Introduction

Dismissal from employment is, in most circumstances, a distressing experience that inflicts
severe economic hardship on the affected worker. It deprive him of his major source of wealth
apart from likelihood of suffering non-pecuniary harm, such as serious trauma from being
dismissed, the discredit of being unemployed, with prospect of humiliation and
embarrassment. Sometimes, an employer may not like an employee for various reasons,
neither does he want to dismiss him and face the circumstances legally, but wants to get rid
of the workman from the organization by making the life of the employee so unbearable, that
he decides to resign himself!
For example under the guise of exercising the management power of transfer, the employer
relegates the worker or take necessary steps to reduce the workers position by giving him
fewer or less prestigious responsibilities than previously held. The affected employee, who is
unable to tolerate the acts of oppression and being victimized by the employer, will in normal
circumstances felt depressed and subsequently tender his resignation and leave the
employer’s services. The question will then arise whether such a departure tantamount for
voluntary resignation or dismissal from employment?
The employer may dismiss an employee’s services for various just reasons, which may be in
form of direct dismissal or Constructive dismissal. The grounds for dismissal include
misconduct (related to duty, discipline and immorality); willful breach of contract of service,
retrenchment under guise of dismissal and other grounds such as poor work performance.
Direct dismissal connotes that the dismissal was at the initiative of the employer. Article 4 of
ILO Convention No 158 of 1982, as did the Recommendation No 119 of 1963, provides
that 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 based on the
operational requirements of the undertaking, establishment or service. Article 5, 6 and 7;
further provide some provisions and guidance before an employer may terminate its
employee; and the employee should be given the opportunity to defend himself against the
allegations made, unless the employer cannot reasonably be expected to provide the
opportunity.
The above Convention and Recommendation has had significant influence not only on the
Malaysian legislatures but also majority of Commonwealth states, as it provides among
others, that the termination should be with valid cause and justification. The ILO Convention
No 158 of 1982 introduced the concept of ‘unjustifiable dismissal’ from employment. Since its
inception, many countries with common law jurisdictions have adopted that term in one form
or the other. For example, in England, the term used is ‘unfair dismissal’; in New Zealand,
‘unjustifiable dismissal’; in Malaysia, ‘dismissal without just cause or excuse’[1]; in Canada
‘unjust dismissal’ and in Australia, ‘harsh, unjust and unreasonable’. The rational underlying
the introduction of statutory protection against unfair or unjustifiable dismissal is to strike a
balance between management autonomy and the protection of the workers’ security of tenure
in employment. The term ‘unfair’ denotes an action correct in strict legal interpretation,
complying with the letter of the law but morally discreditable. The term ‘unjust’ also carries the
same meaning as ‘unfair’. A cause of action is unfair or unjustified when that which is done
cannot be shown to be in accord with justice or fairness. The statutory provision of unfair or
unjustifiable dismissal has created an entirely new cause of action. Though Malaysia did not
ratify ILO Convention No 158 of 1982, nevertheless many provisions of the Convention have
been adopted and enforced in Malaysia.

The term ‘unfair’ denotes an action correct in strict legal interpretation, complying with the
letter of law, but morality discreditable. The term ‘unjust’ also carries the same meaning as
‘unfair’. A cause of action is unjustified when that which is done cannot be shown to be in
accordance with justice and fairness. It follows that an impending dismissal must be
substantively justified and procedurally fair.

The employer must establish a substantive justification for the dismissal, on the balance of
probabilities. An employee cannot be terminated unless there is a valid reason, which is
connected to the capacity or conduct of the worker, or based on the operational requirement
of the undertaking, establishment or service. For example, disobedience to the lawful and
reasonable instructions of the employer would justify dismissal, although this might ultimately
depend on the nature of the disobedience and the reasons for the dismissal. If an impending
dismissal is carried out, the procedure must be just and fair. The employer must furnish the
employee with the full particulars of the allegations that have been made against him. He
should then be given the opportunity to present his own version of the facts and events that
occurred. The employer then is obliged to conduct an impartial enquires into the allegation
made, by observing the rules of natural justice. Any finding or punishment made must be
fair/just and appropriate, having regard to the circumstances surrounding the case. If the
employee thinks that the finding and penalty was harsh and the enquiry was bias and unfairly
conducted, then he may, by virtue of Sec 20 (1) of IRA 1967, make representations in writing
on the ground for dismissal without just cause and excuse.

Concept of Dismissal in Malaysia

The existing labour legislation in Malaysia was enacted to elevate the status of the employee
by regulating working conditions, providing various benefits to the workers apart from
discouraging arbitrary dismissal from employment. The Industrial Relation Act (IRA) 1967
for example is intended to regulate the relationship between employers, workman and union
and seek further to prevents and settle any differences or disputes arising from these
relationships. It is aimed at striking a balance between the need to create a climate for
economic growth as far as industrial relations is concerned on one hand, and social justice,
on the other. The principle feature of the Act is compulsory adjudication, which provides an
avenue for redress of all grievances whether brought by industrial workman or organized
labour union. The IRA further provides that a workman cannot be dismissed save with just
cause or excuse. It thus requires substantive justification and procedural fairness for a valid
dismissal. Sec 20 (1) of IRA 1967 offer statutory protection against an unjustified dismissal,
thus provides better protection compared to common law. The employer must establish a
substantive justification for the dismissal (onus on the employer)[2], and the standard of proof
is on the balance of probabilities[3] (compared to common law where the employee has to
establish the burden of proof on the balance of probability that the dismissal was wrongful). It
must however, be noted that a detail principles and rules on justifiable and unjustifiable
dismissal is not possible. Whether or not a dismissal is substantively justifiable and
procedural fair will depend on the circumstances surrounding each particular case. Thus, the
least expected of an employer is that they must have reasons (just cause and excuse) for the
dismissal and the affected workers must be given necessary opportunity to refute any
allegation made against him. In Lim Sim Tiong vs Palm Beach Hotel Sdn Bhd [Award No
48 of 1974], the Industrial Court noted that:
“..As a court equity and good conscience, it will interfere not only where there has been
victimization but also where it is of the 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 the 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 power..”
Dismissal without just cause or excuse may well be similar in concept to the UK Legislation
on unfair dismissal, but these two are not exactly identical. Sec 20 of IRA is entirely different
from paragraph (c) of Sec 55(2) of the UK Protection of Employment Act.[4] Therefore
the ‘test of unreasonableness’ which is the basis of constructive dismissal by certain school of
thought in UK should not be used as an aid to the interpretation of the word “dismissal” in Sec
20 of Malaysian IRA. Thus, it will be 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 to be bound by it
(contract test).[5]
The law on cases of dismissal has been defined clearly in the case of Goon Kwee Phoy vs
J&P Coats Sdn Bhd [1981] 2 MLJ 129 (FC), where his Lordship Raja Azlan Shah CJ (as
HRH was then) at pg 136 in his judgment said;
“Where representations are made and are referred to the Industrial Court For inquiry, it
is the duty of that court to determine whether the termination or dismissal is with or
without just cause or excuse. If the employer chooses to give a reason for the action
taken by him, the duty of the court will be to enquire whether that excuse or reason has
or has not been made out. If it finds as a fact that it has not been proved, then the
inevitable conclusion must be that the termination or dismissal was without just cause or
excuse. The proper enquiry for the court is the reason advanced by it and the court or
the High Court cannot go into another reason not relied on by the employer or find one
for it…”

