Important Note: This article is for general information and educational purposes only—not legal advice. It draws on the Federal Court’s oral judgment delivered on 24 June 2026 as reported by The Edge and Free Malaysia Today, the Court of Appeal’s unreported written grounds (WA‑25‑562‑11/2022), and the MahWengKwai commentary published on 17 December 2025.
For illustration only
How the Federal Court Settled the “Director vs Employee” Debate
In 2019, two shareholders and directors who had helped build their company were ousted by a majority‑led EGM. The company maintained they were merely directors, and their removal ended any connection with it. The two men contended they were also employees who had been dismissed without just cause. What followed was a five‑year legal battle that reached the highest court in the land.
On 24 June 2026, the Federal Court upheld an award of about RM2 million to Woon Kim Choy and Chang Heng Keong, who were found to have been unfairly dismissed. The central question was whether a company director could also be a “workman” under the Industrial Relations Act 1967. The Court of Appeal had said yes, expressly rejecting the old Inchcape rule that directors could never be employees. The Federal Court agreed.
The flowchart below traces the legal test the courts applied, the evidence that tipped the balance, and the procedural journey from the Industrial Court to the Federal Court. It captures, in a single page, the principles that in‑house counsel, HR professionals, and company founders most need to understand.
Is a director also a “workman” under Section 2 of the Industrial Relations Act 1967?
The Court of Appeal said the answer depends on whether a contract of service exists — not on the person’s title.
Inchcape rule
Directors are the “directing mind and will” of the company and can never be employees. (Expressly overruled)
Contract of service test
A director‑employee relationship exists where the company exercises control, pays wages for services rendered, and a genuine employment contract (written, oral, or implied) is in place. (Gopala Krishnan; Hoh Kiang Ngan; Salomon)
Factors that indicated Woon & Chang were employees
- Monthly salary (not director’s fees)
- EPF & SOCSO contributions
- EA tax forms classified as “SG” (salary)
- Listed in the company’s Register of Employees
- Defined operational roles (Technical Director / Project Director)
- Reported to the Board of Directors
Also relevant: the company’s argument that a pending minority oppression action barred the employment claim was rejected — the two actions can coexist.
Woon & Chang were “workmen”
The Industrial Court had jurisdiction. Their dismissal was without just cause or excuse. Compensation was awarded.
From Industrial Court to Federal Court
- Industrial Court – Not a workman → claim dismissed
- High Court – Upheld; judicial review dismissed
- Court of Appeal – Allowed Woon & Chang’s appeals; quashed the Industrial Court’s dismissal and set aside the High Court’s order; awarded ~RM2 million
- Federal Court – Dismissed the company’s appeal; affirmed the Court of Appeal’s decision (the ~RM2 million award stood)
A Closing Thought
Woon Kim Choy and Chang Heng Keong spent nearly a quarter of a century helping to build Acexide Technology. When the majority shareholder decided they were no longer wanted, they were told they had never really been employees. The Federal Court said otherwise — and the price of that misclassification was RM2 million.