Facts
The Employee, was employed as a flight instructor by Layang-Layang Flying Academy Sdn Bhd from 2014. In October 2017, the Company issued a letter directing him to:
- take 56 days of accumulated annual leave (the equivalent of two years’ entitlement) from 16 October 2017 to 14 January 2018;
- hand over his duties as Head of Training to a nominated replacement;
- return the company car, laptop and office keys; and
- cease authorising flights and assigning duties to staff.
The Company also reserved its right to “review” the Employee’s employment upon his return. The Employee wrote requesting written confirmation that he would still be employed. The Company did not respond. He resigned on 13 November 2017 and filed a claim for constructive dismissal at the Industrial Court. Both the Industrial Court and the High Court dismissed his claim.
Issues
- Whether the Company’s conduct — viewed as a whole — amounted to a fundamental breach of the employment contract sufficient to constitute constructive dismissal under the “contract test.”
- Whether the Employee’s delay in resigning disentitled him from claiming constructive dismissal.
Decision / Court’s Findings
The Court of Appeal allowed the appeal on 13 March 2025.
The Contract Test
The Court affirmed the “contract test”: an employee must prove the employer committed a fundamental breach, or evinced an intention no longer to be bound by the contract. The Federal Court in Tan Lay Peng v RHB Bank [2024] MLJU 840 confirmed that mere unreasonableness, standing alone, is insufficient.
Forced Leave and Re-assignment of Duties
Directing the Employee to take 56 days of leave — two full years’ entitlement — was not a routine act. It was, in substance, a mechanism to “get rid of him.” The simultaneous re-assignment of all his duties, without contemporaneous explanation, further undermined his role and authority. Reasons offered only during proceedings were found to be afterthoughts.
Return of Company Property
The direction to return the company car, laptop and office keys was inconsistent with the continuation of employment and signalled an intention to sever the employment relationship.
Ambiguity as to Future Employment
The 13 October 2017 letter reserved the right to “review” the Employee’s employment. The Company’s subsequent silence breached the implied duty of mutual trust and confidence.
No Unreasonable Delay in Resignation
The Employee resigned only after the Company failed to respond within a reasonable time. The delay was caused by the Company’s own silence and did not disentitle him from claiming constructive dismissal.
Orders Made
- The Court of Appeal allowed the appeal and set aside the decisions of both the Industrial Court and the High Court.
- The case was remitted to the Industrial Court for assessment of back wages and compensation.
- Costs of RM20,000 were awarded to the Employee.
Key Takeaways
For Employees
If your employer strips you of your duties, compels you to take a disproportionate amount of leave and returns your company property — all without a clear explanation — you may have grounds to claim constructive dismissal. Write formally to request confirmation of your employment status. Preserve all correspondence and record any silence. Do not resign prematurely without first seeking legal advice.
For Employers
Clear, timely communication is essential when issuing leave directives or restructuring roles. Reasons offered only at trial will be treated as afterthoughts. Be cautious about combining mandatory leave clearance, re-assignment of duties, and return of company property in a single directive without clear contemporaneous communication.
Why This Case Matters
This decision reinforces a balanced framework for constructive dismissal claims in Malaysia. The contract test protects employers from frivolous claims. It equally protects employees from forced exits dressed up as administrative decisions. Clear communication remains the single most effective tool to avoid exposure.
The above is a legal update for general information purposes only and does not constitute legal advice. For advice specific to your situation, please consult a qualified lawyer.
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