NXP Malaysia Sdn Bhd v Nurshakila Binti Shahlan

Case Significance

An employer's appeal allowed where the Director-General erred in awarding termination benefits, unsatisfactory performance being capable of amounting to misconduct and the decision being internally inconsistent.

This High Court decision is an appeal by an employer against a decision of the Director-General of Labour allowing an employee's claim for termination benefits. The employee had claimed termination and lay-off benefits amounting to RM17,033.03 together with one month's salary in lieu of notice of RM2,435.00, complaining that she had been dismissed on grounds of poor performance without any warning and without an internal inquiry into the alleged shortcomings.

The appeal raised the relationship between an employee's failure to perform and the employer's right to dismiss. The Court proceeded on the basis that an employee's failure to meet a satisfactory standard of work performance can constitute misconduct such that the employee may be dismissed summarily, without notice. On that footing, a dismissal for genuine poor performance is not a termination that attracts statutory termination and lay-off benefits in the ordinary way. The Court also identified an internal inconsistency in the Director-General's decision: the Director-General had rejected the employee's claim for salary in lieu of notice while at the same time finding her entitled to termination benefits, and those two conclusions did not sit together — if the employee was not entitled to salary in lieu of notice, that told against the characterisation of the ending of the employment as one giving rise to termination benefits.

The Court held that the Director-General had erred in deciding that the employee was entitled to termination benefits, and that this error justified appellate intervention. It accordingly allowed the appeal. It also illustrates that a labour tribunal's award may be reversed on appeal not only for an error of substantive law but where its own findings are internally contradictory, an entitlement to termination benefits sitting uneasily with a refusal of salary in lieu of notice on the same facts. The judgment is a useful illustration of the principle that unsatisfactory work performance may amount to misconduct justifying dismissal, and of how an internal inconsistency in a labour tribunal's reasoning — allowing termination benefits while refusing salary in lieu of notice — can warrant the reversal of its decision on appeal.