When an employee signs a mutual separation agreement (“MSA”), the understanding is that the employee has agreed to resign or “mutually separate” from the company, in exchange for the benefits under the MSA. Such benefits typically include ex-gratia payments or payments in recognition of the employee’s length of service.

Sometimes, an employee may resign without a MSA. This could be for other reasons such as to avoid disciplinary proceedings or to avoid being put on a performance improvement plan.

Yet, some of these cases still end up at the Industrial Court. The usual complaint will be that the employee was forced to sign the MSA, or otherwise pressured or coerced into resigning.

We look at two recent decisions of the Industrial Court dealing with this issue.

Tan Shun Sheng v V Capital Sdn Bhd (Award No. 374 of 2022, 3 March 2022)

The Claimant resigned after being informed of his poor performance. The Company offered the Claimant a “Separation and Release Agreement”, to which the Claimant made some counter-proposals. Before this agreement could be finalised, the Company uncovered gross misconduct committed by the Claimant and therefore dismissed him.

The Claimant lodged a complaint of unfair dismissal, alleging that as he already resigned, he was no longer an employee of the Company and therefore did not need to respond to the allegations of gross misconduct. He claimed however, that his resignation was forced.

The Court held that the Claimant willingly participated in discussions about his resignation, going so far as to even counter-propose his own terms. He therefore had no qualms in discussing and preparing his exit from the Company. There was also no evidence or independent witness to prove that the Claimant was forced to resign. The Court held there was no dismissal, given the Claimant had voluntarily resigned.

Rukumany Devi a/p S. Raghavan v Ralph Lauren (Malaysia) Sdn Bhd (Award No. 395 of 2022, 9 March 2022)

The Claimant and the Company entered into a MSA and as a result the Claimant received the sum of more than RM108,000 from the Company.

However, the Claimant’s allegations as to how she ended up signing the MSA was this: She was suddenly called to attend a meeting where she was given two MSA documents with differing compensation figures,  and given an ultimatum to accept either option. She alleged that she was only given 1 hour to decide. She therefore alleged that the Company had decided to terminate her as the MSA documents were pre-prepared and she was given an ultimatum.

The Court held that the Claimant could not prove that she was forced to sign the MSA. During cross-examination, the Claimant admitted that she was given the right to seek legal advice on the MSA but instead consulted her husband.  She also admitted that the “1 hour ultimatum” was an assumption on her part simply because they were in the meeting room for 1 hour.

Further, there was no indication on the MSA or in any subsequent letter or e-mails from the Claimant she was protesting against the MSA. On the contrary, the exchanges in communication between the Claimant and the Company after that were rather cordial. The Claimant also received the compensation under the MSA.   There was no evidence before the Court, other than the Claimant’s own words, that she was put under compulsion to sign the MSA.

The Court concluded that the Claimant signed the MSA on her own free will and volition, and her claim for unfair dismissal was dismissed.

Key Takeaways

Both cases demonstrate that: (1) an employee claiming forced resignation must prove so; and (2) the conduct of the employee during and after the resignation are relevant in determining whether the resignation was forced.

In both cases, the Claimants were unsuccessful in proving forced resignation because their conduct was not consistent with that of someone forced to resign. Counter-proposing a separation suggests parties were on equivalent if not similar bargaining positions, and cordial communications after the resignation with no inkling of a protest, would suggest there was no coercion, threat or duress surrounding the resignation.

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This article was written by Donovan Cheah. Donovan has been named as a Recommended Lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018, 2019, 2020, 2021 and 2022, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.

Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory.  Have a question? Please contact us.

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