b) Chronology of Events:
Remarks: In this section, the events commencing from the first incident of absence from work as a result of hospitalization / medical leave etc. is to be stated in chronological/ sequential order. This is solely with reference to the particular incident / incidents wherein the Company is contemplating a termination of employment of the services of the employee.
c) Previous Medical Record / History:
Remarks: In this section, the previous medical record / history of the employee with the Company may be included for example, the frequency of medical leave utilized; the type of illness complained of; the clinics visited etc.. The Company may also check the declaration by the employee in the ‘Employment Form' pertaining to inherent diseases, illnesses. This statement may be checked in light of the recent illness to ascertain if the employee had been truthful in stating facts in the ‘Employment Form'.
d) General Conduct of the Employee:
Remarks: In this section, the overall conduct of the employee as personnel in the Company may be assessed to be either satisfactory or dissatisfactory. Factors which may be taken into account in assessing the same are the opinion of colleagues, superiors, personnel in the Human Resource department etc.. It is imperative that fair and unprejudiced comment must be made.
e) Competency and Performance of the Employee:
Remarks: In this section, an assessment may be made of the overall competency and performance of the employee in his or her job in ascertaining his or her utility to the Company in contemplating continued employment or dismissal. This effort would evidence fair assessment of the employee in arriving at a decision.
f) Medical Report / Medical Assessment of Employee by Medical Specialist:
Remarks: In this section, the Medical Report / Medical Assessment of the employee by a Medical Specialist is crucial in establishing incapacity / unfitness in health for continued work / the propensity / likelihood of symptoms of illness recurring in future rendering the employee to be in a state of uncertainty as to whether there will be continued absence from work and hence the issue to be determined as to whether continued employment would be fair to / in the best interest of the Company.
g) The Crucial Nature / Importance / Significance of the Role of the Employee in His / Her Department in the Company:
Remarks: In this section, it would be imperative to determine / establish the significant nature or otherwise of the role of the employee in his or her department in the Company. The issues that warrant to be addressed are such as: whether the role of the employee in his or her department is vital / integral to its functions as for example, a Division Head's role or even if the employee is a subordinate in the Department, the importance of the function to the operation of the unit must be ascertained; whether even a short period of absence from work would greatly impact the operations of the unit thereby necessitating employment of temporary personnel etc.; whether the employee possessed ‘special expertise' in his function that would be difficult to substitute or replace etc..
h) Detriment / Loss to the Company If Continued Employment of an Incapacitated Employee Continues:
Remarks: This is an important consideration for the Company to take into account as it would naturally impact upon the business / productivity of the Company and continued absence of an employee from work would also entail economic loss to the Company wherein the benefits due to the employee would need to be borne by the Company in accordance with the contract of employment / labour laws of the country and yet, the absence of the employee from work results in a loss of productivity, costs of hiring temporary replacement workers etc., strain upon the efficiency of other colleagues / co-workers in the department of the employee which may impact the Company substantially in various aspects.
i) Efforts Expended / Attempts Made by the Company To Inform The Employee Of The Fact that His / Her Employment may be in Jeopardy if Absence from Work Continues for an Undetermined Period of Time and Proof of The Same:
Remarks: This is an important course of action that the Company must evidence / prove that it has done so as not to ‘surprise' the employee with the prospect of sudden termination of employment. Hence, the employee must be aware that his employment would be in jeopardy in the event of his continued and undetermined absence from work. It would be advisable to send a registered letter to the residence of the employee as proof of receipt of the letter by the employee may be obtained.
The letter may be worded in the following manner:
‘(Name of Employee)
The Company makes reference to the fact that under the laws of Malaysia, more specifically the provisions under the Employment Act 1955, you are deemed to have exhausted or fully utilized your medical leave and hospitalization benefits / entitlements by virtue of your Contract of Employment with the Company dated.....This is in relation to...............
In view of the same and in accordance with the rights of the Company under the laws of Malaysia governing employment, the Company may at its discretion review the status of your employment and make a decision which it deems to be fair and in the interests of both parties based upon the circumstances which have transpired.
In exercising the said discretion, the Company advises you that the Company expresses empathy in relation to your current state of health and hence, the Company has been fair thus far in allowing you benefits due under your contract of employment / the labour laws of Malaysia. However, the Company trusts that you understand and fully appreciate the fact that your continued absence from work for an undetermined period of time would place the Company in an undesirable situation as it would impact the productivity of your division of work as well as place undue strain upon your co-workers who would have to assume responsibility for your tasks in your absence. There are also economic factors which the Company would need to take consideration of such as the costs of engaging replacement labour, temporary hires, the time utilized to teach or train such temporary personnel etc. which would amount to a wastage of resources for the Company.
