26 May 2021
INTRODUCTION
With the recent economic downturn due to the COVID-19 pandemic, there is considerable turbulence in many sectors of the economy. The economic conditions have a knock-on effect on employment and employee retention. Indeed, at least anecdotally, there appears to be an uptick in the number of employer-employee disputes. With such turbulence, it is anticipated that there may be an increase in wrongful dismissal claims brought by employees against employers.
How then should an employee determine whether there is merit in bringing a claim for wrongful dismissal?
This article provides a brief overview of the law in Singapore on wrongful dismissal and establishes key takeaway points, which employers and employees will find useful.
DISMISSAL AND TERMINATION- A BRIEF OVERVIEW
In Singapore, employers can terminate the employment of employees, provided the manner of termination complies with the provisions of the employment agreement and where applicable, the Employment Act. The main ways in which employment may be terminated are:
Performance/Effluxion of Time: Where there is a contract of service for specific work or for specific periods of time, termination occurs when the work specified is completed or the period of time for which the contract was made has expired;[1]
Termination by parties with notice: either party to a contract of service can terminate by providing written notice. The length required for the written notice is typically stated in the employment contract. In the absence of such provision, the length required for written notice is provided in Section 10 of the Employment Act.
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The minimum period of notice stipulated by the Employment Act depends on the duration which the employee has been in employment with the employer for.
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The notice MUST be in writing and can be given at any time, with the day on which notice is given included in the period of notice.
Termination by parties without notice: either party to a contract of service can terminate without notice, provided that this right is exercised:
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By either party paying to the other a sum equal to the amount of salary under the notice period (salary in lieu);
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Where there has been wilful breach of a condition (essential term) of the contract by the other party; or
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Where there has been misconduct by an employee, which entitles the employer , after due inquiry, to dismiss an employee on grounds of misconduct inconsistent with the express or implied conditions of his service.
Most situations of dismissal will require notice to be given. The only legitimate reason for dismissal without notice is on grounds of misconduct.
Termination of employment comes under the definition of ‘dismissal’, which is defined as the termination of employment by the employer, with or without notice and for cause or otherwise. The 2019 amendments to the Employment Act also make clear that dismissal includes constructive dismissal, which is the situation where an employee was the one that resigned but his/her resignation was not voluntary but was forced because of the conduct or omissions of the employer.
IS IT WRONGFUL DISMISSAL?
Singapore’s laws accord broad protection to employees against wrongful dismissal. Under the Employment Claims Act, the definition of wrongful dismissal includes situations where an employee has been dismissed without just cause or excuse by an employer. This includes situations where notice was given.
The Tripartite Guidelines on Wrongful Dismissal (“Guidelines”), released by MOM, NTUC and the Singapore National Employers Federation on 1 April 2019 under Section 34A of the Employment Claims Act, provides guidance on what constitutes wrongful dismissal and is useful for all stakeholders to note. The Employment Claims Tribunal (and on appeal, the High Court of Singapore) is required to follow these guidelines when deciding a claim involving wrongful dismissal.
The following are examples of what may constitute wrongful dismissal, per the Guidelines:
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Dismissal on discriminatory grounds;
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Dismissal to deprive employee of benefits and/or entitlements;
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Dismissal to punish employee for exercising employment rights;
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Dismissal based on grounds which the employer cannot substantiate;
On the other hand, dismissal can be valid in circumstances including misconduct, poor performance and redundancy, provided certain pre-conditions are followed.
Misconduct
Pursuant to the Employment Act, it is valid for an employer to dismiss an employee without notice only on grounds of misconduct. However, there remains a statutory obligation to dismiss without notice only after conducting a ‘due inquiry’.
Element 1: When does conduct amount to ‘misconduct’?
Should an employee be summarily dismissed without notice, the first issue in contention would be whether the conduct alleged actually amounts to misconduct. What constitutes misconduct under legislation is not limited and is broadly defined in the Guidelines to include theft, dishonesty, disorderly conduct at work, insubordination and bringing an organisation into disrepute. The employer bears the burden of proving that there was indeed misconduct justifying dismissal.
However, employers should also take caution where they are bound by employment contracts which contain clauses setting out specific grounds for summary dismissal, including situations of “gross misconduct” or “serious misconduct”. Such clauses can be problematic especially when the same employment contract fails to specifically define what “gross or serious misconduct” entails. The interpretation of “serious misconduct” is unnecessarily wide and is susceptible to dispute. For example, if the employee was terminated pursuant to the terms of the contract, the employee can contend that the acts complained of did not reach the threshold of seriousness that warrant immediate termination without notice. This can leave an employer open to the allegation of wrongful termination and liability for damages.
