When can an employer summarily dismiss an employee for misconduct? Can an employee sue under common law for an employer’s wrongful dismissal? Can an employee sue for a wrongful manner of dismissal? How does wrongful dismissal relate to the implied term of trust and confidence or an implied duty of good faith (if any)? This article explores these contentious issues of employment law.
This article is written by Ronald JJ Wong from Covenant Chambers LLC and originally published in the Law Gazette. The “Article in 60 Seconds” is contributed by Shanice Phee. You can read the full article below after the scannable points.
The Article in 60 Seconds
- If your employer did not give you notice or paid you salary in lieu before terminating your contract, you can sue your employer for damages (unless there are grounds for summary dismissal)
- An employer can summarily dismiss an employee on the grounds of misconduct at work which may include committing reckless acts that can affect the employer’s reputation negatively or breaching specific terms in the contract
- If the relevant Employment Act provisions apply to you, you may complain to the Ministry of Manpower who may order your employer reinstate your position in the company
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Employment Contracts – Termination and Dismissal
Introduction
When can an employer summarily dismiss an employee for misconduct? Can an employee sue under common law for an employer’s wrongful dismissal? Can an employee sue for a wrongful manner of dismissal? How does wrongful dismissal relate to the implied term of trust and confidence or an implied duty of good faith (if any)?
In practice, such issues become pertinent when the cause for the dismissal does not fall within any of the stipulated grounds of termination in the employment contract. From an employer’s perspective, the right to dismiss summarily may become significant where the termination of the employment contract in circumstances other than a repudiatory breach requires the employer to make severance or redundancy payments.1 Summary dismissal may allow the employer to avoid such payments, subject to the express terms of the employment contract. From the employee’s perspective, wrongful dismissal can found a claim for breach of the employment contract and thus damages. This article discusses the above issues with reference to legal authorities from Singapore as well as other common law jurisdictions.
General Principles on Termination of Employment Contract
The starting point is that an employer-employee relationship is generally founded on contract and in such an event, would be subject to the general principles of contract law (or additionally the Employment Act (Cap 91) (“EA”), where it is applicable).
Thus, where an employer or employee intends to terminate the employment contract, either party has to terminate the contract in accordance with the stipulated terms of the contract.2 Most employment contracts would, therefore, stipulate a notice period for termination or payment of salary for such period in lieu.3 Where no such notice period is contractually stipulated for, the common law would imply a reasonable notice requirement for such termination or payment of salary in lieu.4 Where the EA governs the employment contract, the notice period provided for in s 10(3) of the EA would apply. Notice need not be given in writing (perhaps unless the employment contract stipulates)5 but has to be given by the right party.6
In this sense, an employer or employee can terminate an employment contract without any good reason by simply giving the requisite notice of intention to terminate.7 (However, this may be subject to several qualifications elaborated upon below.)
A wrongful dismissal claim at common law is, therefore, based on the foregoing principles. The House of Lords in Johnson v Unisys Ltd [2003] 1 AC 518 (“Johnson v Unisys”) stated clearly that an action for wrongful dismissal is based on an implied obligation in the employment contract to give reasonable notice of an intention to terminate the employment relationship, or pay the employee a certain sum that is a function of his or her salary in lieu of the same, in the absence of just cause for dismissal; however, the wrongful dismissal action is not concerned with the wrongness or rightness of the dismissal itself.8 The consequence is that an employer is legally entitled to dismiss an employee without having any just cause,9 and is not bound to give the employee a fair hearing before such dismissal, insofar as he has given notice of termination or payment of salary in lieu of the same.10 Where the employer had failed to give such notice of termination or payment in lieu, the employee is entitled to claim against the employer for damages for breach of contract; such damages would amount to the employee’s salary in lieu of such requisite notice.11 The notice period may be expressly stipulated in the employment contract, and in the absence of such express stipulation, would be a reasonable period.
