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in Malaysia
THE LAW OF CONSTRUCTIVE DISMISSAL AND ITS
IMPLICATIONS TO HUMAN RESOURCE MANAGEMENT
IN MALAYSIA
by
BALAKRISHNAN MUNIAPAN1
School of Business & Design
Swinburne University of Technology (Sarawak Campus)
Abstract
This paper specifically analyses some of the constructive dismissal awards
and its implication to human resource management in Malaysia. The
methodology employed in this paper is the analysis of case laws using
criterion-based sampling from the Industrial and Superior Court awards
on constructive dismissal. With a good understanding of the constructive
dismissal awards, it is expected that organisations will manage and treat
their human resources as their greatest assets and prevent constructive
dismissal claims from taking place. This will eventually help to improve
and maintain harmonious employment relations.
Key words: human resource management in Malaysia, dismissal,
constructive dismissal, employment law, employment relations and
comparative industrial relations.
INTRODUCTION
Constructive dismissal is creating a new challenge to human resource
management in Malaysia. This is due to the increasing number of
awards on constructive dismissal made by the Malaysian Industrial
Court over the last nine years. From the years 2001 to 2009, the
1
Balakrishnan Muniapan is a Senior Lecturer in HRM at the School of
Business & Design, Swinburne University of Technology, Sarawak
Campus, in Kuching (Malaysia). He had previously taught HRM at Curtin
University of Technology, Sarawak Campus in Miri, Hertfordshire
University program at BIMC in Beijing (China), and Economics for
British and Australian Universities program in Penang. He has more than
45 publications which include journal articles, book chapters and
conference proceedings (refereed and non-refereed). He has also
presented HRM papers at academic conferences in several countries
within Asia, Australia and Europe. Email: mbalakrsna@yahoo.com.

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Industrial Court has made 562 awards on constructive dismissal,
mostly against employers. With compensation awarded to each
employee amounting to as much as 24 months of back-pay salary plus
a month’s pay for every year of service, employers can no longer
neglect this pressing issue. The concept of constructive dismissal falls
within the purview of s 20 of the Industrial Relations Act 1967.
Constructive dismissal is a ‘deemed dismissal’ if an employer is guilty
of a breach of the employment contract which goes to the root of the
contract. It arises when a workman terminates his/her contract of
employment and considers himself/herself discharged from further
obligations because of the employer’s conduct.
LITERATURE REVIEW
In the context of Malaysian human resource management, studies on
employment laws especially on constructive dismissal are limited as it
is considered as a new area and a specific area of study. Over the years,
some of the authors who have written about Malaysian employment
laws are Muniapan (2006; 2007), Muniapan and Parasuraman (2007),
Ramasamy (2006), Mohammad (2006), Pathmanathan et al (2003),
Thavarajah (2008), Thavarajah and Low (2003), Aminuddin (2007;
2008), Ayadurai (1996), Anantaraman (1997; 2000), D’Cruz (2007),
Kiong (2002), Idid (1993), Gomez (1997) and Wu (1995). Except for
the studies done by Anantaraman (2000) and Thavarajah (2008), none
of the studies have specifically dealt with constructive dismissals in
depth. This paper therefore hopes to fill the existing gap in the
literature, to highlight some of the recent awards and lessons to
prevent constructive dismissal claims from taking place and generally
to contribute to the constructive dismissal and employment laws
literature in Malaysia.
METHODOLOGY
Research in employment law involves the analysis of statutes and case
laws. The statutes are the primary sources while the case laws are the
secondary sources. However, none of the important statutes related to
employment law in Malaysia, such as the Employment Act 1955,
Industrial Relations Act 1967 and Trade Unions Act 1959 have defined
the term ‘constructive dismissal’, although constructive dismissal
comes within the scope of ‘dismissal’ in s 20 of the Industrial Relations
Act 1967 as per the landmark judgment made by Tun Salleh Abbas LP
in Wong Chee Hong v Cathay Organization (M) Sdn Bhd [1988] 1
MLJ 92 (SC). This paper therefore is based on case analysis of some of
the constructive dismissal awards made by the Industrial Court and

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the superior courts by using criterion based sampling, and a review of
existing literatures in the field of constructive dismissal in Malaysia.
The author is familiar and has been involved in the field of
employment law in Malaysia as a lecturer, trainer and consultant and
is familiar with employment laws such as the Employment Act 1955
and the Industrial Relations Act 1967.
EMPLOYMENT RIGHTS IN MALAYSIA
Employment laws in Malaysia provide security of employment for
workmen2 as employment is considered to be a constitutional right
and is protected by the Federal Constitution under arts 5(1)3 and 8(1).4
This was clearly highlighted by the Industrial Court in Award 20/1997
(cited in D’Cruz, 2007), as follows:
The right to livelihood is a right protected by Part II of the Federal
Constitution. In consonance with the concept of social justice which is
firmly entrenched in industrial jurisprudence is the principle that the
security of tenure of an employee is akin to a right of property and is not to
be treated lightly by a dismissing authority.
This is also evident in Kuching Plywood Bhd v Ng Tiong Hie (1994),
whereby the dictum from the Supreme Court of India in Delhi
Transport Coporation v DTC Mazdoor Congress (1990) was cited,
and the learned chairman of the Industrial Court made the following
observation (cited in D’Cruz, 2007):
2
3
4
The term workman is different from term ‘employee’ as defined in the
Employment Act 1955. Employee as defined in the Employment Act, s
2(1) as any person, irrespective of his occupation, who has entered into
a contract of service with an employer under which such person’s
wages do not exceed ringgit Malaysia one thousand and five hundred
(RM1500). In the Industrial Relations Act 1967, the term ‘workman’ is
defined as ‘any person, including an apprentice, employed by an
employer under a contract of employment to work for hire or reward
and for the purposes of any proceedings in relation to a trade dispute
…’. In this paper, both the terms ‘employee’ and ‘workman’ are used
interchangeably depending on the context of statutes applied
(Employment Act and Industrial Relations Act).
The Federal Constitution of Malaysia is the supreme law of the country.
Article 5(1) provides that no person may be deprived of life or personal
liberty save in accordance with law.
Article 8(1) provides that all persons are equal before the law and
entitled to its equal protection. However in practice, this can be
debated as in the case of art 8(2) which allows no discrimination against
any citizens on the grounds of religion, race, descent or place of birth.

