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Case Update: Employee that enters into negotiations for severance and agrees to the terms cannot then claim for wrongful dismissal

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15 February 2023

EMPLOYMENT LAW
Employee – Negotiation – Severance – Resignation – Wrongful Dismissal – Forced to resign

Matrix Global Education Sdn Bhd v Felix Lee Eng Boon
[2023] 2 CLJ 34 | Court of Appeal
- see the grounds of judgment here

Facts Felix Lee (the ‘Respondent’) was employed as the Chief Executive Officer (‘CEO’) of Matrix Global Education Sdn Bhd (the ‘Appellant’). The Respondent’s duties and responsibilities was to manage the Matrix Global Schools ('MGS'), which included Matrix International School ('MIS') and Matrix Private School ('MPS'). However, there was a decline in academic standards and the drop in the quality of MIS and MPS which led to complaints from the parents. The Appellant decided to relieve the Respondent from his role as the CEO and appointed an interim CEO. The Respondent was re-assigned to the Appellant's headquarters to assist with marketing and was offered via an offer letter, an alternative position of Head, Group Corporate Affairs & Communications on a contract basis. The Appellant received information that the Respondent was involved in certain irregularities when he was the CEO and the Appellant took the decision to notify the Respondent of the withdrawal of the offer letter and advised the respondent to resign. Negotiations took place between the parties to discuss the severance package and the Respondent tendered his resignation as the CEO. The Appellant accepted the Respondent's resignation. The Respondent however took the position that he was forced to resign and commenced a claim in the Industrial Court, alleging that he had been constructively dismissed. At the Industrial Court, it was ruled that the Respondent was dismissed without just cause and excuse. The Appellant failed in its application for judicial review. Hence, the present appeal.

Issue 1. Whether the Appellant had committed any fundamental breach of the contract of employment to justify the Respondent treating himself as being constructively dismissed?
2. Whether employee could enter into severance package agreement with employer and later claim for constructive dismissal at Industrial Court?

Held In allowing the appeal, Court of Appeal Judge Lee Swee Seng held that the conduct of the Respondent in entertaining and entering into negotiations for settlement on terms does not fit snugly and indeed cannot support what the Respondent later asserted in the statement of case and at the Industrial Court that Respondent had been constructively dismissed. The Court of Appeal held that the Respondent cannot have the best of both worlds, in which the Respondent in one hand be negotiating and accepting the terms of a separation and at the same time claiming that he had been constructively dismissed. In respect to the suggestion or advice given by the Appellant to the Respondent to resign, the Court of Appeal held that it must be viewed in its proper perspective.  In a case where the company considers the employee to have committed a misconduct, not of the criminal kind but of say poor performance, parties may well enter into a negotiation for a severance of the employment contract on terms mutually agreed and this may even have been commenced after the company has suggested that the employee should consider or even should resign. The Court of Appeal further held that the Respondent, who has legal training, would be conscious of his rights under the law and would not have caved in into resigning just because the Appellant said so. The Respondent can refuse to resign at that suggestion and treat himself as being constructively dismissed. But the moment the Respondent puts in his letter of resignation on terms agreed, that is a concluded contract, and no longer a case of constructive dismissal. Hence, the appeal was allowed and the Court of Appeal quashed and set aside the award of the Industrial Court and with that the order of the High Court that had affirmed the said award. It was the Court of Appeals’ finding that the Respondent in the Industrial Court had resigned from his employment with the Appellant on agreed terms which terms the company had discharged.

Zul Rafique & Partners
{15 February 2023}

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