INDUSTRIAL COURT OF MALAYSIA CASE NO: 26(28)/4-32/08 BETWEEN ENCIK FOO JEE HUAH @ FOO CHEE WAH AND C-PAK CERGAS SDN BHD AWARD NO: 1215 OF 2011 Before Venue : : Y.A. Tuan Ahmad Terrirudin bin Mohd Salleh - Chairman Industrial Court Malaysia, Kuala Lumpur 14.11.2007 25.02.2008, 04.07.2008, 12.03.2009, 13.05.2010, 07.04.2008, 07.05.2008, 06.06.2008, 14.10.2008, 13.01.2009, 12.02.2009, 07.10.2009, 15.12.2009, 26.01.2010, 06.09.2010 & 12.10.2010

Date Reference : Dates of Mention :

Dates of Hearing : Representation :

27.11.2008, 26.10.2009 & 12.05.2011 Mr. Krishna Dallumah From Messrs Krishna Dallumah Manian & Indran Counsel for the Claimant Ms. T. Kavitha From Messrs Trevor George & Partnership Counsel for the Respondent/Company

Reference This is a reference by the Honourable Minister of Human Resources under section 20 (3) of the Industrial Relations Act 1967 (“the Act”) for
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an Award in respect of a dispute arising out of the dismissal of Encik Foo Jee Huah @ Foo Chee Wah (“the claimant”) by C-Pak Cergas Sdn Bhd (“the company”) on 14 November 2007.

AWARD (NO. 1215 OF 2011)
This is a Ministerial reference dated 14 November 2007 under section 20(3) of the Industrial Relations Act (“the Act”). The reference is about the alleged constructive dismissal of Foo Jee Huah @ Foo Chee Wah (“the claimant”) by C-Pak Cergas Sdn Bhd (“the company”) on 22 May 2007. Brief Facts Of The Case The claimant was appointed as a Production Supervisor in the embossing department from 16 June 1997 with a salary of RM1,800.00. On or about 3 July 2006 the company held a Domestic Inquiry (DI) against the claimant based on the allegation that the claimant had slept during working hours. After the DI, the DI panel decided that the claimant would be given a final warning letter, no increment bonus for year 2006, the claimant was to be placed permanently on day shift, no pay during suspension period from 27 June 2006 until 3 July 2006 and counseling by the Human Resource Department. Despite having this, the claimant alleged that the company breach their own decision against him by demoting him from a Production Manager to an Assistant Supervisor at a lower salary and transferring him to another department. The claimant alleged that after no response from the company about his

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dissatisfaction regarding the 2 new punishments against him, he then claimed constructive dismissal. The Law The term "constructive dismissal" has been clearly defined in the case of Western Excavating (EGG) Ltd v. Sharp [1978] 1 All ER 713 where Lord Denning M.R. held that the correct test to apply is the contract test. At p. 717, he enunciated the contract test to be as follows: “... 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 that 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.”. In Malaysia, the law relating to constructive dismissal has been clearly set out in the Supreme Court case of Wong Chee Hong v. Cathay

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Organisation (M) Sdn Bhd [1988] 1 CLJ (Rep) 298; [1988] 1 CLJ 45 where Salleh Abas L.P. had this to say. “The word "dismissal" in section 20 of the Act should be interpreted with reference to the common law principle. Thus it would be dismissal if the employer is guilty of a breach which goes to the root of the contract or if he evinced an intention no longer to be bound by it. In such situations, the employee is entitled to regard the contract as terminated and himself as being dismissed.”. In the Court of Appeal case of Quah Swee Khoon v. Sime Darby Bhd [2001] 1 CLJ 9, his Lordship Gopal Sri Ram JCA observed as follows: “Constructive dismissal can take place, as we have

attempted to demonstrate, in a number of cases. Since human ingenuity is boundless, the categories in which constructive dismissal can occur are not closed. Accordingly a single act or a series of acts may, according to the particular and peculiar circumstances of the given case, amount to a constructive dismissal.”. The onus of proving that there was constructive dismissal lies on the claimant. As such and in line with the authorities as cited above, the claimant seeking to establish a case for prove as follows:(a) The company, by its conduct had breached a term or terms of his contract of employment or has evinced an intention no longer to be bound by it. constructive dismissal must