For the purposes of the Industrial Relations Act 1967, the term “dismissal” is used to describe
the termination of employment by an employer, which can lead to a claim for reinstatement by
a workman under Sec 20 of the IRA. Any act which has the effect of bringing a contract of
employment to an end is a dismissal within meaning of Sec 20 of the Act. In Colgate
Palmolive (M) Sdn Bhd vs Yap Kok Fong [2001] 4 MLJ 97, Court of Appeal quoted with
approval the following passage of the learned chairman of the Industrial Court:
“..With reference to Sec 20, a workman’s complaint consists of two elements; firstly, that
he has been dismissed and secondly, that such dismissal was without just cause or
excuse.[6] It is upon these two elements being established that the workman can claim
his relief, to wit an order for reinstatement which may be granted or not at the discretion
 of the court. As to the first element, industrial jurisprudence as developed in the course
of industrial adjudication readily recognizes that any act which has the effect of bringing
the employment contract to an end is a 'dismissal' within the meaning of Section 20. The
terminology used and the means resorted to by an employer are of little significance;
thus, contractual terminations, constructive dismissals, non-renewals of contract, forced
resignations, retrenchments and retirements are all species of the same genus, which is
'dismissal'. [emphasis added]”

In Ang Beng Teik vs Pan Global Textile Bhd [1996] 3 MLJ 137, the Appeal Court stated
that:
“..Section 20(1) of IRA protects a workman from dismissal save for just cause and
excuse. Parliament has accordingly placed the right of the workman to continue in
employment on the same footing as a proprietary right which has not be forfeited save
for just cause and excuse. Employment, that is to say, the right to one’s livelihood, is
also a fundamental liberty guaranteed by the Federal Constitution. In order for Sec 20(1)
to apply, the workman must consider himself to have been dismissed without just cause
and excuse. “[7]
Justice Gopal Sri Ram JCA, in his judgment further concluded that;
“..The ordinary principles of common law relating to the discharge of a contract of
service by repudiation and acceptance are wholly irrelevant to a case under Sec 20 of
IRA. The Industrial Court, when it comes to decide whether a workman was dismissed
without just cause or excuse, is wholly unconcerned with whether there was a
repudiation by the workman of his contract of employment which was accepted by the
employer, but rather with the much broader question of whether what happened to the
workman was just and equitable. In order for Sec 20(1) to bite, a workman must
consider himself to have been dismissed without just cause or excuse. He may treat
some conduct on part of his employer towards him- conduct that falls short of actual
dismissal or termination- as amounting to dismissal. It may be an order of demotion or
transfer. The workman in question may consider his demotion or transfer as being the
same as a dismissal. In the words of the Act, he ‘considers that he has been dismissed’.
But there has been no formal dismissal or termination. Yet the workman may have
recourse to Sec 20 of IRA. If it were not so, an employer can make a workman’s life so
intolerable so as to force him to resign and then boldly say that there was no dismissal.
Even the common law recognizes that a dismissal may be disguised as a
resignation.”[8]
The burden of proving that a dismissal has occurred is on the employee.[9] Normally, this
burden will not be difficult to discharge where there is a dismissal letter from the employer.
The issue of proof mainly arises in cases of constructive dismissal and forced resignation.
There are generally two types of termination:
Summary Dismissal – occurs when an employee is terminated without contractual or
reasonable notice by the employer. Most employment contract contains provisions for
summary termination upon certain actions being committed by the employee. However it’s
important to bear in mind that in relation to claims brought under Sec 20 of IRA 1967, The
Industrial Court is not only concerned with the matters of contract, but whether the termination
done is with just cause or excuse.
Termination with Notice – Most employment contracts contain provisions for termination of
employment by either party giving a certain amount of notice. While the termination of the
contract by the employee giving the contractual notice is not actionable, the termination of
employment by the employer giving contractual notice is.
In Dr A Dutt vs Assunta Hospital [1981] 1 MLJ 304 (FC), the issue is whether the formal
notice of termination constituted a dismissal. The Federal Court dealt with this issue as
follows:
“..In our view, the spirit of the Act which concedes as extending to protect workmen who
are members of a trade union from dismissal without just cause or excuse, extend the
same protection to a workman who is not member of a trade union, so that despite the
contractual provision of termination of notice, such workman who considers he has been
dismissed without just cause or excuse may make representations for reinstatement. It
further follows that on a proper interpretation of the relevant sections of the Act, there is
no material distinction between dismissal and termination: as either must be with just
cause or excuse, otherwise the Industrial Court may make an award...”
It is well established in Industrial Law that an employer is at liberty at any time to terminate
the services of his employees by contractual notice or payment of wages in lieu thereof, but if
such termination through ostensibly in pursuance of the terms of the contract of service, is in
reality for certain deficiencies or acts of misconduct, the employer cannot rest his case merely
on the contract of service and say that having exercised his right under the terms of the
contract, there is nothing more to be said by him to justify his action. Once his action is
challenged, he must offer reasons for the termination of his employee’s service, for the so-
