Court of Appeal (Putrajaya) – Civil Appeal No. W-01(A)-665-11/2019
ABDUL KARIM ABDUL JALIL, NOR BEE ARIFFIN AND RAVINTHRAN PARAMAGURU JJCA
15 March 2021
Introduction
- This is an appeal against the decision of the High Court which had quashed an Industrial Court Award by way of judicial review.
- The Industrial Court had dismissed a claim for constructive dismissal by the Respondent pursuant to a reference under Section 20(1) of the Industrial Relations Act 1967 based on the following grounds:
- Since the Respondent did not plead reinstatement as a relief in the Statement of Case, the Industrial Court was ceased of jurisdiction to make an Award; and
- The Respondent failed to prove that he was constructively dismissed.
- Pursuant to a judicial review application filed by the Respondent, the High Court found that the Industrial Court had erred in law by ruling that it ceased to have jurisdiction to make an Award and that the Industrial Court had also erred in finding that the Respondent was not constructively dismissed.
Background Facts
- The Respondent worked as a sales representative with the Appellant since 1977. He was assigned a sales coverage area. He was paid a monthly salary and he was also paid a commission based on a formula that took into account the revenue collected from the sales and the time period which it was collected. This was known as the Sales Commission Scheme.
- The Respondent was also provided with an annual salary increment of RM50.00 until 2007. Subsequent thereto, there were no further increments to his basic salary of RM2,000.00 a month.
- The Sales Commission Scheme was revised by the Appellant in October, 2019. The Respondent accepted the revision and carried on with his employment until 2016.
- On 1.5.2016, the Sales Commission Scheme was again revised by the Appellant. In addition, the Appellant also removed Negeri Sembilan from the sales coverage area of the Respondent. Besides, the monthly sales target of the Respondent was increased from RM1,500,000.00 to RM1,690,000.00.
- The Respondent wrote to the Appellant to express his objection to the revised Sales Commission Scheme and the removal of Negeri Sembilan from his sales coverage area. In this regard, it was the Appellant’s case that these revisions were made in order to streamline the business operations and to remain competitive.
- The Respondent did not resign upon being notified of the revisions by the Appellant and instead, the Respondent had only resigned on 10.3.2017, approximately 9 months thereafter. According to the Respondent, he remained in employment to collect evidence of the reduction in his monthly income due to the Appellant’s practice of releasing the sales commission a few months subsequent to the collection of monies from sales.
- On 29.3.2017, the Respondent filed a representation under Section 20(1) of the Industrial Relations Act 1967 for constructive dismissal and the representation was subsequently referred to the Industrial Court by the Minister.
Issues for the Determination of the Court of Appeal
- Pursuant to the appeal filed by the Appellant against the decision of the High Court, there were 2 broad issues to be determined by the Court of Appeal:
- Whether the Industrial Court had jurisdiction to hear the dispute in the absence of the Respondent seeking a relief for reinstatement in the Statement of Case; and
- Whether the Respondent was constructively dismissed.
The Appellant’s Contentions
- The Appellant contended that the Industrial Court lacked substantive jurisdiction to hear the dispute as the Respondent did not want to be reinstated to his position with the Appellant.
- The Appellant also contended that the Respondent was not constructively dismissed as the commission payable to the Respondent was only an incentive and was not part of his salary. In addition, the Respondent had accepted the revision to the Sales Commission Scheme by remaining in employment for 9 months.
The Respondent’s Contentions
- The Respondent contended that the Industrial Court had jurisdiction to hear the dispute by reason of the Ministerial reference under Section 20(3) of the Industrial Relations Act 1967.
- The Respondent also contended that the delay in his resignation did not amount to a condonation of the revision of the Sales Commission Scheme and to the removal of Negeri Sembilan as his sales coverage area.
- Further, the Respondent took the position that the commission was not an incentive and instead, it was his right. It was therefore the Respondent’s case that the revision to the commission was a breach which went to the root of the employment contract.
Decision by the Court of Appeal
- Jurisdiction
- The Industrial Court is seized with jurisdiction to hear a dispute between an employer and an employee once the Minister had made a reference under Section 20(3) of the Industrial Relations Act 1967. In this regard, the Court of Appeal adopted the approach taken by the Federal Court in The Borneo Post Sdn Bhd v Margaret Wong [2001] 8 CLJ 758 where it was held that the Industrial Court is seized with jurisdiction because of the Ministerial reference.
