TLP v RHB Bank Berhad & Anor [2024] 5 MLRA 171

TLP v RHB Bank Berhad & Anor [2024] 5 MLRA 171

Federal Court (Putrajaya) 

Applicable Test for Constructive Dismissal Case

1. The case involves a claim for constructive dismissal by Mr. TLH (represented after his passing by the Appellant, TLP) against RHB Bank Berhad (the Respondent). 
2. Mr. TLH was employed in 2011 as the Operations Head for Thailand Operations in Bangkok. After several reassignments within Thailand, the Bank issued a transfer order in February 2015 for his repatriation to Malaysia to assume a role in the International Infrastructure, PMO and Operation Support department.
3. Mr. TLH objected to the transfer, contending it was without justification and would kill his career and constituted a downgrade. He refused to comply with the order, claimed he was constructively dismissed and filed a representation under section 20 of the Industrial Relations Act 1967. 
4. The Industrial Court originally allowed his claim, awarding him RM216,840.00. While the High Court upheld this, the Court of Appeal quashed the award, ruling that the Industrial Court had applied the wrong legal test (reasonableness test instead of contract test). The Federal Court then granted leave to appeal to clarify the applicable test.

Whether the distinction between the contract test and the reasonableness test persists in view of significant evolutions in industrial jurisprudence.

(1) Whether the distinction between the contract test and the reasonableness test persists in view of significant evolutions in industrial jurisprudence.

(a) Under Malaysian law, it is firmly established that the “contract test” is the exclusive standard for determining cases of constructive dismissal. Based on this standard, the employee must demonstrate that the employer’s actions either violated a core, fundamental term of the employment agreement or clearly signaled that the employer no longer intended to honor the contract (whether those terms were written or implied).

(b) The Federal Court explicitly rejected the “reasonableness test” (whether the employer’s conduct was fair or proper) as a standalone legal requirement for constructive dismissal. The Federal Court noted that “reasonableness” is too subjective and indefinite to serve as a legal standard, which could lead to “unsettled industrial relations”.

(c) While reasonableness is not the legal test, it can be a factor or a tool used to determine whether a fundamental breach of contract has occurred. However, assessment of reasonableness must always relate back to the repudiatory breach of the employment contract.

(d) If the Industrial Court adopts the reasonableness test and fails to apply the contract test to the facts, it commits a fundamental error of law that requires intervention and the quashing of the decision.

(e) The Federal Court cited the case of WCH v Cathay Organisation Malaysia Sdn Bhd [1987] 1 MLRA 346, whereby the locus classicus establishing that “dismissal” under section 20 of the Industrial Relations Act 1967 must be interpreted according to common law contract principles, rejecting the unreasonableness test. Moreover, the case of Pan Global Textiles Bhd Pulau Pinang v ABT [2001] 1 MLRA 657, confirmed the application of the contract test to determine cases of constructive dismissal.

1. The Federal Court dismissed the appeal and affirmed the Court of Appeal’s decision to quash the Industrial Court’s award. 
2. The Federal Court clarified the legal threshold for constructive dismissal in Malaysia, ruling that the contract test remains the governing standard and is distinct from the alternative reasonableness test.

1. In Malaysia, an employee claiming constructive dismissal must prove a breach of a specific contractual term (express or implied) rather than just “unfair” treatment.
2. The burden remains on the employee to prove, on a balance of probabilities, that they were constructively dismissed.
3. Employers generally have the right to transfer employees (especially if a transfer clause exists), provided the transfer does not breach fundamental terms like grade, pay or the implied duty of mutual trust and confidence. 
4. This case reinforces the “locus classicus” (established authority) of WCH v Cathay Organisation, ensuring the contract test remains good law in Malaysia.