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The right to life includes the right to livelihood. The right to livelihood
therefore cannot hang on the fancies of individuals in authority.
Employment is not a bounty from them nor can its survival be at their
mercy. Income is the foundation of many fundamental rights and when
work is the sole source of income the rights to work becomes as much
fundamental. Fundamental rights can ill afford to be consigned to the
limbo of undefined premises and uncertain applications. That will be a
mockery of them.
From an international context, the International Labour Organization
(‘ILO’) Convention No 158 of 1982, Article 4 of the ‘Convention
Concerning Termination of Employment at the Initiative of the
Employer’ (cited in Muniapan, 2007) made the following provision:
The employment of a worker shall not be terminated unless there is a valid
reason for such termination connected with the capacity or conduct of the
worker or based on the operational requirement of the undertaking,
establishment or service.
In employment law, it is a well established fact that the termination of
employment is not an absolute right of employers. Practically, it can
be a very traumatic and costly exercise and proper care and conduct
must be exercised by the employer when effecting or embarking on
such course of action (Thavarajah, 2008). Dismissal is just one of the
types of termination of the employment contract; other types of
termination include resignation, retirement, frustration of contract,
termination due to breach of contract, non-confirmation of a
probationer, ending of a fixed term contract and termination due to
redundancy (retrenchment). Dismissal is commonly associated as an
act of an employer firing or terminating an employee from
employment. Dismissal is normally due to the workman’s misconduct,
which is not consistent with the expressed or implied terms and
conditions of employment. The Industrial Relations Act 1967 and the
Employment Act 1955 regulate the dismissal of a workman and an
employee in the context of Malaysian employment laws.
Dismissal is also one of the managerial prerogatives or managerial
rights provided within the legal context. The Industrial Relations Act
1967, s 13(3), recognises the following managerial prerogatives or
management rights:
(a) the right to promote by an employer any workman from a lower
grade or category to a higher grade or category;
(b) the right to transfer by an employer a workmen within the
organisation of an employer’s profession, business, trade or
work, provided that such transfer does not entail a change to
the detriment of a workman in regard to his terms of
employment;

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(c) the right to employ by an employer of any person that he may
appoint in the event of a vacancy arising in his establishment;
(d) the right to terminate by an employer of any workman by reason
of redundancy or by reason of the reorganisation of an
employer’s profession, business, trade or work or the criteria for
such termination;
(e) the right to dismiss and reinstate a workman by an employer;
and
(f) the right to assign or allocate by an employer duties or specific
tasks to a workman that is consistent or compatible with the
terms of his employment.
However, the right to dismiss an employee by an employer or any
other management prerogatives is not absolute. This needs to be
made clear to employers as the Industrial Court in Lim Sim Tiong v
Palm Beach Hotel (1974) stated:
It is the basic principle of industrial (employment) law that a court would
be wrong to interfere with bona fide exercise of powers which are given to
management by common law and by contracts of service or which are
inherent in management. If there has been no abuse of discretion, no
discrimination, no capricious or arbitrary action, if management has acted
in goods faith and upon fair investigation, an arbitrator should not disturb
the decision taken by the employer. However as a court of equity and good
conscience, this court will interfere not only where there has been
victimisation, but also where it is of opinion that upon the substantial
merits of the case the action taken by the management was perverse,
baseless or unnecessarily harsh or was not just or fair, or where there has
been a violation of principles of natural justice, or where there has been
unfair labour practice or other mala fide action on the part of the
management in the exercise of its powers.
For employers, s 14(1) of the Employment Act 1955 further states
that the employer may, on grounds of misconduct inconsistent with
the fulfilment of the express or implied conditions of his service,
after due inquiry: (a) dismiss without notice the employee;
(b) downgrade the employee; and (c) impose any other lesser
punishment as he deems just and fit. It is an established principle of
employment law that an employer must establish sufficient
circumstances justifying dismissal such as misconduct. His Lordship
Mohd Azmi FCJ stated in the case of Milan Auto Sdn Bhd v Wong
She Yen [1995] 3 MLJ 537 (FC) that the function of the Industrial
Court in dismissal cases on a reference under s 20 of the Industrial
Relations Act 1967 is two-fold, namely:
... first, to determine whether the misconduct complained of by the
employer has been established, and secondly whether the proven

