How to Conduct a Domestic Inquiry for Employee Misconduct in Malaysia

For Employers Facing Employee Misconduct

If you’re an employer in Malaysia dealing with an employee who has committed misconduct, you might feel frustrated, anxious, or even pressured to act quickly. Whether it’s repeated insubordination, theft, harassment, or serious breach of trust, it’s essential to manage the situation correctly because one misstep could expose your company to legal claims for unfair dismissal.

Domestic Inquiry (DI) is a critical step when facing misconduct issues. Done right, it protects both your company’s interests and the employee’s rights.

When Misconduct Disrupts Your Workplace

Misconduct in the workplace can take many forms. Perhaps one of your employees was caught falsifying records. Maybe another showed aggressive behaviour toward colleagues, or has a record of unexplained absences despite multiple warnings.

You may feel that disciplinary action or termination is justified in these cases. But before taking any irreversible steps, the law requires you to act fairly and reasonably. A properly conducted Domestic Inquiry process gives the employee a chance to respond while helping you show that your decision wasn’t arbitrary or discriminatory.

What Malaysian Law Says About Domestic Inquiries

Under Malaysian law, employers are not always legally required to conduct a Domestic Inquiry before terminating an employee. However, Industrial Courts view it as best practice, especially when the reason for termination is misconduct.

Here’s what you should know:

• Employment Act 1955
  • Sets out minimum employment standards and disciplinary processes.
• Industrial Relations Act 1967
  • Protects employees from unfair dismissal and allows them to challenge wrongful termination.
• Code of Conduct for Industrial Harmony 1975
  • Not legally binding, but frequently cited in court for fair disciplinary practices.

The principle of natural justice applies: employees must be allowed to explain themselves before making any punitive decision.

Failing to conduct a proper Domestic Inquiry—especially in cases of serious misconduct—can render your termination decision procedurally unfair, even if the misconduct is proven.

How Legal Support Helps You Get It Right

A Domestic Inquiry is about reducing your legal risk and showing that your company acted responsibly. Legal advice can help you:

• Draft accurate and compliant Show Cause and Charge letters
• Select a neutral and credible inquiry panel
• Structure the inquiry process so that it follows fair procedures
• Document everything in a way that supports your position if the matter escalates to the Industrial Court

This ensures your disciplinary process stands up to scrutiny if challenged by the employee or authorities.

Practical Steps to Conduct a Fair Domestic Inquiry

Here’s a realistic step-by-step guide you can follow to carry out a Domestic Inquiry (after preliminary investigation) in Malaysia:

1. Issue a Show Cause Letter

Start by formally notifying the employee of the alleged misconduct. This letter should:

• State the misconduct clearly (e.g. “unauthorised absence on 5 and 6 June”)
• Ask the employee to respond in writing within 24–72 hours
• Allow the employee to give their side of the story

2. Review the Employee’s Reply

Evaluate their response fairly and objectively:

• If the explanation is satisfactory, you may end the process or issue a warning
• If it’s inadequate or inconsistent with the facts, proceed to the next step

3. Serve a Letter of Charge

Formally charge the employee with misconduct and inform them that a Domestic Inquiry will be held. This letter should:

• Specify the misconduct clearly
• Include the date, time, and venue of the inquiry
• Notify them of their right to bring witnesses or be represented (e.g. by a colleague or union rep)

4. Suspend the Employee (With Pay)

To protect the integrity of the inquiry process, you may suspend the employee with full pay. This helps prevent:

• Tampering with evidence
• Influencing witnesses
• Escalating tensions in the workplace

5. Appoint a Neutral Inquiry Panel

Form a Domestic Inquiry panel with members not directly involved with the case. A typical panel includes:

• A Chairperson (neutral and senior enough to lead the session)
• Two other panel members with no conflict of interest

Avoid including immediate supervisors or anyone with a stake in the outcome.

6. Hold the Inquiry Session

Conduct the Domestic Inquiry fairly and professionally:

• Let the employee present their defence
• Allow both sides to call and question witnesses
• Review all evidence, including documents, emails, CCTV footage, etc.
• Keep detailed notes or transcripts

If the employee refuses to attend, the inquiry can proceed in absentia if they’ve been given fair notice.

7. Decide on the Outcome

Once the inquiry is completed, the panel should produce a written report with its findings:

• Was the misconduct proven?
• Was it severe enough to justify dismissal?
• Are there mitigating factors?

Management will use this report to decide whether to dismiss the employee, issue a lesser penalty, or close the case.

8. Document Everything

Keep records of every step taken:

• Show Cause Letter and reply
• Letter of Charge
• Suspension notice
• Domestic Inquiry notice and hearing notes
• Final decision and justification

This documentation will be crucial if the employee files a claim for unfair dismissal.

Final Thoughts: Get It Right the First Time

Handling employee misconduct is never easy, but conducting a proper Domestic Inquiry can help you follow best practices and protect your company from costly legal disputes.

If you’re unsure how to structure the inquiry, draft the letters, or chair the session fairly, it’s wise to seek legal advice before proceeding.

Need help managing a misconduct case or conducting a Domestic Inquiry?
Contact an employment law professional today to safeguard your business and make the right decisions confidently.

FAQ

1. Is a Domestic Inquiry (DI) legally required before terminating an employee?

Not always. While not mandatory under Malaysian law, a Domestic Inquiry is highly recommended, especially for misconduct cases. The Industrial Court often considers whether a DI was conducted when evaluating whether a dismissal was fair.

2. What is the purpose of a Domestic Inquiry?

A DI ensures the employee is allowed to respond to misconduct allegations. It helps employers follow due process and protects them against unfair dismissal claims.

3. When should I conduct a Domestic Inquiry?

You should initiate a DI after receiving an unsatisfactory reply to a Show Cause Letter, and if there’s sufficient reason to believe the employee has committed serious misconduct.

4. Can I suspend the employee during the inquiry?

Yes. Employers may suspend the employee with full pay during the inquiry process to prevent interference with witnesses or evidence. This is a neutral administrative step, not a punishment.

5. Who should sit on the Domestic Inquiry panel?

The panel should consist of three neutral individuals, including a chairperson. To ensure impartiality and credibility, none of the panel members should have prior involvement in the case.

6. What rights does the employee have during the inquiry?

The employee has the right to:

• Be notified of the charges
• Defend themselves
• Call witnesses
• Review and challenge evidence
• Be represented (by a colleague or union representative)

7. What if the employee refuses to attend the inquiry?

If the employee has been given proper notice and chooses not to attend without a valid reason, the DI can proceed in their absence. This must be recorded and handled transparently.

8. Can I terminate the employee immediately after the inquiry?

Only if the inquiry findings justify dismissal can management consider the evidence, the seriousness of the offence, and whether the punishment is proportionate. Then, a formal Termination Letter must be issued.

9. What should be included in the termination letter after a DI?

The letter should clearly state:

• The reason for termination
• The effective date
• Details of final salary and benefits
• Any right to appeal

10. What are the risks if I skip the Domestic Inquiry process?

Skipping a DI in a misconduct case could lead to claims of procedural unfairness, even if the misconduct is proven. This may result in costly compensation orders or reinstatement by the Industrial Court.