Hence, trust that the Company has reasonably and fairly conveyed to you its position during your absence from work as a result of your incapacitated state. The Company wishes you a speedy recovery / convalescence and the Company expects you to revert on the condition of your health and your availability to resume work as usual at the soonest time possible.'
j) Declaration by the Company of Fair Assessment In Relation to Assessment of Status of Employment of Employee:
Remarks: This declaration is important as evidencing the fact that a fair assessment of the status of the employee had been done by the Company prior to arriving at its decision / justifying its decision. In conducting the balancing act between the interests of the employee and Company, the Company may take into consideration the period of service of the employee and any special contribution in work / expertise etc..
k) Decision of the Company to Terminate the Services of the Employee:
Remarks: In the event that after a fair assessment based upon the criteria stated above, the Company decides to terminate the services of an employee on the grounds of unfitness in health / incapacity to continue employment with the Company, a letter containing wordings to this effect / similarly may be sent to the employee:
‘(Name of Employee)
The Company makes reference to the fact that under the laws of Malaysia, more specifically the provisions under the Employment Act 1955, you are deemed to have exhausted or fully utilized your medical leave and hospitalization benefits / entitlements by virtue of your Contract of Employment with the Company dated.....This is in relation to...............
In view of the same and in accordance with the rights of the Company under the laws of Malaysia governing employment, the Company may at its discretion review the status of your employment and make a decision which it deems to be fair and in the interests of both parties based upon the circumstances which have transpired.
The Company makes reference to a letter dated......sent to your goodself (which you have acknowledged receipt of) informing you of review of your status of employment with the Company in view of your prolonged absence from work as a result of your incapacitated health condition. In the stated letter, you have been put on notice of the intention of the Company to review your status of employment. [The Company has not received any reply from you to date on the date on which you are able to confirm resuming your usual duties upon return to work].
The Company has conducted an assessment of your status of employment with the Company in view of your recent / prolonged incapacitated state of health and in exercising its discretion fairly and reasonably, taking into account all relevant circumstances and considerations, the Company has decided to terminate your employment with effect from.......by giving......days notice as stipulated under Clause......of your Contract of Employment which based upon a mutual and amicable understanding with your goodself, the Company would treat the said termination as a voluntary separation agreement [with no associated benefits due and owing] on the grounds that your contract of employment has been frustrated as a result of your incapacitated state of health.'
J) RECOMMENDED CLAUSE TO BE INSERTED IN FUTURE CONTRACTS OF EMPLOYMENT IN RELATION TO THE ISSUE OF PROLONGED ABSENCE FROM WORK / INCAPACITATION OR MEDICAL UNFITNESS TO CONTINUE WORK
Sample / Suggestion:
PROLONGED ABSENCE FROM WORK / INCAPACITATION OR MEDICAL UNFITNESS TO CONTINUE WORK
In accordance with the terms of the Contract of Employment in good faith as well as the spirit and mutual agreement / intention of the parties and in adherence to the principles and provisions of the labour laws of Malaysia, the Company reserves the discretion which it is deemed to exercise fairly and reasonably, to terminate the Contract of Employment in the event that there is prolonged absence from work on the part of the employee which amongst other factors, may be as a result of incapacitation or medical unfitness to continue work.
