Can an employer unilaterally transfer an employee to a different company or significantly increase their working hours without consent? This issue was explored in Rajan a/l K.M. Daniel v Magnum 4D Berhad [Award No. 1136 of 2026], where the court examined whether cumulative changes to an employee’s terms of service amounted to a fundamental breach of contract.
Brief Facts
- The Claimant was a long-serving employee who had worked with the Group for over 33 years, eventually reaching the position of Engineer.
- In December 2021, the Company issued a letter transferring the Claimant to a separate legal entity , claiming it is a “Staff Inter-Departmental Transfer.”
- The Company then implemented a new duty roster that increased the Claimant’s working hours on specific days by 1.5 hours, without prior consultation with the Claimant.
- The Claimant’s job description was also revised to include manual technical tasks and fieldwork that were previously performed by his subordinates.
- The Claimant was then required to report to a Regional Manager who was previously his contemporary, which the Claimant viewed as a demotion in the reporting hierarchy.
- The Company combined a bonus and salary increment into a single adjustment to placate employees during the transition.
- The Claimant claimed constructive dismissal, asserting that these unilateral changes were a fundamental breach of his employment contract.
Court’s Findings
The Court found that the Company acted in bad faith by misrepresenting the transfer to a separate legal entity as a mere internal departmental move. It was emphasized that an employer cannot unilaterally transfer an employee to a different company without their express consent.
The Company’s attempt to justify the move through a “major renovation” was also rejected, as evidence showed only minor refurbishments were actually carried out.
Regarding the working hours, the Court determined that the 1.5-hour daily increase on draw days constituted a material change to the contract. The Company’s failure to disclose this increase in the transfer letter was viewed as a deliberate concealment.
Furthermore, the Court noted that the new job description required the Claimant to perform technician-level work, which amounted to a substantive demotion despite his job title remaining the same.
In respect of the change in reporting line, the Court also highlighted that this undermined the Claimant’s authority and seniority. By requiring a senior staff member to report to a former peer, the Company effectively diminished his status.
Ultimately, the Court concluded that these cumulative actions were a fundamental breach of the employment contract, justifying the Claimant’s decision to treat himself as constructively dismissed.
Key Takeaways
Employers must remember that the power to transfer an employee is not absolute, especially when it involves moving the employee to a separate legal entity, and where it involves changes to the employment terms such as job scope, working hours, reporting line, and remuneration.
Attempting to disguise a transfer or hide changes to employment terms can be seen as a lack of transparency and evidence of bad faith. To mitigate risks of constructive dismissal, businesses should engage in genuine consultation with employees before implementing major restructuring exercises that affect their core terms of employment.
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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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