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misconduct constitutes a just cause or excuse for the dismissal … Thus the
two questions, which the court had to ask itself, are: (i) was there a
dismissal; and (ii) if the answer to (i) is in the affirmative, was the dismissal
with or without just cause or excuse.
Therefore in any dismissal made by the employer, the burden of
proving the misconduct falls in the hands of the employer (not the
employee) to provide the reasonable reasons for the dismissal. This
was also clearly established by the Industrial Court in Stamford
Executive Centre v Dharsini Ganesan [1986] 1 ILR 101 (IC). The
court commented:
It may further be emphasised here that in a dismissal case the employer
must produce convincing evidence that the workman committed the
offence(s) he is alleged to have committed and for which he has been
dismissed. The burden of proof lies on the employer. He must prove that
the workman guilty, and it is not the workman who must prove himself not
guilty. This is so basic a principle of industrial jurisprudence that no
employer is expected to come to this court in ignorance of it.
As a result, due inquiry based on the rules of natural justice is a must
before dismissing an employee who is within the scope of the
Employment Act 1955. The due inquiry is also necessary for a
workman who is not within the scope of the Employment Act 1955 to
fulfil the requirement of natural justice.5 Dismissal is the most severe
punishment, which can be awarded to a delinquent workman by his
employer mostly for some act of misconduct which had to be proven
after the due inquiry. However in employment law, just as the
employer has the right to dismiss the employee, the employee also has
the right to dismiss the employer if there has been a fundamental
breach of the employment contract by the employer, which goes to
the root of the contract. In some circumstances, the employer’s act of
5
The concept of natural justice has two basic components: (1) the rules
of audi alteram partem and (2) the rule against bias. The of audi
alteram partem rule, or the rule requiring a fair hearing is of
importance and can be used to construe a whole code of administrative
procedural rights. The rule against bias is also of equal importance for a
man should not be judged in his own cause and justice must not be
done but seen to be done. An adjudicator should not be a party to the
dispute if he has some interest therein and it is not necessary to prove
that a particular decision made by the adjudicator was in fact influenced
by biasness. It is sufficient if there is a reasonable suspicion about his
fairness. He must not only be free from biasness, but there must not
even be an appearance of biasness. Source: Eastern Plantation Agency
(Johore) Sdn Bhd v Association of West Malaysian Plantation
Executives, Seremban (1985).

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unilateral changes in the terms and condition of the employment
contract, forces the workman to terminate the contract with or
without notice. This kind of unfair dismissal is popularly known as
‘constructive dismissal’. The constructive dismissal awards made by
the courts over the years have great implications to human resource
management in Malaysia.
CONSTRUCTIVE DISMISSAL
Constructive dismissal is a ‘deemed dismissal’ if an employer is guilty
of a breach of the employment contract which goes to the root of
the contract. It arises when a workman terminates his/her contract
of employment and therefore considers himself/herself discharged
from further obligations because of the conduct of the employer.
According to Bowman and Lord Hailsham (2005) in Halsbury’s
Laws of England, constructive dismissal happens when an
employee terminates the contract of employment with or without
notice and may still make a claim to have been dismissed, if the
circumstances are such that he or she terminated it by reason of the
employer's conduct or a breach of contract by the employer. The
employee must leave immediately in response to the breach of
contract.
In a Canadian case, Farber v Royal Trust Co (1997), Canada's
Supreme Court defined constructive dismissal as follows:
Where an employer unilaterally makes a fundamental or substantial change
to an employee’s contract of employment — a change that violates the
contract’s terms — the employer is committing a fundamental breach of
the contract that results in its termination and entitles the employee to
consider himself or herself constructively dismissed.
Constructive dismissal denotes the conduct of an employer, which is
outrageous and makes continued employment impossible; a workman
need not tolerate it and can treat himself or herself as dismissed
(Lotteries Corporation Sabah Sdn Bhd v Vincent Lee [1991] 1 ILR
554 (IC)). A much clearer explanation of constructive dismissal was
given by Dato’ Gopal Sri Ram JCA in Quah Swee Khoon v Sime Darby
Berhad [2000] 2 MLJ 600 (CA) who simply defines constructive
dismissal as follows:
An employer does not like a workman. He does not want to dismiss him
and face the consequences. He wants to ease the workman out of his
organisation. He wants to make the process as painless as possible for
himself. He usually employs the subtlest of means. He may, under the guise
of exercising the management power of transfer, demote the workman …
Alternatively, he may take steps to reduce the workman in rank by giving