K) SALIENT APPLICABLE PRINCIPLES WHICH MAY BE USED AS A GUIDE WITH REGARDS TO MATTERS PERTAINING TO DISMISSAL FROM EMPLOYMENT ON THE GROUNDS OF INCAPACITY (RETRIEVED SOURCE: GOVERNMENT OF NEW ZEALAND: MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT)
a) The exact nature of the legal requirements in this area varies with the facts and circumstances of each case and "no hard and fast rules can be laid down";
b) It is a well entrenched principle that an employer is not bound to hold an employee's position open indefinitely if the employee is unable to carry out his or her duties as a result of illness, injury or other incapacity. A classic statement of the law is that "there can come a point at which an employer can fairly cry halt". However, if an employer does decide to dismiss for incapacity, that can be challenged through the personal grievance procedure laid down by the local law and procedure of Malaysia. Hence, there is an incumbent need for the employer to be able to justify such a dismissal both substantively as well as procedurally;
c) The test which is often applied by the courts is to ascertain whether the decision to dismiss was one which a fair and reasonable employer could come as at the time when it became effective. The test establishes the fact that it is for the employer to make the decision about how long it can reasonably sustain an employee's absence and at what point dismissal becomes necessary;
d) The employer is required to carry out a fair inquiry and then to make its decision about whether to dismiss the employee "balancing fairness to the employee and the reasonable dictates of its practical business requirements." In one particular case, the business interests component of that balancing act had been rephrased to be interpreted as whether the employer was "reasonably entitled to a belief that as a result of the employee's illness, the employee could no longer be retained as an economic unit. The Industrial Relations court may be inclined to view the balancing act between the employee's interests and the employer's business requirements as analogous to the considerations that may apply in the redundancy context;
e) In the case of Marshall v. Harland & Wolff [1972] 2 All ER 715, decided by the National Industrial Relations Court in England, the decision had set out a number of factors to consider when deciding whether an employment relationship had been dissolved by operation of the doctrine of frustration. It is clear that termination of employment through the operation of that doctrine is quite a different situation from termination of employment at the employer's initiative. The latter situation would require justification whilst the former does not;
f) As is the situation with all personal grievances, an important factor to consider is the terms of the contract which governs the employment relationship. An important consideration would be whether the contract contains any terms which are directly applicable to the situation of the employee's incapacity and one example might be a clause which deems the employment terminated after a certain period of absence due to illness or injury;
g) Under the context of Malaysian law, a common sense approach may suggest that an employee cannot be dismissed for incapacity prior to the exhaustive utilization of his / her sick leave and hospitalization entitlements;
h) Another factor to consider is the length of time that the employment was likely to last in the absence of sickness or injury. It would naturally be easier to justify termination due to incapacity if the employment was inherently temporary in its nature or for the duration of a particular job than if it was expected to be long term;
i) Yet another factor to be taken into account is the nature of the employment and in particular the importance of the position the employee held to the employer's business. Where an employee is one of many in the same type of position it is likely to be harder for an employer to justify dismissal for incapacity than where the employee occupies a key position which must be filled and filled on a permanent basis in the event of prolonged absence. In terms of the "balancing act", the absence of a key employee obviously has a greater effect on an employer's business than the absence of an employee who occupies a less crucial position;
j) A separate factor to consider is the nature of the illness or injury which had rendered the employee unable to perform his or her employment duties and in particular, the length which the illness or injury has continued and the prospects of recovery. The greater the degree of incapacity and the longer the period over which it has persisted and is likely to persist, the more likely it will be to justify dismissal. The importance of this consideration has been stressed by the court in a particular case when it stated that "a good reason to dismiss for incapacity usually consists of a combination of the length of absence to date of the employee and the prospects for the future as to a return to work";
k) The length of the employment prior to the incapacity is another relevant consideration. It may be easier to justify dismissal where the relationship is of long standing. The legal basis is that over a long period of service, the parties must be assumed to have contemplated a longer period or periods of sickness than over a shorter period. The length of time that must pass before a relationship is considered "long standing" may vary according to the nature of the position;
l) The fundamental question remains whether the employer's decision to dismiss was a fair and reasonable decision based upon all the circumstances, balancing the interests of its business with the interests of the employee;
m) Another factor which may need to be considered in certain cases is whether it was reasonable for the employer to impose a date by which the employee was required to return to work or obtain medical clearance to do so;
n) Even if there is substantive justification for a dismissal for incapacity, the dismissal may still be unjustified if the employer has failed to follow a fair procedure in carrying out the dismissal. The common requirements may include: adequate notice of the possibility of dismissal; the opportunity to be represented; a fair and adequate inquiry including appropriate consultation; keeping the employee fully informed of the information held by the employer and so on;
p) Fair process requires the employer to honestly communicate with the employee its intentions and actions at all material times;
q) An employer who wishes to dismiss for incapacity must carry out a fair inquiry before making the decision to dismiss. What is meant by consultation in this context is that the employer made adequate attempts to inquire into and ascertain the facts before dismissing. It is only when the employer is in possession of the full facts including the medical situation that a sensible decision can be made that is fair to both employer and employee;
r) With reference to the need for adequate information, the employer will need to actively seek relevant information, especially if the information already held is stale;
s) With regards to the requirement of input from the employee, legal authority has established that an employer considering dismissal for incapacity needs input from the employee "not in the sense of giving him a hearing as would be required if he was accused of some indiscretion amounting to misconduct but rather in the sense of allowing the Plaintiff an opportunity to throw light on his ability to return to the workplace and to perform his duties." The fundamental reason for obtaining input from the employee in cases of incapacity is to allow them the opportunity to provide information (including but not limited to medical reports) which may avert a conclusion by the employer that dismissal is necessary. Not only must an employer seek input from the employee, it must make it known at the time the information is sought that it may be used for the purpose of a decision to terminate the employment relationship. In an established legal authority, it was noted that the requirement was "to ensure that the employee understands the seriousness of the issue and will have a motive for ensuring that the information is as full and accurate as he or she can make it to be";
t) Ultimately, the employer is required to make a fair decision, balancing its own business interests and the interests of the employee;
u) In another established legal authority it had been expressed that the "cumulative effect of the guidelines laid down in relation to dismissal for incapacity can be described in one phrase, the need for open and honest communication between both parties of their positions and intentions."
