EMPLOYMENT & HR LAW
How to conduct a domestic inquiry in Malaysia before you dismiss
Sacking an employee for misconduct without a proper inquiry is the fastest route to an unfair-dismissal claim. Here is the Section 14 due-inquiry duty, the step-by-step procedure, the suspension rules, and exactly what it costs at the Industrial Court if you get it wrong.
A domestic inquiry (DI) is the internal, court-style hearing a Malaysian employer holds to decide whether an employee is guilty of misconduct before dismissing them. Section 14(1) of the Employment Act 1955 requires a “due inquiry” first, and at the Industrial Court the burden of proving just cause sits entirely with the employer. Get the process wrong and a single dismissal can cost up to 24 months’ back wages.
- The law requires a “due inquiry”, not necessarily a full formal DI. Section 14(1) of the Employment Act 1955 makes it a statutory duty to inquire before dismissing for misconduct; a structured domestic inquiry is the safest way to discharge that duty.
- You may suspend the employee pending the inquiry — but only for up to two weeks, on no less than half pay. If the inquiry clears them, the employer must restore every ringgit withheld (Section 14(2), Employment Act 1955).
- Natural justice is the whole game. The employee must be told the charges, given time to reply, allowed to bring witnesses and be represented, and heard by an impartial panel with no stake in the outcome.
- The employer carries the burden of proof, on the balance of probabilities. At the Industrial Court it is the company — not the employee — that must prove the misconduct happened and that dismissal was justified.
- Skipping the inquiry is not automatically fatal, but it is expensive. A missing or defective DI can be “cured” by a full rehearing at the Industrial Court, where an unfair dismissal is capped at 24 months’ back wages (12 months for probationers).
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Misconduct is where well-meaning employers get into the most trouble. The instinct — when someone is caught falsifying a claim, abandoning their post or worse — is to terminate on the spot. Under Malaysian law, that instinct is a liability. A dismissal for misconduct is only ever as strong as the inquiry behind it, and the burden of proving that inquiry was fair falls on the employer, not the employee. This guide walks through the process the way that survives a challenge.
What a domestic inquiry is, and whether the law requires one
What is a domestic inquiry, and does Malaysian law require one?
A domestic inquiry is an internal hearing, modelled on a courtroom, at which an employer decides whether an employee committed the misconduct alleged. Section 14(1) of the Employment Act 1955 makes a “due inquiry” a statutory obligation before an employer may dismiss an employee, or impose any major penalty, for misconduct.
The Employment Act does not spell out what a “due inquiry” must look like. As one Malaysian employment-law firm puts it, “a ‘due inquiry’ does not always necessitate a formal inquiry… however, many employers prefer the structured approach of a formal domestic inquiry for greater transparency and fairness”, per Aqran Vijandran. In practice, the domestic inquiry is the safest and most defensible way to prove you gave the employee a fair hearing.
The obligation itself is not optional. Under the Employment Act it is a statutory duty on the employer to conduct a due inquiry to determine whether an employee is guilty of misconduct before that employee can be dismissed or a major penalty imposed, per Gan & Zul Advocates & Solicitors. Since the Employment (Amendment) Act 2022 took effect on 1 January 2023, the Act covers employees regardless of wage, so this duty now reaches far more of a typical Malaysian workforce than it once did — see our Employment Act employer guide for the wider picture.
When to hold one — and whether you can suspend first
When must an employer hold a domestic inquiry, and can you suspend the employee first?
Hold a domestic inquiry before you dismiss, downgrade or impose any major penalty on an employee for misconduct — never after the decision is already made. You may suspend the employee while you inquire, but Section 14(2) of the Employment Act 1955 limits that suspension to a maximum of two weeks on no less than half pay.
Suspension pending inquiry is a safeguard, not a punishment, and the law treats it that way. The employer may suspend the employee from work for a period not exceeding two weeks but must pay not less than half of their wages for that period; and if the inquiry discloses no misconduct, the employer must restore the full amount of wages withheld, per D&P Law Group. Suspending someone indefinitely on no pay while you “investigate” is itself a breach an employee can act on.
One distinction employers miss: suspension pending inquiry (up to two weeks, at least half pay) is separate from suspension as a punishment after a finding of guilt, which Section 14(1) caps at two weeks without wages. Do not confuse the two, and do not let a “temporary” suspension drift on for a month while the paperwork sits on someone’s desk.