called termination simpliciter, ie, a termination by contractual notice and for no reason, if not
grounded on any just cause or excuse would still be a dismissal without just cause or excuse.
In MJH Sdn Bhd vs Boopathy a/l Thambusamy [1991] 1 ILR 76, the court held that the
existence of an express term in the contract of employment which gives the employer a “right
to dismiss an employee without due notice” does not absolve the employer of the need to
comply with the rules of natural justice. It is the duty of the court to scrutinize the issue by
looking at the fact and circumstances of the case that lead to such dismissal. If the dismissal
was activated by malice, then the dismissal was in violation of the principle of natural justice,
thus made without just cause or excuse.
At this juncture, it is appropriate to note that in Malaysia, the law is settled in that there is no
distinction between a unilateral termination of a contract of employment and a dismissal, as
either must be with just cause or excuse. In Goon Kwee Phoy vs J&P Coats (M) Sdn Bhd
[1981] 2 MLJ 129(FC), Sultan Azlan Shah CJ (as he was then) stated as follows in an often-
quoted passage that:
“…there is no material difference between a termination of a contract of
employment by due notice and a unilateral dismissal of a summary notice. The effect is
the same and the result must be the same. Hence, where representations are made
and are referred to the Industrial Court for inquiry, the duty of the court is to determine
whether the termination or dismissal is with or without just cause or excuse. If the
employer chooses to give a reason for the action taken by them, the duty of the
 Industrial Court will be to enquire whether that reason has or has not been made out.
However, if the court finds as a fact that it has not been proven, the inevitable
conclusion must be that the termination or dismissal was without just cause or excuse.
The proper inquiry of the court is the reason advanced by the employer, and that the
Court or High Court cannot go into another reason not relied on by the employer or find
one for him...”
While in Hong Leong Equipment vs Liew Fook Chuan [1996] 3 AMR 3186, the question is
whether the Minister’s is conferred with absolute discretion as to refer representations to
Industrial Court by virtue of Sec 20(3) of IRA, and whether the court can interfere with the
discretion exercised by the Minister? Can the workman denied then applied for certiorari to
quash the Minister’s decision and for an order of mandamus to compel the Minister to refer
the dispute to IC on the ground that his dismissal was unjust and had no good excuse since a
domestic inquiry was not held to hear his denial on the accusation made against him? Court
of Appeal noted that:
“…The failure of an employer to conduct a domestic inquiry against a workman is not
relevant to the consideration of the latter has been dismissed without just cause and
excuse. The findings of a domestic inquiry are not binding upon the Industrial Court
which rehears the matter afresh. However, in determining whether the workman was
justly dismissed, the fact that a domestic inquiry was not held may be the fact that
should be taken into account. Under Sec 20(3) of IRA, the Minister has discretion
whether to refer the representations to the Industrial court or not. The discretion
however should be with good faith and just reason. The Minister’s decision upon the
question of frivolity or vexatiousness is not final and conclusive, and may be reopened in
judicial review proceedings. The Hashim Yeop test [10]is relevant at his juncture. It is
utmost importance to scrutinize the factual matrix of each individual case; and it’s the
court that is expressly conferred with an adjudicatory function, which later decides the
matter based on the facts and the circumstances of the case, as whether the workman
had been dismissed with just cause or excuse...”
However, in Tan Tek Seng v Suruhanjaya Perkhidmatan Pendidikan [1996] 1 MLJ 261,
Court of Appeal held that by virtue of Doctrine of Procedural Fairness, the right of a public
servant to be heard pursuant to Art 135 (2) of Federal Constitution is a breach of rules of
natural justice, and thus the dismissal by virtue of Order 33 and 35 of General Order 1980 is
harsh and unfair. Gopal Sri Ram JCA in his judgment commented;
“..Nevertheless, the disciplinary authority must, when deciding what punishment is ought
to be imposed on a particular public servant, act reasonably and fairly. If it acts arbitrarily
or unfair or imposes punishment that is disproportionate to the misconduct, then its
decision is not with just cause, and therefore liable to be quashed or set aside.”
In his per curiam, the judge also emphasized that,
“The requirement for fairness which is the essence of Art 8(1), when read together with
Art 5(1) of the Constitution, goes to ensure not only that a fair procedure is adopted in
each case based on its own facts, but also that a fair and just punishment is imposed
according to the facts of the particular case.”
As it is a ‘living piece of legislation’[11] the Federal Constitution does not spell out each and
every aspect of the fundamental liberties of the citizen, and therefore judicial creativity in
implementing ‘the true brooding spirit of the framers of the Federal Constitution’ is therefore,
‘necessary and timely’[12]. The contemplation is not only of what has been, but also of what
may be. Hence, ‘right to life’ in Article 5(1) is not merely confined to physical existence by
declaring that it is unlawful to extinguish or take away another’s life except by due process of
law but includes the right to quality of life and this necessarily includes right to ‘livelihood’.
Thus, Article 5(1) stresses on the importance of the preservation of life, it is a priceless
possession and cannot be made a mockery of at the whims and fancies of the employer. To
deprive a person of his right to livelihood without just cause or excuse is against the vein of
the Constitution. Therefore, Article 5(1) of the Constitution provides a substantive right not to
dismiss a worker except in accordance with the law[13]

