Differences between Labour Court vs Industrial Court

In summary, the Labour Court’s powers are more limited compared to the Industrial Court.

  1. The Labour Court may may inquire into and either confirm or set aside any decision made by the employer under section 14 of the Employment Act 1955, and only on non-payment of wages or other payments.
  2. The Industrial Court has far more powers, which may include the power to decide on trade disputes, trade union recognition, order reinstatement of the claimant to his former position, and awarding back-wages and/or compensation in lieu of reinstatement.




Only has the power to hear complaints from 2 categories:-

A) THOSE WHO COVERED BY THE EMPLOYMENT ACT 1955 (defined as “employees”)


Section 69B– Power of the Labour Court to hear complaints from persons earning up to RM5,000.00 (excluding commission, subsistence allowance or overtime)

This means that those outside the scope of EA can file a claim at the Labour Court with regard to non-payment of wages or any payment due to them under their contract of service.

 It is to be noted that the power of the Labour Court is limited to what is provided for in the contract of service only and not to what is provided in EA or its regulations like o/t or termination benefits unless these are also provided in the contract of service.

 Section 69C- Power to hear indemnity claims by either party (earning not more than RM5,000, indemnity in lieu of notice due from either party)


So long as the person is a “workman” as defined in section 2 of the Industrial Relations Act 1967, the Industrial Court has the power to hear complaints from the same.

This includes- those covered by the Employment Act 1955 and those who fall within the definition of “workman”

Independent contractors engaged on contract FOR service are excluded.

Has the power to inquire into any dismissal is only in relation to section 14(1)(a) of the EA.  It may inquire into and either confirm or set aside any decision made by the employer under section 14.  However for s14(1)(a), the power of the court is limited to payment of salary in lieu of notice and whatever other payments eg termination benefits that the employee might be entitled to.



Has the power to hear all industrial disputes, including unfair dismissal, trade union recognition, trade disputes;

Has the power to order reinstatement of the employee;

Has the power to penalize the companies, including but not limited to- backwages of up to 24 months; 1 month for every year of service (in lieu of reinstatement), other penalties / compensation

Labour Court is prohibited from setting aside any decision by the employer under s14(1)(c) i.e. any lesser punishment, if that punishment did not result in any loss of wages or other payments due to the employee under his contract of service.

If the lesser punishment was suspension without pay, the Labour Court has the power to set it aside and order the employer to restore the full wages, if after hearing the case it is satisfied that there was no basis for the employer to have imposed that punishment.


The Labour Court is limited to complaints about non-payment of wages or other payments. The Labour Court has no jurisdiction to hear claims in respect of non-contractual cash payments or in respect of benefits in kind.

Section 69A Employment Act 1955– The Labour Court is prohibited from inquiring into, hearing or deciding on any despite which is pending in any proceeding under the IRA 1967 or has been decided upon by the Minister under s.20(3) IRA 1967.

This means that if there is any dispute that is pending before the Industrial Relations Department or a dismissal case that the Minister has already decided upon whether to refer the case, the Labour Court is prohibited from hearing the case. Eg it happens sometimes that a dismissed workman files a case with IRD under s. 20 IRA and at the same time files a claim before the Labour Court for termination benefits. In such a case, the employer can object to the Labour Court proceeding with the case.


Employment Insurance System Act 2017

Summary of Employment Insurance System Act 2017 (“EIS Act 2017”)

1) The EIS Act 2017 came into operation on 1st January 2018.

2) EIS is administered by the Social Security Organisation of Malaysia (“SOCSO”).

3) The EIS is to help employees who have lost their employment, by way of financial assistance.

4) EIS Act 2017 applies to all industries having one or more employee(s).

5) EIS excludes-
a) those employed on a casual basis;
b) spouse of the employer;
c) any employee of a local authority / statutory body;
d) domestic servants;
e) any persons detained in any prison, place of detention etc;
f) any employee who has not attained 18 years of age, or who has attained 60 years of age;
g) any person permitted to win minerals on the land of another in consideration for a portion;
h) any member of public service of the Federation or States;
i) employees who have attained 57 years of age before the EIS Act 2017 where no contributions were paid.

