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2025 MarsdenLR 5918
COURT OF APPEAL PUTRAJAYA
SAHARUNZAMAN BARUN – Appellant
Versus
PERODUA SALES SDN BHD & ANOR AND OTHER APPEALS – Respondent
[Civil Appeal Nos: W-01(A)-473-08-2021 W-01(A)-477-08-2021 & W-01(A)-478-08-2021]
The requirement of reasonableness in employment transfer clauses is fundamental; failure to adhere constitutes constructive dismissal.
Headnote:(A) Industrial Relations Act 1967 - Section 20 - Constructive dismissal - Employees of Perodua Sales Sdn Bhd faced transfer to distant locations after a corporate restructuring, leading to claims of constructive dismissal - The Industrial Court found the transfer unreasonable and a breach of contract, awarding compensation - High Court reversed this, asserting managerial prerogative - Court of Appeal reinstated Industrial Court's award, emphasizing the need for reasonableness in employment contracts. (Paras 6, 12, 16, 113, 114)
(B) Employment Contracts - Transfer clauses - The requirement of reasonableness in transfer clauses is a fundamental contractual obligation - The Company’s actions were deemed mala fide and not in accordance with the agreed terms, leading to constructive dismissal claims being upheld. (Paras 25, 36, 63, 114)
(C) Managerial Prerogative - The exercise of managerial prerogative must align with contractual obligations, including the reasonableness of transfers - The Company’s failure to adhere to this principle resulted in a finding of constructive dismissal. (Paras 14, 39, 63)
Facts of the case:
Three employees of Perodua were transferred to distant locations following a takeover by NAM, leading to claims of constructive dismissal due to unreasonable transfer conditions and loss of job security.
Findings of Court:
The Industrial Court found that the Company’s actions constituted a fundamental breach of contract, awarding compensation to the employees.
Issues: The main issues included whether the transfer was reasonable and whether the Company evinced an intention not to be bound by the contract.
Ratio Decidendi: The court ruled that the requirement of reasonableness in transfer clauses is a fundamental contractual obligation, and the Company’s actions were deemed mala fide, leading to constructive dismissal.
Result: Appeals allowed, reinstating the Industrial Court's awards.
JUDGMENT
[1] Three employees of Perodua Sales Sdn Bhd ("Perodua/the Company") found themselves in a quandary. They had all served between 9 and 22 years with the Company, one being employed as a mechanic and the other two as service advisors. Together with some 20 other employees in Perodua's Branch in Bukit Beruntung and its Sales Service Centre in Sungai Choh, Rawang, they were each given a letter explaining that one Nagoya Automobile Malaysia ("NAM") had taken over Perodua's business operations at Bukit Beruntung and Sungai Choh. The letter further stated that they should take up the employment offer made by NAM.
[2] Like most contracts and correspondences, the devil is in the details. Upon closer scrutiny of the relevant documents, it became apparent that all employees taking up the offer would be engaged for a fixed term of 2 years and they would first be required to tender their resignation from Perodua. After the 2-year term with NAM is over, NAM would have the sole discretion whether to retain them and if not, it would appear that they would have to reapply to Perodua and the Company would then decide whether they would be taken back as that decision would depend on availability of vacancies and the needs of Perodua then.
[3] The 3 employees felt that it was a raw deal as what was to them a permanent position is now being subject to a 2-year fixed term contract with NAM with no certainty of being retained by NAM nor re-employed by Perodua and there was also a deafening silence on what would happen to the years of service that they had each put into the Company Perodua.
[4] There were various rounds of meetings between Perodua and the employees affected by this corporate restructuring exercise involving the transfer of business in these 2 branches to NAM. Perodua obviously would want all the employees to take up the offer from NAM as it would release Perodua from any further contractual obligations to its employees. However, the 3 employees resisted the move for what they perceived to be their legal rights to choose to remain with Perodua for any offer of employment in a business takeover should be on terms no less favourable.
[5] They were not prepared for the next move by Perodua which was a Notice of Transfer dated 27 September 2017, requiring them to report for work within 3 days: one to Kota Kinabalu, another to Kuching and yet another to Kuala Terengganu. They pleaded with Perodua respectively in their letters of 28 September 2017 to reconsider the transfer to these faraway places and to appeal for a transfer to some other branches nearby but to no avail. The Company issued them a show cause notice dated 9 October 2017 of insubordination for failing to obey valid and reasonable orders of the Company and for being absent for work for 2 or more continuous days when they did not report to work at their new postings. They in turn implored the Company to reconsider its position after reiterating why the transfer would be unreasonable and when there was no reply from the Company, they treated themselves to have been constructively dismissed as at 24 October 2017 and referred the matter to the Director General of Industrial Relations under s 20 of the Industrial Relations Act 1967 (" IRA ").
Before The Industrial Court
[6] The Industrial Court handed down its Award for each of the 3 employees as Claimants in their reference for dismissal without just cause and excuse and held that the conduct of the Company Perodua went to the root of the contract and evinced an intention not to be bound by the contract of employment entered into with the affected 3 employees. It was also held that the transfer exercise was not reasonable, as the Company have introduced this element of "as reasonably directed by the Company" into the "Transfer" clause in its contract with one of the 3 employees who joined later.
[7] The Industrial Court discerned this change in approach in exercising its managerial prerogative of transfer
