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Malaysia: Best Practices For A Domestic Inquiry

Last Updated: 23 February 2016
Article by Joanne Ong
Donovan & Ho

Under Malaysian law, where an employee is subject to the Employment Act 1955 ("Act"), it is a statutory obligation imposed on
the employer to conduct a "due inquiry" to ascertain whether an employee is guilty of misconduct before an employee can be
dismissed or before any other major penalty is imposed (See: Section 14(1) of the Act).

However, Section 14(1) of the Act does not specify what amounts to "due inquiry" or how an inquiry should be conducted.
While "due inquiry" has a different meaning from "domestic inquiry", some people use these words interchangeably. While a
domestic inquiry, if done properly, can amount to "due inquiry" under the law, it does not necessarily mean that a full blown
domestic inquiry must be conducted in every case.

Given the complexity above, it natural to find employers (especially those without a proper HR support) who are clueless as
to how to conduct a domestic inquiry. The consequence can be serious as a failure to properly conduct an inquiry could result
in an unfavourable finding from the Industrial Court in the event the employee files an unfair dismissal claim.

As a general rule, it is important to remember that no employee should be dismissed for misconduct unless the employee
concerned has been given an opportunity to defend himself/herself or has been given an opportunity to be heard.

In order to allow employees to properly defend themselves, employers can hold a domestic inquiry which will help them decide
whether the misconduct was committed and what sort of punishment should be meted out.

We have set out below the basic steps in holding a domestic inquiry. Again, it is important to remember that the law does not
require that an employer comply with all these steps before it amounts to a "due inquiry" but these are the steps that should be
taken as a best practice.

Issuance of a Show Cause Letter

It is important to state the allegations of the misconduct clearly and precisely to the employee. This letter is to call for an
explanation for the alleged misconduct and to allow the employee to defend or explain the situation, as well as to state why the
employee believes disciplinary should not be taken. A timeline to respond to such letter must be stipulated in the letter. Also,
the show cause letter should be drafted in a clear and unambiguous language. Whenever possible, the relevant clause of the
company's policy and/or employment contract should be cited.

Example of a badly drafted show cause letter:

"You have breached Company policy and procedure relating to the approval of payment vouchers."

What would be better:

"On 23 January 2015, you had approved payment voucher no. 12455 dated 21 January 2015 ("Voucher"). The Voucher
was for payment of the sum of RM10,000.00 to ABC Sdn Bhd for purchase of stationery. As set out in the Company's
Approval Authority Matrix, you are only authorised to approve payments up to RM5,000.00 only and any payment
exceeding this amount must be referred to and approved by the General Manager. Your approval of the Voucher in excess
of your approval authority limit is in breach of the Company's policies and procedures relating to the approval of payment
vouchers as set out in Clause 3.5 of the Controller's Handbook."

Response to the Show Cause Letter

The employee should respond the show cause letter within the stipulated timeframe. If the explanation is acceptable or
satisfactory, no punishment should be imposed. However, if the employee fails to respond and/or if the explanation is
unacceptable, the Company can either (a) take disciplinary action; or (b) if it feels the allegations are serious enough to warrant
it, issue a notice of domestic inquiry.

Issuance of Notice of Domestic Inquiry

The Notice of Domestic Inquiry should comprise of the following:-

1. specific charge which states the type of offence, the date, the time and place where the offence took place
2. details of the domestic inquiry (ie: date, time and place)
3. inform the employee his/her right to bring along witnesses or any documentary evidence, if any.

Suspension

If it is necessary, the employer may place the employee on suspension pending further investigation of the allegation in respect
of the misconduct. The suspension can be issued together with the show cause letter, or before the domestic inquiry. A
suspension may be granted if the employer feels that it would prevent interference into the investigation or further misconduct.
Under the Act, the maximum period of suspension is not more than 2 weeks with half wages. However, the employer must pay
back the remaining wages to the employee if he is later found to be not guilty. This maximum period of suspension only
applies to employees subject to the Act.

Appointment of the Panel of Domestic Inquiry

The panel (odd number of persons) must consists of people who are neither directly nor indirectly connected to the matter.
Panel members should be employees who are of a higher rank or seniority than the accused employee. Ideally, the employee's
direct manager should not sit on the panel as it could give the appearance of bias. To ensure that the domestic inquiry is
conducted adequately, the chairman of the panel should have some knowledge of the domestic inquiry process, procedures
and regulations relating to employment law.

Hearing of Domestic Inquiry

The prosecution (company) will begin first. The prosecuting officer [usually a senior employee of the Company] will make
out a case against the accused employee. He will present documentary evidence which supports the charges, and also
call witnesses who can testify about the accused employee's misconduct.
The accused will then be allowed to question each of the witnesses on the evidence they have given.
After that, the accused should be given an opportunity to present his defence, and produce his own witnesses and
documentary evidence.
The accused as well as his/her witnesses will be questioned by the prosecutor.
Ideally, proceedings should be recorded and notes taken. Where there is a tape-recording and a transcript is prepared,
the accused should be given an opportunity to examine and approve the transcript for accuracy.
At the conclusion of the hearing, the panel will discuss and study the evidence given by both parties. Thereafter, the
panel will make a finding as to whether the employee is guilty of the misconduct. If the employee is guilty, the panel may
also make recommendations to the management of the company regarding what disciplinary action should be taken.

Conducting a domestic inquiry will naturally be a time-consuming affair for all involved. It may not be necessary for all cases
especially where the misconduct is minor. However, where allegations are serious and/or numerous, it is preferable for the
company to invest the time and effort in getting the domestic inquiry right.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about
your specific circumstances.

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