Can an employee continue working under a salary deferment arrangement for a year and subsequently claim constructive dismissal over unpaid wages? In Chang Hi Tiang v Rentwise Sdn Bhd [Award No. 1578 of 2026], the Industrial Court examined whether an employee’s prolonged silence and acceptance of delayed salaries waived the right to claim constructive dismissal.
Brief Facts
- The Claimant was employed as Head of Business Technology & Services and served as a member of the Senior Management Team for over nine years.
- Facing severe cash flow challenges, the Company established an internal protocol deferring salary payments for senior management while prioritizing lower-ranked staff.
- The Claimant was fully aware of and participated in this salary deferment arrangement without formal protest starting from at least May 2023.
- During a management meeting on 29 April 2024, the Company notified the Claimant that allegations of misconduct against him would be investigated once financial stability was restored.
- Three days later, on 2 May 2024, the Claimant submitted an undated letter alleging non-payment of salaries for March and April 2024 and walked out of his employment.
Court’s Findings
The Industrial Court dismissed the Claimant’s case, holding that he failed to satisfy the contract test for constructive dismissal:
- Although non-payment of salary generally constitutes a fundamental breach going to the root of an employment contract, the Claimant had known about and silently agreed to the salary deferment for a year while continuing to work.
- The deferment of salaries were carried out across the board and lower ranking employees were paid their salaries first, besides the third-party debts being settled. It was incorrect for the Claimant to suggest that he was the only employee who was subjected to the non-payment or deferment of salaries
- By failing to lodge any formal protest or objection over a prolonged period, the Claimant effectively consented to the salary deferment arrangement.
- The Court observed that private venting or complaints to colleagues via messaging applications do not constitute a formal protest to the employer.
- Furthermore, the Claimant did not leave promptly in response to the alleged breach. Instead, the true catalyst for his abrupt departure was the fear of an impending misconduct investigation raised during the senior management meeting.
Key Takeaways
This decision highlights the critical requirement that an employee claiming constructive dismissal must act promptly following an alleged breach of contract. Continuing to work and accepting altered terms without formal objection over an extended period will be viewed as affirming the contract and waiving the breach.
For employers, transparent communication during periods of financial distress is essential. While financial hardship does not automatically discharge wage obligations, establishing clear protocols and demonstrating that employees voluntarily accepted payment adjustments can provide a strong defense against unexpected constructive dismissal claims.
***
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.
Have a question? Please contact us.
