LHAG Insights Special Alert 20230427: Nothing Owed, Nothing Due

• Published date: 09 May 2023
• Subject Matter: Employment and HR, Contract of Employment, Discrimination, Disability & Sexual Harassment, Unfair/ Wrongful Dismissal
• Law Firm: Lee Hishammuddin Allen & Gledhill
• Author: Mr Amardeep Singh Toor and Ashreyna Kaur Bhatia

Nothing Owed, Nothing Due: Limited Damages For Dismissal Claims In Civil Courts

In Malaysia, employers may dismiss employees on various grounds, such as misconduct, poor performance, or redundancy. Employees may also find themselves (i) constructively dismissed when a fundamental term of their contract is breached, or (ii) victims of forced resignation. Such employees typically seek recourse at the Industrial Court - a specialised tribunal established under the Industrial Relations Act 1967 to adjudicate unjust dismissal claims. The Industrial Court is empowered to award specific performance in the form of reinstatement, or monetary compensation in lieu thereof, and backwages of up to 24 months for confirmed employees. Alternatively, employees may turn to the civil courts (i.e., the Magistrates', Sessions, or High Court) for relief.

The existence of two forums in which unjust dismissal disputes may be resolved, naturally leads to the question of whether there are material differences, or financial advantages, in initiating a claim in the civil courts over the Industrial Court and vice versa.

The Fung Keong Principle

In Fung Keong, ¹ the Federal Court established that should an employee file a dismissal claim at the civil courts, damages will be limited to the employee's notice period. This may be further reduced if it can be proven that the employee could have, but failed to secure, a similar job immediately or during the notice period. An employee can neither sue for wounded feelings or loss of reputation, nor be reinstated.

Muddying the Waters?

Over the years, certain decisions have demonstrated a departure from the principles espoused in Fung Keong. In Alan Thomas Bohlsen,² the employee claimed that he was constructively dismissed. After finding in favour of the employee, the High Court awarded damages equivalent to the balance of the employee's fixed-term employment contract instead of the 4 months' notice period. A similar departure was seen in Jon Paul Dante³ where the High Court awarded damages amounting to the remainder of the employee's fixed-term contract.

A Return to Fung Keong

Recently, in the case of 7-Eleven Malaysia Sdn Bhd v Ashvine A/P Hari Krishnan (Civil Appeal No. W02(IM)(NCVC)-629-04/2022), the issue before the Court of Appeal was whether the employee was entitled to pursue a claim for constructive dismissal in the High Court, where she sought an eye-watering sum of RM96 million in damages.

The employee was...