MANY Malaysian employers choose to retain experienced employees beyond the statutory retirement age of 60. Their expertise, technical knowledge and institutional memory often make that an easy business decision.
However, a recent Industrial Court ruling highlights an important legal consequence: once an employer allows an employee to continue working beyond retirement age, it may no longer be able to rely on age alone as a basis for dismissal.
In the case, the employee continued serving as a Project Manager for several years after turning 60, with no significant changes to his terms of employment.
The employer later terminated his employment, citing several reasons, including the cessation of tunnel and bridge formwork projects, the fact that he had exceeded retirement age, and a lack of active work assignments during the preceding 12 months.
After issuing the termination notice, the employer also raised allegations of misconduct and conflict of interest, claiming that the employee was operating a competing business.
The employee challenged the dismissal, arguing that it was without just cause or excuse.
The Industrial Court ruled in his favour.
The Court held that the employer could not rely on retirement age after voluntarily retaining the employee for several years beyond 60.
While Malaysian law sets 60 as the minimum retirement age, employers are not required to terminate employees once they reach that age.
More importantly, the Court found that the employer’s conduct demonstrated a clear intention to continue the employment relationship.
The company had continued paying the employee’s salary and benefits, granted salary increments, and even increased his Employees Provident Fund (EPF) contribution rate from 4% to 8% after he had passed the retirement age.
These actions were inconsistent with any suggestion that the employment relationship had effectively ended at 60. Having chosen to retain the employee, the employer was still required to establish a valid reason for termination and comply with proper procedures.
The Court also rejected the employe’’s attempt to rely on allegations that surfaced only after the dismissal notice had been issued.
Reaffirming established principles, the Court held that employers are generally bound by the reasons given at the time of termination. Allegations raised later are often viewed as an afterthought and cannot ordinarily be used to retrospectively justify a dismissal.
The ruling offers several important lessons for employers.
Once an employee is retained beyond the retirement age of 60, retirement may no longer be available as a straightforward ground for termination, particularly where the employer’s conduct indicates an intention to continue the employment relationship.
Any subsequent dismissal must be supported by just cause and carried out in accordance with procedural fairness.
Employers should also clearly document post-retirement employment arrangements. Whether employment continues on a fixed-term basis, a renewable contract, or another revised arrangement, clear documentation can reduce uncertainty and strengthen the employer’s position in the event of a dispute.
Equally important, employers should ensure that any grounds for dismissal are properly investigated and clearly articulated before termination takes place.
Attempts to introduce new reasons after the fact may not only fail but could also undermine the employer’s credibility before the Industrial Court.
As this decision demonstrates, both substance and process remain critical in employment disputes. ‒ June 10, 2026
Leonard Yeoh is a Senior Partner and Stella Beh an associate with the law firm, Tay & Partners.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
Main image: HR Asia
