KWP ENGINEERING & INDUSTRIAL SUPPLY SDN BHD v LIN SOUT SON

Case Significance

Confirms that an employer's failure to pay an employee's full salary and contractual allowances can be a fundamental breach founding constructive dismissal on the contract test, supporting an award of termination benefits and arrears by the Director-General of Manpower.

This High Court decision at Shah Alam concerns an employer's appeal against a decision of the Director-General of Manpower allowing an employee's claim for termination benefits, arrears of petrol allowance and commission totalling RM39,731.60. The respondent had worked for the appellant as a sales manager since 2007 on a basic salary, together with a petrol allowance and sales commission. She was informed that her last working day would fall in February 2024, and had earlier been told that she would no longer be paid the petrol allowance and commission, though she continued working. She was given no notice of termination, and when she sought to confirm her status she was told to report for work, which she declined to do because the employer owed her salary arrears for January and February 2024. The appellant's director gave evidence that she had not been terminated but had been asked to look for another job as the company was facing financial difficulties. The Court approached the case on the footing that the respondent was an employee within the meaning of the governing employment legislation and considered the law on constructive dismissal, under which an employee may treat the contract as terminated only where the employer is guilty of a breach going to the root of the contract or has evinced an intention no longer to be bound by it — the contract test rather than a test of reasonableness, requiring four conditions to be satisfied. Finding that the failure to pay the full salary and allowances amounted to a fundamental breach of the employment contract, the Court held that the Director-General's decision was correct and dismissed the appeal with costs. The decision confirms that non-payment of wages and contractual allowances is not a neutral act: where it strikes at the root of the employment bargain it entitles the employee to treat herself as constructively dismissed and to recover the benefits that flow from that, and an employer's financial difficulties do not license it to withhold what is contractually due.