Is it legal for an employer to terminate an employee based on a contractual right to terminate the employee contained in the employment contract?

OMAR OTHMAN v. KULIM ADVANCED TECHNOLOGIES SDN BHD [2019] 6 MLRA 756

• Omar Othman (“Employee”) was terminated by Kulim Advanced Technologies Sdn Bhd (“Employer”) based on a contractual right to terminate ie by giving Employee 3 months’ notice. This is also known as “termination simpliciter”.

• The Employer argued that the Employee had not “objected” to the termination and had in fact proceeded to accept the payment given in lieu of notice.

• The Employee then claimed that the termination was wrongful and challenged it at the Industrial Court.

• The Industrial Court found that the Employee had been unlawfully terminated because termination simpliciter is not recognised by the Industrial Relations Act 1967.

• The Employer challenged the decision at the High Court where the Judicial Commissioner of the High Court took the view on the facts that it was not a case of termination simpliciter and thereby quashed the decision of the Industrial Court.

• The Employee appealed to the Court of Appeal.

• The Court of Appeal held that “termination simpliciter” relates to the absolute common law right of an employer to terminate the employee pursuant to the terms of the contract.

• But the Court of Appeal held that “termination simpliciter” is not recognised by the Industrial Relations Act 1967 (“Act”).

• The Employer’s reasons for termination in this case was based on a contractual right in the employment contract and the termination was thus not based on poor performance, misconduct, redundancy, etc as to establish a prima facie case to terminate on just cause and excuse, as required in section 20 of the Act.