1. Employers have the prerogative to place employees on PIP
In Exxonmobil Exploration and Production Malaysia Inc. v Menteri Sumber Manusia & Ors [2019] MLJU 614, per Azizah Nawawi J (now JCA):
“The Claimant was to be placed on the PIP, which is the management prerogative of the Company.”[1]
An employee’s refusal to participate in a performance improvement plan (“PIP”) could amount to insubordination.[2] What employees can do when placed on PIP is to participate, but to do so under protest and to make this protest known in writing [as was the case in Cliford Lawrence Patrick v MIMS Medica Sdn Bhd (Industrial Court Award No. 870 of 2023)]
2. Employers should comply with their PIP Standard Operating Procedure (if any)
In Nesarajah a/l Nadarajah v Mahkamah Perusahaan Malaysia & Anor [2023] MLJU 718 [“Nesarajah Nadarajah”], the employer had a standard operating procedure in relation to PIP but the employer did not comply with the same. The High Court held that:
“Based on the above, I am of the considered view that the Company had made a perverse, irrational and unreasonable decision when it failed to take into account the fact that the decision to place the Applicant in PIP was solely made by COW2 himself without the involvement of HR as provided by PIP SOP.”[3]
3. The Courts will look into the targets set
In Hong Leong Islamic Bank Berhad v. Azhar Abdullah & Anor [2020] MLJU 286 [“Azhar Abdullah”], the learned High Court judge held that the targets set must be reasonable:
“… The employee must be given sufficient time and reasonable targets to achieve. Otherwise the whole exercise would be a charade.”[4] (Emphasis ours)
The High Court in Nesarajah Nadarajah was of the view that employers should set SMART targets for PIP:
“Therefore, I view that the learned Industrial Court Chairman had failed to evaluate the failure of the Company to verify of the targets set are in accordance with the “SMART’ approach i.e. targets are specific, measurable, attainable, realistic and timely.”[5] (Emphasis ours)
Employers should engage in discussions with the employee to develop and formulate the targets for the PIP.[6]
4. Employees’ non-objection to the targets set may not be detrimental to the employees
In Azhar Abdullah, the High Court did not construe the employee’s non-objection to the targets against the employee. The High Court held that:
“Therefore it is reasonable to expect an employee who has been placed in PIP to remain silent because of the fear of insubordination. The 1st respondent was already warned of termination. The 1st respondent’s act is therefore consistent with the state of mind of a person who is already facing termination. Therefore, silence on part of the 1st respondent by not objecting to the unrealistic targets does not vitiate his right to raise the issue at the trial.”[7] (Emphasis ours)
5. Ample time and opportunity must be given to the employee to improve his/her performance
The High Court in Azhar Abdullah was of the view:
“… if the opportunity of improving performance is to be an opportunity which is worth anything, then it must carry with it a reasonable opportunity to improve. The employee must be given sufficient time and reasonable targets to achieve. Otherwise the whole exercise would be a charade.”[8] (Emphasis ours)
In Abdul Malek bin Mohamed v MISC Bhd & Anor [2022] MLJU 2026 (HC) [“Abdul Malek”], the employer gave the employee ample time and opportunity:
“[39] … the oral and documentary evidence produced by the Applicant and the Company reflects that the Applicant was accorded with ample time and opportunity to improve his performance.”[9] (Emphasis ours)
In fact, the employer in Abdul Malek went so far as to give the employee coaching and assistance throughout the PIP on areas of performance which needed improvement:
“… Evidently, the Applicant was given ample time, extensive coaching, and assistance on areas of performance that needed to be improved throughout the period of PIP.”[10]
[1] Exxonmobil Exploration and Production Malaysia Inc. v Menteri Sumber Manusia & Ors [2019] MLJU 614 (HC), at paragraph 30; see also Ravi a/l Murugaiah v Volvo Car Manufacturing Malaysia Sdn Bhd & Anor [2022] MLJU 623 (HC), at paragraph 19
[2] See e.g. Sin Kok Foong v Grey Worldwide Sdn Bhd & Anor [2019] MLJU 608 (HC), at paragraphs 17 to 19
[3] Nesarajah a/l Nadarajah v Mahkamah Perusahaan Malaysia & Anor [2023] MLJU 718 (HC), at paragraph 39
[4] Hong Leong Islamic Bank Berhad v. Azhar Abdullah & Anor [2020] MLJU 286 (HC), at paragraph 24
[5] Nesarajah a/l Nadarajah v Mahkamah Perusahaan Malaysia & Anor [2023] MLJU 718 (HC), at paragraph 51
[6] Abdul Malek bin Mohamed v MISC Bhd & Anor [2022] MLJU 2026 (HC), at paragraph 35
[7] Hong Leong Islamic Bank Berhad v. Azhar Abdullah & Anor [2020] MLJU 286 (HC), at paragraph 17
[8] Hong Leong Islamic Bank Berhad v. Azhar Abdullah & Anor [2020] MLJU 286 (HC), at paragraph 24
[9] Abdul Malek bin Mohamed v MISC Bhd & Anor [2022] MLJU 2026 (HC), at paragraph 39
[10] Abdul Malek bin Mohamed v MISC Bhd & Anor [2022] MLJU 2026 (HC), at paragraph 26