L) CONCLUDING REMARKS
It is hoped that the above Guideline and its inherent pointers would serve as useful guidance to Human Resource personnel and the Company in initiating steps and procedures towards the termination of employees on the grounds of incapacitation or medical unfitness to continue service. In view of the serious implications and impact that termination of employment would have upon employees, it is advised that this course of action should preferably be contemplated as a last resort on the grounds of frustration based upon the futility of the predicament faced by both the employee as well as the employer. This discretion should at all times be exercised by the employer based upon prudent principles and consideration, exercising fairness to the employee in the course thereof.
A) INTRODUCTORY REMARKS
The aim of this guideline is to create awareness in the Human Resource Department of a company / corporation operating in Malaysia about the principles and procedures pertaining to Malaysian labour laws as well as industrial relations matters and the impact of these policies upon proposed / contemplated actions instituted by the Company against its employees.
It is hoped that this guideline will assist to allay the concerns of the Human Resource Department of such companies / corporations when acting on behalf of / in the best interest of such entities in these matters.
B) DISCLAIMER
This is merely a guideline and should be approached / treated as such wherein the application of the principles conveyed should be in a discretionary manner based upon the unique scenario presented by each case / situation.
This guideline should not be treated / deemed to be all encompassing or as a standard rule to be applicable in each and every scenario.
C) SOME BRIEF / GENERAL COMMENTS
The manner in which to handle employee matters would very much depend upon the type of contract of employment under which the employee is employed i.e. whether the employee falls within the definition and protection of the Employment Act or the terms of his or her contract of employment.
However, even where the terms of the contract of employment are solely concerned, nevertheless, some of the principles under the Employment Act may still apply where the terms of the contract of employment is ambiguous. Some of the notable provisions under the Employment Act which would apply as a general rule are the provisions pertaining to entitlement to hospitalization benefits, deduction of wages and unfitness for employment etc..
D) RATIONALE FOR PRINCIPLES UNDER THE MALAYSIAN EMPLOYMENT ACT 1955
It may be speculated that the rationale for some of the principles under the Malaysian Employment Act 1955 applying to contracts of employment not within the governance of the Act is for the application of basic principles / tenets of natural justice. The scope or extent of which these principles would apply to other contracts of employment is unclear.
E) PRECAUTIONARY CAUTION
To be safe / as a defence against any legal action / suits initiated by employees / former employees aggrieved by the conduct of the Company, it would be advisable at all times for the Company to act in a manner which is reasonable, fair and equitable to employees.
F) SITUATION WHERE AN EMPLOYEE IS EXHIBITING SYMPTOMS OF MEDICAL UNFITNESS TO CONTINUE EMPLOYMENT
Where an employee is observed to be frequently on medical leave, the Company may seek verification of the condition from the doctor.
In the event of a situation where all entitlements to medical leave as well as hospitalization benefits have been exhausted, the Company may consider / review the status of employment of the employee. If the Company decides that it would no longer be in its interests to continue to engage the employee due to issues pertaining to medical unfitness, it may consider / explore a voluntary separation with a nominal severance benefit (if this is desired / contemplated). Prior to doing this, it would be prudent for the Company to cover the cost of a thorough medical check-up for the employee. For cost effectiveness, a specialist need not necessarily be engaged. A general practitioner may be consulted, however, he or she would need to have expertise in treating the particular illness or symptoms peculiar to the employee. The findings / report by the doctor suggesting medical unfitness for continued employment may be used to support the case in defence of the employee's allegations.
G) DEFAULT IN WORK DUTIES OF EMPLOYEE AS A RESULT OF MEDICAL UNFITNESS
Where the absence of an employee at work is cited to be as a result of medical unfitness resulting in default in work duties consequently affecting the work processes / workflow in his / her department, it would be advisable to send internal communications via e-mail between the Human Resource Department and the Department Head / Superior of the employee, discussing the impact of the default upon the employee's department / the Company. This should be retained in the file of the employee / Human Resource records as evidence of the conduct of the employee / impact upon the Company in any contemplated future disciplinary action affecting the employment of the employee.
