Is demoting an employee to a position he/she had never held before in a company wrong in law?

NG TECK FAY v. MAHKAMAH PERUSAHAAN MALAYSIA & ANOR [2021] 5 MLJ 574

• Ng (“the Employee”) commenced his employment on 11 April 2008 as an assistant general manager with the company at a monthly salary of RM14,000 and a travel allowance of RM1,000.

• The Employee was given annual salary increments and bonuses throughout his service with the company.

• After 6 years of being employed as an assistant general manager by the company, the Employee was suddenly demoted to senior manager, a post he had never before occupied in the company and had some benefits taken away because of his job reclassification.

• The Employee was told that the changes were due to restructuring in the company and that if he was not agreeable to the new terms he could resign.

• Four days after the demotion came into effect, the Employee informed the company that he considered himself as having been constructively dismissed and walked out of his employment.

• The Employee lodged a complaint about his dismissal with the Industrial Relations Department.

• The Employee’s case was brought before the Industrial Court, by way of Ministerial reference, for adjudication.

• The Industrial Court dismissed the Employee’s claim after holding that the regrading of his employment did not involve any changes to his salary and seniority and that the Employee had failed to prove on a balance of probabilities that the company had committed a fundamental breach of his employment contract that entitled him to consider himself as constructively dismissed.

• The High Court dismissed the Employee’s application to quash the Industrial Court’s decision.

• The Employee appealed to the Court of Appeal.

• The Employee contended that the High Court failed to consider that the company had not shown any justification for conducting the alleged restructuring exercise that brought his demotion and that he had never before been employed as a senior manager in the company, which makes his demotion to the post wrong in law and fundamentally altered his employment contract.

The Court of Appeal found that:

• The Industrial Court had failed to take into account the relevant consideration and acted contrary to the evidence.

• The Industrial Court and the High Court Judge failed to consider that an employee cannot be demoted to a post which he never held before.

• The Employee, in this case, succeeded in proving that his regrading and demotion was a breach of his contract of employment and that he had correctly treated such regrading and dismissal as constructive dismissal.

• The company had failed to show that the dismissal of the Employee was with a just cause or excuse.