Disclaimer: The following is merely the author’s academic opinion and does not in any way constitute legal advice or other professional advice. Formal legal advice should be sought.

A common clause governing the termination of a contract of employment, whether in the context of a probation or not, would be as follows:

a) “During probationary period, two (2) weeks written notice or salary in lieu of notice is required if employment is to be terminated by either party. Upon confirmation, one (1) month’s notice or salary in lieu of notice is required by either party. In case of termination, your salary will be retained subject to income tax clearance from relevant authorities.”[1]

b) “Either party may terminate this contract by giving to the other, in writing, one (1) day’s notice or pay-in-lieu of such notice at any time whilst on probation and one (1) month’s notice or pay-in-Iieu of such notice, upon confirmation.”[2]

c) “Tuan/puan boleh diberhentikan daripada jawatan bila-bila masa selepas diberi sebulan notis atau sebagai ganti notis dibayar sebulan gaji bersih, dengan tidak diberi sebarang sebab.”[3]

Can an employer, relying on a case like Equatorial Timber Moulding Sdn Bhd, Kuching v John Michael Crosskey [1986] 2 ILR 1666 [hereinafter referred to as Equatorial Timber], terminate an employee immediately and refuse to pay the employee’s salary in lieu of notice?[4]

After all, the Industrial Court in Equatorial Timber held that:

“8. … there is an abundance of authorities to support the view that an employer has a contractual right to terminate the services of a probationer without notice and without assigning any reasons whatsoever. And no enquiry need to be held for such a purpose, for termination of service of the probationer during the probationary period is not a punishment or dismissal but simply that of termination – See Tan Choon Hoe vs. Hotel Continental Sdn. Bhd., Penang (Award No. 2376)” (emphasis mine)

At the outset, it must be noted that the above cited extract of Equatorial Timber’s judgement was cited approvingly by the High Court in Bon Ton Sdn Bhd (Bon Ton Resort Langkawi) v Bennett Subash Peter & Anor [2017] MLJU 2207 and Pesaka Capital Corporation Sdn Bhd lwn Khaliah Bte Abbas dan Satu lagi [1995] MLJU 167 [hereinafter referred to as Bon Ton and Pesaka Capital respectively]. Both Bon Ton and Pesaka Capital will be addressed below.

Do the courts recognise and enforce the terms of termination clauses, even in the context of probationers?

In Lembaga Kemajuan Wilayah Kedah (KEDA) v Puan Nur Dini binti Mohd Noh [2018] MLJU 75, Condition 4(f) of the Letter of Offer allowed for termination “at any time by one month’s notice or a month’s salary in lieu of the said notice without the need to give any reasons.”

The Court of Appeal held that, “[30] … Based on Abdul Rauf Alip’s case (supra), which had referred to the Privy Council decision on Government of Malaysia v Lionel [1974] 1 MLJ 3, we were in agreement with Keda that by virtue of condition 4(f) of the Letter of Offer, Keda had every right to terminate the Plaintiff’s contract of employment as a probationer without assigning any reason for the termination (but in this case Keda did give reason for the termination) by paying one month’s salary in lieu of notice.” (emphasis mine)

In Hashim bin Hassan v Floatech (M) Sdn Bhd [2017] MLJU 1901, it was a term of the contract of employment that “during [Mr Hashim’s] probationary period, [his] service is terminable by either party on one (1) month notice without assigning any reasons whatsoever.”[5]

The High Court held that “… the defendant employer was fully entitled to have terminated the services of En. Hashim with one month’s notice.”[6]

The High Court in Shaffarizan bin Mohamad v Government of Malaysia c/o Attorney Generals Chambers & Anor [2015] 7 MLJ 504 held that “… the applicant relationship with the respondents would be based on the letter of appointment and the Lampiran A. Thus the termination of the applicant by giving him one month notice was valid and in accord with the letter of appointment and reg 50(1) of the Regulation 2012.” (emphasis mine)

There are a number of Industrial Court decisions wherein the Court states as-a-matter-of-fact that under the contract of employment, a probationer was entitled to x duration notice or salary in lieu of the notice and the employee was either asked to serve out the notice period or was paid salary in lieu of the notice.