Conclusion

It’s the duty on the employer to ‘treat all dismissal with great care and circumspection’[14],
they should not deprive workers of their security of tenure in employment save and except for
just cause or excuse. As Finnigan eloquently stated: ‘an employer having once taken on an
employee is bound to continue until something occurs (including redundancy) which justifies
terminating it’[15]. As noted earlier, an employer has the prerogative to dismiss workers from
employment under certain circumstances. However, a purported dismissal must be executed
fairly and in a reasonable manner. It is accepted that anything done in a harsh and humiliating
manner produces undesirable consequences. Similarly, dismissing workers from employment
in such a manner or even arbitrarily without any explanation can leave them shattered due to
the unpleasant experience. The manner of the dismissal may have adverse consequences on
the aggrieved worker. Suspicion and misconception among the family members and friends
might arise to which he may fall prey. He will be hurt to hear and be embarrassed by people
talking about the abrupt manner of his dismissal. As Goddard CJ rightly noted, ‘where there is
smoke there is fire’[16]. Sometimes the manner of a dismissal goes beyond what a person
can handle, the result of which causes him mental distress[17]. It results in emotional and
physical stress and stress related illnesses such as severe emotional trauma, anxiety,
nervousness, depression and feeling of low self-esteem. It may also adversely affect an
aggrieved worker’s reputation[18], which may in turn affect
his future employment prospects because the prospective employers may regard the
dismissed worker with suspicion. Thus, the damage and the stigma that befalls a worker
harshly dismissed from employment may have far reaching effects and is likely to remain with
him for a long period and probably for the rest of his life.
Constructive Dismissal – whether it incorporates with the Doctrine concept
of dismissal for cause in Malaysia
Constructive dismissal is defined, for purpose of unfair dismissal, as ‘indirect dismissal’,
where employee terminates the contract, with or without notice, in circumstances such as he
is entitled to terminate it without notice due to the employer’s conduct (employer unilaterally
changes the terms of the relationship)[19]. Although it is the employee who appears to
terminate the employment by walking out, it can be said that the real reason for termination of
employment was in some way the prior conduct of the employer. It is necessary in order to
avoid the employer being able to force or goad the employee to leave the employment and
then say that the employee in fact resigned and so was not dismissed.
In Western Excavating (E.C.C.) Ltd. v. Sharp [1978] 1 Q.B. 761, Lord Denning MR defined
constructive dismissal as:
“..it means no more than the common law rights of an employee to repudiate the
contract of service, where the conduct of his employer is such that the latter is guilty of a
breach that goes to the root of the contract or where he has evinced an intention no
longer to be bound by the contract. In such a situation, the employee is entitled to
regard himself as being dismissed and walk out of the employment…”
The key element of the definition of constructive dismissal is that the employee must have
been entitled to leave without notice because of the employer’s conduct. The word “entitled”
means that the employee could leave when the employer’s behavior towards him was so
unreasonable that he could not be expected to stay[20].
Constructive dismissal could be likened to a double-edged sword. The employee’s reason for
resigning should be such that it affects the important fundamental of his terms and conditions
of service, or the employer’s action was such that no reasonable employee could tolerate
such action. The timing of the resignation should also be reasonably soon, to avoid being
accused of condonation. Any failure on the part of the employee to ensure these two
conditions are fulfilled may result in his resignation not meeting the criteria for constructive
dismissal.[21]
The leading case which established the principles of constructive dismissal is that of Wong
Chee Hong v Cathay Organization (M) Sdn Bhd [1988] 1 MLJ 93 (SC). The case raises an
important question of law as to whether or not the doctrine of constructive dismissal is
applicable in the interpretation of Sec 20 of IRA,1967 on the issue of whether it incorporate
with the principle of dismissal with just cause and excuse. In this case, Mr Wong (the
claimant) who was the former Personal and Industrial Relation Manager was transferred to a
lesser post to manage a cinema theatre belonging to his employer, after 15 years holding the
post, without just cause or excuse. Mr Wong did not accept the transfer because he claimed
such transfer was in breach of the contract of employment and resulted in a relegation of his
responsibilities with its consequent humiliation and frustration, and loss of estimation among
his follow employees which made it impossible for the claimant to carry on being employed in
his employer’s organization. In other words, he had been driven out of his employment.
It was in this case the “contract test” was established and “reasonableness test” was rejected
in determining whether there exists the element of Constructive dismissal. The contract test
simply means that the complaint of constructive dismissal will only succeed where employee
is able to prove that the employer was guilty of conduct which was repudiatory or in
fundamental breach of the contract, and he treated himself a discharged following the breach.
Salleh Abas LP (as he was then) had this to say on the doctrine of constructive dismissal:
“The Industrial Court in dealing with reference to Sec 20(1) of IRA, the first thing that the
court will have to do is to ask itself whether there was a dismissal and if so, whether it
was with or without just cause or excuse. Since the appellant had succeeded in showing
that he was dismissed, then it was for the respondent company to show that the
dismissal was with a just cause and excuse. If the finding pointed a strong indictment
against the respondent company which is unable to rebut,[22] than, the dismissal must
be no other than that it was unjust and without excuse. Dismissal without just cause or
excuse may well be similar in concept to the UK Legislation on unfair dismissal, but
these two are not exactly identical. Section 20 of IRA 1967 is entirely different from
Para (c) of Sec 55(2) of UK Protection of Employment Act 1978. Therefore we
cannot see how the test of unreasonableness which is the basis of the much-advocated
concept of constructive dismissal by a certain school of thought in UK should be
introduced as an aid to the interpretation of the word ‘dismissal’ in our Sec 20. We think
the word dismissal in this section should be interpreted with reference to the common
law principle. Thus, it would be a dismissal if an employer is guilty of a breach, which
goes to the root of the contract, or if the employer has evinced an intention no longer to
be bound by it.[23] Hence, the employer was said to have repudiated the contract of
employment and the employee would be entitled to regard the contract was terminated
and himself as being dismissed (constructively).”
The Court further in delivering the judgment noted that;
 “..the Common Law has always recognized the right of an employee to terminate his
contract of service and therefore to consider himself as discharge from further
obligations if the employer is guilty of such breach that affects the foundation of the
contract, or if the employer has evinced or shown an intention not to be bound by it any
longer. It was an attempt to enlarge the right of the employee of unilateral termination of
his contract beyond the perimeter of the common law by an unreasonable conduct of his
employer that the expression ‘constructive dismissal’ was used. Thus, it is clear that
even in England, ‘constructive dismissal’ does not mean that an employee can
automatically terminate the contract when his employer acts or behave unreasonably
towards him. Indeed, if it were so, it is dangerous and can lead to abuse and unsettled
industrial relations…”
“..Whilst we think that ‘constructive dismissal’ with the unreasonableness test does not
apply, it will be wrong for anyone to hold that constructive dismissal with the contract
test does not apply. Perhaps, in the context of our law, it is better that we do not use the
terminology at all. Alternative expressions with the same meaning, such as ‘implied
dismissal’ or even ‘circumstantial dismissal’ may well be coined and used. But all these
could not go beyond the common law test…”
This matter had further been elaborated in Ang Beng Teik vs Pan Global Textile Bhd
[1996] 3 MLJ 137 (CA), where Justice Gopal Sri Ram had commented that;