The step-by-step domestic inquiry process
What are the steps in a Malaysian domestic inquiry?
A defensible domestic inquiry runs a fixed sequence: a show-cause letter, a review of the reply, a formal charge, an optional suspension, an impartial panel, the hearing itself, the panel’s findings on the balance of probabilities, and a documented decision with a right of appeal. Skipping a stage is where most challenges succeed.
The table below sets out the sequence most Malaysian employers and their advisers follow, based on the standard practice described by firms such as L Y Lu & Co:
| Step | What it involves | Why it matters |
|---|---|---|
| 1. Show-cause letter | State the alleged misconduct clearly and ask for a written explanation, commonly within 24–72 hours. | Puts the employee on notice and gives a first chance to respond. |
| 2. Review the reply | Read the explanation on its merits before deciding whether to proceed. | A satisfactory reply can close the matter without a hearing. |
| 3. Notice of charge | Set out the specific charges and the date, time and venue of the inquiry. | The employee must know exactly what they are answering. |
| 4. Suspend if needed | Optional: suspend up to two weeks on at least half pay while you inquire. | Protects evidence or the workplace without pre-judging guilt. |
| 5. Appoint an impartial panel | A chairperson and members with no involvement in the incident. | Any bias in the panel can void the whole inquiry. |
| 6. Hold the hearing | Both sides present evidence and witnesses; the employee may be represented and may cross-examine. | This is where natural justice is actually delivered. |
| 7. Panel findings | Decide, on the balance of probabilities, whether each charge is made out. | The panel finds the facts; it usually does not choose the penalty. |
| 8. Decision & outcome letter | Management sets the penalty, issues a written outcome, and allows an internal appeal. | Documents both just cause and a fair process for later. |
Indicative sequence for a formal domestic inquiry; the exact steps should be adapted to your handbook and the seriousness of the alleged misconduct.
Two things carry disproportionate weight later. The show-cause letter should state the misconduct clearly and ask for a written response, per L Y Lu & Co; a vague “explain yourself” note is not a charge. And documenting everything — minutes, attendance, the evidence tabled — is what lets you prove months later that the hearing was fair.
The rules the inquiry panel cannot skip
What natural-justice rules must the inquiry panel follow?
Natural justice gives the accused employee three non-negotiable rights: to be informed of the specific charges, to be given a genuine opportunity to be heard and to defend themselves, and to be judged by an impartial panel. An inquiry that denies any one of them is procedurally unfair, however clear the underlying misconduct.
In practice, a Malaysian employee at a domestic inquiry must be notified of the charges, allowed to defend themselves, permitted to call witnesses, given the chance to review the evidence against them, and allowed to be represented by a colleague or union representative, per L Y Lu & Co. The employee is also entitled to question the employer’s witnesses. Denying representation, or springing new charges on the day, are the kinds of shortcuts that turn a winnable case into a lost one.
The panel matters as much as the process. A panel that includes the manager who made the complaint, or anyone who witnessed the incident, is not impartial — and a finding from a compromised panel is worth little at the Industrial Court. The same duty-to-inquire principle underlies the way employers must handle a workplace sexual-harassment complaint, where a botched inquiry carries its own penalties.
Who proves what, and to what standard
Who has to prove the misconduct, and to what standard?
The employer bears the burden of proof, and the standard is the civil one — the balance of probabilities, not the criminal “beyond reasonable doubt”. If a dismissed employee brings a claim, it is the company that must prove both that the misconduct happened and that it justified dismissal.
This is settled Malaysian law. In the leading authority, the Federal Court framed the Industrial Court’s task in a dismissal case in one sentence:
“If the employer chooses to give a reason for the action taken by him, the duty of the Industrial Court will be to enquire whether that excuse or reason has or has not been made out.” — Goon Kwee Phoy v J & P Coats (M) Bhd, cited by MahWengKwai & Associates
The same source cites Ireka Construction Berhad v Chantiravathan Subramaniam James for the plain rule that “the burden of proof lies on the employer to prove that he has just cause and excuse” for the dismissal, per MahWengKwai & Associates. That is why the quality of your inquiry matters so much: it is the evidence you will lean on to discharge that burden.
