We came across an interesting Industrial Court decision regarding an employer's actions of frequently transferring an under-performing employee as well as requiring her to take a Covid test during the Movement Control Order period. Does such actions justify a claim for constructive dismissal?
This week's update answers this question.
Moshila Palanisamy v Blue Wave Shipping (M) Sdn Bhd [Industrial Court Award No. 234 of 2022]
This update addresses the following questions:
1. Does a company's persistent actions of requiring an employee to take a Covid-19 test prior to reporting to work amount to constructive dismissal?, and
2. Is a salary reduction coupled with placing an employee under a Performance Improvement Plan due to a decline in a company's business volume arising out of the pandemic justify a claim for constructive dismissal?
In our feature case, the claimant commenced employment with the company as a Customer Service Manager and was placed on probation. She was subsequently re-assigned to its Non-Vessel Operating Common Carrier (NVOCC) Department as a Manager before a few months later being informed that her job scope was once again changed from managing the NVOCC Department to the NVOCC Indoor Sales and Marketing.
In addition to these changes to her job role, the claimant’s salary was also reduced due to the Covid-19 pandemic and the resulting restrictions imposed by the government, which had affected the company's business volume. A few days after her latest designation, she was additionally placed on a Performance Improvement Plan ('PIP'). She then went on medical leave and whilst on it, the company had attempted to repeatedly reschedule her appointments for a Covid-19 test to facilitate her return to work.
The claimant alleged that these cumulative actions showed that the company had behaved in a hostile manner towards her and that she had faced further humiliation as a result of being shouted at and scolded in front of the staff and customers of the company. This led to her walking out of her employment and claiming constructive dismissal. At the time of her walking out, she had served the company for nine months.
Subsequent to her walking out, the company issued her a Notice of Reinstatement which it later retracted on the basis of her poor performance. This hearing before the Industrial Court was therefore in relation to her claim for constructive dismissal.
What the Industrial Court Held
The Industrial Court held in favour of the company and dismissed the claimant’s assertion of constructive dismissal. In coming to this conclusion, the court first addressed the issue of the company’s decision to reduce the claimant’s salary by 35% and whether this amounted to constructive dismissal wherein it said:
“ The claimant had alleged that on 6 May 2020, there was a 35% reduction in her salary and it was illegal and without her knowledge. The company had informed all employees including the claimant whose salary is above RM4,000 that there will be a reduction of 35% taking into account the slow business volume of the company as the company was on minimal operation during the pandemic Covid-19 and MCO 1.0 implemented by the Government at that material period. Most of the company's employees including the claimant was working from home since 18 March 2020. The claimant was informed via email and over the telephone calls by Ms. Hema from the company's outsourced HR (In-Talent HR Consulting Sdn Bhd) on 7 April 2020 on the adjustment of the salary during the MCO period…
…If in the event the claimant had not agreed to the reduction, she should have resigned claiming constructive dismissal on 7 April 2020 and not wait till 20 May 2020. Furthermore, the reduction in her salary was never mentioned in her resignation letter dated 20 May 2020. There was undue delay on her part by not leaving her employment immediately after she was notified and explained on the reduction of the employee's salary by the Company.”
Read more: Salary Reduction and Implications in The Workplace
The court also addressed the issue raised by the claimant that the company’s persistent actions in asking her to go for a Covid-19 test was a form of victimisation justifying her claim for constructive dismissal wherein it said:
“The claimant had claimed in her Statement of Case that she had been a conscious employee and had acted towards the best interest of the company, but her conduct for Covid-19 test clearly shows the conduct of the claimant towards the company. Never in any e-mails or messages did the claimant ask the company that she wants to come in the office to work, to complete her assignments and her tasks given.
The claimant was comfortably fine getting medical certificates. In fact, the company had allowed her work from home due to her eyes conditions with no deduction of her salary, but yet questioned the way the Covid-19 test was handled by the company. Here the claimant keeps getting medical leaves certificates from the same general practising clinic and keep postponing her Covid-19 test despite the effort of the company had numerous times rescheduled and accommodated her Covid-19 test at her nearby medical facilities, in order to facilitate her coming back to active duties, but not to terminate her employment. It should be noted that the company did not make any deductions to the claimant's salary during her medical leaves and unpaid leave. From the evidence, it should be noted also that from 18 March 2020 until 20 May 2020 when the claimant tendered her resignation, she was working from home and had never came into the office for work.”