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(b ) He left in response to that breach and not for some other unconnected and ancillary reason; and (c) He did not delay too long in terminating the contract in response to the company's breach, otherwise he may be deemed to have waived the breach. (See: Tatsumori (M) Sdn Bhd v. Paramjit Kaur d/o Gurcharan Singh [1995] 2 ILR 933 (Award No. 508 of 1995) Balakrishnan Krishnasamy v. Western Digital (M) Sdn Bhd. [1999] 1 LNS 282 (Originating Motion No. R3-25-38 of 1998,)). In Bayer (M) Sdn. Bhd. v. Anwar Abd Rahim [1996] 2 CLJ 49 the High Court enunciated as follows: “Thus it is settled law that the test applicable in a constructive dismissal case is "the contract test" and not "the test of reasonableness". To claim constructive dismissal, four (4) conditions must be fulfilled. These conditions are: (a) There must be a breach of contract by the employer. (b) The breach must be sufficiently important to justify the employee resigning. (c) The employee must leave in response to the breach and not for any other unconnected reasons. (d) He must not occasion any undue delay in terminating the contract; otherwise he will

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be deemed to have waived the breach and agreed to vary the contract.”. Thus, if the employee leaves in circumstances where these conditions are not met, he will be held to have resigned and there will be no dismissal within the meaning of the Act. The Issues Based on the law as outlined above, the issues before the court are whether the alleged of victimization tantamount to a breach that affects the foundation of claimant’s contract of employment or whether the company has evinced an intention not to be bound by the contract any longer to justify claimant’s claim for constructive dismissal. The Claimant's Case The claimant in his witness statement (CLWS1), testified that on 27 June 2006 he was issued with a Notice to Show Cause for the alleged misconduct of sleeping during working hours at the work station on 23 June 2006 and the company not happy with the claimant's explanation initiated a DI against him and the claimant was found guilty. As a result the company meted out several punishments against the claimant (page 7 of CLB). However, the company then meted out another punishment that is downgrading the claimant from Production Supervisor to an Assistant Supervisor with a lower salary (page 8 of CLB). The company then transferred the claimant to another department vide a letter dated 21 July 2009 (page 9 of CLB). Being dissatisfied the decision of the company to impose two new punishments the claimant then appealed for reinstatement of the original wage and position but the company

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kept delaying the matter. It is the evidence of the claimant that on 30 April 2007 (page 16 of CLB) he wrote a letter to the company where he stated that in paragraph 4 of the said letter that he has appealed so many times to the Managing Director and the Director to put him back to his original position but was told to wait. Thus, the claimant said that he left with no choice but had to leave the company on constructive dismissal vide a letter dated 14 May 2007. The Company's Case There is only one witness for the company. The witness is Ooi Eng Hooi (COWS1) vide his witness statement (COWS1), COW1 stated that at the material time he was Finance Human Resource and Purchasing Director of the company. COW1 did not dispute that the claimant did work for the company and the company did mete out punishments against the claimant. It is the contention of COW1 that when the company handed out the two new punishments against the claimant he duly accepted and acknowledged it. However he said that the said punishment was given against the claimant because new evidence surfaced in July 2006 showing that the claimant had been sleeping more than once. According to COW1 the company at the material time viewed that claimant as a habitual offender and the plant Managing Director as the punishing authority after consulting the Head Office decided to demote the claimant with a pay cut and to transfer him to another department. It is the contention of the company that the claimant only wrote to the company to expressing his grievances over his demotion and downgrading 9 months after the said punishments.

