“Whether an employee can challenge a transfer order by an employer on grounds that the transfer order was not reasonable”
CASE:
BRIEF FACTS:
- Saharunzaman, Noramidah and Mohd Razif [the Employees] were employees of Perodua, who had served Perodua for between nine and 22 years.
- The Employees were employed at Perodua’s Rawang branch when they were informed that an associate company, NAM, had taken over operations.
- They were asked to resign from Perodua and accept a two-year fixed-term position with NAM on similar terms, subject to future review.
- The Employees declined the offer due to uncertainty over their continued employment.
- Shortly thereafter, Perodua transferred Saharunzaman to Kota Kinabalu, Noramidah to Kuching and Mohd Razif to Kuala Terengganu, requiring them to report within three days.
- Saharunzaman was a person with disability undergoing treatment and had a working wife and 5 children; Noramidah had a working husband and 3 school-going children and Mohd Razif had a child, a pregnant wife who was due to deliver in 2 months and an aged and sick mother he was looking after.
- Given the circumstances, the Employees pleaded for transfers nearer to their existing workplaces, but their appeals were rejected.
- Instead, show-cause notices were issued for failing to report to the new stations.
- It must be noted that their employment letters had the following transfer clause:
“you may be required to perform your services to the Company or any of its subsidiaries or associated entities in the current location of your employment with the Company or such other locations as reasonably directed by the Company. The Company reserves the right to transfer your employment to its subsidiaries or associated companies”
- The Employees then treated themselves as constructively dismissed and lodged representations under the Industrial Relations Act 1967.
- The matter was then referred to the Industrial Court.
THE DECISION OF THE INDUSTRIAL COURT (IC)
- The IC ruled in favour of the Employees holding that they had been constructively dismissed by Perodua.
- It found that the unilateral changes imposed on the Employees’ roles constituted a fundamental breach of contract, thereby entitling them to resign.
- The IC held that the changes materially altered the terms of employment without the Employees’ consent, leaving them with no reasonable option but to do so.
- Accordingly, the IC awarded compensation and back wages to the Employees.
- Perodua not being happy challenged the decision at the High Court.
THE DECISION OF THE HIGH COURT – APPEAL ALLOWED
- On appeal, the High Court set aside the decision, holding that the changes fell within the Employer’s managerial prerogative.
- The Court found no evidence that the revised roles were substantially inferior, and further held that the Employees’ failure to raise formal objections amounted to acceptance of the changes.
- Accordingly, the Court concluded that the Employees had resigned voluntarily and were not constructively dismissed.
- The Employees then appeal to the Court of Appeal.
THE DECISION OF THE COURT OF APPEAL – APPEAL ALLOWED
- The Court of Appeal restored the Industrial Court’s decision and ruled in favour of the Employees.
- The Court held that the Industrial Court had correctly applied the “contract test” and had correctly taken into account the requirement of “reasonableness” which was an agreed term in the contract of employment.
- While an employer may have managerial prerogative to transfer employees, such power remains subject to scrutiny where exercised unreasonably, mala fide or for an improper purpose.
- The Court found that the Employer’s transfer orders were not based on genuine operational needs, but were instead punitive measures imposed after the Employees refused to resign and join the associate company on less secure terms.
- The transfers to distant locations on short notice were unreasonable and intended to pressure the Employees into leaving without payment of termination benefits.
- The Employees were therefore entitled to regard themselves as constructively dismissed.
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