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him fewer or less prestigious responsibilities than previously held.
Generally speaking, he will make life so unbearable for the workman so as
to drive the latter out of employment.
In a constructive dismissal, an employer is guilty of a breach of the
employment contract which goes to the root of the contract or if the
employer has shown and committed unreasonable actions or
behaviours which repudiates the contract of employment. In such
situations, the workman is entitled to regard the employment contract
as having terminated and construe himself/herself as having been
constructively dismissed.
In Malaysia, the Supreme Court (now Federal Court) ruling by Tun
Salleh Abas LP in Wong Chee Hong v Cathay Organization (M) Sdn
Bhd [1998] 1 MLJ 92, firmly established the doctrine of constructive
dismissal. As a result, constructive dismissal has been brought within
the ambit of s 20 of the Industrial Relations Act 1967,6 which means
dismissal rights under the law are now extended to those workmen
who are compelled to resign because of the conduct of their
employers (Anantaraman, 2000).
However, constructive dismissal cases need to be analysed from a
different perspective unlike wrongful dismissal and unfair dismissal or
from any other type of employment terminations, as in a constructive
dismissal, the burden of proof is on the workman to prove that his/her
employer is guilty. The term ‘wrongful dismissal’ is based on contract
law and it happens when the employer breaches the employment
contract and forces the employee to leave and the claims for wrongful
dismissal means looking at the employment contract to see if the
employer has breached the contract. In the context of English
employment law, constructive dismissal would be the case of a
6
Section 20(1) — ‘Where a workman, irrespective of whether he is a
member of a trade union of workmen or otherwise, considers that he
has been dismissed without just cause or excuse by his employer, he
may make representations in writing to the Director General to be
reinstated in his former employment; the representation may be filed at
the office of the Director General nearest to the place of employment
from which the workman was dismissed.’ The Industrial Court in PG
Pak Poy & Associates Sdn Bhd vs Looi Sook Chan (1986) asserted that:
‘Section 20 of the IRA embodies the concept of security of tenure of
employment … a workman is entitled to keep his job and no employer
may be allowed to throw a workman out of his employment without
good reason. This provision gives a workman the right to claim
reinstatement and this court may order reinstatement in the workman’s
former employment if his dismissal is considered to be without just
cause or excuse.’

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wrongful dismissal. The term ‘unfair dismissal’ on the other hand, is
based on statute when the employer dismisses the employee without
reasonable excuse as in s 20 of the Industrial Relations Act 1967.
However, in the Malaysian context of employment law, the term
‘wrongful dismissal’ and ‘unfair dismissal’ are synonymous and are
used interchangeably (Thavarajah, 2008) and constructive dismissal is
seen as another type of dismissal apart from wrongful dismissal and
unfair dismissal.
In determining constructive dismissal claims, it is the contract test
and not the reasonable test, which must be present. The contract test
was used in Wong Chee Hong v Cathay Organization (M) Sdn Bhd
(also cited in Sama World Asia Sdn v Teh Soo Seng [2008] 1 ILR 112
(IC ) where the learned judge, Tun Salleh Abas LP made the following
comments:
Thus it would be a dismissal if an employer is guilty of a breach which goes
to the root of the contract or if he has evinced an intention no longer
bound by it. In such situation, the employee is entitled to regard the
contract as terminated and himself as being dismissed.
Similarly in the case of Shabudin Abdul Rashid v Talasco Insurance
Sdn Bhd [2004], 4 CLJ 514 the Court of Appeal held that:
We confirm this to be the true test as the employer’s conduct … must be
such as to amount to there being a breach of some term in the appellant’s
contract of employment and must be so fundamental as to evince an
intention not bound by the contract of employment.
In Western Excavating (ECC) Co Ltd v Sharp [1978] 1 All ER 713 (CA)
which was an earlier English case, the decision was established that
reference must be made to the contract of employment in order to see
whether the employer’s conduct constitutes a fundamental breach of
contract. This principal was also used in MPH Bookstores Sdn Bhd v
Lim Jet Seng [1987] 1 ILR 585 (IC), that in order for a claim of
constructive dismissal to be successful, both limbs of the common law
‘contract test’ must be present; they are as follows:
Did the employer’s conduct amount to a breach of the contract or had he
evinced an intention no longer to be bound by the contract thereby
entitling the workman to resign, and did the workman make up his mind
and act at the appropriate point in time soon after the conduct, which he
had complained of, had taken place.
Therefore, the onus of proof is on the workman and not on the
company to prove on a balance of probabilities that he/she was
dismissed. The claimant has to prove that the company has breached
the contract thereby entitling him/her to plead under constructive
dismissal. In order to prove that he/she has suffered constructive

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dismissal, an employee must prove that he/she did so as a result of a
breach of contract by his/her employer who no longer intends to be
bound by the essential terms of the contract. The key element of
constructive dismissal is that the workman must have been entitled
to leave without notice as a result of the employer’s conduct. The
word ‘entitled’ means that the employee could leave when the
employer’s behaviour towards him/her was so unreasonable that he/
she could not be expected to stay (Smith and Wood, 2007).
Circumstances where the workman can classify when an
employer’s action has led to constructive dismissal (D’Cruz, 2007)
are:
(a) arbitrary reduction of wages, commission, allowance, etc;
(b) withdrawal of contractual benefits provided as they are
mentioned in the contract of service;
(c) altering or taking away facilities reflective of the position;
(d) demotion or downgrading to a lower post, with or without the
reduction of salary, fringe benefits, etc;
(e) transfer to a different location if such transferability is not clearly
stated in the letter of appointment;
(f)
substantial changes in the job function, especially if the
employee is incapable of performing those functions;
(g) behaviour by the employer, which is intended to humiliate the
employee;
(h) acts of victimisation such as setting unattainable deadlines,
constant fault-finding and harassment (including sexual
harassment); and
(i)
threatening with dismissal if the employee does not resign from
the job.
The table below shows a drastic increase in the number of
constructive dismissal awards made in 2009 which is the highest over
the last nine years and the number is expected to rise in 2010. This is
indeed alarming and it is a pressing issue that cannot be taken lightly
by human resource practitioners in Malaysia. With compensation
awarded to each employee amounted to as much as 24 months of
back-pay salary plus a month’s pay for every year of service,
organisations can no longer neglect this issue. Therefore, it is essential
for human resource practitioners to learn and understand the cases on
constructive dismissal in order to not only manage it but also to
prevent constructive dismissal claims from taking place.