Notwithstanding poor drafting, employers are bound by the terms of the employment contract they have signed and should take heed of Singapore caselaw on the issue of whether an employee’s conduct in fact constitutes conduct sufficiently egregious to justify summary dismissal. Employers cannot unilaterally deem an act or omission to be ‘gross or serious misconduct’ and summarily dismiss the employee under the employment contract without sufficient justification.
In this regard, the landmark case of Phosagro Asia Pte Ltd v Piattchanine, Iouri [2016] SGCA 61, (“Phosagro”) is instructive. This case concerned issues relating to the termination of employment on grounds of serious misconduct and/or wilful breach of terms of the employment contract. That case held that in determining whether the misconduct complained of is sufficiently serious to terminate employment (where the contract does not provide guidance on the definition of misconduct), courts look to the common law principles relating to repudiation. The Court of Appeal in that case was guided by the key case of RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd and another appeal [2007] 4 SLR(R) 413, listing the four situations where a breach of contract amounts to repudiation:
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Where the contract clearly states that an innocent party is entitled to terminate in the event of certain events occurring;
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Where a party renounces the contract, conveying an intention not to perform his/her obligations;
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Where the term breached was, by the intention of parties, of a nature so important that any breach entitles the innocent party to terminate, regardless of the consequences of breach (i.e. a condition/warranty of the contract);
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Where the breach deprives the innocent party of substantially the whole benefit of the contract.
Whether an employee’s actions amount to “serious or gross misconduct” depends on the individual circumstances of each case. . Nonetheless, given the decision of Phosagro, it appears that the Court may be more willing to find gross misconduct in situations involving dishonesty or the commission of criminal offences in the course of employment or otherwise connected with the employment.
Element 2: The ‘due inquiry’ requirement
While the Act states that companies may dismiss an employee on grounds of misconduct without notice only after conducting a due inquiry, the Act does not set out what the requirements of ‘due inquiry’ are. Instead, the MOM’s website provides general guidelines (“Due Inquiry Guidelines”) that this entails (1) informing the employee of his/her alleged misconduct, (2) giving the employee the opportunity to present his/her case, and (3) persons hearing the inquiry cannot be in a position that may suggest bias.
Although the Due Inquiry Guidelines do not have the force of law, we suggest that case law is developing in tandem with Due Inquiry Guidelines. The case of Long Kim Wing v LTX-Credence Singapore Pte Ltd [2017] SGHC 151 (“Long Kim Wing”) sets out the principles of what constitutes a proper ‘due inquiry’ and demonstrates that the jurisprudence of the courts on what constitutes ‘due inquiry’ is increasingly being developed closer in line with the Due Inquiry Guidelines and away from the previous position established in Velayutham M v Port of Singapore Authority [1974-1976] SLR(R) 307 (“Velayutham”). While Long Kim Wing concerned a non-covered employee and focused on the clause in the employee’s General Service Terms providing for dismissal without notice of an employee on grounds of misconduct after due inquiry, the decision of Long Kim Wing was predominantly based on Section 14 of the Employment Act.
In contrast, the previous position in Velayutham, on what constitutes ‘due inquiry’ did not require an employee faced with misconduct charges to be physically present at a disciplinary meeting convened on the question of whether to dismiss the employee for misconduct, especially if full investigations into the alleged misconduct had already been conducted and the results of the investigation and relevant documents had already been placed for consideration before the disciplinary meeting. There was no claim for unfair dismissal notwithstanding the employee was not asked to appear before the disciplinary meeting and was not afforded the opportunity to present his own defence.
Despite acknowledging the precedent of Velayutham, the High Court held in Long Kim Wing that ‘due inquiry’ required something more than just the mere making of inquiries and conducting an investigation. An employee must be informed clearly of the allegations and evidence against him to provide him with an opportunity to defend himself by presenting his position, with or without evidence. This accords with notions of natural justice and procedural fairness, which are critical in light of the serious consequences for the employee following summary dismissal.
In light of Long Kim Wing, employers should bear in mind that companies should closely audit whether their HR processes design and set out a ‘due inquiry’ process consistent with Long Kim Wing and the Due Inquiry Guidelines. Companies should ensure that:
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The Company is very clear on what the allegation being investigated is and the role of the employee in the misconduct;
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The employee must be clearly informed of the allegation and the related evidence;
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The employee should be given a right to be heard/the opportunity to defend himself;
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The inquiry procedure should be as formal as possible. This can entail taking contemporaneous notes/transcripts of interviews and/or proceedings;
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The eventual termination letter should be detailed and state with sufficient specificity facts of the misconduct and how the due inquiry process found the employee to have engaged in misconduct on the balance of probabilities. This will ensure that if an employee brings a claim against the employer for wrongful dismissal, the employer is able to discharge the burden of proving that there was misconduct sufficient to warrant summary dismissal.
Finally, employers should also note that for the purposes of holding a due inquiry, an employer is permitted to suspend an employee from work for a period not exceeding one week. The suspension cannot continue beyond a week unless MOM approves so. During this suspension period, the employee is to be paid at least half his/her salary, and if the inquiry fails to disclose misconduct, the employee must be returned the full amount of salary withheld.
