Under Malaysian law, where an employee is subject to the Employment Act 1955 ("Act"), it is a

statutory obligation imposed on the employer to conduct a "due inquiry" to ascertain whether an
employee is guilty of misconduct before an employee can be dismissed or before any other major
penalty is imposed (See: Section 14(1) of the Act).

However, Section 14(1) of the Act does not specify what amounts to "due inquiry" or how an inquiry
should be conducted.  While "due inquiry" has a different meaning from "domestic inquiry", some
people use these words interchangeably. While a domestic inquiry, if done properly, can amount to
"due inquiry" under the law, it does not necessarily mean that a full blown domestic inquiry must be
conducted in every case.

Given the complexity above, it natural to find employers (especially those without a proper HR
support) who are clueless as to how to conduct a domestic inquiry. The consequence can be serious as a
failure to properly conduct an inquiry could result in an unfavourable finding from the Industrial Court
in the event the employee files an unfair dismissal claim.

As a general rule, it is important to remember that no employee should be dismissed for misconduct
unless the employee concerned has been given an opportunity to defend himself/herself or has been
given an opportunity to be heard.

In order to allow employees to properly defend themselves, employers can hold a domestic inquiry
which will help them decide whether the misconduct was committed and what sort of punishment
should be meted out.

We have set out below the basic steps in holding a domestic inquiry.  Again, it is important to
remember that the law does not require that an employer comply with all these steps before it amounts
to a "due inquiry" but these are the steps that should be taken as a best practice.

Issuance of a Show Cause Letter

It is important to state the allegations of the misconduct clearly and precisely to the employee. This
letter is to call for an explanation for the alleged misconduct and to allow the employee to defend or
explain the situation, as well as to state why the employee believes disciplinary should not be taken. A
timeline to respond to such letter must be stipulated in the letter. Also, the show cause letter should be
drafted in a clear and unambiguous language. Whenever possible, the relevant clause of the company's
policy and/or employment contract should be cited.

Example of a badly drafted show cause letter:

"You have breached Company policy and procedure relating to the approval of payment
vouchers."

What would be better:

"On 23 January 2015, you had approved payment voucher no. 12455 dated 21 January 2015
("Voucher"). The Voucher was for payment of the sum of RM10,000.00 to ABC Sdn Bhd for
purchase of stationery. As set out in the Company's Approval Authority Matrix, you are only
authorised to approve payments up to RM5,000.00 only and any payment exceeding this amount
must be referred to and approved by the General Manager. Your approval of the Voucher in
excess of your approval authority limit is in breach of the Company's policies and procedures
relating to the approval of payment vouchers as set out in Clause 3.5 of the Controller's
Handbook."

Response to the Show Cause Letter

Issuance of Notice of Domestic Inquiry

The Notice of Domestic Inquiry should comprise of the following:-

1. specific charge which states the type of offence, the date, the time and place where the offence
took place
2. details of the domestic inquiry (ie: date, time and place)
3. inform the employee his/her right to bring along witnesses or any documentary evidence, if
any.

Suspension

If it is necessary, the employer may place the employee on suspension pending further investigation of
the allegation in respect of the misconduct. The suspension can be issued together with the show cause
letter, or before the domestic inquiry. A suspension may be granted if the employer feels that it would
prevent interference into the investigation or further misconduct.

Under the Act, the maximum period of suspension is not more than 2 weeks with half wages. However,
the employer must pay back the remaining wages to the employee if he is later found to be not guilty.
This maximum period of suspension only applies to employees subject to the Act.

Appointment of the Panel of Domestic Inquiry

The panel (odd number of persons) must consists of people who are neither directly nor indirectly
connected to the matter. Panel members should be employees who are of a higher rank or seniority than
the accused employee. Ideally, the employee's direct manager should not sit on the panel as it could
give the appearance of bias. To ensure that the domestic inquiry is conducted adequately, the chairman
of the panel should have some knowledge of the domestic inquiry process, procedures and regulations
relating to employment law.

Hearing of Domestic Inquiry

 The prosecution (company) will begin first. The prosecuting officer [usually a senior
employee of the Company] will make out a case against the accused employee. He will
present documentary evidence which supports the charges, and also call witnesses who can
testify about the accused employee's misconduct.
 The accused will then be allowed to question each of the witnesses on the evidence they have
given.
 After that, the accused should be given an opportunity to present his defence, and produce his
own witnesses and documentary evidence.
 The accused as well as his/her witnesses will be questioned by the prosecutor.
 Ideally, proceedings should be recorded and notes taken. Where there is a tape-recording and
a transcript is prepared, the accused should be given an opportunity to examine and approve
the transcript for accuracy.
 At the conclusion of the hearing, the panel will discuss and study the evidence given by both
parties. Thereafter, the panel will make a finding as to whether the employee is guilty of the
misconduct. If the employee is guilty, the panel may also make recommendations to the
management of the company regarding what disciplinary action should be taken.

Conducting a domestic inquiry will naturally be a time-consuming affair for all involved. It may not be
necessary for all cases especially where the misconduct is minor.  However, where allegations are
serious and/or numerous, it is preferable for the company to invest the time and effort in getting the
domestic inquiry right.

DOMESTIC INQUIRY

A domestic inquiry was born out of two circumstances. The first is the requirement of the
Employment Act, 1955 and the second is the Rule of Natural Justice.

According to the Employment Act 1955, an employer is required to carry out a due inquiry in the
event of a misconduct committed by an employee before the employer can carry out a punishment.
This is a statutory obligation imposed on the employer.

Following the Rule of Natural Justice in Malaysia, no one shall be condemned unheard, the context of
DI is applied as follows:

The charged employee must have reasonable notice of the case they have to meet.

The employee must have reasonable opportunity of being heard in their own defense; where the
judge should listen to both sides and this includes the opportunity to face and challenge their
accusers, witnesses and whatever evidences there are against them.

The hearing must be by an impartial tribunal i.e. a person who is neither directly or indirectly the
party to the case.

A domestic inquiry is needed before before the employer can carry out a punishment.

Domestic Inquiry Procedures

1. A letter that includes the specific charge of the offence, date, time, place and also which rules or
regulations have been violated, is served to the employee alleged of misconduct.

2. Create a panel made up of neutral parties:

 Chairman (not involved in the investigation),

 Two independent panel members (may be employees from another department)

 A prosecutor (may be a personnel officer in the HR department)

3. The prosecution will begin first in the hearing. They are to make out a case against the accused first
by producing witnesses who have direct knowledge of case.

4. The accused (the employee alleged to have committed the offence), is then allowed to question
(cross examine) each of the witnesses on the evidences they have given.

5. Then, the accused will be asked to enter their defence i.e. to tell their side of the story. The accused
may produce witness or witnesses to support what they have said. The accused as well as their
witnesses are subject to cross-examination by the prosecutor. The chairman will guide the proceeding
and to record the evidences in writing.
6. After the hearing, discussion will be held and study the evidences given by both parties. Finally the
chairman will submit the panel's finding and recommendations to the Management for their decision.

7. Management's decision generally falls into three categories:

 To dismiss the employee without notice; or

 Downgrade the employee; or

 Impose any other lesser punishment as deemed just and fit, and where a punishment of
suspension without wages is imposed, it shall not exceed a period of two weeks.