Some recent examples include:

i) Adriana Abu v Mass Rapid Transit Corporation Sdn Bhd [2019] 1 ILR 549

“[22] The claimant was accorded with her contractual notice of one month and informed that her last date of service would be 13 March 2017.”

ii) Chandrannayuddu Letchumanan v Aker Solutions Malaysia Sdn Bhd [2018] 2 LNS 2680

“[31] … According to the letter of non-confirmation dated 3 July 2014, the Company officially informed the Claimant that they decided not to confirm the Claimant’s services with the Company by giving him two (2) weeks in lieu of notice as required in the employment offer letter dated 1 August 2013.”

iii) Mohd Zulhilmi Othman v Ranhill Capital Sdn Bhd [2018] 2 LNS 2667

“[17] Based on the evaluation carried out on the 01.06.2016 the Company found the Claimant’s performance unsatisfactory. vide letter dated 01.06.2016 the Company informed the Claimant that:

“At the end of that period you were found not to meet the Company’s expectations and therefore found not suitable for the position.

As such the Company is hereby invoking item 2-probation and item 10- Termination of your letter of appointment dated 12.01.2015, and has decided to exercise the right to execute the said clauses and wish to inform you that the required two (2) week notice in lieu effective 01.06.2016 is hereby served.””

iv) Jaspal Kaur Ajit Singh v Leonfast Sdn Bhd [2018] 4 ILR 360 [hereinafter referred to as Jaspal Kaur]

“[5] On 29 May 2017, the respondent terminated her employment contract with effect from 31 May 2017. She was given early release and her last working day was on 29 May 2017. She was also paid two weeks’ notice salary in lieu of notice  from 1 June 2017 until 14 June 2017 as provided in the first para of cl. 4 in the terms and conditions of service of her offer of employment even though she need not be paid in accordance with the provision in claimant’s as set out above.”

In Jaspal Kaur, the Claimant signed a declaration that “if or at anytime after [her] employment, the information given on this form are found to be false, incorrect or incomplete, the Company reserves the right to dismiss [her] service without notice or compensation.” It was established that the Claimant knowingly lied on the form. Thus, the Industrial Court was right to have concluded that in light of this, the employer need not have a paid the salary in lieu of notice.

An examination of the full judgements of the abovementioned cases reveal that there is no discussion of an employer not having to honour the terms of a termination clause in a contract of employment.

Thus, it can safely be concluded that the courts do recognise and would enforce the terms of termination clauses even in the context of probationers.

How should Equatorial Timber be interpreted in light of the above?

It is submitted that Equatorial Timber should be taken to be the general rule wherein a contract of employment does not have any clause governing termination, particularly regarding the duration of notice to be provided and the provision for salary in lieu of that notice.

Should the contract of employment have such a clause, it is clear that it will be enforced by the courts (as seen in the Industrial Court, High Court, and Court of Appeal cases cited above).

If one were to read Equatorial Timber as negating terms of a contract of employment governing termination, this interpretation would be contrary to the principle of freedom of contract & would be highly unequitable.

What about Bon Ton and Pesaka Capital?

In Bon Ton, the learned judge cited Equatorial Timber to support the proposition that “principally, the court recognized the rights of the employer either to confirm or to terminate the services of the probationer at the end of the probation period. If the service of a probationer is terminated during the probationary period, then the employer must show that the termination was made on the grounds of misconduct or any sufficient reasons.”

In Pesaka Capital, learned counsel for the employer relied upon Equatorial Timber to argue that the employee has no right to his position after his service has been terminated at the end of the probation period. Azmel J agreed with the learned counsel’s arguments.

On appeal, the coram of Shaik Daud, Siti Norma Yaakob and Ahmad Fairuz JJCA reversed Azmel J’s decision.[7]

Notwithstanding that, it is clear that Equatorial Timber was not relied upon in Bon Ton and Pesaka Capital in the context of termination clauses re probationers.


Clauses in an employment contract governing termination of the contract must be honoured by a company, even in cases involving probationers. A person terminated during his/her probationary period should either be asked to serve out the notice period or be paid salary in lieu of the notice.

[1] Lester Teoh Tong Chua v The Emperor Hotel Sdn Bhd [1996] MLJU 250 (HC)

[2] Jebsen & Jessen Engineering (M) Sdn Bhd v David A/L Sandanasamy and Anor [2010] 5 MLJ 628 (CA)

[3] Lembaga Kemajuan Wilayah Kedah (KEDA) v Puan Nur Dini binti Mohd Noh [2018] MLJU 75 (CA)

[4] Assuming there is a clause/term in the contract of employment providing for notice and salary in lieu of notice

[5] see paragraph 27 of [2017] MLJU 1901

[6] see paragraph 36 of [2017] MLJU 1901

[7] Khaliah Bte Abbas v Pesaka Capital Corp Sdn Bhd [1997] 1 MLJ 376 (CA)