- In upholding the view that the Industrial Court had substantive jurisdiction to hear the dispute, the Court of Appeal held that the Industrial Relations Act 1967 is a beneficent social legislation which was meant to provide better remedies than those granted under common law. In this respect, the Court of Appeal enunciated that reinstatement is not the only reason for a dismissed employee to make a representation under Section 20(1) of the Industrial Relations Act 1967. The dismissed employee is entitled to other generous remedies such as compensation in lieu of reinstatement and backwages.
- The Court of Appeal also held that whilst an employee is obliged to seek to be reinstated in his former employment when making a representation under Section 20(1) of the Industrial Relations Act 1967, once the case is referred to the Industrial Court by the Minister, there is no longer a requirement in the Industrial Relations Act 1967 for the employee to plead the remedy of reinstatement. Rule 9 of the Industrial Court Rules 1967 only stipulates that the Statement of Case shall contain the following:
- A statement of all relevant facts and arguments;
- Particulars of decisions prayed for;
- An endorsement of the name of the first party and his address of service; and
- As an appendix or attachment, a bundle of all relevant documents relating to the case.
- The Court of Appeal also made reference to Section 30(6) of the Industrial Relations Act 1967 which confers the Industrial Court with very wide discretion to include in the Award “any matter or thing which it thinks necessary or expedient.” In the context of this provision, the Industrial Court is not restricted to order reinstatement even if it was specifically pleaded in the Statement of Case,
- In summary, the Court of Appeal found that the Industrial Court cannot question its own jurisdiction simply because the employee did not seek the remedy of reinstatement in the Statement of Case.
- In the premises, the Appellant’s appeal was dismissed and the decision of the High Court on this issue was affirmed by the Court of Appeal.
- Constructive Dismissal
- The Court of Appeal found that the learned High Court Judge had erred in reversing the decision of the Industrial Court on the issue of constructive dismissal by reason of the following:
- The payment of a sales commission as stated in the letter of appointment is not a fundamental term of the employment contract as it is stated that the commission is an incentive for good performance and it is also based on sales volume. It is therefore not a fixed allowance unlike the annual bonus stipulated in the letter of appointment.
- The Sales Commission Scheme was revised in 2009 and the Respondent accepted it without walking out of his employment. The Respondent had in essence accepted that the Sales Commission Scheme can be varied by the Appellant.
- The delay of 9 months in resigning by the Respondent after being notified of the revisions by the Appellant was lengthy. During this time, he had accepted the extra benefits which were offered to him alone and he did not indicate that he would be leaving.
- On the removal of Negeri Sembilan as the Respondent’s sales coverage area, it is not stipulated in the letter of appointment that Negeri Sembilan is a sales coverage area. In fact, the letter of appointment states that the “area of coverage may be reviewed from time to time as and when the need arises.” This was therefore a matter for the management’s judgment and discretion.
- Based on these reasons, the Court of Appeal held that the Respondent failed to establish that he was constructively dismissed and by his conduct in not resigning within a reasonable time after the alleged breach by the Appellant, the Respondent had waived such breach.
- The Appellant’s appeal on this issue was therefore allowed and the High Court’s decision was set aside.
Impact of the decision of the Court of Appeal
- Based on our reading and understanding of this decision by the Court of Appeal, the key takeaways are as follows:
- An employee who makes a representation under Section 20(1) of the Industrial Relations Act 1967 for unfair dismissal or constructive dismissal is not obliged to plead reinstatement as a remedy or relief in the Statement of Case if the matter is referred to the Industrial Court. The Industrial Court has the jurisdiction to decide the dispute even if reinstatement is not pleaded or pursued as a relief; and
- In a claim for constructive dismissal, it is imperative that an employee resigns from his employment within reasonable time after the alleged breach of the employment contract by the employer. A failure by an employee to leave his employment within reasonable time after the alleged breach by the employer could be deemed to be a waiver of the breach by the employee.
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- Rohan Arasoo Jeyabalah
Partner
- Teoh Yen Yee
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