H) NOTE OF CAUTION WITH REGARDS TO TERMINATION OF AN EMPLOYEE'S SERVICES WITH THE COMPANY
The matter with regards to termination of an employee's services with the Company is a sensitive matter and if not tackled cautiously, may result in detrimental consequences ensuing to the Company. Regardless of whether an employee is engaged in employment with the Company on the basis of contract for a stipulated period or on a permanent basis, the matter pertaining to termination of employment must be tackled cautiously as under the laws of Malaysia, the matter pertaining to termination of employment is treated very seriously. It would be advisable that the Company refrain from attempting to entrap an employee to justify termination of his or her service of employment with the Company. Examples of such conduct tantamounting to entrapment would be for example, deliberately finding fault with the employee; unreasonable accusations of negative conduct unsupported by proof or evidence; coercing admission to negative conduct or acts; unsupported accusations of criminal conduct etc.. It is advisable that an employee not be dismissed based upon trivial / insignificant violations of Company rules.
I) PROCEDURES WHICH MAY BE ENGAGED IN THE CONTEMPLATED TERMINATION OF AN EMPLOYEE ON THE BASIS OF CITED MEDICAL UNFITNESS TO CONTINUE WORK / DUTIES IN THE EMPLOYMENT OF THE COMPANY
In a scenario where an employee has been admitted to hospital for surgery for a cited medical condition / illness wherein the period of hospitalization as accorded under the Employment Act 1955 is fully utilized and thereafter, medical leave is also fully utilized during the period of recuperation at home, the Company may desire to consider termination of the services of the employee. This is especially in a situation where full recovery from the illness / treatment of the illness is undetermined and may be very long.
In such a scenario, the Company may take steps / action in contemplation of terminating the services of such an employee. These steps would be, for example, the following:
1) If the employee is recuperating at home after surgery and has not reported for work since, where all entitlement to medical leave under the labour laws of Malaysia have been fully utilized, the Company, curious to ascertain the actual physical health condition of the employee, may decide to instruct Human Resource personnel or the superior of the employee to visit the employee at home and thereafter inform the Company of his or her physical observation of the employee. It should be noted however, in a situation where medical leave entitlement has not been fully utilized, the doctor's certification that the employee is unfit for work may not be challenged easily;
2) The Company may instruct the employee to attend a complete medical screening test (costs to be borne by the Company) with specific emphasis on the ailment complained of to ascertain if the employee will be fit for duty / if the illness may recur etc.. In a situation where termination of employment based upon an employee's cited unfitness for continued work is concerned, it would seem mandatory for the Company to initiate this action to safeguard its justification / reasons for terminating the services of the concerned employee;
3) It would seem to be imperative for the Company to prepare an Internal Report, with full details incorporated on the chronology or sequence of events concerning the employee, leading up to the Company's decision to terminate and the said report must justify the actions of the Company in doing so. The report must be legalistic in nature, neutral and reflecting all the facts with supporting evidences attached as documentary evidence;
4) The Internal Report may contain the following headings / contents in chronological order:
a) Title of Report:
For example: Evaluation of Employment Position / Status of............Deemed To Be Medically Unfit / Incapacitated And Hence Unable To Continue Work. (Report to be prepared as a ‘Private & Confidential' document).
b) Chronology of Events:
Remarks: In this section, the events commencing from the first incident of absence from work as a result of hospitalization / medical leave etc. is to be stated in chronological/ sequential order. This is solely with reference to the particular incident / incidents wherein the Company is contemplating a termination of employment of the services of the employee.
c) Previous Medical Record / History:
Remarks: In this section, the previous medical record / history of the employee with the Company may be included for example, the frequency of medical leave utilized; the type of illness complained of; the clinics visited etc.. The Company may also check the declaration by the employee in the ‘Employment Form' pertaining to inherent diseases, illnesses. This statement may be checked in light of the recent illness to ascertain if the employee had been truthful in stating facts in the ‘Employment Form'.
d) General Conduct of the Employee:
Remarks: In this section, the overall conduct of the employee as personnel in the Company may be assessed to be either satisfactory or dissatisfactory. Factors which may be taken into account in assessing the same are the opinion of colleagues, superiors, personnel in the Human Resource department etc.. It is imperative that fair and unprejudiced comment must be made.
e) Competency and Performance of the Employee:
Remarks: In this section, an assessment may be made of the overall competency and performance of the employee in his or her job in ascertaining his or her utility to the Company in contemplating continued employment or dismissal. This effort would evidence fair assessment of the employee in arriving at a decision.