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Analysis of Awards on Employment Termination (2001 – 2009)
Types of
Termination
2001
2002
2003
2004
2005
2006
2007
2008
2009
Constructive
26
35
40
34
22
42
97
126
140
Misconduct
726
810
763
1638
2144
2051
1200
878
613
Retrenchment
41
52
61
61
16
32
422
155
114
Others
–
–
–
–
–
–
402
573
328
Total
793
897
864
1733
2182
2125
2121
1732
1195
Source: Malaysia Industrial Court at http://www.mp.gov.my/.
SOME OF THE CONSTRUCTIVE DISMISSAL AWARDS
Transfer of a workman
The right to transfer a workman within the organisation of an
employer’s profession, business, trade or work is a managerial right;
however that such transfer does not entail a change to the detriment
of a workman in regard to his or her terms of employment. This law
on transfer was also clearly summarised by Raus Sharif J in Chong Lee
Fah v The New Straits Times Press (M) Bhd [2006] 1 MLJ 289 (HC)
cited in Thavarajah (2008). In the earlier case of Supermix Concrete
(M) Sdn Bhd v Raduan Ahmad [2002] 1 ILR 80 (IC), the claimant
argued that a transfer to another plant was a breach of the
fundamental contract. The judge held that in a transfer provision, the
company had the discretionary power to transfer at any other location
as and when the company required or needed; therefore, there was
no mala fide or victimisation; the company’s power to transfer the
claimant in this case was a bona fide exercise.
However in Dicklin Sdn Bhd v Bathma Subramaniam [1991] 2
ILR 750, IC, the court held that the transfer provision was only limited
to a transfer from one selection, division or associated company to the
other and that under the contract of service, the company had no
contractual right to transfer the claimant from West Malaysia (Subang
Jaya) to East Malaysia (Kota Kinabalu). The company’s action was mala
fide given the fact that there was an ongoing retrenchment exercise
and knowing that the transfer will force her to resign, to avoid paying
retrenchment benefits.

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In the case of Cosdel (Singapore) Pte Ltd v Ching Chooi Ham
[2002] 1 ILR 562 (IC) the claimant had verbally agreed to be
transferred to another location assuming that the terms and
conditions of the employment were similar to the current job. Upon
receiving a new appointment letter with different terms, she agreed
to accept the transfer provided that the terms and conditions of her
employment were not changed. The court held that it was an unjust
dismissal whereby the company had altered the terms and conditions
of the employment.
There were a few cases of constructive dismissal in the late
1990s which were related to transfers which are relevant for us
explore further. In Funai Electric (Malaysia) Sdn Bhd Johore v
Salliah Ahmad [1997] 2 ILR 1002 (IC), the claimant, an assistant
manager (shipping) claimed constructive dismissal on the ground
that her transfer to the service parts department resulted in the
erosion of her duties and responsibilities. She claimed constructive
dismissal only after reporting to the new position and after being
there for 12 days. The court allowed her claim of constructive
dismissal notwithstanding the delay of 12 days on the ground that
the claimant had to report to the new position as well as spend 12
days to find out whether it was indeed a demotion; this was not fatal
to her claim.
In Titan Polyethylene (M) Sdn Bhd v Othman Busu [1997] 3
ILR 497 (IC), when the company demoted the claimant from the
position of group human resource manager to assistant to the vicepresident of human resource, he wrote to the managing director to
reconsider his decision and to reinstate him in his former position.
Pending the outcome of his appeal, the claimant worked under
protest for 2.5 months before claiming constructive dismissal. He
explained that the delay was there because he wanted to give the
company a chance to remedy the breach. The court did not hold
the delay as amounting to affirmation of the new terms of his
contract.
In Hotel Malaya Sdn Bhd v Say Lip Nyen [1994] 1 ILR 464 (IC),
the action of the hotel in transferring its maintenance executive to the
newly created job of ‘car park executive’ without any indication of
duties and functions was claimed by the claimant as both mala fide
and a breach of contract. The court found that the claimant's new job
functions at the car park tantamounted to that of a car park attendant.
It upheld the claim of constructive dismissal and rightly ordered for
reinstatement to his former position in the maintenance department
without any loss whatsoever.