“..The law is filled with cases where miscarriage of justice has occurred because regard
it had to labels and not substance. The term ‘constructive dismissal’ is only a convenient
label to describe the conduct on part of the employer which make a workman consider
that he had been dismissed without just cause or excuse, although there is no formal
order of dismissal..”

In Western Excavating (E.C.C.) Ltd. v. Sharp [1978] 1 Q.B. 761 which was adopted in
Wong Chee Hong, Lord Denning M.R. illuminated the contract test at page 769:-

“If the employer is guilty of conduct which is a significant breach going to the root of the
contract of employment, or which shows that the employer no longer intends to be
bound by one or more of the essential terms of the contract, then the employee is
entitled to treat himself as discharged from any further performance. If he does so, then
he terminates the contract by reason of the employer's conduct. He is constructively
dismissed. The employee is entitled in those circumstances to leave at the instant
without giving any notice at all or, alternatively, he may give notice and say he is leaving
at the end of the notice. But the conduct must in either case be sufficiently serious to
entitle him to leave at once. Moreover, he must make up his mind soon after the conduct
of which he complains: for, if he continues for any length of time without leaving, he will
lose his right to treat himself as discharged. He will be regarded as having elected to
affirm the contract.”

The term ‘constructive dismissal’ is not defined in the Industrial Relations Act (IRA) 1967.
However, from various judgments, the courts have interpreted it to denote that the employer
is in breach of a significant term of the contract, going to the root of the contract of
employment[24], whether through some conduct of the employer, such as making working life
intolerable or demotion or a transfer, among others. This is where the employer fundamentally
breaches the employee’s contract of employment, or treats an employee in such a manner
that he/she is entitled to resign – employees leave their jobs due to employer’s conduct. In
Wong Chee Hong, the doctrine of Constructive dismissal is only use in the context of the
contract test, as to the matter whether the workman had been dismissed with just cause and
excuse. In other words, the principle of just cause or excuse as stated under Sec 20(1) of IRA
1967 is still the core ingredients in determining whether the employee’s dismissal is done
equitably and fairly, before the principle of ‘contract test’ adopted from common law is used in
matter to justify constructive dismissal.
In MPH Bookstores Sdn Bhd vs Lim Jit Seng [ Award No 179 of 1987], it was held that for
a claim of constructive dismissal to succeed, both limbs of the common law ‘contract test’
must be present, that is, firstly, did the employer’s conduct amount to the breach of the
contract ( gone to the foundation of the contract) or had he evinced an intention no longer to
be bound by the contract ( express or implied) thereby entitling the workman to resign, and
secondly, did the workman make up his mind and act at the appropriate point in time soon
after the conduct which had been complained or had taken place? The workman has the
burden of proving (onus) that he has been constructively dismissed (not actual dismissal) and
must notify his employer of his stand before lodging a representation seeking
reinstatement[25]. The standard of proof is not as rigid as in criminal prosecution, which is on
the balance of probabilities[26].

In Moo Ng vs Kiwi Products Sdn Bhd [1998] 3 CLJ 475, it has been emphasized (at pg
490) that :

“If the employer is guilty of conduct which is a significant breach going to the root of the
contract of employment, or which shows that the employer no longer intends to be bound by
one or more of the essential terms of the contract, then the employee is entitled to treat
himself as discharged from any other performance. Moreover, he must make up his mind
soon after the conduct of which he complains; for, if he continues for any length of time
without leaving, he will lose his right to treat himself as discharged. He will be regarded as
having elected to affirm the contract.”

It is a settled law that in claims for constructive dismissal, the burden is on the claimant to
prove that the employer committed a breach of contract. It follows therefore that only those
cases where the employer’s conduct amounted to a breach of contract can be regarded as
authoritative[27]. Thus, if the employer tries to impose a unilateral change in the employment
terms, such a change in the job, a lowering in income earnings, a significant change in the
location of employment, a demotion, then provided there is no contractual right to do so, such
conduct will entitle the employee to resign.[28]

However, there is the danger of carrying the doctrine of Constructive Dismissal too far. Of
late, there has been a tendency among some employees to walk out of the job at the slightest
provocation or unreasonable behavior on part of the employer and then claimed constructive
dismissal, as a reason for termination of service. Unfortunately, many of the claims did not
succeed since it failed to meet the necessary criteria. It is appropriate to mention the recent
case of Ang Beng Teik vs Pan Global Textiles [1996] 3 AMR 2941 where Court of Appeal
spoke of the dangers of carrying the doctrine too far. The circumstances under which the
employees are entitled to treat themselves as discharged from the obligations to render
further performance under the contract of employment and to leave at once without notice,
ought to be considered with due care[29]. It then cited Wong Chee Hong case where Salleh
Abas LP had observed the follows;

“Thus, it is clear that even in England, ‘constructive dismissal’ does not mean that an
employee can automatically terminate the contract when his employer acts or behave
unreasonably towards him. Indeed, if it were so, it is dangerous and can lead to abuse
and unsettled industrial relations. Such a proposition was rejected by the Court of
Appeal. What is left of the expression is now no more than the employee’s right under
the common law, which we had stated earlier and goes no further…”

