Announcement

Zul Rafique & Partners Succeeds in a Claim Of Constructive Dismissal for Non-Payment of Salary

Share:

Print
P. Thavaselvi and Julian Kie Chang Ming from ZUL RAFIQUE & Partners’ Employment and Industrial Relations Practice Group, have successfully defended Rhombus Food & Lifestyle Sdn Bhd in the Industrial Court and High Court in a claim of constructive dismissal by an individual after approximately 4 months of the alleged non-payment of salary.

Case Details:
Facts:
Mr. Ng Sau Foong (“Mr. Ng”) was the majority shareholder and Chief Executive Officer of Delicious Moments Sdn. Bhd. (“DMSB”). Rhombus Food & Lifestyle Sdn Bhd (“Purchaser”) was a subsidiary of Rhombus Connexion Sdn Bhd (“the holding company”) and a member of Rhombus Food & Lifestyle Group of Companies (“RFL Group”). In November 2016, the Purchaser and Mr. Ng entered into a share sale agreement where Mr. Ng agreed to sell his shares in DMSB to the Purchaser (“the Share Sale Agreement”).

Pending the purchase of shares, it was mutually agreed between parties that (i) DMSB would be considered as a member of RFL Group; and (ii) the Purchaser would assist in administering DMSB’s payment of monthly salaries and statutory deductions to all its employees, including Mr. Ng’s. At all times, Mr. Ng’s salary and statutory deductions were paid by DMSB.

As the Purchaser considered DMSB as a member of the RFL Group and administered DMSB’s payroll, the Purchaser issued Mr. Ng with a letter of appointment dated 1.11.2016 by which the latter was appointed as Brand CEO – Western Division. The footer of the said letter dated 1.11.2016 named DMSB as the company on whose behalf the said letter was issued.

On 18.4.2017, after a town hall meeting held by the holding company concerning the rebranding of Rhombus Connexion Group, Mr. Ng was re-designated as Lead Partner of Restaurants & Café (Western) Division of Rhombus Connexion Group vide letter of appointment dated 18.4.2017. Whilst the said letter dated 18.4.2017 was issued by the holding company, the footer of the letter named the Purchaser on whose behalf the said letter was issued. However, at all times after 18.4.2017, Mr. Ng’s salary and statutory deductions were still paid by DMSB until December 2017.

In January 2018, the Share Sale Agreement fell through. Accordingly, by a letter dated 16.1.2018, the Purchaser informed Mr. Ng that the Share Sale Agreement was terminated and that DMSB was no longer considered as a member of RFL Group. From January 2018, the Purchaser ceased centrally processing the salaries as well as statutory deductions and contributions for all employees of DMSB, including Mr. Ng’s. After 16.1.2018, the Purchaser ceased to have business dealings with DMSB.

By a letter dated 25.5.2018, Mr. Ng considered himself constructively dismissed by the Purchaser on grounds that the Purchaser had failed to pay his monthly basic salary between January and April 2018. By a letter dated 6.6.2018, the Purchaser denied Mr. Ng’s allegations and stated that at all times, his salary was paid by DMSB. Furthermore, Mr. Ng had declared DMSB as his employer to EPF, Income Tax and SOCSO. Hence, Mr. Ng was not the Purchaser’s employee.

Decision: The Industrial Court[1] dismissed Mr. Ng’s claim of constructive dismissal.
The crux of the issues for determination was whether Mr. Ng was an employee of the Purchaser. In handing down the Award in favour of the Purchaser, the Industrial Court held:
 
  • that the Share Sale agreement was limited to the purchasing of the shares of DMSB and it did not involve taking over the employment of Mr. Ng by the Purchaser. Mr. Ng’s salary slips also clearly showed that his salary was at all times paid by DMSB;
  • that Mr. Ng had failed to establish on the balance of probabilities that he was an employee of the Purchaser; and
  • consequently, there was no dismissal by the Purchaser.
In the alternative, the Industrial Court also held that non-payment of salary is a serious breach of the employment contract, which required Mr. Ng to make up his mind soon and leave. However, he did not act sooner but only considered himself constructively dismissed after approximately 4 months of the non-payment of salary, as alleged. Accordingly, the Industrial Court dismissed Mr. Ng’s claim.

High Court
Dissatisfied with the decision of the Industrial Court, Mr. Ng filed an application for Judicial Review[2] in the High Court to quash the Industrial Court Award. The High Court held in favour of the Purchaser and upheld the Industrial Court Award.
[1] Industrial Court Award No. 2736 of 2019
[2] Ng Sau Foong v. Rhombus Food & Lifestyle Sdn Bhd & Anor [Judicial Review No.: WA-25-592-12/2019]

For more insight into this area of law, please contact our Partners in the Employment & Industrial Relations Practice Group:
P Jayasingam
Wong Keat Ching
Thavaselvi Pararajasingam
Teoh Alvare

Please email your details to [email protected] if you would like to subscribe to our Knowledge Centre.

Let's Connect!
➭ LINKEDIN: Zul Rafique & Partners
➭ INSTAGRAM: @zrplaw