Malaysian court examines whether employer's actions after misconduct allegations constitute dismissal
The Industrial Court of Malaysia recently dealt with an employment dispute involving allegations of constructive dismissal, where a worker claimed his employer had fundamentally breached his employment contract through improper transfer and demotion procedures.
The worker argued that his employer had violated essential terms of his employment contract by demoting him from a managerial position to an officer-level role and transferring him to a location hundreds of kilometres away with just 24 hours' notice.
He also claimed that disciplinary proceedings against him were conducted without proper procedures, including holding an inquiry before formal charges were communicated to him and proceeding without key witnesses or evidence.
This case highlights critical issues surrounding workplace harassment investigations, disciplinary procedures, and the balance between management prerogatives and workers' rights.
The worker started employment with the medical services company on 17 May 2021 as vice president/operational manager with a monthly salary of RM6,000.
His employment contract required him to undergo a six-month probationary period during which his performance would be assessed. The employment relationship began deteriorating in September 2021 when serious workplace issues emerged.
On 4 September 2021, the company suspended the worker for fourteen days pending investigation into alleged workplace misconduct.
The suspension letter specifically stated that the worker was "prohibited from entering or attending any of the company's clinics located in Krubong, Batu Berendam, Jasin, and Kamunting during the suspension period."
The worker was further directed to remain contactable and available for investigation purposes.
The allegations against the worker were serious, involving claims of sexual harassment made by a female colleague.
These allegations included requesting the colleague's telephone number, making sexual remarks, stalking through messaging platforms, retaliating against overtime claims when she refused his advances, and circulating her personal photographs to other staff members.
The worker objected to both his suspension and the disciplinary inquiry directive through a formal letter, arguing that no formal charges had been communicated to him at the material time.
The disciplinary inquiry proceeded on 17 September 2021 without proper procedural safeguards. The company held the hearing "without first issuing a show cause letter and/or a notice of domestic inquiry."
Most significantly, the allegations were only read to the worker at the start of the inquiry itself, giving him no prior opportunity to prepare his defence.
The process was fundamentally flawed as the alleged complainant was not present during the hearing. The court noted that "no documentary evidence, supporting materials, or witnesses were adduced to substantiate the allegations."
Despite this absence of evidentiary support, the worker was directed to respond to the allegations and submit a written reply.
An unusual timeline emerged during the proceedings. The court found that the company's director of operations had informed the board of directors that the company "had recorded the complaint of misconduct against the worker on 06.09.2021 despite the fact that the worker had already been suspended on 04.09.2021 before the complaint."
This raised questions about the legitimacy of the initial suspension, as the worker was suspended before the complaint was formally recorded.
On 21 September 2021, the worker received Transfer Order No. 01 of 2021 via messaging platform, informing him of his transfer to the company's branch in another state.
The transfer order cited various business reasons including initiatives to overcome cost inefficiency due to overlapping duties, business transformation phases, uncertain movement control order policies affecting the medical sector, and unknown variable factors resulting from the COVID-19 pandemic.
The transfer significantly altered the worker's employment conditions. His designation changed from vice president/operations manager to operations management officer, and he was required to report to the new branch, approximately 412 kilometres from his existing workplace, effective immediately from 22 September 2021.
The decision to transfer him had been made on 15 September 2021, even before the disciplinary inquiry was held.
The worker formally objected to the transfer order on 21 September 2021, expressing concerns about the unreasonably short notice period and the substantial geographical relocation.
He specifically stated that "it was impossible for him to report in [the new location] within 24 hours" and questioned the demotion in rank.
The company's response was uncompromising, accusing him of insubordination and prohibiting him from "reporting for duty at its branches" or working from home, threatening to lodge a police report if he was found at any company premises.
The Industrial Court applied well-established legal principles governing constructive dismissal claims.
The court explained that constructive dismissal occurs when an employee's contract is breached by the employer's conduct, allowing the employee to resign and claim they were effectively dismissed.
This principle means workers can treat themselves as dismissed when their employer's actions fundamentally violate their employment terms.
The court emphasised that establishing constructive dismissal requires proving five key elements: breach of essential contract terms, fundamental nature of the breach, sufficient notice to remedy the breach, employer's failure to remedy within the notice period, and resignation within reasonable time thereafter.
The burden of proof rests on the worker to establish these elements on a balance of probabilities.
During cross-examination, the worker was referred to the company's policy book, specifically the employee grading clause, where he acknowledged that his original position as operations manager fell within Level 2.
The court also received confirmation from the company's human resources manager through a message dated 21 September 2021, which "unequivocally confirmed that the worker's new designation was that of a 'Pegawai' and not 'Pengurus'" - essentially confirming the demotion from manager to officer level.
The court found the company's witnesses lacked credibility, particularly the director of operations whose testimony contained material contradictions.
Initially claiming the transfer was for business restructuring, he later said it was for a temporary three-day campaign, despite no mention of this in the official transfer documents.
The training officer also conceded during cross-examination that the worker was demoted, acknowledging that his position dropped from Level 2 Manager to Level 3 Executive according to the company's grading system.
The court observed that it "closely observed the demeanour, consistency, and overall credibility" of the director of operations during oral testimony and found him not to be credible, noting his "evidence was marred by material contradictions and self-serving assertions."
When confronted with contemporaneous documents that contradicted his testimony, "including documents issued under his own hand," he continued offering explanations that were "demonstrably false and misleading."
In contrast, the worker's evidence was found to be supported by contemporaneous documentation issued by the company itself.
The court found that the company's conduct constituted "a significant breach going to the root of a contract of employment" showing that the company "no longer intends to be bound by one or more of the essential terms of the contract."
The Industrial Court concluded that "the worker, in short, had been constructively dismissed." The court awarded the worker twelve months' backwages totalling RM64,800, to be paid within thirty days with 8% annual interest thereafter.