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Evidence, Evaluation and Findings After perusing through the evidence and submissions filed by both parties, the court notes that the company contends that the claimant failed to prove that he was constructively dismissed because the claimant had accepted the demotion position and the claimant continued to be in that demotion position for 9 months. Before dwelling into the contentions raised by the company, the court is of the view that it is appropriate at this juncture to first check whether the claimant has successfully discharge the burden placed on him that the company had committed an act that has amounted to a breach of a fundamental term of the claimant's contract which goes to the root of the contract. The court after reviewing the evidence placed in this case discovers that the company did breach the fundamental term of the claimant's contract when demoted him and transferred him to another department. This is because the court is of the view that the claimant has been sufficiently punished by the company. (This is clearly stated in the company's letter dated 5 July 2006 (page 5 of CLB)) when the claimant was charged for “sleeping during working hours at work station on 23 June 2006”. Therefore when the company imposed two new punishments, the court finds that the actions taken by the company at the material time was unreasonable since the company admitted that they acted based on fresh evidence (COW1 admitted this fact during cross-examination) and the claimant was not given any opportunity to reply to the new charge. Further, COW1 admitted during cross-examination that the company did not call any fresh inquiry for the fresh evidence. Thus, in court's view the unilateral action taken by the company is enough to conclude that the company has breach his contract with the claimant. Secondly, the
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court is of the view that salary is a fundamental term in a contract of service and it can only be changed or varied by mutual consent of the parties. To support this contention the court refers to the case Primason Sdn Bhd v. Chin Ooi Leng [1996] 2 ILR 1708 (Award No. 593 of 1996) which held inter alia, that: "A term that affects a workman's continued employment is a fundamental term and a party can only be bound by such a term he has agreed to. It is of paramount importance that the essential and fundamental terms are clearly spelt out when the workman is employed in the first instance and these terms must be communicated to the workman to be binding upon him. While it is true that the relationship of employer-employee is fundamentally contractual in nature but in industrial law such a relationship should be examined equitably. Invariably the Industrial Court applies to contract of employment special rules which are not applicable to other types of contracts. It is for this reason the employer could not terminate the contract effectively even if the contract contained terms providing for its termination and those terms were observed. Terms and conditions of a contract of employment can only be changed or varied by mutual consent of the parties. The company cannot do what it likes to the contract of employment with the claimant or be permitted to run amok without fear of consequences on a workman's right to work." In relation to the demotion in rank, again the court finds that the company's action was unilateral and harsh since no chance was given to
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the claimant to rebut his case. In this aspect to refers to the case of Wong Chee Hong's (supra) case on p. 96: “From being the head of one of the respondent company's departments, he was reduced to a mere cinema manager, a position which he had held some fifteen years ago as a junior executive. No doubt his terms and conditions of service remained unaltered and the transfer was part of the terms of his employment. The respondent company must have known that no man worthy of a minimum self respect would accept a transfer with a demotion in rank, stripped of all the powers he once enjoyed amongst his fellow employees. This is not a transfer but a demotion, a punishment meted out without any disciplinary action taken.”. With regards to the claimant's transfer, it is pertinent to observe that the law on the issue of transfer is very clear in that "it is an acceptable principle that the right to transfer an employee from one department to another and from one post of an establishment to another or from one branch to another or from one company to another within the organization is the prerogative of the management”. In Chong Lee Fah v. The New Straits Times Press (M) Bhd. & Anor [2005] 4 CLJ 605, the High Court held, inter alia, as follows: “It is an acceptable principle that the right to transfer an employee from one department to another or from one company to another within the organization is the prerogative of the management. In fact this right of transfer is embodied in the Industrial Relations Act 1967, where s. 13

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provides that a company has the right to transfer its employees within the organization so long as such transfer does not entail a change to the detrimental of an employee in regard to the terms of employment.”. In the case of Antioni Sd. Bhd. v. Maria Lawrence [2001] 2 ILR 364 @ 367 the learned Chairman had this to say:"It is a well-established principle in industrial jurisprudence that the transfer of employees in the interest or exigencies of the employer's business is a managerial prerogative. Such a prerogative, however, is not absolute or untrammeled. Where a transfer is tainted by ulterior motive, arbitrariness or capriciousness, unfair labour practice or mala fide the same is subject to intervention.”. And in Govindasamy Munusmay v. Litang Plantations Sd. Bhd. [2006] 3 ILR 1830 the learned Chairman stated as follows:"It is well established in industrial law that the right to transfer an employee from one department to another or from one branch to another or from one company to another within the organization is the prerogative of the management and the Industrial Court will not interfere unless the transfer is actuated with improper motive.”. However the right to transfer is not without restriction. In Ladang Holyrood v. Ayasamy A/L Manikam & 16 Ors [2004] 2 CLJ 697, ("Holyrood's case") Arifin Zakaria, JCA (now Chief Judge High Court of Malaya) endorsed the right of the company to transfer its employees

