The Law & Rights of Probationers in Malaysia

No Provision in the Employment Act (EA) 1955 on Probation

A review of the Malaysian Employment Act (1955) including the recent EA (Amendment) Act 2022 confirms that there is nothing contained in the Act with regards to the duration of the probation period (for a newly hired employee) and the rights of probationers specifically. In short, the rights of probationers are found in the employment contract signed between the employee and the company offering him/her employment, as well as in the EA 1955, which applies to all employees, including probationers.

Nonetheless, the rights of probationers will be seen in the employment contract, employment handbook, company’s policies and/or collective agreement (CA), where applicable. In the absence of anything stated in the employment contract, employment handbook, companies’ policies and/or CA, the rights of probationers will strictly be governed by the EA and judicial authorites.

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Do Probationers enjoy security of tenure in their Employment?

The statutory laws applicable to all employees in terms of security of tenure in employment, include confirmed employees as well as probationers. The statutes which are applicable to all employees, including probationers, include Art. 5 of the Federal Constitution in respect of the “right to life” which provides that:

“No person shall be deprived of his life or personal liberty save in accordance with law”.

In addition to the above, Sec. 14 (1) of the EA 1955 provides that:

“An employer may, on the grounds of misconduct inconsistent with the fulfilment of the express or implied conditions of his service, after due inquiry –

(a)    dismiss without notice the employee; or

(b)   downgrade the employee; or

(c)   impose any other lesser punishment as he deems just and fit, and where a punishment of suspension without wages is imposed, it shall not exceed a period of two weeks.

Furthermore, Sec. 20 (1) IRA 1967 provides that:

“where a workman, irrespective of whether he is a member of a trade union or workmen or otherwise, considers that he has been dismissed without just cause or excuse by his employer, he may make representations in writing to the Director General of IR to be reinstated in his former employment; the representations may be filed at the office of the Director General of IR nearest to the place of employment from which the workman was dismissed”.

We will now turn to judicial authorities enunciated by the Courts over the years to guide us on the legal rights accorded to probationers, and whether a probationer enjoys the same protection and rights as that of a confirmed employee.

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Persuasive Authorities & Case Laws on Probationers

In “The Law of Industrial Disputes” (11^th Edn.) page 224, the learned author O.P. Malhotra stated that:

“It is well settled law that at the end of the probationary period, it is open to the employer to continue the employee in his service or not in his discretion, otherwise the distinction between probationary and permanent employee will be wiped out. Even if on the expiry of the probation period the work of the employee is satisfactory, it does not confer any right on (him) to be confirmed.”

On the other hand, C.P. Mills in his book, “Industrial Disputes Law in Malaysia” (2^nd Edition) page 111 commented that:

“The Industrial Court has held that the employment of a person on probation does not give the employer a right to terminate the contract at his absolute discretion. Even at common law the employer’s right to determine the contract during the probationary period depended on the employer being reasonably satisfied as to the unsuitability of the employee. That is to say, the employer’s decision should be made bona fide, not arbitrarily or capriciously.”

In Jusco Florist v Tan Mooi Hun (Award No. 265 of 1987) 2 ILR 176, the Industrial Court observed that:

“It is well settled law that despite a provision in the employment contract to the effect that an employer has the right to terminate the services of a probationer during his probation without assigning any reason therefor, it would still be open to industrial adjudication to consider whether the termination if challenged was mala fide or whether it constituted dismissal without just cause or excuse, and to grant suitable relief if it was found to be so…”.

In Khaliah binti Abbas v Pesaka Corp Sdn Bhd [1997] 1 MLJ 376, the COA held that a probationer comes within the ambit of Sec. 20 IRA 1976, as follows:

“It is our view that an employee on probation enjoys the same rights as a permanent or confirmed employee and his services cannot be terminated without just cause and excuse.”

However, one must bear in mind that there were Industrial Court decisions that indicated there is a distinction between the legal position of a probationer and a confirmed employee notwithstanding the decision in Khaliah binte Abbas (supra), as seen in the case of Koperasi Serbaguna Pekerja Fleda Bhd v Zainal Arifin bin Mohd Noor [1994] 2 ILR 862, where the IC held that:

“The period of probation in a service contract case, therefore, may be taken as a communication by the employer that in case the employee proves himself, within the period of probation, to the satisfaction of the employer, that he, the probationer, is a fit and proper person to perform the duties for which he has offered his services, the probationer would be entitled to be confirmed or taken in on a permanent basis. The appointment of a person on probation is therefore, tentative and dependent on the employer’s satisfaction as to his suitability. But this satisfaction must be a reasonable satisfaction and not an arbitrary or capricious one…”

Can a Probationer be deemed to be confirmed in Employment after the end of the Probation Period, if he is not informed of his confirmation in employment?