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In Harta Maintenance Sdn Bhd v Vanaja Chelliah & Ors [1999]
1 ILR 639 (IC), the claimants were cleaners at the Kajang Hospital and
because of their trouble with their supervisor, they were transferred
to the Kuala Lumpur Hospital. Though the right to transfer was the
prerogative of the employer, it should not entail a change to the
detriment of the employees. The claimants accepted the cleaner's job
in Kajang because the place of their work was just one block away
from their homes. However, transfer was detrimental to the claimants
as it caused them economic loss, an increase in travelling expenses,
and a decrease in their monthly income in terms of overtime income.
The court upheld their claim of constructive dismissal and ordered
compensation to be paid to the claimants.
Therefore, it is pertinent for organisations to understand their
legal right to transfer their employees as well as their limitations. This
was highlighted by the Industrial Court in Kian Joo-Southcorp Sdn v
Nurul Syafiqah binti Abdullah [2003] 2 ILR 344 (IC). In this case, the
court cited Ghaiye’s Misconduct in Employment in respect to the
power to transfer, which the learned author has emphasised, is
subject to well recognised restrictions namely:
(a) there is nothing to the contrary in terms of employment;
(b) the management has acted in a bona fide manner and in the
interests of its business;
(c) the management is not actuated by any indirect motive or any
kind of mala-fide;
(d) the transfer is not made for the purpose of harassing and
victimising the workman; and
(e) the transfer does not involve a change in the conditions of service.
The above restrictions was also cited in the Court of Appeal by Arifin
Zakaria JCA in Ladang Holyrood v Ayasamy a/l Manikam & Ors
[2004] 3 MLJ 339, and Raus Sharif J in Chong Lee Fah v The New Straits
Times Press (M) Bhd [2006] 1 MLJ 289; [2005] 4 CLJ 605 cited in
Thavarajah (2008).
Setting unreasonable targets
The assignment of work and the setting of work targets and
performance goals are considered to be the right of organisations;
however, under certain circumstances, this can lead to constructive
dismissal if this right is not exercised in a bona-fide manner. For
example, in Informatics v George Varkey Sebastian [2002] 1 ILR 300
(IC), the claimant contended that the company had set an
unreasonable target and a re-designation. A contract test applied

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whereby the judge held that in a constructive dismissal claim, the
onus is upon the claimant to establish on a balance of probabilities
that the company by its conduct had breached a term or terms
(express or implied) of the contract; that the breach is a fundamental
one going to the root or foundation of the contract; that the claimant
has terminated the contract by reason of the company’s conduct and
the conduct is sufficiently serious to entitle the claimant to leave at
once; and that the claimant in order to treat himself as discharged, left
soon after the breach.
Lasalle International Design School Sdn Bhd v Azhari Haltami
[2002] 1 ILR 340 (IC) is an interesting case where the claimant, a
lecturer, was unfairly dismissed when the company restructured the
organisation and also due to unsatisfactory work performance. The
court held that where it concerned unsatisfactory performance, the
company has to prove that the company has given sufficient warnings
or notice to improve the employee’s quality of work, failing which,
the employee could be asked to leave. During the process of
restructuring, the management has the right to reduce the number of
workmen in accordance to the company’s needs; however this
exercise must be bona fide and genuinely undertaken. Since there was
no evidence to prove that the claimant was given prior notice of
retrenchment and warnings about his unsatisfactory performance, the
dismissal was deemed unfair.
Unilateral of changes in contract
It is well established in employment law that the employment terms
and conditions cannot be varied unilaterally by one party. In Konnas
Jet Cargo Systems Sdn Bhd v Cheah Cheong Tian [1995] 2 ILR 800
(IC) the claimant was a general manager of the company and a memo
from the company dated 3 February 1987 unilaterally altered his
duties and responsibilities and also made him subservient to an
assistant general manager brought in from the parent company. The
breach of contract as alleged occurred on 3 February 1987 but the
claimant only left his employment on 6 July 1987, more than five
months later. Since the company insidiously committed a series of
breaches which were inconsistent and incompatible with the
claimant's functions, duties, status and dignity as a general manager of
the company only after its letter dated 3 February 1987, the court
ruled that the delay was not fatal.
In Sugar Bun Services Corp Bhd v Ong Siew Choon [2006] 1 ILR
99 (IC), the employee’s fixed annual bonus was an express term in the
employee’s annual remuneration and as such, it was a fundamental
term of the contract between the two parties. The company therefore

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could not unilaterally withdraw the said fixed annual bonus without
the employee’s consent. The company’s action amounted to a serious
breach of the claimant’s contract of employment.
Payment of wages
In the case of ATI Technologies (M) Sdn Bhd & Anor v Jamilah Abu
Bakar [2002] 1 ILR 385 (IC), the claimant constructively dismissed
herself when she was not paid monthly salary. The court held this as
unjust dismissal and ordered the claimant to be paid back wages and
compensation in lieu of reinstatement. In TKS Kitcheneering Studio
(SA) Sdn Bhd v Chia Mooi Keng [2002] 1 ILR 124 (IC), the company
had constructively dismissed the claimant via her demotion and the
drastic salary reduction without providing her with any reasons. In
Broadway Typesetting Sdn Bhd v Puan Ho Nyet Khoon [1987] 2 ILR
350 (IC), the claimant was dismissed because she was 4 1/2 months
pregnant. The court held that the company had avoided paying her
maternity leave and had therefore found that there was no just cause
or excuse to dismiss the claimant.
In Sama World Asia Sdn Bhd v Teo Soo Seng [2008] 1 ILR 112
(IC), cited in Thavarajah (2008), the employee claimed constructive
dismissal when the company did not pay his salary, income tax and
EPF (Employee Provident Fund) for three months as well as his
reimbursements for travelling and medical expenses. The Industrial
Court however dismissed the employee’s claim, holding that the
employee had failed to prove that the company had evinced an
intention not to be bound by the contract.
Repudiation of contract
In Plastic Tecnic Sdn Bhd v Saraswathy d/o Manickam & Ors [1991]
1 ILR 643 (IC), the company relocated itself from Petaling Jaya to
Bangi promising its employees that a free transport service would be
continuously provided. However, the bus service ceased operations
after two months. The conduct of the company in ceasing operations
was held to be a repudiation of a fundamental term of the contract,
and the employees were therefore, entitled to regard themselves as
having been constructively dismissed.
Breach of implied term
The terms and conditions of employment are both expressed
(written) and implied (not written or psychological contact). There
were several cases of breach of implied contact in the 1990s which