Finally, the court addressed the issue of whether the company’s actions of transferring the claimant a number of times before placing her on a performance improvement plan amounted to constructive dismissal wherein it said:
Quotation/Citation Three (On the Claimant’s Transfers)
“The company was in fact trying its best to relocate the claimant to suit with her skills, knowledge and experiences to form a newly NVOCC department. This was the best effort from the management of the company to accommodate the claimant to utilise her network and market contracts as the claimant had extensive experience in NVOCC business and at the same time, the claimant's position was not downgraded nor the salary was reduced. At all material time, the claimant did not raise any objection or complaint with the task entrusted to her.  The transfer of employee in the interest of the employer's business is a management prerogative. It is trite law that a company has the right to transfer its employees from one department to another and from one post of an establishment to another or from one branch to the other of from one company to another within its organisation. The decision of the company to transfer the claimant was in line with the express term of her employment.”
Quotation/Citation Four (On the Claimant’s Performance Improvement Plan)
“Performance Appraisal & Development Programme is an internal process taken by the company to help develop the claimant in areas that the company feel that the claimant needs to improve. It is a company's right to evaluate her performance on the job scope and level of understanding whereby the company through COW1 had advised her verbally on her performance. It was understandable that beginning from 18 March 2020, the entire country was placed under MCO 1.0 by the Government due to pandemic of Covid-19, and it was a reasonable delay to have the Performance Appraisal on her performance as the company and its employees have yet to grips with the pandemic and the way to work during the difficult period. The letter at p. 14 of CLB does not state that the claimant was placed on a probation of 1 month, but only state that the Performance Appraisal is extended, and it does not in any way amounts to fundamental breach of the contract.  On 20 May 2020, the Performance Improvement Plan (PIP) was conducted between In-Talent HR team with the claimant via Zoom Meeting whereby COW1 had advised the claimant who had agreed to have a discussion session with him to clarify and have better understanding of her job scope and performance. However, on the contrary, the claimant had tendered her resignation letter on the very same date on her own accord.  The claimant's allegation that the company had created an intimidating, hostile and offensive work environment towards her are hereby unfounded and baseless. In fact, the company had tried its very best to accommodate the claimant by creating a new department to allow her to put her experience to use.”
How Your Organisation Can Benefit From This Case
Delaying a Performance Review and Placing an Employee under a Performance Improvement Plan Does Not Amount to Constructive Dismissal
The Industrial Court here clarified that in light of the pandemic and resulting restrictions on working from home, an organisation is entitled to delay its performance appraisal exercise and also conduct its performance appraisal exercise with its employees virtually. In this case, the court found no fault a) with the company delaying the claimant’s performance assessment and b) subsequently choosing to conduct the appraisal via Zoom before c) later deciding to place her on a PIP. These actions were well within its managerial prerogative and does not amount to constructive dismissal.
An Employee Too Bears Personal Responsibility for Accommodating An Organisation’s Instructions to Take a Covid-19 Test
The Industrial Court tellingly here found that the impact of the Covid-19 pandemic needs to be seen thru the lens of the employer’s eyes too and an employee cannot continue demanding to be able to work from home without considering her employer’s business needs. Equity works both ways here and an employee needs to also demonstrate initiative on his/her part to accommodate her employer’s requests in finding a fair compromise between working from home and returning to the office.
In fact, the company would have been justified in disciplining her on the basis of her refusal which constitutes insubordination.
Delaying One and a Half Months’ After a Salary Reduction Means an Employee Loses His/her Right to Claim Constructive Dismissal
Many employees have seen their salaries reduced resulting from the pandemic. While this technically is a fundamental breach of the employment relationship which amounts to constructive dismissal, an employee needs to walk out immediately and leave the company’s employment in connection with the salary reduction. Any delay here, including waiting one month would be seen by the courts as the employee electing to waive, i.e. accept, the breach.