This is a write-up on the case of Matrix Global Education Sdn Bhd v Felix Lee Eng Boon [2023] 2 CLJ 34.

FACTS:

Mr. Felix Lee Eng Boon (Employee) was relieved of his duties as CEO of Matrix Global Schools (MGS) (Company) due to declining academic standards and a drop in the quality of education, leading to lower admission of students under his tenure. The Employee was initially offered an alternative position in the Company but the offer was withdrawn after the Company received information on irregularities during his tenure. Instead, he was asked to resign.

However, prior to his resignation, negotiations took place between the parties to discuss the severance package, which the Company finally agreed to provide as follows: (i) six months’ salary in lieu of notice; (ii) full waiver of the Employee’s child’s tuition fees until the completion of the remaining academic term; and (iii) restructuring of the Employee’s car ownership scheme in order to allow him an additional three months to repay his car loan.

Notwithstanding accepting the Company’s offer and resigning as a result, the Employee proceeded to file a claim in the Industrial Court on the basis of being forced to resign and for constructive dismissal.

The Industrial Court believed the Employee and ruled that the Employee was dismissed without just cause and excuse and ordered the Company to pay back-wages and compensation in lieu of reinstatement amounting to RM381,720. The Company filed for judicial review but failed, leading to its appeal before the Court of Appeal.

FINDINGS:

Upon the hearing of the appeal, the Court of Appeal found that the Employee’s conduct in negotiating and accepting a severance package did not support his claim of constructive dismissal.

The Court of Appeal held that the suggestion to resign must be viewed in proportion and within context, and in itself could not amount to constructive dismissal. In this case, the Employee, when asked to resign, could have refused and treated himself as being constructively dismissed. However, the Employee did not but instead proceeded to negotiate his terms of separation, and finally accepted the severance package and tendered his resignation.

Ultimately, the Employee had entered into a concluded contract, and his claim of constructive dismissal was no longer valid. The Court of Appeal allowed the appeal and quashed the Industrial Court’s award.

Key Excerpts:

Some of the key excerpts of the Court of Appeal’s Judgement are as follows:

[72] The conduct of the (Employee) in entertaining and entering into negotiations for settlement on terms does not fit snugly and indeed cannot support what he later asserted in the statement of case and at the Industrial Court that he had been constructively dismissed.

[73] The respondent cannot have the best of both worlds; negotiating and accepting the terms of a separation and then at the same time claiming that he had been constructively dismissed. He cannot have the cake and eat it; entering into a negotiated settlement without reservation of rights and then launching a claim for more on account of being constructively dismissed.

[74] If the (Employee) … is so certain that the narrated actions of the (Company) are so connected with one another as to culminate in a repudiation of the employment contract, then he must show and be seen to have dissociated and distanced himself from the actions of the company and to forthwith walk out of the employment and treat himself as being constructively dismissed.

[75] A mere suggestion, advice or option to resign is not conclusive of constructive dismissal or forced resignation. The higher one is in the employment ladder and here we are talking about the top executive position of a CEO just below that of the managing director or executive director, the higher the test that one has been forced to resign.

…

[77] We must emphasise the fact that whether a resignation is a “forced resignation” is very much fact-centric and fact-sensitive and in the above case the High Court had noted that there were two separate occasions where the company had prepared letter of resignation for the employee to sign.

[78] In the present case not only is the claimant legally qualified, but he had himself written his own email tendering his resignation in measured and mellowed language of maturity – marking a memorable departure from service with the company as “MGS will always be a large part of me.”

[79] The suggestion or advice to resign must be viewed in its proper perspective and proportion. In industrial disputes between a company and its employee or workman, it is always a plus for industrial harmony if any severance of employment can be done on terms mutually adoptable. 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.”

My Thoughts:

The case once again involves a situation where an employee despite having negotiated and agreed to a resignation or mutual separation with the company, decides to initiate a claim against the Company in the Industrial Court anyway. Such a situation, unfortunately, is not new and not uncommon.

This is perhaps due to employees knowing that they have nothing to lose if their claim fails in the Industrial Court as the Industrial Court does not order damages or costs against a failed claimant. This has led to employees taking advantage of the system, and just “trying their luck”.

In this case, although the Company eventually succeeded in defending itself, it took them reaching the Court of Appeal to achieve so, which would have surely cost them a lot in terms of time and money, legal fees included.

Sadly, until the system is changed one day where employers are better protected from vexatious or frivolous claimants/employees, here is some advice to employers:

1. Be cautious when negotiating a severance package with an employee and make sure the entire process is properly documented.
2. While an employer can suggest an employee to resign, it must be done in a tactful way to avoid any accusations of the suggestion being a threat or the employee being forced or pressured into resigning.
3. Seek legal advice frequently and promptly. The lawyer may assist in ensuring any mutual separation to be properly recorded and that any risk of litigation is at least minimised.

PS: This article was first published here. Should you require advice on a similar issue, or are facing a similar issue, please feel free to contact me.