6) Contribution Rate– a total of 0.4% of the(comprising 0.2% by employer, PLUS 0.2% by the employee), subject to the contribution rate being capped on wages of RM4,000.00 per month. This rate may be revised every 3 years. Contribution is to be paid no later than the 15th of every month.

7) “Wages” is defined as “…all remuneration payable in money by an employer to an employee including any payment in respect of leave, holidays, overtime and extra work on holidays but does not include:
* any statutory contributions (eg EPF);
* travelling allowance;
* any sum paid to employee for special expenses incurred as a result of employment;
*any gratuity on discharge or retirement;
* any annual bonus;
* any benefit provided by SOCSO;
* any other remuneration prescribed.

8) Benefits
a) Job Search Allowance
A monthly payment to for a period of 3 to 6 consecutive months to assist an insured person who has lost employment during the period he is seeking for employment;

b) Early Re-employment Allowance
An incentive paid in lump sum to an insured person for accepting an offer of employment within the waiting period or the period of receiving the Job Search Allowance.

c) Reduced Income Allowance
A lump sum payment to an insured person who has 2 or more employments and has lost one or more of his employments.

d) Training Allowance and Training Fee
A monthly payment to an insured person for a period of not more than 6 months for attending any training in Malaysia provided by a training provider.

A training fee of up to RM4,000.00 will be payable to an approved training provider for up-skilling. There is also a training allowance provided for general expenses.

9) Entitlement- there must be a minimum contribution of 12 months for the 1st claim. If the affected employee has successfully made a first claim, and unluckily has lost his/her job again and needs to make a subsequent claim, the contribution from previous employment is NOT taken into account. There must be a minimum contribution period for EACH and EVERY new claim, and it increases exponentially. Eg for 2nd claim, there must be a minimum contribution of 16 months, and so on.

Gardening leave


Your employer may ask you not to come into work, or to work at home or another location during your notice period. This is called ‘gardening leave’.

You’ll get the same pay and contractual benefits.

Garden leave or gardening leave is the practice where an employee leaving a job (having resigned or otherwise had their employment terminated) is instructed to stay away from work during the notice period, while still remaining on the payroll.

An issue that arises in practice is the position of an employee during the period between his giving notice and the expiry of the notice period. It is common for an employer to ask the employee to stay at home during the period. An employer may take this course of action, rather than waive the notice, as he wishes to ensure that the employee does not go to work for a competitor during that period and/or to give that employee’s replacement time to take over his contacts and business. Contracts usually provide an employer with this right.

There are no local cases that deal with the legal position of “garden leave” or “gardening leave”.  Judges in the Malaysian cases have talked about “garden leave” in the context of “…the employee was placed on garden leave” but did not expand any further on the legal position, or applicability in Malaysia.  As such, the English and Australian positions are considered.


A brief article on the English position is found in the website of an English law firm known as Slater & Gordon:-


The relevant portion of the article states:-

“The employee is also entitled to their normal pay and contractual benefits over their gardening leave period.”


A brief article on the Australian position is found in the website of an Australian law firm known as Holding Redlich:-


The relevant portion of the article states:-

“…Lessons for employers

  • While an employee is on gardening leave, he or she is entitled to all the remuneration and employment benefits as if the employee was working for you ordinarily.  Do not remove access to motor vehicles, mobile phones or other work tools unless you are sure they constitute ‘tools of trade’ as opposed to agreed components of the employee’s remuneration package….”


The reason behind “Garden Leave” is to place an employer on leave by remaining away from the office, while serving out their notice period.  I would be inclined to adopt the position of England and Australia.  The employee who is placed on garden leave should be entitled to his salary and contractual benefits as well, unless it can be shown that the allowances are of the nature that can be removed.