In the Federal Court case of K.C. Mathews v Kumpulan Guthrie Sdn Bhd [1981] CLJ (Rep) 82, it was held that:

“There can, in our opinion, be no doubt about the position in law that an employee appointed on probation for six months continues as a probationer even after the period of six months if at the end of the period his services had either not been terminated or he is confirmed. It appears clear to us that without anything more an appointment on probation for six months gives the employer no right to terminate the service of an employee before six months had expired – except on the ground of misconduct or other sufficient reasons, in which case, even the services of a permanent employee could be terminated. At the end of the six months period, the employer can either confirm him or terminate his services, because his service is found unsatisfactory. If no action is taken by the employer either by way of confirmation or by way of termination, the employee continues to be a probationer.”

The FC adopted with approval the decision in the Indian case of Express Newspapers Ltd v Labour Centre & Anor (AIR) [1964] SC 806, where, inter alia, it was held that at the end of the probationary period no action is taken by the employer either by way of confirmation or by way of termination, the employee continues to be in service as a probationer.

Other Authorities on the Rights and status of Probationers

While the law does not recognize the concept of automatic confirmation for a probationary employee, where by conduct of an employer a probationer is accorded benefits applicable to a confirmed employee, then the courts are prepared to recognize the probationer as a confirmed employee by virtue of the conduct of the employer.

In Paari a/l Perumal v Abdul Majid Hj Nazardin & Ors [2000] 6 MLJ 602, a clerk was placed on a 3 months’ probation period. Under his contract, he was entitled to taker annual leave if he was confirmed in his employment. He was not informed that he was confirmed in employment but was allowed to take annual leave. The clerk subsequently left employment and claimed damages against his employer for breach of contract, i.e., failure to pay him his annual increment, which was dismissed by the Magistrates Court.

On appeal, the High Court held that the clerk was a confirmed employee despite the absence of an express confirmation. It was held that where an employer has given the employee benefits which are meant for confirmed employees, it meant that the employee was treated as a confirmed employee.

In Vikay Technology Sdn Bhd v Ang Eng Sew [1993] 1 ILR 90 (Award No. 40 of 1993), employee who was a factory Manager was terminated after 5 months on the job (6-month probation period) due to unsuitability for the job (deterioration of work performance, loss of respect of his subordinates, sat in office with door closed, did not learn the manufacturing process and relied heavily on subordinates, and arriving for company’s annual dinner).

The IC held that:

“an employee on probation cannot expect to be accorded with the same status, rights or privileges as a permanent employee. So long as the employer is reasonable satisfied that the employee is not suitable for the job, he may be removed. Suitability is not just based on the performance of the employee but also on his conduct, behaviour and attitude in relation to the job employed.”

“On the other hand, it is also well settled that this managerial prerogative of the employer to terminate a probationary employee is not absolute, and the discretion so given is not unfettered. It must be exercises in good faith. If there is mala fide, unfairness and/or tainted with any ulterior motive to cause victimization, then the court can in those circumstances whittled down the capricious decision or conduct of the employer.”

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Test for dismissing an Employee for Poor Performance – Is it the same for a Probationer and a Confirmed Employee?

In Kedah Marble Sdn Bhd v Jaafar Mohamed [2000] 1 ILR 794, the Industrial Court held that:

“As far as poor performance is concerned the Industrial Court has set down that in order to justify the dismissal of the claimant on this ground, the company has to establish:

• that the claimant was warned about his performance;

• the claimant was accorded sufficient opportunity to improve; and

• that notwithstanding the above the claimant failed to sufficiently improve his performance.

There is no evidence that the claimant had performed badly. The company could not produce any evidence to show that the claimant was a poor worker.”

For senior management staff on probation or even after their confirmation, the need for warnings prior to termination for non-performance is less apparent. In the case of United Oriental Assurance Sdn Bhd v Kamala Rangithan a/l Selladuray [1992] 2 ILR 280, the Court commented as follows:

“The learned counsel for the claimant urged the court to accept the doctrine of prior notice and cited a string of cases in support. The prior notice is that the attention of the claimant should be drawn to his shortcomings and that he should be given time to improve on his performance. With respect, the court feels that prior notice is not relevant in the case. The claimant had 16 years of experience in insurance business before he joined the company, and I think he needs no reminder from anyone, least of all from the company, to do his work. He knew very well what the target means and the reality of the insurance business. This is plain common sense with a man of his calibre and a man of his intellectual position.”

In making reference to the English case of James v Waltham Holy Cross [1973] JKCR 378, the court held obiter as follows:

“Those employed in senior management may be by the very nature of their jobs be fully aware of what is required of them and fully capable of judging themselves whether they are achieving that requirement. In such circumstances, the need for warning and an opportunity for improvement are less apparent.”

