In this Case Update series, I share summaries of recent Malaysian court decisions to explore the current approach taken by the courts when deciding on employment-related issues. You can find all the posts in the series by clicking here, including case updates on other legal areas by TheMalaysianLawyer co-founder Lee Shih.
It is common for employers to opt to negotiate a mutual separation or voluntary resignation when handling a potential dismissal. This could arise where there is a misconduct, unsatisfactory performance, or possible redundancy. Many employers take the view that is better for both parties to sit down and agree on the separation instead of the employer unilaterally exercising its rights under the law and risking a dissatisfied employee bringing an unfair dismissal claim.
However, what happens where an employee resigns following discussions with the employer, and later claims that this resignation was forced, or obtained under duress or pressure from the employer, and therefore that he was in fact unfairly dismissed?
The Industrial Court recently considered this issue in Aezrine Shah Abdullah v. Fat Boys Records Sdn Bhd (Award No. 443 of 2017). Aezrine Shah Abdullah (the Employee) had been employed by Fat Boy Records Sdn Bhd (the Employer) for approximately 10 years. At a meeting called by the Employer, several allegations of improper conduct were raised against the Employee. Following the meeting, the Employee resigned.
The Employee then claimed that he had been coerced and forced into resigning, and therefore that he had been in fact dismissed by the Employer without just cause and excuse.
This case update will focus on the factors considered by the Industrial Court in determining whether the resignation was forced or voluntary.
The Employee’s employment with the Employer commenced in April 2004. On 1 January 2014, performance review meeting was held between the Employee and the CEO of the Employer.
At the meeting several allegations were raised against the Employee involving —
- continued late work attendance;
- late delivery of work;
- lack of teamwork;
- conducting outside/freelance projects during office hours;
- using office facilities and equipment for the outside/freelance projects; and
- receiving payments for the outside/freelance work and poaching the Employer’s clients.
At the meeting, which last 4 hours, the Employee was provided with evidence of these allegations.
Pursuant to the meeting, the Employee submitted a resignation letter dated 10 January 2014. His last working date was 22 January 2014, and the Employer paid an amount equivalent to two months’ salary as severance payment.
The Employee later claimed that he was coerced and forced to resign, denying all the allegations against him, and contended that his forced resignation was a dismissal without just cause/excuse. The Employer maintained that they did not coerce or force the Employee to resign, and claimed that the fact that the Employee negotiated the severance package and his early release showed that he resigned voluntarily.
Factors taken into consideration by the court
The court decided that the burden was firstly on the Employee to prove that he was forced or coerced to resign.
The Employee’s counsel submitted that the Employee was wrongfully confined and restrained from leaving the meeting room for 4 hours, but the court found that the Employee had failed to establish this allegation, as there was no evidence that the Employee was physically restrained from leaving the room.
The Employee’s counsel also submitted that the Employee’s free will was sapped because the CEO threatened him with repercussions if he did not resign. The Employee alleged that the CEO gave him two options — either to resign or, if he refuses, then the Employer would issue a warning letter every month for 3 months, and then he would be dismissed.
The court reiterated the position that it is settled law that a forced resignation is not a resignation, but is instead a dismissal in fact. However, the court stressed that merely because an employer suggests to an employee to resign to leave the company does not automatically mean that a resignation was forced. There must be
- clear evidence of compulsion; and
- an inevitable conclusion that the employee would be dismissed if he did not resign,
and that the resignation was caused by this threat.
The court cited Stanley Ng Peng Hon v. AAF Pte Ltd, where it was held:
It will be clear that the underlying basis of the doctrine of “forced resignation” is the existence of facts showing that an employee was put under compulsion to resign and that if he declined to do so, the employer would proceed to dismiss him in any event.
However, the court also pointed out that if the resignation was brought about by other factors (other than the threat of dismissal), it would not be a forced resignation amounting to a dismissal.
The court explained that, if the Employee had the opportunity to take independent advice and then offered his resignation, that fact would strongly support a resignation rather than a dismissal.
In this case the Employee gave evidence that —
- he did not leave the room throughout the 4 hours, and that his request to the CEO for some time to talk to someone about the matter was rejected;
- the CEO told him he could only have a little bit of thinking time, and was not allowed to go home to deliberate or to get back to the CEO a few days later; and
- he felt confused when asked to resign, and was afraid that if he did not resign he would be dismissed.
Did the Employee voluntarily resign, or was he dismissed?
The court’s view was that, given the circumstances and the fact that he was not given reasonable time to deliberate or seek advice on the CEO’s request for him to resign, the Employee was not in the right frame of mind when he signed the resignation letter, and that it was the “antithesis of free, unpressurised resignation”.
The court did not accept the argument that the Employee should be deemed to have voluntarily resigned because he had negotiated his ex-gratia payment and early release, as the Employee had not been warned that the purpose of the meeting had been to dismiss him. In the circumstances, the court concluded that the Employee had been doing his best to salvage what he could from the inevitable fact that he was about to be dismissed.
Therefore the court’s conclusion on this issue was that the Employee had not resigned, but instead had been dismissed by the Employer.
Employers should be very cautious when approaching discussions with employees over potential mutual separations or voluntary resignations.
It is very important to ensure that the employee is given sufficient time and space to consider any discussions or proposals, to reduce the risk of what seemed like a mutually-agreed separation or voluntary resignation later being deemed to be a unilateral dismissal by the employer.
It should be noted that, although the court decided that the Employee had been dismissed by the Employer and had not resigned voluntarily, the court went on to conclude that the Employee had justified or contributed to his own dismissal by misconduct. Because of this, the dismissal was warranted and the unfair dismissal claim was dismissed.