Bearing the above judgment, in order to prove that one has been constructively dismissed, it
will be necessary for the workman to establish the basic principle which was amptly
summarized in Bryn Perrins “Industrial Relations and Employment Law” wherein it states
(legal requirement):[30]

(a) that the employer had by his conduct breached the contract in respect of one or more of
the obligations, owed to the workman; the obligations breached may be in respect of either
express terms or implied terms (actual or anticipatory breach) or of both;

(b) that the terms which had been breached go to the foundation of the contract; or, stated in
other words, the employer had breached one or more of the essential terms of the contract
and shows that they no longer intends to be bound by the terms (possibly a genuine, albeit
erroneous, interpretation of the contract by the employer will not be capable of constituting a
repudiation in law);

(c) That the workman, pursuant to and by reason of the aforesaid breach, had left the
employment of the employer (not for some other unconnected reasons); that is, that the
workman had elected to treat the contract terminated; and

(d) that the workman left at an appropriate time soon after the breach complained of; that is,
that he did not stay on in such circumstances (must not delay too long) as to amount to an
affirmation of the contract, notwithstanding the breach of the same by the employer. Any
delay may be deemed to have waived the breach and agreed to the vary term of the contract.
[31]

If the employee leaves in circumstances where these conditions are not meet, he
will be held to have resigned pre-maturely and there will be no dismissal within
the meaning of the legislation at all.[32] But if the employee is confident that he has
fulfilled all the conditions and therefore entitled to resign, he can submit his resignation and
make representation in writing to the Director General of Industrial Relation, for reinstatement
to his former employment (under Sec 20 of IRA,1967). If the Industrial Relation Office’s effort
to conciliate the dispute fails, the dispute may be referred to the Industrial Court for
arbitration.

Once these prerequisites for constructive dismissal have been established by the workman in
reference to a dismissal under section 20 of the Act the Industrial Court then moves into the
next limb of inquiry; and that is to determine whether the employer had just cause or excuse
for the dismissal. Here the burden shifts upon the employer. Raus Sharif J. (as His Lordship
then was) in Pelangi Enterprises Sdn. Bhd. v. Oh Swee Choo & Anor [2004] 6 CLJ 157
refers to this ‘shift of the burden’; calling that upon the workman as “the first burden of proof”
(that he had been constructively dismissed) and that upon the employer as the “second
burden of proof” (that the action to dismissed was done with just cause or excuse).

Circumstances where the workman can classify employer’s action lead to constructive
dismissal are[33]:

1. Arbitrary reduction of wages, commission, allowance, etc.

Ø In ATI Technologies (M) Sdn Bhd & Anor V. Jamilah Abu Bakar, IC Award
385/2002, the claimant was constructively dismissed when she was not paid monthly
salary. The court held as unjust dismissal since the employer had breached the terms
of the contract which is fundamental, thus allowing the employee to claimed that he
had been constructively dismissed and ordered the claimant to be paid back wages
and compensation in lieu of reinstatement

2. Withdrawal of contractual benefits provided they are mentioned in the Contract of Service.
Ø In Plastic Tecnic Sdn Bhd v Saraswathy dlo Manickam & Ors (1991) 1 ILR
643 (Award No 173 of 1991), 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 stopped after two months. The conduct of the company in
stopping the bus service 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.

3. Altering or taking away facilities reflective of the position.

Ø In Kedah Cement Sdn Bhd v Ahmad Razif Abdullah [1998] 3 ILR 619 (Award
No 570 of 1998), the claimant, who was a senior executive officer, was entitled to
housing and he was allotted a semi-detached house. Later he agreed to give the
house to a new comer on the condition that the company allocated an apartment to
him. When one of the company's apartments became vacant, it was allocated to
somebody else. Having had his request refused on several past occasions, the
claimant considered himself constructively dismissed and the court upheld his claim on
the ground that the employer's conduct made continued employment impossible for the
claimant

4. Demotion to a lower post, with or without reduction of salary, fringe benefits, etc.
Ø In Hong Leong Bank v Phung Tze Thiam [2008] 2 MLJ 785 (CA), the
respondent who was a branch manager in Tawau was demoted, redesignated and
transferred to the head office in Kuala Lumpur after found guilty on several charges
against him. The respondent claimed constructive dismissal due to the failure of the
appellant to give opportunity to him to correct his weakness before disciplinary action is
taken against him as stated in the contract of employment and based on the
Company’s Personnel Policy &Regulations, where the respondent is bound by it. Court
held that the breach was a fundamental breach that goes to the root of the contract,
therefore amounting to constructive dismissal.
5. Transfer to a different location if such transferability is not clearly stated in the Letter of
Appointment – the prerogative or right of the management to transfer an employee is subject
to certain restrictions. The transfer should not operate to the prejudice or detriment of a
workman or cause economic loss to the employee and his family, and loss of estimation
amongst his fellow employees. The right of transfer must be exercised in good faith.
Ø In Dicklin Sdn Bhd v Bathma Subramaniam [1997] I ILR 505, it was held that,
if there is no contractual term in the contract of employment to enable the employer to
transfer the employee, and if the employer insists on the employee to be transfer, then
it is a repudiation of the contract of employment which would entitled the employee to
claim constructive dismissal.
Ø In the celebrated case of Wong Chee Hong vs Cathay Organization (M) Sdn
Bhd [1988] 1 MLJ 93 (SC), both transfer and demotion tantamount to constructive
dismissal. As mentioned by Tun Salleh Abbas LP :

“Cathay must have known that no man, worthy of minimum self respect, would accept
a transfer with a demotion in rank, stripped of all powers he once enjoyed amongst his
fellow piers (employees). It clearly shows that not only Cathay was displeased with Mr
Wong, but it also exhibited the company’s intention not to be bound by the contract
any longer. Such a relegation of responsibility with its consequent humiliation and
frustration, and loss of estimation among the fellow employees made it impossible for
Mr Wong to carry on being employed under the company’s organization. In other word,
he had been driven out of his employment. This is therefore a dismissal…”

6. Substantial changes in the job function, especially if the employee in incapable of

performing those functions.
Ø In Funai Electric (Malaysia) Sdn Bhd Johore v Salliah Ahmad [1997] 2 ILR
1002, the claimant, an assistant manager (shipping) claimed constructive dismissal on
the ground that her transfer to the service parts department resulted in 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 and spending 12 days to find out whether it
was indeed a demotion was not fatal to her claim.