Two forms of fairness are in play, and you need both. Procedural fairness is whether the process — charges, hearing, impartial panel — was sound. Substantive fairness is whether the misconduct actually justified the penalty. A perfectly run inquiry that dismisses someone for a trivial first offence can still be substantively unfair, and a proven serious offence can still be undone by a procedurally unfair hearing.
What it costs if you skip or botch it
What happens if you skip or get the domestic inquiry wrong?
Skipping the inquiry is not automatically fatal — a missing or defective domestic inquiry is treated as an irregularity that can be “cured” by a fresh hearing at the Industrial Court. But that is cold comfort: you then have to prove the misconduct from scratch in a public tribunal, and an unfair dismissal is capped at 24 months’ back wages.
The leading cases are clear that a procedural gap alone will not save an employee. As Gan & Zul summarises the position, “a defective inquiry or failure to hold a DI is not a fatality but only an irregularity curable by de novo proceedings before the Industrial Court” — the principle set in Dreamland Corporation (M) Sdn Bhd v Choong Chin Sooi (Supreme Court, 1988) and Wong Yuen Hock v Syarikat Hong Leong Assurance Sdn Bhd (Federal Court, 1995). In plain terms: the court can rehear the whole matter itself.
The catch is that a “curable” defect still lands you in front of the Industrial Court carrying the full burden of proof, with no inquiry record to rely on. The route and the exposure look like this:
| Stage | What happens |
|---|---|
| File a claim | The dismissed employee lodges a Section 20 representation with the Director General of Industrial Relations within 60 days of dismissal. |
| Conciliation | The Industrial Relations Department attempts a settlement; unresolved cases proceed to the Industrial Court. |
| Hearing | The employer must prove just cause and excuse on the balance of probabilities — effectively a fresh inquiry, in public. |
| Remedy if unfair | Reinstatement, or compensation and back wages capped at 24 months (12 months for probationers) under the Second Schedule of the Industrial Relations Act 1967. |
Section 20 route and back-wages cap per MahWengKwai & Associates.
For a mid-level employee on RM6,000 a month, a maximum back-wages award runs to roughly RM144,000 before costs and management time — which is why a properly run inquiry up front is almost always cheaper than the alternative. Getting a genuinely difficult exit right — whether it is misconduct, a probationer termination or a retrenchment — is a skill worth building in your managers before you need it.
How Carriera helps — and what we don’t do
Where does Carriera fit in a disciplinary process?
No — Carriera does not conduct domestic inquiries, act as an inquiry panel, or give legal advice; a serious or contested case belongs with your employment lawyer or IR consultant. Where we help is before and after: training your managers to run the process correctly, and recruiting a permanent replacement once a role opens up.
As an HRD Corp Approved Training Provider, Carriera Academy runs claimable Employment Act, HR and payroll training — the kind that gives your line managers the confidence to issue a proper show-cause letter and sit on a fair panel, funded from your existing levy. See how the funding works in our HRD Corp claim guide.
And when a difficult exit does leave a gap, our recruitment team sources permanent white-collar talent for 50+ companies across sectors including logistics and freight, manufacturing and accounting and finance — so a departure becomes a considered rehire, not a scramble.
Still have questions?
Domestic inquiry — employer FAQ
Is a domestic inquiry compulsory in Malaysia?
Can I suspend an employee during a domestic inquiry?
What standard of proof applies at a domestic inquiry?
Is my dismissal automatically unfair if I did not hold a domestic inquiry?
How long does an employee have to challenge a dismissal in Malaysia?
Does Carriera conduct domestic inquiries or give legal advice?
Sources: the Section 14 “due inquiry” duty and the Section 14(2) suspension rule (two weeks, at least half pay, full restoration if cleared) per D&P Law Group, cross-checked against the Employment Act 1955 (Act 265); the statutory-obligation framing and the “curable irregularity” principle (Dreamland Corporation, Wong Yuen Hock) per Gan & Zul; the step-by-step procedure, show-cause letter and natural-justice rights per L Y Lu & Co; the “due inquiry need not be formal” point per Aqran Vijandran; the employer’s burden of proof (Goon Kwee Phoy, Ireka Construction), the Section 20 sixty-day route and the 24-month back-wages cap per MahWengKwai & Associates. Verified 10 July 2026. This article is general information for employers, not legal advice; take advice on your specific facts before acting.
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