Wrongful Dismissal, Implied Term of Trust and Confidence and Good Faith
A distinction should also be drawn between the issue of whether there was wrongful dismissal (ie notice or payment in lieu was furnished) and whether the manner of dismissal was fairly made.12 Their Lordships in Johnson v Unisys held that there was no right at common law to an employee being dismissed in a fair manner. In Johnson v Unisys, the plaintiff was an employee who alleged that he had suffered a mental breakdown as a result of the employer dismissing him on the very day he was called into a meeting where certain allegations were made against him. The House of Lords held that the there is no cause of action in common law for the unfair manner of dismissal, and that the claim was properly struck out.
Their Lordships considered that the implied term of trust and confidence in employment contracts should not be extended to further require the employer to treat the employee fairly in the manner of dismissal as there would be potential problems of causation and disproportionate liability on the part of employers.13 However, in that case, their Lordships decided this issue on the basis that it would not be the proper exercise of the judicial function to extend the scope of this implied term where this is clearly within the ambit of legislature’s function; the evidence of this being the UK Employment Rights Act 1996 which was legislated specifically to deal with such matters. Consequently, it was not open to the judiciary to create a parallel remedy at common law which is not subject to the same limits that the legislation contains.14
The decision in Johnson v Unisys was circumscribed or clarified by a subsequent House of Lords decision, Eastwood v Magnox Electric and McCabe v Cornwall County Council [2005] 1 A.C. 503 (HL) (“Eastwood”). Their Lordships in Eastwood drew a distinction between an employer’s acts pre-dismissal, which would fall within the scope of the implied term of trust and confidence, and an employer’s acts at the point of dismissal and post-dismissal, which would not fall within the scope of the implied term and thus could not be grounds for an employee’s claim for unfair dismissal (for the reasons stated in Johnson v Unisys). Thus, the House of Lords in Eastwood held that an employee who suffers financial loss from psychiatric or other illness caused by his pre-dismissal unfair treatment (eg unjustified suspension of employment) may have a common law cause of action which precedes and is independent of his subsequent dismissal.15 Lord Steyn in both Johnson v Unisys and Eastwood expressed his view that the precedent of Addis v Gramophone Company Limited [1909] 1 AC 488 (HL) did not preclude the possibility of a claim for special damages flowing from the manner of a wrongful dismissal16 and that Parliament could not have intended to circumscribe the possibility of common law claims for unfair dismissal.17 As he pointed out, the majority of the House in Johnson v Unisys premised their decision on the assumption that the co-existence of a statutory scheme and the development of a common law remedy would not be workable, but this assumption was not established; if the concern was that of possible double recovery, it should not pose a significant obstacle.18 Notwithstanding this, Lord Steyn noted the “formidable evidential difficulties” in respect of proving causation for such a claim.19
The above area of law is not yet settled under Singapore law. This was considered in Chan Miu Yin v Philip Morris Singapore Pte Ltd [2011] SGHC 161 (“Chan Miu Yin”) at [34]-[45]. The Court there decided, in the context of a striking out application, that it was not “plain and obvious” that Singapore law does not recognise a common law claim for damages based on unfair dismissal.
It, therefore, remains open to the Singapore Courts to adopt the approaches in Johnson v Unisys and/or Eastwood. While this remains a theoretical possibility, it is to be wondered how significant an in-road on this area of law would be since, as pointed out by Lord Steyn, a claimant would most likely face insurmountable difficulties in proving causation for such claims.
The gloss to the above principles on termination of employment contracts by giving notice or payment in lieu is that it is open to argument that under Singapore law, there may be implied in employment contracts a term that the employer will not exercise the contractual right to terminate the employment contract in bad faith.
