[Note: At the time of writing, the Federal Court’s grounds of decision have not been published. This article considers viewpoints of the Industrial Court, High Court, and Court of Appeal as a whole. It is subject to the published grounds of judgment of the Federal Court on relevant points of law and fact.]

When an employee is given a higher position in an “acting” capacity, and they are subsequently reassigned to their former position – is this a demotion?

The case of Keretapi Tanah Melayu Berhad v Mohan A/L Vythialingam & Ors (Civil Appeal No.: W-01(A)-664-11/2019) started in the Industrial Court where the employee was held to be constructively dismissed without just cause and excuse, which was affirmed by the High Court in a judicial review. At the Court of Appeal, this decision was overturned, and the Industrial Court’s decision regarding the Claimant’s reassignment was quashed.

The Federal Court overturned the Court of Appeal’s decision and affirmed the decisions of the High Court and Industrial Court that the employee was constructively dismissed.


Brief Facts

  • The Claimant was a locomotive driver. 
  • He was offered a temporary acting position as an Acting Industrial Relations Executive for a fixed period of 6 months, followed by reassignment as an Acting Executive, Rules & Regulations (for an unspecified duration).
  • The Claimant received an acting allowance during both assignments. 
  • After 10 months, he was informed that he would be transferred back to his original designation (locomotive driver), where the only impact would be the cessation of his acting allowance. 
  • Unhappy with the reassignment, the Claimant resigned and claimed constructive dismissal. 

Temporary Acting Position vs Demotion

The burden of proof is on the employee to prove constructive dismissal. The Claimant’s unilateral reassignment from his acting positions (although temporary) back to his previous permanent position under his executed employment contract was held to amount to a constructive dismissal because:

  1. The Claimant’s performance was not disputed, and he discharged his duties and responsibilities well in the acting posts without issue.
  2. The Claimant did not have any disciplinary issues or commit misconduct during the period in which he was performing the role in the acting position.
  3. The label of “Acting” does not mean that the Company can terminate the ‘Acting’ attachment at any time at its discretion. Furthermore, the Company did not specify that the second acting position would be for a fixed term. Therefore, there was a reasonable expectation of the Claimant remaining in the acting position as long as no fixed term had been imposed.
  4. The unilateral transfer to a post with lesser functions and responsibilities, without good reason and without the acting allowance (i.e.: a decrease in earnings), amounted to a demotion. 

Commentary

The High Court compared an employee in an acting position to a probationer; as probationers enjoy the same rights as permanent or confirmed employees not to be terminated without just cause or excuse, an employee in an acting position is entitled to that right as well. 

When an employer offers more favourable terms of employment for an acting position and treats the employee as if they were in a permanent role (regardless of whether this is stated in writing), certain expectations are created. These are called implied terms of employment. By treating the employee as if the position was permanent (and not acting), it could be said that the employer has implicitly accepted employment terms similar to that of a permanent position, and this now becomes legally binding on the employer.

The Federal Court’s decision does not mean that an acting position shall always be considered as permanent, or that a reversion to the employee’s original position (before they took on the acting role) will always amount to a demotion. Constructive dismissal claims are fact-sensitive, and each case must be looked at on its own facts. A slight variation in the fact pattern could result in a very different outcome.

At the Court of Appeal (although their decision was overturned by the Federal Court), these Industrial Court decisions were discussed, which showcases different factual permutations:

  • In Baladevan Nadarajan v. PPG Performance Coatings (M) Sdn Bhd [2019] 3 ILR 28, the assignment of an Acting Plant Manager was held to be temporary, and the Company had the right to return the employee in an “acting” role to their original position. In this case, the return to the original position did not come with any reduction in benefits/earnings. The employee was allowed to maintain their remuneration package for the “higher” acting position even though they were eventually returned to their original position. Further, the employee, without protest, signed a new employment contract to accept the reversion to his previous role, before changing his mind later. 
  • In A Girish Kumar Gopalakrishnan v. Kilang Kelapa Sawit Sri Lingga Sdn Bhd & Bell Management Sdn Bhd (Award No. 1371 of 2010), the Court recognised the Company’s right to transfer employees but cautioned against malicious intent or violation of the employment contract. Here, the Claimant had a legitimate expectation that his appointment as Acting Mill Manager was a promotion, and that he would be retained in that position. The Company was satisfied with his performance in the acting role, he was provided with bonus and increase in salary and allowance. However, he was transferred back to his previous position without reason.

As an employer, the expectations should be made clear at the outset when reassigning an employee to an acting position on a temporary basis. For example, appointments to an acting position should be documented and state that:

  • The acting position is temporary / will be for a fixed period only, with the exact start and end dates (which should be followed).
  • There shall be no expectation of permanence in the acting position, and that the Company has the prerogative to revert the employee to their original position at any time.

The above terms should be expressly agreed to by the employee in writing before they take on the acting position.

As a matter of best practice, employers should discuss the reassignment with the employee in advance, and obtain the employee’s consent (regardless of whether the reassignment is permanent or temporary in nature) to reduce the risks of dispute. This is particularly important if the employer intends to eventually revert the employee to their former position, where there may be detrimental changes to the terms of employment, such as a significant decrease in functions, responsibilities, pay, or status.

***

This article was written by Adelyn Fang (Associate) from Donovan & Ho’s employment law practice. 

Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations.  Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation. Have a question? Please contact us.

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