THE LAW ON CONSTRUCTIVE DISMISSAL IN MALAYSIA

THE LAW ON CONSTRUCTIVE DISMISSAL IN MALAYSIA

To explain what constructive dismissal is, there can be no better reference than to the decision of Ang Beng Teik v. Pan Global Textile Bhd, Penang [1996] 4 CLJ 313
There is no magic in the expression ‘constructive dismissal’. It is only a convenient label to describe the kind of conduct of an employer towards an employee which, though short of a formal dismissal or termination, the latter may treat as amounting to a dismissal without just cause or excuse.

The categories of such conduct are not closed.

Whether the conduct complained of is, in truth, a dismissal cloaked as something else, is a question of fact.

Constructive Dismissal in simple terms is when the employee deems himself to be terminated due to a fundamental breach of the contract of employment. In Wong Chee Hong v. Cathay Organisation (M) Sdn Bhd [1988] 1 CLJ 298 (Rep) at p. 302, Salleh Abas LP explained the meaning of constructive dismissal as follows:
“We think that the word “dismissal” in this section should be interpreted with reference to the common law principle. Thus it would be a dismissal if an employer is guilty of a breach which goes to the root of the contract or if he has evinced an intention no longer to be bound by it. In such situation the employee is entitled to regard the contract as terminated and himself as being dismissed.”

Constructive Dismissal originates from act of the employer breaching fundamental terms of the contract of employment and the employee when faced with such breach as expediently as possible deems himself constructively dismissed and leaves his employment. In simple terms, it can be said that it is the employee that “terminates” his employer.

In order for the employee to be able to claim constructive dismissal, four conditions must be met:

  1. There must be a breach of contract by the employer. This may be either an
    actual breach or an anticipatory breach;
  2. That breach, must be sufficiently important to justify the employee resigning, or else it must be the last in series of incidents which justify his leaving. Possibly genuine, albeit erroneous, interpretation of the contract by the employer will not be capable of constituting repudiation in law;
  3. He must leave in response to the breach and not for some other unconnected reasons; and
  4. He must not delay too long in terminating the contract in response to the employer’s breach otherwise he may be deemed to have waived the breach and agreed to vary the contract.

If the employee leaves in circumstances where these conditions are not met, he will be deemed to have resigned and there will be no dismissal within the meaning of the Industrial Relation Act.

The legal Test to be applied is as laid down in Anwar Abdul Rahim v. Bayer (M) Sdn Bhd;[1998] 2 CLJ 197:-
“The proper approach in deciding whether constructive dismissal has taken place is not to ask oneself whether the employer’s conduct is unfair or unreasonable (ie, the unreasonable test). It must be proven that the conduct of the employer is such, that it amounts to a fundamental breach which goes to the root of the contract, or that it illustrates the employer’s intention of not wanting to pursue the contractual relationship anymore”

There is no fixed circumstance that would amount to constructive dismissal however the law is clear that the burden lies with the employee and these are some of the situations recognized:-

DEMOTION
Ang Beng Teik v. Pan Global Textile Bhd Penang [1996] 4 CLJ 313 “Take the case of demotion. A workman in a particular case who suffers a demotion may consider himself to have been dismissed without just cause or excuse. He may treat the demotion as a dismissal.”

FORCED/UNILATERAL PAY-CUT
North Malaysia Distributors Sdn Bhd v. Ang Cheng Poh [2001] 3 ILR 387, “The unilateral pay-cut was a clear wilful breach of the employment contract on the part of the company. The salary of an employee being the fundamental factor in a contract of employment has been breached.”

TRANSFER “NOT BONA FIDE”
Govindasamy Munusamy v. Industrial Court Malaysia &Anor [2007] 10 CLJ266, “showed that the transfer per se was not bona fide, but with a view to eliminate the applicant from the service of the second respondent by transferring him to a different entity which was not part of the contractual term.”

WITHDRAWAL OF FIXED ANNUAL BONUS
Sugarbun Services Corp Bhd v. Ong Siew Choon [2006] 1 ILR 99,“Thefixed annual bonus was an express term affecting the claimant’s annual remuneration and as such it was a fundamental term of the contract between the parties. The company, therefore, could not unilaterally withdraw the said fixed annual bonus without the claimant’s consent. To do so would amount to a serious breach of the claimant’s contract of employment.”

NON-PAYMENT OF SALARY
Tan Kok Chai v. Mega 9 Housing Sdn Bhd [2020] 2 LNS 0013, “Non-payment of salary by the employer has always been regarded as a fundamental breach of the contract of employment.”

IMPLIED DUTY OF TRUST AND CONFIDENCE
Syahirah A Karim v. Baiduri Dimensi Sdn Bhd [2019] 2 LNS 3192, “In Quah Swee Khoon v. Sime Darby Bhd [2001] 1 CLJ 9,the Court of Appeal has clearly held that the human ingenuity is boundless and that the categories in which constructive dismissal can occur are not closed. Either a single act of oppression or a series of actions when considered as a whole could amount to repudiatory breach of the implied contractual term of mutual trust and confidence and the duty to act in good faith in the exercise of the management powers of the Company.”

FORCED RESIGNATION
Stanley Ng Peng Hon V. AAF Pte Ltd. [1978] 1 LNS 186 “A resignation obtained under compulsion is no resignation in law.”

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