Malaysia – Employment And Industrial Relations Update: Thavakumar a/l Kandiahpillai v SapuraOmv Upstream (Sarawak) Inc & Anor W-01(A)-49-02/2025.
Overview
A former employee (“the Employee”) brought a constructive dismissal claim against SapuraOMV Upstream (Sarawak) Inc. (“the Company”). The Employee contended that his redesignation from Head of Legal and Contracts to Legal and Contracts Manager, together with the requirement that he report to a newly appointed Head, Legal & Compliance rather than directly to the CEO, amounted to a demotion and a fundamental breach of his employment contract.
The Industrial Court dismissed the Employee’s claim for constructive dismissal. The High Court subsequently dismissed the Employee’s application for judicial review and affirmed the decision of the Industrial Court. The Employee appealed to the Court of Appeal against the decision of the High Court.
The Court of Appeal’s decision
The Court of Appeal unanimously held that the High Court and Industrial Court did not commit any errors of law and consequently dismissed the appeal with costs. The Court of Appeal’s decision rested on two main grounds: affirmation of the employment contract and the absence of any fundamental breach by the employer.
Firstly, the Court of Appeal held that the Employee had affirmed the contract. He had been informed of the redesignation by the Company’s letter of 29 April 2019 and had expressly objected to it in an email dated 15 May 2019. However, he remained in employment for more than a year. Even if the restructuring had amounted to a fundamental breach, his continued employment was inconsistent with treating the contract as having been ended by that breach.
Secondly, the Court held that the restructuring did not amount to a fundamental breach. The responsibilities of the new Head, Legal & Compliance were broader than the functions performed by the Employee and included company secretarial, ethics and compliance matters. The Industrial Court also found that the Employee did not perform compliance functions. There was therefore no material reduction in his duties and no basis for concluding that he had been demoted.
Key takeaways
- Employees who rely on an alleged fundamental breach must act promptly. Continuing to work for a substantial period after becoming aware of the alleged breach may amount to affirmation of the employment contract.
- A change in title or reporting line does not, by itself, establish a demotion or constructive dismissal. The Court will examine the substance of the employee’s role, responsibilities and status.
The Employee has since filed an application for leave to appeal to the Federal Court.
Practical implications for employers
The decision underscores the importance of documenting restructuring decisions, defining revised roles and reporting lines clearly, and maintaining contemporaneous records of communications with affected employees. Employers should also assess whether a restructuring changes the substance of an employee’s duties, remuneration or status, rather than focusing only on job titles.
The Company in this case was represented by Mr Vijayan Venugopal and Mr Wong Kian Jun from our Employment and Industrial Relations practice group.