f) Medical Report / Medical Assessment of Employee by Medical Specialist:
Remarks: In this section, the Medical Report / Medical Assessment of the employee by a Medical Specialist is crucial in establishing incapacity / unfitness in health for continued work / the propensity / likelihood of symptoms of illness recurring in future rendering the employee to be in a state of uncertainty as to whether there will be continued absence from work and hence the issue to be determined as to whether continued employment would be fair to / in the best interest of the Company.
g) The Crucial Nature / Importance / Significance of the Role of the Employee in His / Her Department in the Company:
Remarks: In this section, it would be imperative to determine / establish the significant nature or otherwise of the role of the employee in his or her department in the Company. The issues that warrant to be addressed are such as: whether the role of the employee in his or her department is vital / integral to its functions as for example, a Division Head's role or even if the employee is a subordinate in the Department, the importance of the function to the operation of the unit must be ascertained; whether even a short period of absence from work would greatly impact the operations of the unit thereby necessitating employment of temporary personnel etc.; whether the employee possessed ‘special expertise' in his function that would be difficult to substitute or replace etc..
h) Detriment / Loss to the Company If Continued Employment of an Incapacitated Employee Continues:
Remarks: This is an important consideration for the Company to take into account as it would naturally impact upon the business / productivity of the Company and continued absence of an employee from work would also entail economic loss to the Company wherein the benefits due to the employee would need to be borne by the Company in accordance with the contract of employment / labour laws of the country and yet, the absence of the employee from work results in a loss of productivity, costs of hiring temporary replacement workers etc., strain upon the efficiency of other colleagues / co-workers in the department of the employee which may impact the Company substantially in various aspects.
i) Efforts Expended / Attempts Made by the Company To Inform The Employee Of The Fact that His / Her Employment may be in Jeopardy if Absence from Work Continues for an Undetermined Period of Time and Proof of The Same:
Remarks: This is an important course of action that the Company must evidence / prove that it has done so as not to ‘surprise' the employee with the prospect of sudden termination of employment. Hence, the employee must be aware that his employment would be in jeopardy in the event of his continued and undetermined absence from work. It would be advisable to send a registered letter to the residence of the employee as proof of receipt of the letter by the employee may be obtained.
The letter may be worded in the following manner:
‘(Name of Employee)
The Company makes reference to the fact that under the laws of Malaysia, more specifically the provisions under the Employment Act 1955, you are deemed to have exhausted or fully utilized your medical leave and hospitalization benefits / entitlements by virtue of your Contract of Employment with the Company dated.....This is in relation to...............
In view of the same and in accordance with the rights of the Company under the laws of Malaysia governing employment, the Company may at its discretion review the status of your employment and make a decision which it deems to be fair and in the interests of both parties based upon the circumstances which have transpired.
In exercising the said discretion, the Company advises you that the Company expresses empathy in relation to your current state of health and hence, the Company has been fair thus far in allowing you benefits due under your contract of employment / the labour laws of Malaysia. However, the Company trusts that you understand and fully appreciate the fact that your continued absence from work for an undetermined period of time would place the Company in an undesirable situation as it would impact the productivity of your division of work as well as place undue strain upon your co-workers who would have to assume responsibility for your tasks in your absence. There are also economic factors which the Company would need to take consideration of such as the costs of engaging replacement labour, temporary hires, the time utilized to teach or train such temporary personnel etc. which would amount to a wastage of resources for the Company.
Hence, trust that the Company has reasonably and fairly conveyed to you its position during your absence from work as a result of your incapacitated state. The Company wishes you a speedy recovery / convalescence and the Company expects you to revert on the condition of your health and your availability to resume work as usual at the soonest time possible.'
j) Declaration by the Company of Fair Assessment In Relation to Assessment of Status of Employment of Employee:
Remarks: This declaration is important as evidencing the fact that a fair assessment of the status of the employee had been done by the Company prior to arriving at its decision / justifying its decision. In conducting the balancing act between the interests of the employee and Company, the Company may take into consideration the period of service of the employee and any special contribution in work / expertise etc..
k) Decision of the Company to Terminate the Services of the Employee:
Remarks: In the event that after a fair assessment based upon the criteria stated above, the Company decides to terminate the services of an employee on the grounds of unfitness in health / incapacity to continue employment with the Company, a letter containing wordings to this effect / similarly may be sent to the employee:
‘(Name of Employee)
The Company makes reference to the fact that under the laws of Malaysia, more specifically the provisions under the Employment Act 1955, you are deemed to have exhausted or fully utilized your medical leave and hospitalization benefits / entitlements by virtue of your Contract of Employment with the Company dated.....This is in relation to...............
