The fact that a mutual separation agreement was executed quickly does not necessarily mean that it was accepted under coercion. This was the finding of the Industrial Court's decision in Fatimah Binti Noordin v. Carsem (M) Sdn Bhd Award No. 274 of 2020 which was recently upheld by the Ipoh High Court.
Background Facts
The claimant employee commenced employment with the respondent employer in 2002 and last held the position of a Section Manager with the Human Resources Department.
When the employee reported for work on 20 April 2017 after a two-week annual leave break, she was informed by the employer that her last day of employment would be the next day. She was then asked to sign a mutual separation agreement (MSA) and was escorted out the premises by security personnel after doing so.
Following the execution of the MSA, the employer, through an investigation, found that there were instances of fraud perpetrated by the employee in the supply of manpower since 2012. The employer filed a police report which led to the employee's arrest and withheld payment of the agreed sum under the MSA.
The employee then made representations that she was dismissed without just cause or excuse to the Director General for Industrial Relations under section 20 of the Industrial Relations Act 1967 which were then referred to the Industrial Court pursuant to a ministerial reference.
Industrial Court's Findings
In bringing a dismissal without just cause or excuse claim, an employee bears the burden of proving that they were dismissed. Once this is satisfied, the burden shifts to the employer to show that the dismissal was done with just cause or excuse.
The employee argued that she was in fact dismissed as she did not sign the MSA voluntarily; the employer had tricked her into doing so. She was told that her position had been made redundant (which was untrue) and that she would be paid compensation if she agreed to sign the MSA. She was given a copy of the MSA and made to sign it on the same day, and was not given an opportunity to consult anyone.
The employer argued that the employee was not dismissed. The employee had signed the MSA, which captured parties' mutual agreement to terminate the employment relationship. She was not at any point coerced, pressured or influenced into executing the MSA. Neither did she record her objection to the terms of the MSA.
The Industrial Court found that the employee failed to show that she was dismissed.
First, the fact that the MSA had been executed was not disputed. Second, there was no evidence to show that the employee had signed the MSA under duress or coercion. In fact, the employee took the position that she had signed the MSA under duress only after the employer withheld the payment. The Industrial Court also found it difficult to believe that the employee, being a senior employee with 15 years' experience in human resources, would have signed the MSA without understanding its consequences.
Ipoh High Court's Decision
The Ipoh High Court earlier this month upheld the decision of the Industrial Court. The fact that the employee had quickly agreed to sign the MSA did not necessarily negate the voluntariness of her acceptance. The High Court also found the employee failed to discharge her burden of proving that she was dismissed there was no evidence before the Industrial Court that she had accepted the MSA under compulsion or duress.
Key Takeaways
Involuntary employment termination in Malaysia can be tricky. Employees (regardless of whether they are covered by the Employment Act 1955) can challenge the termination of their employment on the basis that it amounts to a dismissal without just cause or excuse.
However, as this case illustrates, a properly executed MSA is a strong defence against an argument that the employee was dismissed. Unless the employee is able to show that the MSA is void or unenforceable for any reason (noting the high evidentiary burden to do so), a MSA brings the employment relationship to a mutually agreed end.