Malaysian industrial court considers worker's defence of small profits and good intentions
The Industrial Court of Malaysia recently dealt with a dismissal case involving an employee who failed to declare a conflict of interest while conducting business transactions with her employer during working hours.
The case involved an administrative assistant with over eight years of service who was terminated after her employer discovered she had been supplying health products to the company through a third-party supplier connected to her husband.
The worker had earned profits from these transactions without making the required disclosure under company policy.
The worker argued that the dismissal was excessive, claiming she had only received small profits and that her intention was to help colleagues during the COVID-19 pandemic rather than to gain financially.
She also argued that her employer had failed to conduct a proper domestic inquiry before terminating her employment, and that there were inconsistencies between the charges and the termination letter.
According to records (case No. 21/4 1570/22), the worker was employed as an administrative assistant in the information technology department of an oil and gas exploration company.
The worker started her employment in September 2014 with an initial monthly salary of RM2,400. Her contract was renewed multiple times, and by her final contract period from November 2020 to November 2022, she was earning RM3,350 monthly.
Her duties included providing administrative support, coordinating accounting and financial matters for the IT Department, and assisting with invoice processing in the company's computer system.
In February 2022, the employer received complaints about potential conflicts of interest involving employees regarding purchases of health products such as COVID-19 rapid test kits and face masks.
An investigation conducted on 15 March 2022 revealed that the worker had been supplying these products to the employer through a third-party company.
During the investigation, the worker provided a written statement on 16 March 2022 where she admitted to supplying health products to the employer.
She explained that her husband acted as an agent for the supplier, and that she would purchase products from this company at cost price and then mark them up for sale to the employer.
The worker admitted to eight separate transactions between March 2021 and February 2022, totalling RM8,381 in sales.
Following the investigation, the employer issued a formal notice on 16 March 2022, presenting three charges of misconduct against the worker.
The first charge related to her failure to declare her relationship with the supplier as required by the Employee Handbook's conflict of interest provisions.
The second charge detailed specific instances where the worker supplied health products to the employer and received payments, listing transactions from March 2021 through December 2021.
The third charge focused on the personal gains she made from these transactions, which ranged between RM0.50 and RM2.00 per item.
All three charges cited violations of the Employee Handbook, particularly sections dealing with dishonesty, misuse of company funds for personal gains, and conflict of interest provisions.
The handbook stated that employees "should not participate in activities, express any statements or behave in a manner which might damage the [employer's] image or which might act against its business principles."
In her written response dated 21 March 2022, the worker admitted to all three charges levelled against her.
The worker requested minimal disciplinary action, stating this was her first offence. The employer decided to terminate her employment on 29 March 2022 without conducting an internal disciplinary hearing, as the worker had already admitted to the misconduct.
The Industrial Court applied established workplace law principles for dismissal cases, focusing on whether the employer had reasonable grounds to believe the worker committed misconduct.
The court used a test that asks whether "the employer acted reasonably in thinking the employee did it" rather than requiring absolute proof of wrongdoing.
The court noted that in workplace misconduct cases, the responsibility lies with the employer to prove their case, but the standard is not as strict as criminal court cases.
Instead, the court applied workplace standards that require the employer to show they had solid and reasonable grounds to suspect the employee was guilty of misconduct.
Regarding the absence of an internal disciplinary hearing, the court referenced established case law which held that procedural shortcomings during internal processes can be addressed when the matter is heard properly by the Industrial Court.
The court stated that proper hearings before the Industrial Court can remedy defects in internal company processes.
The worker's attempt during the hearing to suggest she had supplied products to individual employees rather than the employer was rejected by the court.
The court described this as "an outright afterthought, a desperate effort to escape from what she had unequivocally admitted in the [written statement] as having supplied the health products to the [employer]."
The employer's Employee Handbook contained detailed provisions on conflict of interest, requiring employees to declare any outside business activities or family interests that could create conflicts.
The policy specifically stated: "All Employees holding any outside business appointment, outside non-executive directorship, etc. any local statutory or public appointment or owning equity, or whose family have family interests, all as defined above, must declare such interests in writing to the [employer]."
The worker had been employed for over eight years and was expected to be familiar with these policies. However, she failed to make any written declaration regarding her husband's relationship with the supplier or her own financial interest in the transactions.
During questioning, when asked about the arrangement between her husband and the supplier, the worker confirmed: "The arrangement is for your husband to purchase goods directly from them and for your husband to sell it to the customers."
The court found that the worker had "abused her position within the [employer] to secure financial benefits for herself and/or her husband" through marked-up health products.
The worker's defence that she only received small profits and intended to help colleagues during the COVID-19 pandemic was dismissed by the court.
The court stated: "it matters not that the profits generated by the [worker] were in small amounts. This is not justification or a defence and does not absolve the [worker] from accountability under the Employee Handbook."
The court examined whether the punishment of dismissal was appropriate for the misconduct committed. It referenced previous workplace cases, including one where the court held:
"There is conflict in other form, such as using the time an employee is paid for to carry out his own business activities or using the facilities paid for by the employer to further his business activities."
The court also cited another case which established that an employee conducting other business during work hours constitutes misconduct regardless of work performance.
That case stated: "An employee is paid to do work for the employer for the period specified and for an employee to be seen gainfully doing some other work not connected to the work for which the employee is engaged to do as in this case is certainly an act of misconduct on the part of the employee."
The court found that the worker's misconduct constituted a clear breach of the Employee Handbook's conflict of interest provisions.
In its final decision, the court concluded: "no reasonable employer would be tolerable to the misconduct committed by the [worker] and no reasonable employer would allow its employee to do private business at the expense of the employer. Such act of misconduct destroys the trust and confidence the employer had towards the employee."
The court said: "the [employer] had successfully proved on the balance of probabilities reasonable suspicion that the [worker] had committed the misconduct as charged and that the [employer] had acted reasonably when terminating the [worker] which is proportionate in the circumstances."
The dismissal was therefore found to be justified, and the worker's claim for unfair dismissal was dismissed.
