THE CONCEPT OF CONSTRUCTIVE DISMISSAL IN MALAYSIA

1)          Constructive dismissal is a term used when an employee terminates his employment contract and considers himself discharged from further performance of his work as a result of his employer’s behaviour. For example, the employer has made the employee’s position at work untenable leaving the employee with no alternative but to quit his employment under protest. Although there is no actual dismissal by the employer, the end result is the same as if the employee had been fired.

2)           Gopal Sri Ram JCA in Quah Swee Khoon v Sime Darby Bhd [2001] 1 CLJ 9 at 19 described ‘constructive dismissal’ as follows:

“A reading of the pleaded case for the parties resolved the issue that fell for adjudication before the Industrial Court into what the profession has come to call as a “constructive dismissal”. There is no magic in the phrase. It simply means this.

An employer does not like a workman. He does not want to dismiss him and face the consequences. He wants to ease the workman out of his organisation. He wants to make the process as painless as possible for himself. He usually employs the subtlest of means. He may, under the guise of exercising the management power of transfer, demote the workman. That is what happened in Wong Chee Hong (ibid). Alternatively, he may take steps to reduce the workman in rank by giving him fewer or less prestigious responsibilities than previously held. Generally speaking, he will make life so unbearable for the workman so as to drive the latter out of employment. In the normal case, the workman being unable to tolerate the acts of oppression and victimisation will tender his resignation and leave the employer’s services. The question will then arise whether such departure is a voluntary resignation or a dismissal in truth and fact.”

3)           In determining whether there is a constructive dismissal or not, the court will ask the question, firstly, whether there is a dismissal and secondly, whether the dismissal is just and with excuse. If the above questions are answered in affirmative, then the case will be made out against the employer.

4)           In similar case, Gopal Sri Ram JCA explained at page 20:

“The task is no different where a case of constructive dismissal is alleged. The Industrial Court must in such a case also determine firstly whether there was a dismissal. And secondly, whether that dismissal was with just cause or excuse. That is the statutory formula employed by s. 20(1) of the Act.

Constructive dismissal can take place, as we have attempted to demonstrate, in a number of cases. Since human ingenuity is boundless, the categories in which constructive dismissal can occur are not closed. Accordingly, a single act or a series of acts may, according to the particular and peculiar circumstances of the given case, amount to a constructive dismissal. There are cases which fall as illustrations at either end of the spectrum. An example of a case where a single act of oppression or victimisation may amount to a constructive dismissal is Wong Chee Hong (ibid). There, the Supreme Court held the workman’s refusal to accept a transfer to be justified on the ground that it amounted to a constructive dismissal. Salleh Abbas LP, delivering the judgment of the court said:

“Thus in our judgment the transfer, which relegated the applicant to a position of lesser responsibilities, albeit on the same terms and conditions of service, which transfer the Applicant refused to accept, is a dismissal. It clearly shows that not only the respondent company was displeased with the Applicant but it also exhibited the respondent company’s intention not to be bound by the contract any longer. Such relegation of responsibility with its consequent humiliation and frustration and loss of estimation amongst his fellow employees made it impossible for the Applicant to carry on being employed under the respondent company’s organisation. In other words, he had been driven out of his employment. This is therefore a dismissal. (See Cox v. Philips Industries Ltd. [1975] 1 WLR 638 and J.F Bumpus v. Standard Life Assurance Co. Ltd [1974] IRLR 232).

Woods v. W.M. Car Services [1981] ICR 666 illustrates a case at the other end of  the spectrum. In that case, Brown-Wilkinson, J observed as follows:

In our view it is clearly established that there is implied in a contract of employment a term that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: Courtaulds Northern Textiles Ltd. v. Andrew [1979] IRLR 84. To constitute a breach of this implied term it is not necessary to show that the employer intended any repudiation of the contract: the tribunal’s function is to look at the employer’s conduct as a whole and determine whether it is such that its effect, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it: see British Aircraft Corporation Ltd. v. Austin [1978] IRLR 347. The conduct of the parties has to be looked at as a whole and its cumulative impact assessed: Post Office v. Roberts.

