Constructive dismissal in Malaysia: What should you do when your employer is trying to force you to resign

‍Introduction

"Constructive dismissal" refers to a situation where an employee feels compelled to resign because of the employer's actions, decisions, or policies that breach the employment contract. Essentially, it is a forced resignation where there is no direct termination by the employer and it occurs when an employer substantially changes the terms of an employee’s employment contract which is not consented to by the employee, either expressly or impliedly.

How to successfully claim for constructive dismissal?

It is important to note that in a constructive dismissal claim, the burden of proof is on the employee to prove that their employer is guilty. In order to succeed in a claim for constructive dismissal, the employee must prove that the employer has breached the employment contract and that such breach goes to the root of the contract or that the employer has evinced an intention to no longer be bound by it.

To have a successful claim, it is also imperative that the employee left the company in response to the breach of the employment contract, and not for any other unconnected reason. Some steps taken can also be fatal to a constructive dismissal claim.

Giving notice to remedy the breach

If there is a breach by the employer, the employee can only institute a claim for constructive dismissal after the employee has given notice to the employer to remedy the breach. Should the employer remedy the breach, then the employee would not be entitled to claim for constructive dismissal. On the other hand, if the employer fails to remedy the breach, the employee must take immediate action so as to avoid being construed as waiving his rights for legal action in respect of the breach.  

Under section 20 of the Industrial Relations Act 1967, an ex-employee who believes their dismissal, including constructive dismissal, was without just cause or excuse can file a representation to the Director General for Industrial Relations within 60 days of the dismissal. If reconciliation efforts fail, the Minister of Human Resources may refer the case to the Industrial Court for resolution. The ex-employee can seek reinstatement or compensation, including back wages of up to 24 months (or 12 months for probationary employees).

Circumstances which can be considered constructive dismissal

There are a myriad of situations and circumstances which would tantamount to constructive dismissal. Some of them are:

1. Demotion in rank and status;
2. Unilateral reduction in salary;
3. Sexual harassment;
4. Deprivation of work and marginalization;
5. Effectively forcing the employee to resign.

It would be relevant for the Court to also ascertain whether the Claimant was driven out of his employment by the conduct of the Company or the Claimant had simply abandoned his employment on his own volition. For instance, in Matrix Global Education Sdn Bhd v Felix Lee Eng Boon [2023] 2 CLJ 34, the Court of Appeal held that once an employee engages in discussions for a severance / separation package and subsequently tenders a resignation letter upon the agreed terms, a binding contract is formed. It is therefore no longer possible for an employee to sign off on a separation agreement and then allege constructive dismissal. In gist, the employee cannot have his cake and eat it too.

Under section 20 of the Industrial Relations Act 1967, an ex-employee may make a representation to the Director General for Industrial Relations if he considers that his employment was dismissed without just cause or excuse by his employer (this includes constructive dismissal). This representation must be filed within 60 days from the date of dismissal. In the event reconciliation between parties is unsuccessful, the Minister of Human Resources may, if he thinks fit, refer the representation to the Industrial Court for determination. The ex-employee may seek reinstatement of his employment or compensation and backwages of up to 24 months (or 12 months for probationers). However, in deciding on the quantum for backwages, one of the factors that the Industrial Court would consider is whether the claimant has been gainfully employed elsewhere after his or her dismissal.

Conclusion

Once the employee suspects that the employer may be trying to force them out of the company, it is crucial to take proactive steps and seek legal consultation. This is because the steps taken by both the employee and the employer will be relevant and may materially affect the outcome of the claim in court. For instance, it is important for the resignation letter of the employee to state the reasons for early termination of the employment contract on their part. If the employee does not mention that he is being constructively dismissed or cites other reasons for leaving the company, then that could be used against him in legal proceedings.

‍This article is written by  Raja Nadhil Aqran (Partner). It only contains general information. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such.

If you would like to fix an appointment with one of our lawyers for a consultation, contact us at info@aqranvijandran.com.

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