This was considered in the decision of Chan Miu Yin at [46]-[59]. The Court there decided, in the context of a striking out application, that it was not “plain and obvious” that Singapore law does not recognise the existence of an implied term that the employer will not exercise the contractual right to terminate the employment contract in bad faith. The Court in Chan Miu Yin noted the Singapore Court of Appeal decision of Latham Scott v Credit Suisse First Boston [2000] 2 SLR(R) 30 (CA) (“Latham Scott”), where the Court considered, inter alia, the plaintiff’s argument that his employer had acted in bad faith in dismissing him, notwithstanding that the Court noted that the employment contract could have been terminated without any reasons insofar as the notice period was adhered to.20
There are significant problems with the possibility of such an implied duty of good faith. First, it is not clear on what authority the Court in Latham Scott was considering the issue. Second, the issue of exercising a right of termination in bad faith appear to be at odds with the right to terminate without giving any reason. Common law has been slow to extend a doctrine of good faith into contract law, and particularly, the exercise of contractual rights.21 The Court in Chan Miu Yin suggested that this could be overcome by resorting to the implied term of trust and confidence as was contemplated by Lord Hoffmann in Johnson v Unisys. This seems rather contrived because, as done in Eastwood, the purpose of the implied term is to preserve the continuing relationship which should subsist between employer and employee.22 The exercise of the right to terminate an employment contract is antithetical to that purpose. Why should the implied term of trust and confidence then bite on the termination of contract? Nevertheless, it remains open under Singapore law that such an implied duty exists, whether in the form of an implied duty of termination not in bad faith (or a general duty of good faith) or within the scope of the implied term of trust and confidence.
It should, however, be noted that the Singapore High Court in Noor Mohamed bin Mumtaz Shah v Apollo Enterprises Ltd (trading as Apollo Hotel Singapore) [2000] 1 SLR(R) 670 (HC) (“Noor Mohamed”) has held that in the specific scenario where an employment contract was terminated in circumstances where redundancy results and that employee would have been entitled to redundancy payments if he had been retrenched on the basis of redundancy, there would be a presumption that the termination was in fact on the basis of redundancy. The employer would then have the burden to rebut this presumption to show that it was not solely or mainly due to such redundancy that the employment contract was terminated. The rationale for this is that it would otherwise be easy for employers to eschew their legal obligations to repay redundancy benefits where the employee had been entitled.23 The Court relied on two English authorities, Malton v Crystal of Scarborough Ltd [1971] ITR 106 and Stride v Moore (Metal Spinners) Ltd [1967] ITR 11724 to conclude that the above-stated principles was the law in England, and that Singapore law should follow that. The difficulty with this reasoning and the reliance on these authorities is that they were decisions of industrial tribunals which based their decisions on the UK Redundancy Payments Act 1965. Specifically, s 9(2)(b) of the Act provides for the above presumption: “an employee who has been dismissed by his employer shall, unless the contrary is proved, be presumed to have been so dismissed by reason of redundancy”.25 In contrast, no such presumption is provided for in the EA. Section 45 of the EA only states as follows:
No employee who has been in continuous service with an employer for less than 3 years shall be entitled to any retrenchment benefit on his dismissal on the ground of redundancy or by reason of any reorganisation of the employer’s profession, business, trade or work.
The authority upon which the Court in Noor Mohamed came to its decision on the presumption of redundancy is, therefore, questionable. While the rationale for adopting such an approach is sensible, ie to prevent employers from circumventing the legislative purpose of the redundancy provision, the reasoning by which it came to adopt such an approach could have instead been based on a purposive reading of the EA. The reasoning process of the Court is significant for employment scenarios that are not governed by the EA. Taking the ratio and the phrasing of the decision in Noor Mohamed on its face, it is plausible to extrapolate the reasoning and reliance on the two English authorities above generally to all employment contracts, whether governed by the EA or otherwise. This is significant because it would be akin to an implied duty of termination not in bad faith (or duty of good faith) discussed above, or perhaps be deemed to be a consequence of such an implied duty, in which case, there would be Singapore authority for arguing that such an implied duty already exists. However, this would be developing employment law on a wrong footing. It appears then that it remains open whether Singapore employment law would develop this area. One would have to be mindful of the approaches taken in Johnson v Unisys and Eastwood discussed above, where their Lordships were cautious not to develop the common law in this regard where Parliament had already specifically legislated for it in respect of certain categories of employment contracts.
Summary Dismissal
Unlike termination by notice or payment of salary in lieu, summary dismissal entitles the employer to terminate the employment contract immediately without notice or payment in lieu.26 This is because summary dismissal is predicated on the employee’s repudiatory breach of the employment contract.
