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Case Update: Proceed with Caution: MSS Contracts and Wrongful Dismissal Claims

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28 June 2024

EMPLOYMENT LAW
Mutual Separation Scheme – Retrenchment Package – Unfair Dismissal – Just Cause & Excuse – Misconduct – Industrial Court

B. Braun Medical Industries Sdn Bhd v Mugunthan A/L Vadiveloo
Civil Appeal No. A-01(A)-590-08/2022|Court of Appeal
- see the grounds of judgment here

Facts Mugunthan A/L Vadiveloo (the 'Respondent') began working for B. Braun Medical Industries Sdn Bhd (the 'Appellant') in 2015 as a Senior Manager, Commissioning and Maintenance. Facing financial difficulties, the Appellant considered reducing staff. The Respondent and other managers opposed this proposal. In January 2019, during a meeting with the Human Resource Director (HRD) and Assistant Manager, the Respondent was presented two options which was prepared in a document with two tables: a Mutual Separation Scheme (MSS) or a Retrenchment Package, with the MSS offering more money. The Respondent requested time to consider and later accepted the MSS with four amendments, which were agreed upon by the Appellant. The MSS Agreement was signed, and the Respondent submitted his resignation, subsequently, requesting an early release for a new job. The Appellant agreed, modifying the MSS Agreement, and paid the Respondent three months' salary despite his not serving the notice period. The Respondent then claimed unfair dismissal under the Industrial Relations Act 1967. The Industrial Court ruled in his favor, awarding RM143,504.30 for 12 months' back wages minus the MSS amount, stating the Appellant failed to prove redundancy so as to justify the MSS Agreement. The Appellant's Judicial Review application was dismissed by the High Court, leading to this appeal to the Court of Appeal.
Whether the court can decide that X’s execution of the MSS contract constituted a dismissal of X by Y without just cause or excuse in the form of a ‘forced resignation’.

Issues 1. If –
(a) An employee (X) had been forced to sign an MSS contract with X’s employer (Y) under Y’s threat that –
i. X’s employment had become redundant; and
ii. Y would retrench X if X did not agree to the MSS contract; and
(b) Y had not threatened to dismiss X from employment
 
Whether the court can decide that X’s execution of the MSS contract constituted a dismissal of X by Y without just cause or excuse in the form of a ‘forced resignation’.

2. In the factual circumstances as stated in the above sub-paragraph (1) –
(a) Whether Y bears the legal burden to prove on a balance of probabilities that X had signed the MSS agreement voluntarily and consequently, X had not been unlawfully dismissed by Y by way of a forced resignation; OR
(b) Does X have to discharge the legal burden to prove on a balance of probabilities that X had been forced to resign as Y’s employee by executing the MSS agreement involuntarily and as such, X had been unlawfully dismissed by Y?
Held The Court of Appeal allowed the appeal and issued a certiorari order. YA Datuk Wong Kian Kheong, delivering the decision of the Court of Appeal after reviewing the case facts, held that had all relevant considerations been taken into account, no reasonable Industrial Court Chairperson would have granted the Award. These considerations included negotiations between the Respondent and the Appellant’s HRD, where several requests by the Respondent were accepted. The Court found both parties' conduct during negotiations relevant, particularly noting satisfactory terms proposed by the Respondent. Moreover, the Respondent was given time to consider the MSS agreement without facing an ultimatum. When the Respondent made four amendments at a subsequent meeting, it was of his own initiative, not at the Appellant's request. Importantly, the Respondent’s resignation letter did not indicate coercion by the Appellant, as it thanked colleagues and wished the company well. The Respondent himself affirmed voluntarily signing the MSS Agreement in WhatsApp messages to colleagues to dispel any rumours that he was terminated. The Court of Appeal also recognized the Appellant's efforts in accommodating the Respondent's request for early release and fully paying the MSS sum despite non-compliance with the notice period. Therefore, the Court of Appeal concluded that the failure to consider these factors constituted a legal error. Regarding the second issue, the Court held that an employee alleging a Forced MSS Contract must prove it on a balance of probabilities. It stressed that distinctions between Forced Resignation and Forced MSS Contract are irrelevant since both hinge on whether the resignation was truly voluntary. The Court of Appeal cautioned Industrial Court Chairpersons to exercise caution when deciding claims of wrongful dismissal, particularly those involving alleged forced resignations, where the employee had previously entered into a mutually agreed MSS contract with the employer and received all associated benefits. In conclusion, the appeal was allowed and the High Court’s decision was set aside with a certiorari order being granted. The Respondent was also made to pay costs amounting to RM20,000.

Zul Rafique & Partners
{28 June 2024}

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