Clear Communication in the Workplace and Risks of “Forced” Leave: Malaysian Court of Appeal Finds Constructive Dismissal in the Absence of Clarity in Retention of Employment

Introduction

The right to claim “constructive dismissal” refers to the right of an employee to terminate his contract if the employer has committed a breach that goes to the “root” or foundation of the contract, or if the employer demonstrated an intention to no longer be bound by the contract (this is known as the “contract test”).

The Malaysian Court of Appeal recently delivered a significant judgment on this issue in the case of Sudhir a/l A K Kumaren v Industrial Court of Malaysia & Anor [2025] 4 MLRA 385, finding that the appellant, a flight instructor, was constructively dismissed by his employer. This decision overturned earlier rulings by the Industrial Court and the High Court , which had both dismissed the appellant’s claim of constructive dismissal.

The Court of Appeal’s ruling clarifies the legal standards applicable to constructive dismissal claims in Malaysia and underscores the employer’s duty to maintain mutual trust and confidence in the employment relationship.

Factual Background

The appellant, Mr. Sudhir Kumaren (“Employee“), was employed by Layang-Layang Helicopter Academy Sdn Bhd (later renamed Layang-Layang Flying Academy Sdn Bhd) (“Company“) from 2014 as a flight instructor.

On 13 October 2017, the Employee received a letter, directing him to:

1. use the accumulated 56 days of his annual leave over a spread of almost three months, from 16 October 2017 until 14 January 2018;

2. hand over his duties as Head of Training to Captain Idris bin Ismail who had been nominated by the Company as the acting Head of Training; 

3. hand over to the Company the company car, computer and office keys; and

4. cease authorising flights or assigning ground school duties to staff of the Company.

In this letter dated 13 October 2017 (“13 October 2017 letter“), the Company also reserved its right to review the Employee’s employment with the Company upon his return from leave.

The Company further issued an Internal Memorandum dated 23 October 2017 to all staff notifying that the Employee would be on leave from 16 October 2017 until 14 January 2018. The said memorandum also stated that the employee that he would assume duty upon his return from his leave.

The Employee reacted through a letter dated 23 October 2017 (“23 October 2017 letter“), contending that the 13 October 2017 letter indicated an intention to dismiss him from his employment. He then asked for written confirmation that he would still be employed by the Company upon his return from the annual leave which he had “been directed to take“. The Employee further stated that he looked forward to receiving a response within three days.

As there was no reply, the Employee then wrote another letter, dated 13 November 2017, to the Company, stating that the Company had failed to respond to the 23 October 2017 letter, particularly to the Employee’s queries on his employment status. As a result, the Employee considered himself constructively dismissed by the Company with effect from 13 November 2017.

In that regard, the Employee did not report for work following the expiration of his leave on 14 January 2018. Consequently, in a letter dated 19 January 2018, the Company informed the Employee that unless he provided a plausible explanation, his absence from work from 15 January 2018 would be deemed as an abandonment of his employment.

The Employee filed a claim at the Industrial Court alleging constructive dismissal without just cause or excuse.

Decision of the Industrial Court

Following hearings in late 2019, the Industrial Court issued its Award dated 9 June 2020 (“Industrial Court Award“) finding that:

1. The Court was not satisfied that there was a breach of contract by the Company.
2. If at all there was a breach, it was not sufficient to justify the Employee leaving his employment.
3. The Court did not doubt that the company had evidence that it wanted to retain the Employee.
4. There was an undue delay in the Employee terminating the contract on 13 November 2017.

In conclusion, the Industrial Court deemed the Employee’s “absence from work as abandonment of his employment with the Company”, and the Court dismissed the claim for constructive dismissal.

Decision of the High Court

Following the dismissal by the Industrial Court of his claim, the Employee filed an application for judicial review to the High Court against the Industrial Court Award.

On 22 July 2022, the High Court at Kota Kinabalu dismissed the application for judicial review, finding that the Employee had failed to substantiate his claim that he was constructively dismissed. In reaching this decision, the High Court held that:

1. The 13 October 2017 letter stated that the Employee would be paid his monthly salary as usual. The letter also mentioned that the Employee’s continuous employment would be considered by “the board of directors”, which could be that of the Company or its parent company.

2. The conduct of the Company in (i) calling the Employee to go on leave from 16 October 2017 to 14 January 2018 (to clear the accumulated leave or for any reasons); (ii) nominating another person to handle the Employee’s duties; (iii) requesting the Employee to handover to the Company the Company’s car, laptop and office keys; and (iv) requesting the Employee not to perform tasks of authorising flights and assigning ground school duties to the Company’s staff, could not “be said to be so inconsistent with the continuation of the employment” of the Employee.