Poor performance and Redundancy
While the dismissal with notice or salary in lieu of notice on grounds of poor performance and redundancy are legitimate reasons for dismissal, the employer needs to substantiate if poor performance was cited as an express reason for dismissal without notice. In this regard, it may be a good idea for employers to document instances of poor work performance.
Additionally, it may be a good idea for employers to institute a performance improvement plan policy (PIP). Having a PIP in fact benefits both employer and employee by ensuring that there is clarity and transparency as to mutual expectations of employee responsibilities and a clear statement of the potential consequences of persistent underperformance, including dismissal.
Redundancy is a further basis for termination with notice or termination with salary in lieu of notice provided. Redundancy is defined by the Guidelines as the situation where a company has excess manpower, the company is undergoing restructuring, the job no longer exists, or the employee’s job scope has changed. However, retrenchments should be conducted with reference to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment.
WRONGFUL DISMISSAL EVEN WHERE THERE IS NOTICE
Employers retain the prerogative to terminate an employee’s employment with notice or salary in lieu of notice purely through an exercise of contractual rights. An employer dismissing an employee with notice without giving reasons (and failing to do so even when asked) would not be considered wrongful if the employee does not have any facts, incidents or situations suggesting that the intention of the employer was to terminate on grounds other than termination in accordance with the contract. There thus arises a presumption that the dismissal is not wrongful where notice is given.
However, dismissals with notice may be wrongful where an employee can substantiate a wrongful reason for the dismissal, such as discrimination (on grounds of age, race, gender, religion, marital status, family responsibility or disability), deprivation of benefit (e.g. an imminent bonus that is declared and which the employee is entitled to), or punishment of an employee for exercising employment rights (e.g taking parental leave). In addition, where the employer provided reasons for the dismissal with notice but the reason later emerges to be false and unsubstantiated, the dismissal is wrongful.
RECOURSE FOR WRONGFUL DISMISSAL FOR EMPLOYEES
Employees who feel that were wrongfully dismissed can submit their disputes to mediation before the TADM, where no legal representation is permitted. However, where the matter is not successfully settled at TADM mediation, the matter can then be escalated to be heard before the Employment Claims Tribunal (ECT). The TADM and ECT both have a jurisdictional claim limit of S$20,000.00 per claim (or S$30,000 if the employee is assisted by a union).
If successful, the employee is entitled to seek a claim for reinstatement in his former employment or compensation. If reinstatement is the remedy of choice, the employer must reinstate the employee in his/her former employment and pay the employee an amount equivalent to wages that the employee would have earned had he/she not been dismissed.
If compensation is the chosen remedy, then the amount of compensation to be awarded consists of:
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the loss of income of the employee, subject to a maximum of 3 months of the employee’s gross rate of pay and;
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the harm caused to the employee by the employer.
The amount of compensation under (b) is to be calculated using a base amount not exceeding two months of the employee’s gross rate of pay, which will increase or decrease by up to 50% of the base amount, depending on whether aggravating (e.g. conduct of dismissal in humiliating manner, false accusations) or mitigating factors (e.g. misconduct, poor performance or insubordination of the employee).
Possible Broader Financial Risk under new Employment Act
The Court of Appeal held in Wee Kim San Lawrence Bernard v Robinson & Co (Singapore) Pte Ltd [2014] 4 SLR 357 that the normal measure of damages in a case of wrongful dismissal is the salary payable for the notice period for lawful termination. However, if an employee was already terminated with notice, he/she would already be paid the notice period salary he/she was entitled to. Under the common law, there is no further entitlement to further payment.
It is unclear whether the amendments to the statutory regime affords employees an opportunity to claim additional damages such as loss of income and back-payment of wages following reinstatement. Employers should be wary of the likelihood of additional financial risks connected with wrongful dismissal above and beyond what is provided for under the common law as a result of the statutory amendments to the Employment Act. It may be argued that because the statute merely adds on to the principles of common law and is not expressly stated to have abrogated the common law orthodoxy of limiting losses to the salary payable for the relevant notice period, there is an opportunity for the employee to claim further damages in addition to the normal measure of damages in common law.
CONCLUSION
The MOM Due Inquiry Guidelines provide a useful framework in helping understand whether an employee’s claim for wrongful dismissal has merit. However, notwithstanding the Guidelines, there remains ambiguities within the statutory regime regarding the amount of compensation that employees with a wrongful dismissal claim are allowed to recover, as it appears to conflict with the common law position on the measure of damages in a case of wrongful dismissal. Finally, employers are urged to ensure that in any case of alleged misconduct against an employee, the requirements of ‘due inquiry’ are strictly adhered to.
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[1] s 9 Employment Act.