Notwithstanding the above authorities, we are fortunate to have the landmark case of Hartalega Sdn Bhd v Shamsul Hisham [2004] 3 CLJ 257 where the High Court ruled that the test to dismiss an employee for poor performance was not the same for probationers and confirmed employees. The HC stated that probationers are considered to be employees on trial and there is no necessity to provide them with written warnings prior to dismissal, and made the following points:

1. Having perused Khaliah’s case, it was very obvious to me that the COA has enunciated that a probationer enjoys the same rights as a confirmed employee, and his or her service cannot be terminated without just cause or excuse.

2. It appeared to me that Khaliah’s case does not explain or state the standard required to be proved by the employer to justify the probationer’s termination is with just cause and excuse and that the standard is the same as that required of a confirmed employee.

3. I approve John Louis O’Hara’s (the Chairman of IC) statement in the Dorsett case who commented that Khaliah’s case does not expound the substantive law pertaining to a probationer but relates to the specific question that if a probationer is to be terminated, it should be within the general purview of Sec. 20 (3) of the IRA in that it should not be without just cause or excuse.

4. Having scrutinized the award, it does seem to me that the Chairman of the IC interpreted Khaliah’s case per se and came to the conclusion that since a probationer is a workman within the meaning of Sec. 20 (1) IRA 1967, therefore the same standard is to be applied to both a probationer and a confirmed employee in reference to dismissal.

5. To my mind, I subscribe to the concept/principle that there should be a distinction between the two categories of workman. I verily believe that merely bringing the probationer within the ambit of Sec. 20 of the IRA does not automatically imply that the probationer is elevated to the status of a confirmed employee as this was not the intention of the legislature in enacting Sec. 20 (3) of the IRA 1967.

6. To my mind, it was wrong for the Chairman of the IC to adopt the principles in Ireka and Rooftech which only refer to confirmed employees. My opinion is that the rigid test as expounded in the said case should not be applied to employees on probation, especially with regard to requiring a written warning. To me, the monthly appraisal report produced by the applicant and which was communicated and discussed with the respondent was sufficient for reason of dismissal.

7. I noted both counsels agreed that it was conditional for a probationer to perform his functions to the satisfaction of his employer. Failure to do so would render the probationer liable to be dismissed, save that such a decision must be not capricious or arbitrary. However, the Chairman of the IC did not refer to this in his award, instead he used the procedural test of poor performance relating to the dismissal of a confirmed employee for poor performance. Hence, to my mind, he failed to apply the correct test in relation to a probationer and the subject of dismissal.

8. It also appeared to me that the Chairman of the IC harped on the fact that he was relying on Khaliah’s case, but a careful perusal of his award does not disclose a discussion of bona fides, which is essential in the dismissal of an employee on probation as propounded in the aforesaid case – yet at the conclusion of his award, he made a finding that the dismissal of the respondent was made mala fide on the applicant’s part.

Key Takeaways

1. A probationer enjoys the same rights and protection accorded by the law (FC, IRA 1967 and EA 1955). Therefore, an employee (probationer included) who has been dismissed from employment has the same statutory right to file a complaint under Sec. 20 (1) IRA 1967 that he considers himself to have been dismissed without just cause or excuse by his employer.

2. A probationer continues to remain as a probationer if he is not informed of his confirmation in writing at the end of his probation period. Nonetheless, his performance and conduct at work needs to be properly monitored and reviewed and he needs to be informed of his status of employment (based on performance and conduct) before the expiry of the extended period of probation.

3. A probationer, based on KC Mathews case, cannot be terminated before the expiry of his probation period, unless on grounds of misconduct or other sufficient reasons. Thus, it will not be tenable in law to dismiss a probationer before the end of his probation period on grounds of unsatisfactory performance.

4. While there is no strict need to give written warnings to a probationer who is not performing satisfactorily (where such written warning (s) musty be given to a confirmed staff), the company’s decision to terminate a probationer due to non-confirmation must be with sufficient grounds, and not made arbitrarily or capriciously.

5. While probationers and confirmed staff enjoy security of job tenure, in that a dismissal must be grounded on just cause or excuse, the test for unsatisfactory performance between a probationer and a confirmed employee is different. The need to give written warnings for a probationer is not strictly needed, where there are other communications on performance already satisfied, as in the monthly appraisals during probation period.

6. In order not to allow a probationer to claim that he has been confirmed in employment (if the company’s intention is not to confirm the probationer as yet), the company must not extend any benefits that are meant only for a confirmed employee to the probationer during his probation or extended probation period.

7. Notwithstanding the distinction in the test for dismissing a probationer and a confirmed employee (for unsatisfactory performance), a company may want to practice issuing written warning (s) including the notice of non-confirmation resulting in a termination of employment to probationers as well as confirmed employees. This is especially if by doing so, it does not in any way, affect the smooth flow of the company’s business operations.

Dato’ Dr. Lim Weng Khuan

Note:  This article is intended to be for the information of clients, interested readers and for intellectual discourse and does not constitute nor to be relied upon as legal or professional advice.