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from one company to another within its organization but subject to well recognized restrictions as set out in Ghaiye's Misconduct in Employment which are as follows: (i) there is nothing to the contrary in the terms of employment; (ii) the management has acted bona fide and in the interest of its business; (iii) the management is not actuated by any indirect motive or any kind of mala fide; (iv) the transfer is not made for the purpose of harassing and victimizing the workmen; and (v) the transfer does not involve a change in the conditions of service. His Lordship further went on to state that whether a transfer entails a change to the detriment of an employee in regard to the terms of employment, or whether the transfer was bona fide is a question of fact for the court to determine. In the instant case, the court finds that the claimant's letter of appointment did not state that he was transferable (page 1 of CLB). Secondly, no evidence was adduced by the company to show that the claimant was transferable. Thirdly, the claimant's transfer was clearly done to punish him for the the misconduct since it is not disputed that due inquiry was not conducted by the company. Thus, it is without

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doubt that the claimant's transfer was not done bona fide but more to punish him. In light of the above findings, it is crystal clear that the claimant was constructively dismissed by the company. Coming back to the contentions of the company that the claimant accepted the demotion and he continued to be in that demotion position for 9 months, the court finds that there was no delay on the part of the claimant because based on facts it has been clearly established that after he was given the two new punishments vide letter dated 20 July and 21 July 2006 (pages 8 and 9 of CLB) he did make several verbal protest to the Managing Director and COW1. Secondly, the claimant took the grievance to the Industrial Relation Office within 5 days of the company meted out the punishment against him (pages 10 and 11 of CLB). Thirdly, the claimant was promised numerous times by COW1 to wait for the decision by the company but the company failed to respond until the claimant claimed constructive dismissal. Fourthly, COW1 did not deny that during cross-examination that he requested the claimant to give him more time to decide on the matter. As such, the court is of the finding that the claimant cannot be penalised for having relied on such assurances and not walking out earlier on constructive dismissal. In other words, the court is of the opinion that the delay on the part of the claimant cannot be treated as having acquiesced in the breach. In this matter also the court refers to the case of Hewlett Packard (M) Sdn. Bhd. v. Thangasamy Brown Gnanayutham [2000] 1 ILR 198 where it was held by the learned Chairman that the breach of this implied obligation of trust and confidence may consist of a series of actions on the part of the employer which cumulatively amount to a breach of the term.
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In the light of all the above, bearing in mind section 30(5) of the Industrial Relations Act 1967 to act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal form, the court finds that the claimant had proved that the conduct of demoting him from a Production Manager to an Assistant Supervisor at a lower salary and transferring the claimant to another department was in breach of the fundamental term of the contract of employment. As for remedy the court is of the considered view that reinstatement is no longer appropriate. This is so in the light of the fact that it has been more than 5 years has lapsed since the claimant left the company. Hence compensation in lieu is instead awarded. In computing the amount of compensation to be awarded the court takes note of the Federal Court decision in the case of Dr. James Alfred v. Koperasi Serbaguna Sanya Bhd. Sabah [2001] 3 CLJ 541 on the need to take into account factor like when the employee has been gainfully employed elsewhere after his dismissal . In the present case, claimant has stated the income he received from his new employment is RM800.00. Taking these facts into account, the court is of the view that a 20% deduction is fair, reasonable and equitable. The court hereby makes the following orders: i) Backwages - from the date of constructive dismissal (14.05.2007) to the last date of hearing (12.05.2011) subject to a maximum of 24 months ie :

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RM2,681.00

x

24

=

RM64,344.00

(-)

less

20%

(RM12,868.80) = RM51,475.20 ii) Compensation in lieu of reinstatement - one month salary for every completed year of service (from 16.06.1997 to 14.05.2007) = 9 years and 10 months. RM2,681.00 x 9 = RM24,129.00 and 10 months ( 10 ÷ 12 x RM2,681.00 = RM2,234.17) = RM26,363.17.

It is further ordered that the total amount of RM77,838.37 be paid to the claimant through his solicitor within thirty days from the date of this Award.

HANDED DOWN AND DATED THIS 17th OF AUGUST 2011 -signedAHMAD TERRIRUDIN BIN MOHD SALLEH CHAIRMAN MALAYSIA INDUSTRIAL COURT KUALA LUMPUR

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