Medical Board Out

Medical Board Out” refers to a situation where the affected employee is sufficiently incapacitated due to a medical illness or disability, rendering them unable to fully and/or satisfactorily perform their job, leaving the employer with little or no option but to terminate the employee on the basis of medical grounds.

An employer may terminate the employee’s services if it can be proven that the illness/disability has severely curtailed the ability of the employee to perform his job and recovery is unlikely.

The considerations should be taken into account by an employer are the following (note this is not exhaustive):-
1) Has the illness/disability severely curtailed the ability to perform his job?
2) Is recovery likely? If so, when, and to what extent?
3) Can the employer wait any longer and for how much longer?
4) What is the illness?
5) What is the job function?
6) What is the period of absence?
7) Has the absence impacted the company/other employees?
8) Has there been meeting(s) with the affected employee, apprising him of the difficult circumstances?
9) Is there an attempt to accommodate the employee by offering an alternative role?

The employer must show that they have thoroughly taken the various factors into consideration and that based on the information they have compiled, the decision was made to terminate the employee. The Court may hold a termination to be unfair if an employer is shown to not make the sufficient and necessary enquires on the illness of the employee and merely terminates, based on the assumption that the illness was permanent in nature.

For employees covered under the Employment Act 1955, there are provisions relating to statutory sick leave and hospitalization leave. There are however no provisions for the minimum requirements of a medical board out procedure. As such, a medical board out procedure is a matter of contract between the employer and employee, and/or based on the company’s policies and procedures, if any.

A proper medical board out procedure/meeting, to be adopted by the employer for all affected employees is ideal as it would help establish that due consideration, with all regard to the surrounding circumstances, were taken into account before a decision was made to terminate. This helps in demonstrating that termination was not made on a whim.

Do note that the employee may be eligible for termination benefits (if protected by EA or if your internal T&Cs provide such benefits), any utilised annual leave, any other benefits or allowances payable under his contract and notice period.

Difference between Retrenchment, VSS, & MSS

Although the end result is the same for retrenchments, VSS and MSS (i.e. the employee is no longer employed), there are differences.

This is dismissal of employees who are regarded as surplus to requirements. The company / department itself is not being closed, but rather a select group of employees are retrenched. Not all employees are retrenched.

Companies in carrying out retrenchment are required to abide the legal provisions of the Employment Act 1955 (where relevant) and the general rule of LIFO (Last In First Out).

Voluntary Separation Scheme. This arises when a company that is not officially retrenching but nonetheless wishes to get rid of employees.

In this scenario, the company will make an announcement that is addressed to the employees along the lines of 1) “Profit hasn’t been good” 2) “We have been making losses” 3) “The company is not dismissing anyone, but will welcome application from employees to be considered for VSS”.

It is like a job advertisement that invites applicants. The difference here is that it is not a job advertisement, but rather, an invitation by the company for application by the employees, to be considered for VSS.

Usually the company will also talk about the terms and conditions of the VSS (compensation terms, qualifications, requirements etc).

Because of the nature of VSS, it is usually more difficult for employees who have left the company on VSS to challenge this in the Malaysian courts.

Mutual Separation Scheme. This arises when both parties agree to terminate the employment relationship. The keyword is “mutual”, i.e. both parties agree to a settlement that is a win-win scenario for them.

Section 20 IRA 1967
As is the case with all dismissals of employees, the employer has the burden of proving just cause or excuse in dismissing the employee(s).

If it is a retrenchment and the purported reason is eg, losses for the preceding xx number of years, then the employer must be able to show the losses by way of the profit and loss account, etc.

A VSS is more difficult for the employee to argue unless it can be shown that the employee was coerced into it, or there existed the usual elements that may render the VSS void or voidable.

Absenteeism & Lateness

The relevant section in the Employment Act 1955 that deals with absenteeism is section 15(2).