7. Behavior by the employer, intended to humiliate the employee.

Ø In Abe Hatome Sdn Bhd v Chan Kuan Chong [1998] 1 ILR 28, The claimant
was forced to write daily reports, was told to perform as chauffer for the company’s
Japanese guest, his tabled was changed and telephone was removed. The claimant’s
duty was pasted on the table and read aloud in order to humiliate him. He was
deprived of his annual increment and his employer refused to assign him to his normal
duty as Public Relation Manager. Court held that the cumulative effect of series of
events taken together constituted a repudiary breach of the implied term of trust and
confidence which entitled the claimant to claim constructive dismissal.

8. Acts of victimization such as setting unattainable deadlines, constant faultfinding and

harassment.
Ø In Kamari bin Kasan v Malaysian Maritime Academy Sdn Bhd [2000] 5 MLJ
54, the court held that the claimant was victimized by his employer by disallowing the
claimant to participate in the disciplinary board meeting, thus the principle natural
 justice of audi alteram partem was not adhered to. Furthermore, the complainant who
filed against the claimant was the member of the board thus the decision made was
unfair and tainted with mala fide. The High Court also held that the Industrial Court had
erred in law in deciding that victimization was not pleaded, and was not a factor to be
considered in the claim of constructive dismissal.

9. Threatening with dismissal if the employee does not resign from the job.
Ø In Mattel Tools Sdn Bhd vs Gerard Wong Koon Seng [1994] 2 ILR 950, he
claimant was accused of doing money laundering business in the company. He was
initially threatened by his immediate manager to resign. He subsequently acceded, to
the request after consulting the human resources director. The company however
refutes the allegation, and contended the resignation was voluntary. The claimant then
claimed that he consulted the HR Director who later helped the claimant to write the
resignation letter, and the reason for the resignation was ‘personal reason’. Court held
that there exist some element of threat/ or coercion/ or persuasion made by the
company as a result of which the claimant submitted his resignation letter. This
involuntary resignation thus tantamount to constructive dismissal by the company
without just cause or excuse.
However, forced resignation which is an indirect way of dismissal, is not the same as direct
dismissal or constructive dismissal, though the distinction between the two concepts may
often be confused. In the case of Kuala Lumpur Glass Manufacturers Sdn Bhd vs Lee
Poh Keng [1995] 2 ILR 917, the court held:

“It is clear from the above that a forced resignation is not constructive dismissal. The
distinction between the two concepts may often be confused, and Court can found its
jurisdiction to proceed upon the inquiry into the issues whether a dismissal of an employee
had been for just cause or excuse. However, it needs to be emphasized here that the finding
of ‘force resignation’ and ‘indirect dismissal’ does not necessarily tantamount to the court
coming to a conclusion that the employee had been dismissed without just cause or
excuse…”

In this case the Court further commented that :

“The unreasonable exercise of an employer’s contractual powers in a manner which

breaches the duty of the employer to refrain from the conduct which might undermine the
relationship of confidence and trust ( ie. proven act of company’s agent such as unwarranted
letter of warning, threats to make claimants life miserable that he will be force to leave, and
the act of harassment taken cumulatively do constitute such breach of implied duty), and thus
can constitute the Court making a finding of constructive dismissal and holds that the
dismissal had been without just cause or excuse…”

In Hotel Malaya vs Goh Hock Fong [1994] 2 ILR 379, the court would generally undertake a
two-stage process ie. after deciding whether there was a constructive dismissal, the Court
should then proceed to determine whether the employer had ‘just cause or excuse’ for
bringing about the constructive dismissal. However in this case, the court went on to state that
there may be cases where;
 “..the two issues are so interwoven that a finding of constructive dismissal must
necessarily also involve a conclusion that the dismissal was without just cause or
excuse.”

Based on the limbs that must be proved in the court of law by both the party (employer and
the employee) as stated in Pelangi Enterprises Sdn Bhd and Hotel Malaya, in order for the
court to establish whether there exist any element of constructive dismissal as preyed by the
employee, it shows that both the principles of “the contract test” and “just cause or excuse”
must incorporates before the court could conclude the case. Absence of any of the principles
by either of the party would warrant the case to be decided against them.

Conclusion

In the context of the foregoing analysis, it is safe to conclude that besides breach of
fundamental terms of contract, its implied terms have come to stay as grounds for
constructive dismissal. Employers now have to shoulder greater responsibilities towards its
employees particularly the implied terms in the context of health and safety, cooperation, and
mutual trust and confidence. The categories in which the constructive dismissal could occur
are not closed. A single act or a series of acts may, according to the particular and peculiar
circumstances of the case, amount to constructive dismissal.[34] Though ‘test of
unreasonableness’ has been objected by our courts, any “unreasonable conduct” of the
employer, so far as it is within the ambit of his implied contractual obligations (as decided by
the Industrial Court from case to case), it would be upheld as grounds for constructive
dismissal.

In Quah Swee Koon vs Sime Darby Bhd [2000] I CLJ 9 (CA), Gopal Sri Ram JCA had this
to say on constructive dismissal:

“Constructive dismissal can take place, as we have attempted demonstrate, in a number of

cases. Since human ingenuity is boundless, the categories in which constructive dismissal
can occur are not close. Accordingly, a single act or a series of acts may, according to the
particular and peculiar circumstances of the given case, amount to constructive dismissal.
There are cases which fall as illustrations at either end of the spectrum…”

However, one must always understand the danger of carrying the doctrine of Constructive
Dismissal too far. All the elements that needs to be fulfilled as stated in Bryn Perrins
“Industrial Relations and Employment “ and the requirements in Wong Chee Hong v Cathay
Organization (M) Sdn Bhd [1988] 1 MLJ 93 (SC) must be adhered before one can claimed to
be constructive dismissed. Both of the principles of “the contract test” and “just cause or
excuse” must incorporates before the court could conclude the case. Absence of any
principles by either of the party would warrant the case to be decided against them.

