Many employers assume that directors fall outside the protection of the Industrial Relations Act 1967 ("IRA"). After all, directors are often viewed as part of the company's management and decision-making structure.

However, a recent Federal Court decision involving Woon Kim Choy and another v Acexide Technology Sdn Bhd reaffirmed the Court of Appeal’s decision that a person may simultaneously be a shareholder, director and employee of the same company, and removal from one role does not necessarily terminate the others.

The Federal Court’s decision marks a departure from the traditional assumption that directors are automatically excluded from the definition of a "workman" under the IRA. Instead, the courts will examine the actual duties, responsibilities and employment arrangements before determining whether statutory protection applies.

Brief Facts

The appellants, Woon Kim Choy and Chang Heng Keong, were among the promoters of Acexide Technology Sdn Bhd. Following the incorporation of the company, they became shareholders and directors of the company.

Subsequently, an Extraordinary General Meeting (EGM) was convened by the majority shareholders, resulting in the appellants being removed as directors of the company. Following their removal, the appellants commenced proceedings for minority oppression as shareholders and separately lodged complaints of unfair dismissal under Section 20 of the IRA.

The company challenged the claims, arguing that the appellants were directors rather than employees and therefore did not fall within the definition of a "workman" under the IRA.

The Industrial Court agreed with the company and held that the appellants were part of the company's "directing mind and will" and therefore could not be regarded as employees. The High Court subsequently upheld that decision.

The Court of Appeal's Decision

The Court of Appeal overturned the decisions of both the Industrial Court and the High Court.

The Court held that there is nothing incompatible about a person simultaneously acting as a director and an employee of the same company. The two roles are distinct and may co-exist, provided there is evidence of a separate contract of employment, whether written, oral or implied through conduct.

In reaching its decision, the Court examined several factors demonstrating the existence of an employment relationship, including:

• The appellants' inclusion in the company's register of employees;

• Company records referring to payments made to them as salaries rather than directors' fees;

• EPF and SOCSO contributions made on their behalf;

• Monthly income tax deductions; and

• The operational functions they performed within the business.

The Court concluded that the appellants' roles as employees were separate from their positions as directors. Consequently, their removal as directors did not automatically terminate their employment.

Having found that the appellants were "workmen" within the meaning of the IRA, the Court further held that their dismissals were without just cause or excuse and awarded compensation in lieu of reinstatement. The combined compensation awarded exceeded RM2 million.

Federal Court Affirms

On 24.6.2026, the Federal Court upheld the Court of Appeal’s decision, affirming that a person may simultaneously be a shareholder, director and employee of the same company. 

As a result, the Court of Appeal's ruling stands: a director is not automatically excluded from being a "workman" under the IRA, and employers must look beyond job titles when determining employment status.

Key Takeaways for Employers

1. A Director Can Also Be an Employee Many employers assume that directors are automatically excluded from employment law protection. This case confirms that the question is not whether a person is a director, but whether there is a separate employment relationship. If a director performs operational duties under a contract of service and receives remuneration as an employee, he or she may still qualify as a "workman" under the IRA.
   

2. Removal as Director Does Not Automatically Terminate Employment A company may lawfully remove a person from the board of directors under the Companies Act 2016. However, that does not automatically extinguish the individual's employment rights..

   
   

   Where the individual is also an employee, the employer must separately terminate the employment relationship in accordance with employment law principles and establish just cause or excuse if challenged.
   

3. The Court Looks Beyond Titles Employers should not assume that job titles alone determine legal status. The Court will examine the substance of the relationship, including:
   

   • Actual duties performed;

   • Reporting structures;

   • Payroll records;

   • EPF and SOCSO contributions;

   • Tax treatment; and

   • Internal company documentation.

   The existence of these indicators may support a finding that an employment relationship exists even where the individual is also a director or shareholder.
   

4. Minority Oppression Claims and Unfair Dismissal Claims Can Co-Exist An important aspect of this decision is the Court's recognition that the appellants were pursuing different rights in different capacities.
   

   Their minority oppression action arose from their status as shareholders, while their unfair dismissal claims arose from their status as employees.
   

   The Court confirmed that pursuing one remedy does not necessarily preclude the other. An individual may therefore simultaneously seek relief as a shareholder and as an employee where the circumstances justify it.

Conclusion

The Federal Court's refusal to disturb the Court of Appeal's decision in Acexide serves as an important reminder that employment relationships are determined by substance rather than labels.

For HR practitioners and employers, the lesson is straightforward: before concluding that an individual falls outside the protection of the IRA, consider whether there is evidence of a genuine employment relationship.

A person may wear multiple hats within a company. While a director may be removed from the boardroom, he may still remain an employee in the eyes of the law.

Failing to appreciate that distinction could expose an employer to significant liability for unfair dismissal.