In view of the same and in accordance with the rights of the Company under the laws of Malaysia governing employment, the Company may at its discretion review the status of your employment and make a decision which it deems to be fair and in the interests of both parties based upon the circumstances which have transpired.
The Company makes reference to a letter dated......sent to your goodself (which you have acknowledged receipt of) informing you of review of your status of employment with the Company in view of your prolonged absence from work as a result of your incapacitated health condition. In the stated letter, you have been put on notice of the intention of the Company to review your status of employment. [The Company has not received any reply from you to date on the date on which you are able to confirm resuming your usual duties upon return to work].
The Company has conducted an assessment of your status of employment with the Company in view of your recent / prolonged incapacitated state of health and in exercising its discretion fairly and reasonably, taking into account all relevant circumstances and considerations, the Company has decided to terminate your employment with effect from.......by giving......days notice as stipulated under Clause......of your Contract of Employment which based upon a mutual and amicable understanding with your goodself, the Company would treat the said termination as a voluntary separation agreement [with no associated benefits due and owing] on the grounds that your contract of employment has been frustrated as a result of your incapacitated state of health.'
J) RECOMMENDED CLAUSE TO BE INSERTED IN FUTURE CONTRACTS OF EMPLOYMENT IN RELATION TO THE ISSUE OF PROLONGED ABSENCE FROM WORK / INCAPACITATION OR MEDICAL UNFITNESS TO CONTINUE WORK
Sample / Suggestion:
PROLONGED ABSENCE FROM WORK / INCAPACITATION OR MEDICAL UNFITNESS TO CONTINUE WORK
In accordance with the terms of the Contract of Employment in good faith as well as the spirit and mutual agreement / intention of the parties and in adherence to the principles and provisions of the labour laws of Malaysia, the Company reserves the discretion which it is deemed to exercise fairly and reasonably, to terminate the Contract of Employment in the event that there is prolonged absence from work on the part of the employee which amongst other factors, may be as a result of incapacitation or medical unfitness to continue work.
K) SALIENT APPLICABLE PRINCIPLES WHICH MAY BE USED AS A GUIDE WITH REGARDS TO MATTERS PERTAINING TO DISMISSAL FROM EMPLOYMENT ON THE GROUNDS OF INCAPACITY (RETRIEVED SOURCE: GOVERNMENT OF NEW ZEALAND: MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT)
a) The exact nature of the legal requirements in this area varies with the facts and circumstances of each case and "no hard and fast rules can be laid down";
b) It is a well entrenched principle that an employer is not bound to hold an employee's position open indefinitely if the employee is unable to carry out his or her duties as a result of illness, injury or other incapacity. A classic statement of the law is that "there can come a point at which an employer can fairly cry halt". However, if an employer does decide to dismiss for incapacity, that can be challenged through the personal grievance procedure laid down by the local law and procedure of Malaysia. Hence, there is an incumbent need for the employer to be able to justify such a dismissal both substantively as well as procedurally;
c) The test which is often applied by the courts is to ascertain whether the decision to dismiss was one which a fair and reasonable employer could come as at the time when it became effective. The test establishes the fact that it is for the employer to make the decision about how long it can reasonably sustain an employee's absence and at what point dismissal becomes necessary;
d) The employer is required to carry out a fair inquiry and then to make its decision about whether to dismiss the employee "balancing fairness to the employee and the reasonable dictates of its practical business requirements." In one particular case, the business interests component of that balancing act had been rephrased to be interpreted as whether the employer was "reasonably entitled to a belief that as a result of the employee's illness, the employee could no longer be retained as an economic unit. The Industrial Relations court may be inclined to view the balancing act between the employee's interests and the employer's business requirements as analogous to the considerations that may apply in the redundancy context;
e) In the case of Marshall v. Harland & Wolff [1972] 2 All ER 715, decided by the National Industrial Relations Court in England, the decision had set out a number of factors to consider when deciding whether an employment relationship had been dissolved by operation of the doctrine of frustration. It is clear that termination of employment through the operation of that doctrine is quite a different situation from termination of employment at the employer's initiative. The latter situation would require justification whilst the former does not;
f) As is the situation with all personal grievances, an important factor to consider is the terms of the contract which governs the employment relationship. An important consideration would be whether the contract contains any terms which are directly applicable to the situation of the employee's incapacity and one example might be a clause which deems the employment terminated after a certain period of absence due to illness or injury;
g) Under the context of Malaysian law, a common sense approach may suggest that an employee cannot be dismissed for incapacity prior to the exhaustive utilization of his / her sick leave and hospitalization entitlements;
h) Another factor to consider is the length of time that the employment was likely to last in the absence of sickness or injury. It would naturally be easier to justify termination due to incapacity if the employment was inherently temporary in its nature or for the duration of a particular job than if it was expected to be long term;