“An employee shall be deemed to have broken his contract of service with the employer if he has been continuously absent from work for more than two consecutive working days without prior leave from his employer, unless he has a reasonable excuse for such absence and has informed or attempted to inform his employer of such excuse prior to or at the earliest opportunity during such absence.”

Key words-
– more than two consecutive working days
– without prior leave from his employer
– attempted to inform his employer
– at the earliest opportunity during such absence

The ideal steps to be taken by an employer (at bare minimum)
1) (Usual scenario where the employee returns to work)
– ensure that all requirements as stated in the key words are satisfied.
– issue a show cause letter
– wait for reply from employee
– read the reply from the employee and determine if the excuse is acceptable.
– punish. Under section 14(1) Employment Act 1955 :

“On the grounds of misconduct, the employer may, AFTER due inquiry, impose any of the following punishments:
a) Dismiss without notice the employee;
b) Downgrade the employee (This means a demotion to a lower position and it may entail a salary reduction appropriate to the new grade); or
c) Impose any lesser punishment as he deems fit and just and fit. Any lesser punishment may include:  salary reduction/ deferment of increment/ suspension without pay/ written warning. Take note that if suspension without pay is imposed, the maximum period that is permitted is 2 weeks.

2) (scenario where it is habitual / repeated)
– as above, but issue a final warning.

3) (scenario where the employee does not return to work)
– repeat as above
– if no reply is forthcoming, then terminate.

– Proceed against the employee for abandonment of contract.

Why does the employer need to repeat the disciplinary process?  Can’t the employer refer to the previous warning and just take action on the absenteeism?

Section 20 IRA 1967 places the burden on the employer to show that the employee was fairly dismissed. The purpose is to prove to the court that there was just cause or excuse in dismissing and that the rules of natural justice were followed by providing the employee with the opportunity to explain his absence. Many (although not all) companies have in place a disciplinary procedure which is usually requires more steps to be taken compared to what is decided in case law. If the company is able to show that the due process of the disciplinary procedure was adhered to and followed, then there is a better chance that the court will agree with the company’s decision.

How many times can the employer warn before there can be a dismissal of the employee?

There is NO set / fixed rule on the number of warnings to be given. It is not the case of 3 strikes, and you are out. All the cases have mentioned is that if its habitual and repeated, then it warrants dismissal. A one-off incident would not warrant dismissal. Each case must depend on its own particular facts and circumstances.

There is NO set / fixed rule on the number of warnings to be given. All the cases have mentioned is that if its habitual and repeated. A one-off incident would not warrant dismissal. Each case must depend on its own particular facts and circumstances.

Employers are encouraged to go through the appropriate disciplinary process, i.e. issue show cause letter, await reply, consider reply and then punish.

Employers are discouraged from giving immediate warnings to employees. This is akin to punishing first without giving the employee the opportunity to explain his actions. The courts view warnings negatively. If for example, on a fine day, you are walking on the street and a policeman immediately whips out his pistol and shoots you, that would not be nice.  Ditto for warnings.

Employment Insurance Scheme


Check out the link above.  The Government has introduced an Employment Insurance Scheme (“EIS”).  Some of the objectives of this EIS includes providing income protection who lose their jobs, increasing employability to those who lose their jobs, providing support for job search, job matching, job placement and workers mobility.

The important points for this scheme/system are:

  1. The rate of contribution will be announced by the government after the Bill has been approved. Few speculations that you guys might heard before is that the 0.25% from the employee, 0.25% from the employer. However, this rate is subject to final confirmation.
  2. The eligibility to receive payments would apply to loss of employment due to certain reasons only.  Where loss of employment is because of (dismissal due to) misconduct, voluntary resignation, retirement and expiry of fixed term contract, there is NO entitlement;
  3. The ex-employee will obtain money every month till s/he manages to find a job. However, it applies up to 6 months only, and the allowance will stop if on the 7th month and the employee is still unable to find work.
  4. Throughout the unemployment period, there will be provision of training allowance where these training will be provided by verified trainers.
  5. The EIS is going to be implemented on 1st January 2018.