In RSN v AIA IT (M) Sdn. Bhd. [Award No. 487 of 2026], the Industrial Court examined whether an employee can claim constructive dismissal in response to a disciplinary investigation. This case highlights that a company’s right to investigate grievances and initiate disciplinary procedures is not a fundamental breach of the employment contract. It also shows how a failed constructive dismissal claim can have financial consequences for the employee.
Brief Facts
- The Claimant was employed as an Associate Director and was still under probation at the time of the dispute.
- He initially raised a grievance against his manager for using foul language, which the Company addressed by issuing a warning letter to the manager.
- Shortly after, several team members filed written complaints against the Claimant, alleging he misused confidential salary information and intimidated staff.
- The Company issued a show cause letter to the Claimant to seek an explanation regarding these allegations.
- Instead of responding to the allegations, the Claimant requested a mutual separation agreement and a waiver of his obligation to repay a sign-on bonus.
- When the Company rejected the separation proposal and re-issued the show cause letter, the Claimant walked out and claimed constructive dismissal. He alleged that the Company breached his employment contract by failing to take action against his manager, by suspending the Claimant and issuing him a show cause letter, and by reassigning his role.
- The Company viewed the Claimant’s actions as a voluntary resignation. As such, the Company sued the Claimant in the civil court for recovery of his sign-on bonus and salary in lieu of notice.
Civil Court’s Findings
The civil court allowed the Company’s claim and ordered the Claimant to pay approximately RM150,000 to the Company, representing 1 month salary in lieu of notice and his sign-on bonus inclusive of EPF contributions.
This judgment was upheld by the High Court on appeal. The Claimant was also ordered to pay costs of RM5,000 to the Company.
Industrial Court’s Findings
The Industrial Court first addressed the Claimant’s initial grievance against his manager. It noted that the Company had taken swift action by cautioning the manager, a fact the Claimant himself had previously acknowledged and appreciated. Consequently, the Court found no failure on the Company’s part to address the Claimant’s concerns.
Regarding the allegations against the Claimant, the Court observed that the Company was duty-bound to investigate the serious complaints raised by other staff members. The issuance of a show cause letter was a legitimate exercise of management’s prerogative and did not amount to a breach of contract. Evidence surfaced that the Claimant had himself engaged in aggressive behaviour toward his team, mirroring the very conduct he had complained about.
Overall, the Industrial Court determined that the Company had sufficient justification for its actions and had not evinced an intention to no longer be bound by the contract. As such, the Industrial Court concluded that the Claimant left of his own volition, and dismissed the claim of constructive dismissal.
Key Takeaways
Employees contemplating a constructive dismissal claim should be mindful of the potential financial consequences if the claim fails. If the claim is dismissed, the employee is deemed to have resigned voluntarily, which may trigger liabilities such as repayment under employment bonds, sign-on bonuses, or salary in lieu of notice.
Constructive dismissal claims should therefore be based on legitimate legal grounds, and not used as tactical manoeuvres. Employers are entitled to conduct bona fide investigations, and actions such as issuing a show cause letter, placing employees on suspension, and temporarily securing company assets will not, on their own, amount to constructive dismissal.
In this case, the Claimant was found to have resigned voluntarily and was held liable to repay a substantial sign-on bonus and salary in lieu of notice. Employers should ensure that contracts, bonds, and bonus arrangements clearly provide for repayment obligations where employees leave prematurely.
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This article was written by Donovan Cheah (Partner) 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.
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