i) Yet another factor to be taken into account is the nature of the employment and in particular the importance of the position the employee held to the employer's business. Where an employee is one of many in the same type of position it is likely to be harder for an employer to justify dismissal for incapacity than where the employee occupies a key position which must be filled and filled on a permanent basis in the event of prolonged absence. In terms of the "balancing act", the absence of a key employee obviously has a greater effect on an employer's business than the absence of an employee who occupies a less crucial position;
j) A separate factor to consider is the nature of the illness or injury which had rendered the employee unable to perform his or her employment duties and in particular, the length which the illness or injury has continued and the prospects of recovery. The greater the degree of incapacity and the longer the period over which it has persisted and is likely to persist, the more likely it will be to justify dismissal. The importance of this consideration has been stressed by the court in a particular case when it stated that "a good reason to dismiss for incapacity usually consists of a combination of the length of absence to date of the employee and the prospects for the future as to a return to work";
k) The length of the employment prior to the incapacity is another relevant consideration. It may be easier to justify dismissal where the relationship is of long standing. The legal basis is that over a long period of service, the parties must be assumed to have contemplated a longer period or periods of sickness than over a shorter period. The length of time that must pass before a relationship is considered "long standing" may vary according to the nature of the position;
l) The fundamental question remains whether the employer's decision to dismiss was a fair and reasonable decision based upon all the circumstances, balancing the interests of its business with the interests of the employee;
m) Another factor which may need to be considered in certain cases is whether it was reasonable for the employer to impose a date by which the employee was required to return to work or obtain medical clearance to do so;
n) Even if there is substantive justification for a dismissal for incapacity, the dismissal may still be unjustified if the employer has failed to follow a fair procedure in carrying out the dismissal. The common requirements may include: adequate notice of the possibility of dismissal; the opportunity to be represented; a fair and adequate inquiry including appropriate consultation; keeping the employee fully informed of the information held by the employer and so on;
- o) A reasonably common procedural error in cases of dismissal for incapacity is failure to notify the employee or notify them far enough in advance that the continuation of his or her incapacity may result in dismissal. The need for specific notification of the imminent possibility of dismissal is not removed by a previous acknowledgment from the employee that their job may be in jeopardy or by an "out of date" notification by the employer that dismissal may occur;
p) Fair process requires the employer to honestly communicate with the employee its intentions and actions at all material times;
q) An employer who wishes to dismiss for incapacity must carry out a fair inquiry before making the decision to dismiss. What is meant by consultation in this context is that the employer made adequate attempts to inquire into and ascertain the facts before dismissing. It is only when the employer is in possession of the full facts including the medical situation that a sensible decision can be made that is fair to both employer and employee;
r) With reference to the need for adequate information, the employer will need to actively seek relevant information, especially if the information already held is stale;
s) With regards to the requirement of input from the employee, legal authority has established that an employer considering dismissal for incapacity needs input from the employee "not in the sense of giving him a hearing as would be required if he was accused of some indiscretion amounting to misconduct but rather in the sense of allowing the Plaintiff an opportunity to throw light on his ability to return to the workplace and to perform his duties." The fundamental reason for obtaining input from the employee in cases of incapacity is to allow them the opportunity to provide information (including but not limited to medical reports) which may avert a conclusion by the employer that dismissal is necessary. Not only must an employer seek input from the employee, it must make it known at the time the information is sought that it may be used for the purpose of a decision to terminate the employment relationship. In an established legal authority, it was noted that the requirement was "to ensure that the employee understands the seriousness of the issue and will have a motive for ensuring that the information is as full and accurate as he or she can make it to be";
t) Ultimately, the employer is required to make a fair decision, balancing its own business interests and the interests of the employee;
u) In another established legal authority it had been expressed that the "cumulative effect of the guidelines laid down in relation to dismissal for incapacity can be described in one phrase, the need for open and honest communication between both parties of their positions and intentions."
L) CONCLUDING REMARKS
It is hoped that the above Guideline and its inherent pointers would serve as useful guidance to Human Resource personnel and the Company in initiating steps and procedures towards the termination of employees on the grounds of incapacitation or medical unfitness to continue service. In view of the serious implications and impact that termination of employment would have upon employees, it is advised that this course of action should preferably be contemplated as a last resort on the grounds of frustration based upon the futility of the predicament faced by both the employee as well as the employer. This discretion should at all times be exercised by the employer based upon prudent principles and consideration, exercising fairness to the employee in the course thereof.
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