Federal Court’s Reinstatement Order Reignites Debate on Fixed-Term Employment : A case study on Ooi Mei Chien v. Osram Opto Semiconductors Sdn Bhd & Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd [2020] 5 MLJ 58
In a bold and precedent-reaffirming decision on 17 June 2025 for the case of Ooi Mei Chien v. Osram Opto Semiconductors Sdn Bhd, the Federal Court of Malaysia ordered the reinstatement of a former senior executive, rejecting the notion that monetary compensation should be the default remedy even for high-ranking roles.
The case made waves not only for its outcome, but also for what it revealed about how Malaysian courts are continuing to interrogate the substance behind fixed-term labels. This echoes the Federal Court’s earlier landmark in Ahmad Zahri bin Mirza Abdul Hamid v AIMS Cyberjaya Sdn Bhd [2020] 5 MLJ 58, which redefined the legal landscape for fixed-term employment.
The Core Issue: Substance Over Label in Fixed-Term Contracts
The reinstatement ruling serves as a timely reminder that contracts must reflect the reality of the employment relationship. The Ahmad Zahri case laid down critical principles still shaping the courts’ approach today:
(i) Auto-renewed fixed-term contract especially without fresh negotiations may indicate an intention for long-term employment.
(ii) The way employers treat their workers internally, including access to benefits, promotions, and expectations, can override what’s stated on paper.
(iii) Intention is everything because the Court will not hesitate to lift the corporate veil and examine conduct over contract where justice requires.
These principles came to life again in June 202 this time with reinstatement, not just damages.
Fixed-Term Contracts: No Longer a Safe Harbour?
The 2025 reinstatement ruling demonstrates that:
- Even senior executives can be reinstated if the dismissal is proven unjust; –
- The Court is unafraid to revive employment relationships when trust remains intact, even after protracted litigation;
- Labels like “fixed-term” won’t shield employers from legal scrutiny if the actual working relationship says otherwise.
What Employers Should Do Now
(i) Audit fixed-term arrangements by limiting the renewals, justify the contract term, and avoid mimicking permanent employment patterns.
(ii) If the role is truly temporary, have proper written justification and avoid automatic extensions.
(iii) To reconsider one-size-fits-all exits since now separation via compensation may not always be accepted by courts. Reinstatement is back on the table.
What Employees Should Know
(i) If your role continues seamlessly beyond one or more “fixed” contracts, you may be entitled to permanent status protection.
(ii) Preserve internal evidence because Emails, appraisals, and renewal notices could help show the job wasn’t really “temporary.”
The Ahmad Zahri doctrine and the 2025 Federal Court reinstatement order form a powerful one-two punch: Malaysian courts are looking beyond paper contracts, especially when fixed-term labels are used as shields against job security. If it walks like a permanent job and talks like a permanent job, it probably is one in the eyes of the law.
As fixed-term employment continues to be tested in Malaysian courts, this decision sends a clear signal: contractual form cannot defeat employment reality.
In this evolving legal landscape, it is no longer safe to assume that contract labels alone will protect your position whether as an employer or an employee. The risks of misclassification, wrongful termination, or unjust dismissal are real and growing. This is the time to consult professionals who understand both the law and its practical enforcement.
Whether you’re seeking to structure your workforce lawfully or safeguard your rights in a questionable dismissal, we are here to help you act with certainty and protect your future. Reach out to us, before a dispute reaches the courtroom.
If you have any questions or require any additional information or clarification, please contact our lawyer that you usually deal with.