3. A “mere suggestion” of the deliberation by the board of directors of the Company and/or its parent company regarding the future employment of the Employee could not be inferred to mean that the Company had committed a fundamental breach of contract of employment, or that there was an intention by the Company not to be bound by the essential terms of the contract of employment.

4. The failure of the Company to reply to the 23 October 2017 letter within three days could not be construed as a breach on the part of the Company of the fundamental terms of the contract of employment, or constructive dismissal of the Employee.

Decision of the Court of Appeal

Dissatisfied with the decision of the High Court, the Employee appealed to the Court of Appeal against the decision of the High Court. On 13 March 2025, a three-member panel of the Court of Appeal allowed the appeal, overturning both the decisions of the Industrial Court and High Court based on its findings as follows:

Misapplication of “Contract Test” for Constructive Dismissal 

The Company’s actions, viewed as a whole, fundamentally breached the employment contract, thereby satisfying the “contract test” for constructive dismissal. The Court described the following actions of the Company that justified the Employee’s position that he was constructively dismissed:

1. “Forced” leave and re-assignment of duties

Instructing (or as the Court put it, “enforcing“) the Employee to take 56 days of leave, equivalent to two years of the Employee’s annual leave entitlement, was tantamount to constructive dismissal in order to “get rid of him”.

In this regard, the Court of Appeal found that the High Court did not address the practical impact of removing the Employee’s responsibilities, which undermined his role and authority, and the contradiction between the reassignment of duties and the Company’s claim that the Employee’s employment remained secure.

Notably, although the Company provided reasons for its actions (e.g. concerns about fatigue), these reasons were not contemporaneously communicated to the Employee. They surfaced only during the Industrial Court proceedings. This after-the-fact reasoning undermined the reliability of the testimony of the Company’s witness or the latter’s credibility. The reasons given constituted an afterthought to justify earlier actions.

2. Return of company property

The Court viewed the direction to the Employee to return all Company properties (including the company car and computer) as indicative of the Company’s intention to sever the employment relationship, rather than maintain the status quo.

3. Ambiguity of future employment

The 13 October 2017 letter created uncertainty regarding the continuation of the Employee’s employment with the Company. The destabilising impact of this ambiguity reasonably undermined the Employee’s confidence in the security of his position; the ambiguity created by the Company’s actions breached the implied term of mutual trust and confidence.

The Employee’s perception of repudiation of the contract was further reinforced when the Company did not respond to the 23 October 2017 letter, thus supporting the position that the Employee was constructively dismissed.

Delay in Resignation

Contrary to the lower court’s finding of delay, the Court of Appeal held that the Employee’s resignation on 13 November 2017 was reasonable, as he waited for a response to the 23 October 2017 letter. The Employee sought clarification and only resigned when he did not receive any response. This demonstrated an effort to resolve the matter amicably before resigning. The delay was caused by the Company’s silence, which was interpreted as repudiation of the employment contract.

In conclusion, the Court of Appeal ordered the Company to pay the Employee back wages and compensation to be assessed by the Industrial Court (i.e. remitting the case back to the Industrial Court for assessment). The Court also awarded RM20,000 in costs to the Employee.

Key Takeaways 

The Court of Appeal’s decision highlights points that should be taken into account by companies when issuing directives or instructions to employees to utilise their accrued annual leave, especially if such directives or instructions are accompanied by actions (e.g. reassignment of duties) that may be construed to raise ambiguity about the employment status of an employee.

The decision of the Court of Appeal also underscores the importance of timely and clear communication between companies and their employees. In this case, the Court particularly noted that:

1. The Employee only resigned on 13 November 2017, after the Company did not respond to the 23 October 2017 letter where the Employee had requested written confirmation that he would be employed by the Company upon his return from leave.

2. Although the Company provided reasons for its actions (e.g. concerns about fatigue of the Employee), these reasons were not contemporaneously communicated to the Employee but surfaced only during the Industrial Court proceedings. This after-the-fact reasoning was deemed by the Court to be an afterthought to justify the Company’s earlier actions.

Accordingly, companies should carefully consider the possible ramifications of communications issued to their employees in relation to their employment, in view of the risks of a protracted dispute with the employee.

If you have any queries on the above, please feel free to contact any of our team members.