HR Risk Management with Employment Practice Liability Insurance

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Human Resource Risk Management

Dismissal DefinedDismissal: Termination with or without notice by the employer.

Types of Dismissal:

Wrongful Dismissal: Termination of an employee with or without notice and is without just or cause.

Constructive Dismissal: In Malaysia, the concept of constructive dismissal is also recognised by the court and it will treat a resignation as a dismissal if the resignation is involuntary or under threat of dismissal. Stanley Ng Peng Hon v. AAF Pte. Ltd. (1979) 1 MLJ 57.

Remedies Dismissal Without Just and CauseReinstatement: This is the primary relief conferred on the Industrial Court by the Industrial Relations Act 1967 (IRA).

Monetary Compensation: Compensation can be awarded to a workman who had been dismissed without just cause or excuse up to a maximum of 24 months in pack pay plus one month for every year of service served by the employee.

Monetary Compensation & Reinstatement.

Dismissal Risks To Employers

Malaysian Labor and Industrial Law is viewed by a vast majority to offer protection to employees in numerous ways. However recent development shows a small number of companies adopting good human resource and management practices enabling them to address dismissals more effectively which has resulted in companies winning cases.

In 2005, Malaysian employers had paid in arbitrated compensation to former employees approximately RM 28 Million.

Over 3,000 companies were expected to have been brought before the Industrial Court in 2006 to answer allegations that they had wrongfully dismissed their employees.

A total of 2209 labor cases were heard in 2005 for a population of 25 million.

The expected pay outs were estimated to be in the vicinity of RM35 million.

Cases awarded to employees by The Industrial Court of Malaysia gives rise to unexpected manpower costs, substantial legal fees and payouts, with a real possibility of insolvency and bankruptcy faced by the business.

Sample Industrial Court Case

Ex-employee Wins Suit Over Charges He Did External Work

SOURCE: The Star Thursday, Sept 7, 2006

KUALA LUMPUR: A supervisor who was demoted to the position of clerk three years ago because he allegedly did external work during working hours won his case in the Industrial Court.

MEC Forwarding System Sdn Bhd was ordered to pay K. Ramachandran a total of RM114,917.40 in back wages and compensation in lieu of reinstatement.

Court chairman N. Rajasegaran ruled in an award handed down last Friday that the international freight forwarding company based at KL International Airport had not proven the charge of misconduct against Ramachandran.

He added that the companys act of reducing Ramachandrans salary of RM2,974 by RM500 was sufficiently serious enough to justify his leaving his employment.

K. Ramachandran was an operations supervisor before he quit on June 14, 2003.

Statistics of Cases

Employment Practice Liability InsuranceOn the scenario presented, we identified an opportunity in the provision of a professional Employment Practice Liability Insurance policy to protect businesses from potential wrongful dismissal compensation.

This is applicable for both the SMI and MNC companies as long as a company employs people.

The risks is huge for the small and medium sized companies given compensation awards in recent times puts a company into significant financial difficulty and in some instances winding up of a business.

Professional legal help from IR Lawyers (Specialist) ranges from RM 25,000 to RM 50,000 or higher if the case is escalated to Court of Appeal and High Court.

Current Solution LaunchedApril 3, 2014, I-HR Consulting Sdn Bhd and Tune Insurance Malaysia Berhad collaborated to offer first of its kind solution called HR Risk Management.Initiative launched and commended by HR Minister Y.B. Dato Sri Richard Riot JaemHR Risk Management: a 3 in 1 solution offering SMEs Access to HR Knowledge and Content via a HR Portal www.ihrnet.comReal-time Advisory on HR matters provided by a team of consultants with extensive HR and IR experience.Coverage of up to RM 100,000 to protect companies against wrongful dismissal claims by an employee.This addresses a gap in the market for HR and Employment Practice Risk Management.Exclusively available through iHR Consulting and starting from as little as RM1,500 per year for all this.


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