Turning once again to the pleadings, it is abundantly clear that the Applicant was complaining that he had been driven out of employment whereas the respondent was contending that the former had left of his own volition. Whether one would describe the conduct complained of as amounting to constructive dismissal or the breach of the implied term governing mutual trust and confidence is really a matter of semantics. Nothing turns upon it. At the end of the day, the question simply is whether the Applicant was driven out of employment or left it voluntarily. Upon that question, the pleadings in the present instance are sufficiently precise.”

5)           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. (See Bouzourou v. The Ottoman Bank [1930] AC 271 and Donovan v. Invicta Airways Ltd. [1970] Lloyd’s LR 486).

In Bouzourou’s case an employee would have been entitled, according to the Privy Council, to regard himself as being dismissed if his transfer from one province to another province rendered him exposed to an immediately threatening danger of violence or disease to his person. And in Donovan’s case the Court of Appeal held that when the conduct of the employer was such that it rendered the continuance of the employee’s service impossible, the latter was entitled to treat the contract as at end and to obtain damages for wrongful dismissal.”

6)        In that case, the Supreme Court concluded that before the Industrial Court determines whether there is a constructive dismissal, a contractual test must be applied. Salleh Abas LP explained the contractual test as follows (at p. 304):

“Looking at the award, it is clear to everyone that the Industrial Court in coming to the conclusion that the Applicant was dismissed did not misdirect itself in law. The Court only spoke of constructive dismissal in the context of contract test. It never even made any reference to unreasonableness test. This is made clear by the following passage at p. 9 of the award.

Past cases of constructive dismissals dealt with by this Court ... are agreed that whether or not there has been constructive dismissal is to be determined by the contract test: that is, did the employer’s conduct amount to a breach of contract which entitled the employee to resign? And did the employee make up his mind and act at the appropriate point in time soon after the conduct of which he complained had taken place. (Otherwise he would be regarded as having elected to affirm the contract and would lose the right to repudiate the contract, i.e., to treat himself as discharged.)

(The words in brackets are ours)

We accept this passage to be the correct statement of the law. The questions asked by the Industrial Court in fact are similar to that part of the judgment of Lord Denning MR in the Western Excavation case where the learned Master of the Rolls set out the contract test. Only in these circumstances can an employee be held to be constructively dismissed and that is what constructive dismissal is.”

7)           This contract test has been adopted in many subsequent cases. In the case of Shahabudin Abdul Rashid v Talasco Insurance Sdn Bhd [2004] 4 CLJ 514 at 518, Siti Normah JCA held that:

“We confirm this to be the true test as the employer’s conduct in reorganizing the business must be such as to amount to there being a breach of some term in the appellant’s contract of employment and must be so fundamental as to evince an intention not to be bound by the contract of employment. Expressed in another way has there been a unilateral repudiation of the contract of employment by the respondent as to entitle the appellant to claim that he has been constructively dismissed? The test is definitely the contract test and the law on this is well settled. See the case of Wong Chee Hong v. Cathay Organisation (M) Sdn. Bhd. [1988] 1 CLJ 45; [1988] 1 CLJ (Rep) 298 which was followed in Holiday Inn, Kuching v. Lee Chai Siok Elizabeth [1992] 1 CLJ 141; [1992] 2 CLJ (Rep) 521.”

8)           Therefore, a few conditions must be met before the Court ruled that there is a constructive dismissal done by the employer. Otherwise, the alleged constructive dismissal would only become a normal resignation.

9)           Those conditions and pre-requisites are:

a.   There must be breach of contract by employer. Breach of contract by an employer may involve breach of an expressed or implied term; and this may be an actual breach of the contract or an anticipatory breach;

b.   The breach of contract must be serious enough to warrant resignation of the employee or it must be the last incident in a series of events that led to the employee leaving his employment at that instance.

c.   The reason for the employee to leave his employment must be solely due to the breach of contract by the employer and not for some unconnected reasons.

d.   The employee did not delay in terminating the contract following the breach of contract by the employer. Otherwise, he may be considered as having affirmed the breach and agreed to alter the contract.