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lead to constructive dismissal. For example in Aik Poh Rubber
Industries Sdn Bhd v Goh Seng Hooi [1991] 2 ILR 849a (IC), the court
applied the common law principle that the company by humiliating,
intimidating and assaulting the claimant which made him fear for his
safety was guilty of breach of an implied term which goes to the root
of the contract of employment. This is therefore dismissal. In another
award provided by the court in Multrapac Sdn Bhd v Low Kok Piew
[1993] 2 ILR 242 (IC), the court held that no employer has the right
to assault his/her employee for any reason. Therefore, the claimant
had the right to walk out after the assault and treated himself as being
dismissed by the company. While in the case of Syarikat Pengurusan
Ladang Sdn Bhd v Sebastian Joseph Fernandez [1991] 1 ILR 99a
(IC), the Industrial Court held that when the conduct of an employer
is outrageous and makes continued employment impossible for a
workman, he/she need not tolerate it and can treat himself or herself
as dismissed.
BACK WAGES AND COMPENSATION FOR CONSTRUCTIVE
DISMISSAL
Section 20(1) of the Industrial Relations Act 1967 provides
employment protection for workmen. The section provides:
Where a workman, irrespective of whether he is a member of a trade
union of workmen or otherwise, considers that he has been dismissed
without just cause or excuse by his employer, he may make
representations in writing to the Director General to be reinstated in his
former employment; the representations may be filed at the office of the
Director General nearest to the place of employment from which the
workman was dismissed.
As for the back wages and compensation for constructive dismissal,
there is no set formula to be followed. In Holiday Inn Kuching v Lee
Chai Siok Elizabeth [1992] 1 MLJ 23 (HC), the claimant found
employment after her dismissal, therefore requested for
compensation in lieu of reinstatement. The court held that the
claimant did not want the job back, thus there is no basis for
awarding damages or compensation in lieu of reinstatement. Lately,
there have been delays in obtaining a hearing date and this creates
considerable problems to claimants who seek reinstatements. Thus
under such circumstances, back wages or compensation in lieu of
reinstatement will be the only remedy provided by the ordinary
court for wrongful dismissal. In Sibu Steel (Sarawak) Sdn Bhd v
Ahmad Termize Bujang [1996] 2 ILR 885 (IC), the social objective
of s 20 of the Industrial Relations Act 1967 was pointed out by the
court as follows:

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The remedies of reinstatement or compensation in lieu thereof are
consequential to the substantive right conferred upon workmen of their
entitlement to security to tenure which is translated into the practical
assurance that no employer can dismiss or even contractually terminate
the service of his employee without just cause or excuse … the complaint
of unjust dismissal solely on the ground that the remedy of reinstatement is
no longer expedient or otherwise inappropriate.
ESTABLISHING CONSTRUCTIVE DISMISSAL
In Ang Beng Teik v Pan Global Textile Bhd, Penang [1996] 3 MLJ 137
(CA), where Tun Salleh Abas LP had observed that in proving
constructive dismissal, the claimant has to establish:
(a) that the company, by its conduct had breached the contract of
employment in respect of one or more of the essential terms of
the contract;
(b) that the beach is a fundamental one going to the root or
foundation of the contract;
(c) that the claimant had terminated the contract by reason of the
company’s conduct and that the conduct is sufficiently serious
to entitle the claimant to leave at one; and
(d) that the claimant, in order to assert the right to treat himself as
discharged, left soon after the breach.
He further commented that when the claim for reinstatement under
s 20(1) of the Industrial Relations Act 1967 is based on constructive
and not actual dismissal, the onus of proving that he has been
constructively dismissed lies on the workman himself. Therefore if
the workman leaves the company where these conditions are not
met, he may be considered as having resigned.
The evidence of the employer’s conduct and the events determine
whether the claimants have been dismissed or constructively
dismissed by the company. Dato Gopal Sri Ram JCA in Ang Beng Teik
v Pan Global Textile Bhd, Penang [1996] 3 MLJ 137 (CA) said that
‘the term ‘constructive dismissal’ is only a convenient label to
describe the conduct on the part on the employer which makes a
workman consider that he has been dismissed without just cause or
excuse, although there is no formal order of dismissal’.
SOME RECOMMENDATIONS TO REDUCE CONSTRUCTIVE
DISMISSAL CASES
Thavarajah (2008) asserted that under the broad concept of
‘constructive dismissal’, the courts are imposing further

