Resignation in Malaysia. Rash decisions may bring serious consequences.

Think before you quit. Rash decisions may bring serious consequences.

Well informed employees would be familiar with the concept of “constructive dismissal”, where an employee leaves his employment as a result of the employer breaching a fundamental term of the employment contract, or where the employer evinced an intention to no longer be bound by the employment contract. Constructive dismissal is in fact a termination and entitles the employee to claim unfair dismissal. That being said, employees should be very careful in making allegations of constructive dismissal as a rash decision could leave them liable to paying the employer damages for breach of contract.

Brief Facts

Our firm recently represented a multinational shipping company (“Company“) in a civil suit against their former manager (“Manager“).  It had come to the Company’s attention that there were several allegations of misconduct made against the Manager, including possibly fraudulent or false entertainment claims.  When the Company suspended the Manager pending further investigations, the Manager claimed constructive dismissal and left employment with the Company with immediate effect. The Company denied allegations of constructive dismissal as its position was that it was merely placing the Manager under its usual investigative and disciplinary process.

The Company subsequently commenced legal proceedings against the Manager for among other things: (a) payment in lieu of notice of termination ; and (b) damages for entertainment claims reimbursed by the Company to the Manager, which the Company claimed were fraudulent, inaccurate and/or false.

During trial, the Company’s position was that the Manager, in claiming constructive dismissal without basis, had in effect abandoned or terminated his employment with the Company without notice. This was in breach of his contract of employment which required either party to provide 3 month’s notice of termination or make payment in lieu of notice. The Company was aggrieved because the Manager “walked out” of his job without serving notice.

The Company also adduced evidence to show that certain entertainment claims made by the Manager for reimbursement were fraudulent, inaccurate or false. In this case, the Manager claimed reimbursement for several events which he said were attended by certain employees of the Company. There was evidence, including witness testimony and a sworn statement, that those employees never attended those events.

The Manager’s defence was that he did not need to pay the salary in lieu of notice as he was alleging constructive dismissal (ie, that it was the Company that dismissed him constructively, not that he abandoned his employment). In defending the claim, the Manager also tried to question the propriety of the Company’s disciplinary process.  He also claimed that all his entertainment claims were valid but did not adduce any evidence to support this allegation other than his own testimony.

Findings of the Court

The Court ruled in favour of the Company and entered judgment against the Manager on all counts.

The Court agreed with the Company that there was a breach of contract by the Manager when he abandoned his employment without notice. It also held, among other things, that the Manager was fully aware he was only on suspension due to the various notices issued by the Company to him.  The Manager also admitted during cross-examination that he knew he was placed under suspension. There was therefore no evidence of a dismissal by the Company. The Manager’s act of claiming he was dismissed constructively with immediate effect and without serving his notice was in breach of his contract of employment.  In essence, under contract law, there was simply no justification for the Manager to leave employment without notice or payment in lieu thereof.

The Court also found that there was sufficient evidence by the Company  to show that the entertainment claims by the Manager were false. The Manager was ordered to repay the Company for the entertainment claims paid out to him.

Commentary

The jurisdiction of the civil court and the Industrial Court are different and mutually exclusive.  Whilst the Manager had also filed a claim for unfair dismissal,  whether he was constructively dismissed is a matter to be determined by the Industrial Court and not the civil court. To put it succinctly as previously held by the Courts – the civil court deals with cases of “legal justice” while the Industrial Court deals with “social justice”.  A termination of employment can be lawful (ie pursuant to the express terms of the contract) but can also be unfair (ie without just cause and excuse).

The Manager attempted to raise constructive or unfair dismissal as a defence to the civil suit but was unsuccessful because whether the Company’s disciplinary process was “fair” had no bearing on whether the Manager was legally and contractually required to serve a notice of termination. There was also no evidence that there was a dismissal by the Company.

The findings of the Court in our recent case further upholds the position that the jurisdictions of the civil court and the Industrial Court are distinct and separate. Prior to the trial of the matter, the Manager also made an application to stay (suspend) the civil proceedings on the basis that the matter should be determined by the Industrial Court. This application was rightfully dismissed as the subject matter before the civil court was breach of contract, which is well within the jurisdiction of the civil court.

Employees who are tempted to make allegations of constructive dismissal should get proper legal advice before making any rash decisions as there are serious consequences if the employee’s actions amount to a breach of the contract of employment. Breach of contract is a wrong that can be ventilated via the civil court, so the fact that the employee may have a corresponding claim for unfair dismissal will not act as a defence.

Employees should be reminded that an employment contract is still a contract and any course of action that could be deemed contrary to the express terms should be considered very carefully.

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