Non-Payment of Remuneration as a Ground for Constructive Dismissal

In a claim of constructive dismissal, the employee ends the contract of employment and bears the burden of proving that he/she was constructively dismissed.[1]

In order to succeed, the employee “must establish that there has been some conduct on the part of the employer which breach an express or implied term of the contract of employment going to its very root.”[2]

The Federal Court in Ngeow Voon Yean v. Sungei Wang Plaza Sdn Bhd / Landmarks Holding Bhd [2006] MLJU 219 recognised that the payment of remuneration is the “basic consideration of [an] employer.”[3]

Thus, the non-payment of remuneration would undoubtedly amount to a breach of an express term of the contract of employment which goes to the very root of the same.

In Cekal Teguh Sdn Bhd v Mahkamah Perusahaan Malaysia & Ors [2019] MLJU 1402, Nordin bin Hassan J (now JCA) held:

“This non payment of salaries is a fundamental breach of the contract of employment which entitled the 2nd to 7th respondents to claim for constructive dismissal and was rightly decided by the 1st respondent that 2nd to 7th respondents were constructively dismissed without just cause and excuse by the applicant.”[4]

Mohamad Ariff JC (later JCA) echoed similar sentiments in Parimaladevi a/p P Ponnusamy v Mahkamah Perusahaan Malaysia & Anor [2009] MLJU 1692:

“Most of all, there was a non-payment of salary when it was due, and the law is clear that failure to pay salary is a fundamental breach of contract entitling the employee to consider himself or herself to be constructively dismissed. See Equitylink Consultants (M) Sdn Berhad v Doctor Jayaprakash Mohan Rao [1992] 1 ILR 492”[5]

The courts have, in the past, allowed constructive dismissal claims based on non-payment of remuneration.

Both Kejuruteraan Samudera Timur Sdn Bhd v Seli A/K Mandoh & Anor [2004] 5 MLJ 179 and North Malaysia Distributors Sdn Bhd v Ang Cheng Poh [2001] 3 ILR 387 concern cases of non-payment of remuneration as a result of unilateral deduction by the employer.[6] The Industrial Court in both cases, allowed the employee’s claim of constructive dismissal.

In Dr. Rayanold Pereira v. Menteri Sumber Manusia & Anor [1997] 3 CLJ Supp 116, the Minister of Human Resources refused to refer to the Industrial Court a claim of constructive dismissal due to non-payment of remuneration.[7]

Nik Hashim JC (later FCJ) allowed the judicial review application[8] and held that, “The allegation of breach of contract of employment through the salary cut and non-payment of March 1993 salary are not without basis. There is no provision for loan in the contract enabling the salary cut.”[9]

An employee claiming constructive dismissal due to the non-payment of remuneration has to terminate the contract of employment within a reasonable time after the non-payment.[10] Failing which, this could amount to a waiver of the employer’s actions and would defeat a claim of constructive dismissal.[11]