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responsibilities on organisations and employers. Therefore,
employers whether domestic or multinational, would have to
shoulder greater responsibility towards their employees. For
example, an employer who ignores a complaint by a female employee
that she has been sexually harassed may have to defend his/her
inaction before the Industrial Court pursuant to a complaint by the
female employee that she had been constructively dismissed.
With the increasing claims on constructive dismissal, the
management of human resources becomes more challenging with
legal implications for organisations and employers. As a result, from
the perspectives of the author, the following recommendations and
suggestions can be a useful guide to reduce claims of constructive
dismissal. These recommendations are not difficult to implement as
they are simple strategies based on the human dimension of
management. These include the creation of harmonious employment
relations, a consultative management approach, effective and efficient
grievance handling machinery and effective human resource
strategies (Muniapan, 2006). These recommendations are also useful
for the effective management of employment in any industry, society
or country.
The creation of harmonious employment relations is essential.
Employees are considered as the most important resource of the
organisation because they contribute to the growth and success of the
organisation. Like any other resource in the organisation, they would
need to be managed; but unlike any other physical resource,
employees are human beings that have feelings, freedom of thoughts
and freedom to make choices, the liberty to act, or not to act, in a
certain manner, etc. Because employees are considered as a unique
and vital organisational resource, they would need to be managed
properly. Industrial relations or employment relations essentially are
‘human relations’ and understanding the ‘humane’ and ‘human’
aspect of management is the first step in creating harmonious
employment relations. The constructive dismissal cases that were
highlighted earlier indicate poor human management and are one of
the sources of the claims made by employees. Therefore, the
organisations would need to play a strategic role in creating and
maintaining harmonious employment relations.
Moreover, both employers and employees should regard each
other as partners to build lasting relationships. They would need to
adopt a consultative approach in resolving issues through dialogue,
taking into consideration the needs and concerns of both parties. The
employers or the management should also provide effective
leadership and direction in the overall interests of all parties. They
should lead by example and accept responsibilities. The employers

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should adopt a more participative management style, participative
management style is more suitable to the current management
environment in Malaysia as several research studies indicates that the
authoritarian or directive management styles is not suitable for many
organisations in the current business environment. Participative
management is an open form of management where employees have
a strong decision-making role. A participative management system
needs to be developed by the management especially in a nonunionised environment to actively seek a strong cooperative
relationship with their employees. Besides reducing the constructive
dismissal claims, the advantages of participative management include
increased productivity, improved quality, and reduced costs.
The handling of employee grievance with an effective grievance
handling machinery is a must to resolve any disputes at supervisory
level. A grievance is like a small fire; the earlier you put it out, the
better. The grievance should be studied thoroughly and objectively,
and due consideration should be given to the social and cultural
aspects of the grievance and the parties involved. The grievance
handling procedure of the organisation can affect the harmonious
environment of the organisation. The grievances of the employees
are related to the contract, work rules, policy or procedure, health
and safety regulation, individual complaints, wage, bonus and other
employment related issues. Here, the attitude on the part of the
organisations in their effort to understand the problems of
employees and to resolve the issues amicably have a better
probability in maintaining a culture of high performance (Kumar,
2006). The grievance handling process must be done in a fair and
equitable solution for all parties; both the employer and employees.
The solution should be just (firm), but justice should be tempered
with compassion wherever possible. Finally, the solution to the
grievance should not only be effective in redressing the present
grievance but it should also be effective in avoiding recurrence of
such grievances in the future (D’Cruz, 1999). Therefore,
organisations need to educate their managers about the importance
of the grievance procedures as the effective grievance handling is an
essential part of cultivating good employee relations and running a
fair, successful, and productive workplace.
Effective human resource management and employment relations
strategies in terms of employee selection, induction, training and
development, performance management and appraisal, compensation
management and employee relations are also essential. As previously
stated employers should regard their employees as their most important
asset as it is not great products or services that make an organisation
great but the people. Investment in their employees and developing

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them is also a must for the organisations to remain competitive in the
marketplace. Every manager manages employment relations, although
not every manager is an employment relations manager in the
organisation. As the current expectation on human resources is shifting
from managing the organisation of the business to managing the
business of the organisation (Yong, 2005), it is essential for
organisations operating in Malaysia to manage their human resources
effectively.
CONCLUSION
Constructive dismissal claims and cases are creating new challenges in
human resource management and it is indeed one of the important
and emerging patterns of employment relations in Malaysia. The cases
of constructive dismissal provided and the recommendations will be
a helpful guide to organisations and human resource practitioners in
Malaysia to prevent constructive dismissal claims from being
practiced in their respective organisations. They will also be able to
avoid some of the common mistakes as found from the analysis of the
case laws related to constructive dismissal. Thus this will help in
reducing the number of claims and cases of constructive dismissal
which will be referred to the Ministry of Human Resources under s 20
of the Industrial Relations Act 1967. With a good understanding of the
awards on constructive dismissals, it is expected that organisations
will manage and treat their human resources as their greatest assets
and prevent claims of constructive dismissals from taking place. This
will eventually help to improve and maintain harmonious
employment relations.
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