Constructive Dismissal : Principles & Case Laws

• Published date: 28 February 2023
• Subject Matter: Employment and HR, Contract of Employment, Unfair/ Wrongful Dismissal
• Law Firm: Kevin Wu & Associates
• Author: Charumathy Nair

The common law has long recognised the right of an employee to terminate their contract of service. Therefore, for employees to be discharged from their obligations under the employment contract, it must be shown that the employer is guilty of a breach that affects the foundation of the labour or if the employer has displayed an intention to no longer be confined to such work relationship thus leading to a constructive dismissal.

In view of the above, over the years, Malaysian case laws have firmly established the doctrine and elements of constructive dismissal. As a result, constructive dismissal was successfully enshrined within the bounds of Section 20 of the Industrial Relations Act 1967¹, which means dismissal rights under the law were extended to employees who are compelled to exit a workplace due to an employer's detrimental actions. Discussed below is a perusal of such principles and case laws for a better understanding on the concept of constructive dismissal.

'THE CONTRACT TEST'

The test of constructive dismissal is a test of contractual breach rather than unreasonableness. In order to succeed in constructive dismissal claim, a contract test must be present. The contract test was established in the landmark case Wong Chee Hong v Cathay Organisation (M) Sdn Bhd² wherein the learned judges of the Supreme Court enunciated 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 evinced an intention no longer to be bound by it. In such situations, the employee is entitled to regard the contract as terminated and himself as being dismissed.

'Constructive dismissal does not mean that an employee can automatically terminate the contract when his employer acts or behaves unreasonably towards him'

The principles above were derived from the landmark English case of Western Excavating (ECC) Co Ltd v Sharp³ wherefore the case states 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.

In the case of Govindasamy Munusamy v. Industrial Court Malaysia & Anor⁴ where Hamid Sultan Abu Backer (as he then was), laid down the test of constructive dismissal as follows:-

i. the Company has by its conduct breached the contract of employment in respect of one or more of the essential terms of the contract;

ii. the breach is a fundamental one going to the root or foundation of the contract;

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