In CIMB Bank Berhad v Ahmad Suhairi Bin Mat Ali & Anor [2023] 1 LNS 1698, the Court of Appeal clarified what amounts to constructive dismissal, and whether the employee’s delay in resigning was fatal to his case.
Brief Facts
- The Employee who had been with the Bank for 22 years was reassigned from his position as Area Commercial Manager (“ACM”) in Kedah/Perlis, to a Team Leader of the Special Acquisitions Team (“SAT”) in Penang.
- The Employee protested the transfer through multiple emails. He contended that the transfer was a demotion as he was asked to perform tasks previously done by his subordinates. He also claimed that he was given unrealistic targets without adequate support staff.
- The Bank did not contemporaneously respond to the Employee’s emails of protest.
- However, when the Employee assumed the Team Lead role in SAT, he requested for business cards, the bank letterhead, rubber stamps and other documents needed for his new role.
- The Employee ended up resigning 1 month and 18 days after assuming the Team Lead role of SAT, and claimed constructive dismissal.
- The Industrial Court dismissed the Employee’s claim of constructive dismissal.
- On judicial review, the High Court quashed the Industrial Court’s award, finding that there was constructive dismissal.
- The Bank appealed to the Court of Appeal.
Court’s Findings
The Court of Appeal reiterated that the test for constructive dismissal is the “contract test” and not the “unreasonableness test”. Therefore, in determining whether constructive dismissal took place, the question to be asked is whether the employer had significantly breached the employment contract, or acted in a way to indicate that the employer no longer wants to be bound by the terms of the employment contract. If yes, the employee is constructively dismissed and entitled to treat himself as discharged from further performance.
The Court found that the Employee was constructively dismissed on the following grounds:
- The Bank’s failure to respond to the Employee’s emails was inexcusable. It was obvious to those involved that a situation was developing and this at the very least, necessitated a response. The Bank turned a blind eye to the Employee’s grievances.
- While employers have the prerogative to transfer or reassign employees, this authority can be challenged if it amounts to a demotion, punishment, victimisation, or if it is driven by ill intentions.
- The SAT leader position was inferior to the Employee’s previous position as ACM. In his new role, he had to work alone without certain staff reporting to him. The targets set for him were also manifestly unrealistic and unachievable without any subordinates or support staff.
- The transfer can be considered a demotion notwithstanding that there was no salary reduction or change in job grade, because the Employee had to perform tasks which were previously performed by his subordinates.
- Although the Employee only walked out after 1 month and 18 days as Team Leader of SAT, and he temporarily assumed the inferior role and requested for stationaries to perform his function in the inferior role, it cannot be construed as an affirmation of the unilateral variation of employment contract. This was because the Employee had repeatedly protested to the transfer.
Key Takeaways
This case should be read in line with the recent Federal Court decision in Tay Lay Peng v RHB Bank Berhad, which reaffirmed that the legal test for constructive dismissal is the “contract test”. In that case the Federal Court held that unreasonableness of the employer is not a legal criteria to establish constructive dismissal, but is one of the factors that can be taken into account to determine whether there has been a fundamental breach of the contract or an intention to no longer be bound.
It is important for employers to act promptly when addressing employee grievances. The failure of the Bank to timeously respond to the Employee’s protests highlighted a disregard for the concerns raised. When employees express legitimate concerns or objections, employers should attempt to engage in a meaningful dialogue, rather than turning a blind eye.
While employers retain the prerogative to transfer employees, such actions can be contested if they amount to a demotion, or are driven by ill intentions. Despite no explicit salary reduction or change in job grade, the Court deemed the transfer as a demotion due to the downgrade in responsibilities, unrealistic targets, and the employee’s lack of support staff.
Despite the Employee temporarily assuming the new role and requesting stationery to perform his functions, the Court did not construe this as an acceptance of the Bank’s breach. Instead, it considered the employee’s repeated protests throughout that process.
While this case does not necessarily break new ground about constructive dismissal, it serves as a good reminder about the best practices to be adopted by employers when dealing with issues like transfers and other changes to an employee’s terms of employment.
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This article was written by Sabrina Chang (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.
