Please click HERE to download the full article in PDF.
Introduction
The High Court’s decision in Mohd Sofian bin Amirudin v Bank Simpanan Nasional, delivered by Justice Anand Ponnudurai of the High Court of Malaya at Kuala Lumpur is a significant development in Malaysian employment law. Viewed through the lens of the civil courts, the case highlights that employment disputes involving statutory bodies may, depending on the employee’s cause of action, fall outside the Industrial Court’s jurisdiction and instead be determined by the civil courts based on common law and contractual principles. The decision also provides important guidance on fixed-term contracts and the limits of transfer clauses, affirming that a transfer may amount to a repudiatory breach of contract where it fundamentally alters an employee’s role and responsibilities, even without any reduction in salary.
Brief Facts
The plaintiff was a senior employee of Bank Simpanan Nasional (“BSN”), serving as Head of Cards Business & CRM under a fixed-term contract expiring on 31 December 2021. Following disciplinary proceedings in August 2021, he received a warning. Just two days later, he was transferred to a newly created Special Project Unit (“SPU”), with his salary and allowances preserved but his role and reporting structure significantly altered.
The plaintiff refused to comply with the transfer order and to report to the SPU, taking the position that the transfer amounted to a demotion and electing to treat himself as constructively dismissed. He initially attempted to lodge a representation of unfair dismissal with the Industrial Relations Department. However, he was informed that the Industrial Court had no jurisdiction over his claim due to section 52 of the Industrial Relations Act 1967, as BSN is a statutory body.
As a result, the plaintiff commenced a civil action in the High Court seeking, among other reliefs, a declaration of constructive dismissal, backwages until retirement age, as well as reputational and general damages. The claim was premised on the allegation that the defendant’s conduct amounted to a repudiatory breach of the plaintiff’s employment contract. The defendant, in turn, treated the plaintiff’s refusal to report for duty pursuant to the transfer as a repudiation of the contract and counterclaimed for three months’ salary in lieu of notice.
Overview of Issues
The High Court was required to determine (i) whether the plaintiff’s employment was genuinely on a fixed-term basis; (ii) whether the transfer to the SPU was contractually valid or it amounted to a breach of the employment contract; (iii) the remedies, if any, to which the plaintiff was entitled; and (iv) whether the defendant’s counterclaim for salary in lieu of notice could be sustained.
Underlying these issues is the central question addressed in this discussion: the extent to which an employer may rely on a transfer clause to reassign an employee without breaching the contract, particularly where the reassignment significantly alters the employee’s role, status and duties.
High Court’s Decision
The Court first held that the plaintiff’s employment was governed by genuine fixed-term contracts. Despite multiple renewals over the years, each contract contained clear terms as to duration and did not provide for automatic renewal. The plaintiff was found to have knowingly accepted these terms, and there was no basis to characterise the employment as permanent.
The central issue, however, was the validity of the transfer. For ease of reference, the transfer clause is reproduced as follows:
“10.0 Pertukaran
10.1 Pelantikan ke jawatan ini adalah tertakluk kepada kesediaan dan kesanggupan Tuan untuk ditukar dan bertugas di mana-mana Jabatan / Bahagian / Cawangan BSN atau Anak Syarikat / Syarikat Sekutu di dalam Kumpulan BSN.
10.2 Pelantikan Tuan juga adalah tertakluk kepada kesediaan diarahkan untuk menjalankan tugas gred jawatan yang lebih rendah dari gred jawatan hakiki Tuan selagi ia tidak menjejaskan skala gaji yang sedang dinikmati.”
The defendant contended that Clause 10.1 authorised the transfer of the plaintiff to any “Jabatan”, “Bahagian”, or “Cawangan” within the BSN Group, whilst Clause 10.2 further empowered the defendant to require the plaintiff to perform duties of a lower grade, provided that his salary scale remained unaffected.
The plaintiffs’ primary objection was that the transfer to the SPU amounted to a demotion. The plaintiff contended that the SPU was neither reflected in the defendant’s organisational chart nor contemplated under Clause 10.1, which expressly referred only to a “Jabatan”, “Bahagian”, or “Cawangan”, but not a “Unit”. Further, the plaintiff asserted that no clear job scope was prescribed for the position and that the transfer would undermine his supervisory functions and responsibilities, and that a “Unit” ranked at a lower organisational level than a “Department”.
On the facts, the Court found that the transfer to the SPU went beyond what the contract permitted. The SPU was not an established department, branch or division at the time the transfer was directed. The contract made no reference to such a unit. Instead, it was a newly created “Unit” with no clearly defined job scope.
The Court held that whilst Clause 10.2 permitted the plaintiff to de directed to perform duties of a lower grade provided that his salary remained unaffected, the provision must be construed as regulating the parties’ employment relationship, and not as an unrestricted licence for the defendant to side-line a senior officer into a unit of undefined purpose.
Although the plaintiff’s remuneration remained unchanged, the transfer effectively removed him from his substantive position as a Head of Department and placed him in a newly created unit with no defined functions, no clear job scope, and no staff under his supervision. The SPU was not part of the bank’s established organisational structure and was later disbanded within a short period.
In substance, the Court held that the transfer amounted to a demotion and a fundamental alteration of the plaintiff’s duties and status. As such, it constituted a repudiatory breach of contract, entitling the plaintiff to treat the contract as terminated.
However, the Court made clear that the remedies available were limited to those recognised at common law. The plaintiff was not entitled to damages for loss of reputation or future earnings. Instead, the Court awarded damages equivalent to four months’ salary, representing the unexpired balance of the plaintiff’s employment contract.
In light of the finding that the defendant was in breach, the defendant’s counterclaim for salary in lieu of notice was dismissed.
Implications of this Decision
This decision highlights the limits of managerial prerogative in employment relationships, particularly in the context of transfer clauses. Even where a contract expressly permits an employee to be reassigned to perform duties of a lower grade without any reduction in salary, the employer must ensure that the transfer does not fundamentally undermine the employee’s role or status. A mere preservation of salary will not be sufficient if the substance of the position is materially altered.
The case is also a reminder that statutory bodies may fall outside the Industrial Court’s jurisdiction, with disputes instead determined under strict contractual principles. While this limits exposure to broader remedies such as reinstatement or compensation for unfair dismissal, it also means that the employer’s actions will be closely scrutinised against the precise terms of the contract.
Additionally, the absence of a clearly defined role, organisational structure, or documented rationale for the transfer was a significant factor in the Court’s reasoning. Employers should therefore ensure that any restructuring or reassignment is properly documented and justifiable within the contractual framework.
Key Takeaways
This decision reinforces that transfer clauses must be exercised in good faith and within their intended scope. Employers cannot rely on such clauses to effect what is, in substance, a demotion or sidelining of an employee.
Even if broadly worded, a transfer clause cannot justify stripping an employee of their substantive role or materially reducing their responsibilities and status. Courts will assess the substance of the reassignment.
Outside the Industrial Court regime, claims are assessed strictly under contract law, with remedies correspondingly limited.
Ultimately, the case underscores the importance of substance over form. The Courts look beyond broad wording to the real effect of an employer’s actions on an employee’s role and status.
For further information, please contact:
Janice Wong Heu Fun, Partner, ZUL RAFIQUE & partners
janice.wong@zulrafique.com.my
