In a recent ruling, the Federal Court has affirmed the enduring validity of the “contract test” as the benchmark for determining constructive dismissal cases, emphasizing its consistency and clarity in industrial relations. The court’s decision underscores the importance of maintaining legal coherence and certainty in employment disputes.
Justice Nordin Hassan, in delivering the unanimous judgment of a three-member bench, emphasized that the reasonableness of an employer’s conduct should be considered as a factor within the framework of the contract test, rather than constituting a separate legal requirement. Departing from the established contract test, he warned, would only introduce ambiguity and confusion into industrial relations.
The court highlighted that the contract test has been consistently applied in Malaysia since 1988, aligning with legal practices in other Commonwealth jurisdictions such as England, Singapore, Australia, and Canada. This reaffirmation of the contract test’s primacy serves to provide clarity and stability in adjudicating constructive dismissal claims.
The case in question involved an appeal by the estate of a former RHB Bank employee, Tan Leong Huat, who alleged constructive dismissal after leaving his job in March 2015. Despite arguments by the deceased’s estate suggesting the interchangeability of the contract test and the reasonableness test, the court maintained the distinctiveness of the contract test in assessing constructive dismissal matters.
Tan Leong Huat’s case stemmed from his objection to a job relocation and subsequent refusal to report for duty, leading him to claim constructive dismissal. Following a series of legal proceedings, including a ruling in his favor by the Industrial Court in 2019, the Federal Court ultimately dismissed his appeal in February.
The Federal Court’s reaffirmation of the contract test serves as a pivotal clarification in employment law, ensuring consistency and coherence in the resolution of constructive dismissal disputes. This ruling underscores the importance of adherence to established legal principles in safeguarding the rights and interests of both employers and employees in the Malaysian context.