Singapore court ruling clarifies when employees can legally end employment early
A Magistrates Court in Singapore recently dealt with an employment dispute that examined whether an employee could resign from a fixed-term contract without paying liquidated damages. The case hinged on a contract clause that allowed early termination only if an "irresistible factor" existed.
The worker argued that his major depressive disorder qualified as such an irresistible factor, making him unfit to work and entitling him to end his contract prematurely. He claimed his medical condition had developed around the time of his resignation and prevented him from fulfilling his contractual obligations.
The employer disputed this claim, arguing the worker had resigned to pursue further studies rather than due to any medical condition. They sought three months' salary as liquidated damages for the early termination, as specified in the employment contract.
Understanding fixed-term employment terms
The worker had been employed as a Chinese language tutor at an education centre since January 2021. In November 2021, he signed a second employment contract for a fixed term ending in November 2022. However, he resigned in February 2022, approximately nine months before the end date.
The contract contained a specific clause stating the worker "cannot resign for any reason unless there is an irresistible factor (such as the employee is sick and provides a medical certificate that proves he is no longer fit for work, etc.), and can provide proof." Without such proof, the worker would need to pay liquidated damages equal to three months' salary.
When resigning, the worker initially told his employer he wanted to "go back to school and further [his] studies" in Traditional Chinese Medicine. Only after his resignation did he begin seeking medical treatment and claim his departure was due to his condition.
The court analysed what constitutes an "irresistible factor" that would legally permit early contract termination. The judge determined that such a factor must make it impossible or extremely difficult for the employee to fulfil contractual obligations.
"By definition, an 'irresistible factor' can hardly arise from the mere existence of a medical condition in itself or the fact that an employee is affected by medical issues," the judge stated. "The straightforward definition of the term requires that [the worker] show that as at the date of resignation that he was unable to continue fulfilling his contractual obligations or could not resist bring to an end his contractual obligations as a result of his medical condition."
The court emphasised that when relying on medical conditions, the contract specifically required proof that the worker was "no longer fit for work." Being diagnosed with a medical condition alone was insufficient - the condition needed to render the worker unable to continue working.
After his resignation, the worker consulted several medical professionals. He visited a polyclinic in February 2022, had a hospital consultation in April 2022, and later saw a psychiatrist who was appointed as a single joint expert in the court proceedings.
The medical certificates from these consultations stated the worker was unfit for duty for specific periods but did not indicate he was permanently unfit to work as a tutor. The hospital memorandum only stated he was "currently being treated for Depression" without finding he was unfit to work.
The psychiatrist who acted as the court's expert concluded that while the worker likely experienced the onset of his condition in January 2022, he "was not totally incapacitated by [major depressive disorder] and rendered unable to work due to his illness but he was nevertheless very unhappy whenever he had to teach."
While the court determined the worker had breached the employment contract by resigning without proving an irresistible factor existed, it also considered whether the liquidated damages clause requiring three months' salary as compensation was enforceable.
The employer argued the three-month salary requirement was justified because "it takes [the employer] 3 months to train a new hire before the new hire can teach classes independently." However, the court found insufficient evidence of a standard three-month training period at the education centre.
The judge explained: "The documents and evidence before this Court indicates that there is no fixed or standardised training period of three months which applies to new teachers hired by [the employer]." Some new teachers began teaching shortly after being hired, while others had longer training periods.
The court noted that the same damages would apply regardless of when during the one-year contract the worker resigned, making it unreasonable in many scenarios. "This would mean, for example, that [the worker] is liable to pay [the employer] Default Damages amounting to three months of his salary even if he had ended his employment during the last month or the last two months of the Fixed Term," the judge explained.
The court applied established legal principles to determine if the clause was an unenforceable penalty: "The essence of a penalty is a payment of money stipulated as in terrorem of the offending party while the essence of liquidated damages is a genuine covenanted pre-estimate of damage."
Given these findings, the court ruled that while the worker had breached his employment contract by resigning without proving an irresistible factor, the liquidated damages clause was unenforceable as a penalty.
The judge awarded the education centre nominal damages of $1,500 rather than the three months' salary they had sought, stating: "For the reasons set out above, I find that [the worker] has breached the Employment Contract and award [the employer] nominal damages of $1500."