Constructive dismissal seems to be a “growth’ industry. There has been almost a five- fold
increase in the number of awards handed down by the Industrial Court from twenty(20) back
in tear 2000 to one hundred and twenty six(126) at the end of 2008. With compensation to
each employee amounted 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 issue.
 21

[1] Industrial Relation Act, 1967 ;Section 20(1)

[2] IC Award 263/1985.
[3] Union Construction Allied Trades v Brain [1981]1 ILR 224
[4] “An employee shall be treated as dismissed by his employer if the employee terminates that
contract, with or without notice, in circumstances such that he is entitled to terminate it without
notice by reason of the employer’s conduct.”
[5] Salleh Abas LP delivering judgment in Wong Chee Hong v Cathay Organization [1988]1 MLJ at
pg 95.
[6] Based on the judgment of Mohd Azmi FCJ in Milan Auto Sdn Bhd v Wong She Yen[1996]1 AMR
2145(FC).
[7] R.Ramachandran v The Industrial Court of Malaysia [1997]1 MLJ 145(FC)
[8] Stanley Ng Peng Hon v AAF Private Ltd [1979] 1 MLJ 57
[9] Nikmat Piling Sdn Bhd v Teng Tong Kee [1998] 3 CLJ 367
[10] Minister of Labour Malaysia v Lie Seng Fatt [1990] 2 MLJ 19
[11] Per Raja Azlan Shah (LP) in Dato Menteri Osman bin Baginda and Anor v Dato’ Ombi
Syed Alwi bin Syed Idrus [1981] 1 MLJ 29.(SC)

[12] Per Kang Hwee Gee J in Krishnan Kutty a/l Sanguni Nair v Telekom Malaysia Kawasan Utara
[1999] 4 MLJ 393, 408.

[13] B Lobo, ‘Security of Tenure in Employment – Constitutional and Proprietary Rights of

Employees’ [1996] 3 MLJ cxviii, at p cxxiii.

[14] B Lobo, ‘Whether the Test for Unjust “Constructive” Dismissal in Malaysia?’ [1999] 3 MLJ
xc, at cviii.

[15] Finnigan, ‘Equity and Equality in Employment, with Particular Reference to New Zealand’
(1993) NZLJ 402, 405.

[16] Per Goddard CJ in the New Zealand case of Trotter v Telecom Corp Ltd [1993] 2 ERNZ 659,
701.

[17] Mental distress is neither a disease nor an intangible thing but a state of disturbing or miserable
mental or emotional condition. It is one’s mental, emotional, and physical responses to irritants
or a threat that disturbs or interferes with one’s every day functioning. A person suffering from
mental distress may experience any of the following, namely, irritability, anger, frustration,
exhaustion, burn-out, lethargy, lack of concentration, anxiety, depression, or insomnia. It has
been medically proven that mental distress is normally associated with ulcers, migraines, poor
digestion, mental breakdown, and cardiovascular disease particularly coronary artery disease.
See, for example Medical and Health Encyclopaedia by Morris Fishbeln (ed) (New York: H S
Stuttman Co, 1963) 850-851.

[18] Reputation is defined in the Oxford English Dictionary as ‘the common or general estimate of
a person with respect to character or other qualities; the relative estimation or esteem in which
a person … is held’. As it may take years of effort for some one to develop, build and acquire
reputation, it can be a priceless asset worth of protection. See, Keith R Evans, The Law of
Defamation in Singapore and Malaysia (2nd ed) (Singapore: Butterworth, 1993) 3. Damage to
reputation may arise where the employer intentionally or otherwise subjects an employee to
extreme emotional distress by conduct, which is unreasonable, unwarranted and outrageous. For
example, an employer suggesting without proof that the employee had engaged in acts constituting
criminal conduct, or he is not an honest and trustful person, or is lazy or that that he had
demonstrated an inability to adequately perform the duties of his position and is incompetent.

[19] LB Curzon, Dictionary of Law

[20] Smith and Sir John C. Wood, Industrial Law, 4 Edition.
th

[21] M.N. D’Cruz, Current Malaysian Labour Law,1 Edition at pg 232

st

[22] “..It is for the employer to show that the dismissal was with just cause or excuse.” Salleh Abas
LP at pg 97
[23] Donovan v Invicta Airways Ltd [1970] 1 Llyod Rep 486
[24] Western Excavating(ECC) Ltd v Sharp [1978] IRLR 27
[25] Southern Bank Bhd v Ng Keng Lean [2002] 2 CLJ 514
[26] Telecom Malaysia Kawasan Utara v Krishnan Kutty Sangguni Nair [2002] 3 CLJ 314 (CA)
[27] Wira Security Service Sdn Bhd v Abdul Razak Abdul latiff [1996] 2 ILR 1399.
[28] Tatsumori Sdn Bhd v Paramjit Kaur [1995]2 ILR 933
[29] M.N. D’Cruz, Malaysian Employment law, Volume 2, Marsden Law Book, 2008, 1st
Publication, at pg 327.
[30] Dr. Dunston Ayadurai in his text Industrial Relations In Malaysia: Law & Practice 3rd Edition at page 297
[31] Projek Lebuhraya Utara Selatan Bhd v Mohd Syukri Ngah [2001] 2 ILR 10
[32] M.N. D’Cruz,Practical Guide to Malaysian Labour Law, Berita Publishing Sdn Bhd, 1998,
3rd reprint at pg 147.
[33] M.N. D’Cruz, Malaysian Employment law, Volume 2, Marsden Law Book, 2008, 1st
Publication, at pg 323.
[34] Plateau Industries Sdn Bhd v Khoo Kay Cheong [2001]1 ILR 52