In cases of constructive dismissal, employees are typically forced to quit due to unfair treatment(s) by their employers. For example, a transfer or re-designation of the employee to a position outside of the employee’s job scope as defined in the employment contract, wrongful demotion, the management not acting in good faith or acting contrary to the terms of the employment contract. As Justice Dato’ Abdul Malik Ishak expounded in the Court of Appeal case of Farquhar Butler Brothers Supplies Ltd 1988 CanLII 185 (BC CA):
“A constructive dismissal occurs when the employer commits either a present breach or an anticipatory breach of a fundamental term of a contract of employment thereby giving the employee a right, but not an obligation, to treat the employment contract as being at an end.”
In such cases, the employee may resign and bring a suit for constructive dismissal against the company under the Industrial Court.
THE CONTRACT TEST
In the case of Western Excavating (ECC) Ltd v Sharp [1978] IRLR 27, Lord Denning established the ‘Contract Test’ to prove a claim of constructive dismissal. This test was affirmed and applied in the Supreme Court case of Wong Chee Hong v Cathay Organisation (M) Sdn Bhd [1988] 1 MLJ 92, which is a landmark case. It was further applied in recent local cases, such as the Court of Appeal case of CIMB Bank Bhd v Ahmad Suhairi bin Mat Ali & Anor [2023] 5 MLJ 829, outlining four conditions the claimant must prove:
- there must be a breach of contract by the employer;
- the breach must be sufficiently important to justify the employee resigning;
- the employee must leave in response to the breach and not for any other unconnected reasons; and
- the employee must not delay unduly in terminating the contract; otherwise, they will be deemed to have waived the breach and agreed to vary the contract.
CRITICAL POINTS TO BE CONSIDERED BY THE CLAIMANT
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- BURDEN OF PROOF
The burden of proof lies on the claimant, meaning the employee who wishes to bring an action against the company must prove the conditions set forth above to the court.
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- TIMEFRAME
It is imperative that after the breach of contract by the company, the affected employee must take an immediate action—either by protesting, giving notice to the employer, or leaving the company. As decided in the case of Pexxon Sendirian Berhad v Sia Qui Yau, Johore [1989] 2 ILR 235, a delay of one month can be considered too long and unreasonable, potentially indicating affirmation of the new contract terms.
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- DUTY TO INFORM THE EMPLOYER
The claimant must inform the employer of the constructive dismissal claim through protests in their resignation letter or other relevant documents.
However, while these conditions and factors can support a claim, each case is judged on a case-by-case basis. There are instances where claimants have failed to prove their case to the court due to their actions prior to the company’s breach of contract. For instance, some employees have acted prematurely, resigning in anticipation or fear of a breach rather than an actual breach. Additionally, when employees abandoned their employment hastily or did not adhere to their terms of employment, their claims were weakened, thus reducing the likelihood of success in their claim for constructive dismissal.
Although the company has the right to transfer an employee as part of management’s prerogative, such transfers should not harm the employee. Essentially, the transfer must not be carried out in bad faith, must not alter the terms of employment negatively, and must have a just cause and excuse. Acting in contrast would lead to a case of constructive dismissal.
If you are facing a situation related to constructive dismissal or need some guidance in navigating similar issues, please do not hesitate to contact us for expert legal advice and support.
Disclaimer: This article is for informational purposes only and does not constitute any legal advice. If you have any questions or require further information on this matter, please do not hesitate to contact us directly.