Generally, an employee may be summarily dismissed from employment on the basis of: (i) an express term in the employment contract providing that the employer may do so upon the occurrence of certain stipulated circumstances;27or (ii) upon the repudiatory breach of the employment contract, which is then accepted by the employer.28
Legal authorities suggest that misconduct, even though not expressly stipulated in the employment contract to be a ground for termination, could justify summary dismissal of an employee on the basis of a repudiatory breach of the employment contract (presumably, the breach of an implied condition of the employment contract). The EA also provides for summary dismissal on the basis of misconduct in respect of employment relationships that are governed by the EA, which will be discussed below.
Summary Dismissal for Misconduct under the Employment Act
If an employment relationship falls within the scope of the EA, the employee may be summarily dismissed on the basis of misconduct pursuant to s 14 of the EA. In this regard,
s 14 of the EA states:
Misconduct of employee
14.—(1) An employer may after due inquiry dismiss without notice an employee employed by him on the grounds of misconduct inconsistent with the fulfilment of the express or implied conditions of his service except that instead of dismissing an employee an employer may —
(a) instantly down-grade the employee; or
(b) instantly suspend him from work without payment of salary for a period not exceeding one week.
(2) Notwithstanding subsection (1), where an employee considers that he has been dismissed without just cause or excuse by his employer, he may, within one month of the dismissal, make representations in writing to the Minister to be reinstated in his former employment.
(3) The Minister may, before making a decision on any such representations, by writing under his hand request the Commissioner to inquire into the dismissal and report whether in his opinion the dismissal is without just cause or excuse.
(4) If, after considering the report made by the Commissioner under subsection (3), the Minister is satisfied that the employee has been dismissed without just cause or excuse, he may, notwithstanding any rule of law or agreement to the contrary —
(a) direct the employer to reinstate the employee in his former employment and to pay the employee an amount that is equivalent to the wages that the employee would have earned had he not been dismissed by the employer; or
(b) direct the employer to pay such amount of wages as compensation as may be determined by the Minister, and the employer shall comply with the direction of the Minister.
(5) The decision of the Minister on any representation made under this section shall be final and conclusive and shall not be challenged in any court.
(6) Any direction of the Minister under subsection (4) shall operate as a bar to any action for damages by the employee in any court in respect of the wrongful dismissal.
(7) An employer who fails to comply with the direction of the Minister under subsection (4) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $10,000 or to imprisonment for a term not exceeding 12 months or to both.
(7A) Where any amount to be paid by an employer under subsection (4) is not paid in accordance with the direction of the Minister and the employer has been convicted of an offence under subsection (7), the amount or so much thereof as remains unpaid shall be recoverable by the court as if it were a fine and the amount so recoverable shall be paid to the employee entitled to payment under the direction of the Minister.
(8) For the purpose of an inquiry under subsection (1), the employer may suspend the employee from work for a period not exceeding one week but shall pay him not less than half his salary for such period.
(9) If the inquiry does not disclose any misconduct on the part of the employee, the employer shall immediately restore to the employee the full amount of the salary so withheld.
It should be noted that pursuant to s 2 of the EA (definition of “employee”), s 14 of the EA only applies to:
a person who has entered into or works under a contract of service with an employer and includes a workman, and any officer or employee of the Government included in a category, class or description of such officers or employees declared by the President to be employees for the purposes of this Act or any provision thereof, but does not include —
(a) any seaman;
(b) any domestic worker;
(c) subject to subsection (2), any person employed in a managerial or an executive position; and
(d) any person belonging to any other class of persons whom the Minister may, from time to time by notification in the Gazette, declare not to be employees for the purposes of this Act …
“workman” means —
(a) any person, skilled or unskilled, who has entered into a contract of service with an employer in pursuance of which he is engaged in manual labour, including any artisan or apprentice, but excluding any seaman or domestic worker;
(b) any person, other than clerical staff, employed in the operation or maintenance of mechanically propelled vehicles used for the transport of passengers for hire or for commercial purposes;
(c) any person employed partly for manual labour and partly for the purpose of supervising in person any workman in and throughout the performance of his work:
Provided that when any person is employed by any one employer partly as a workman and partly in some other capacity or capacities, that person shall be deemed to be a workman unless it can be established that the time during which that workman has been required to work as a workman in any one salary period as defined in Part III has on no occasion amounted to or exceeded one-half of the total time during which that person has been required to work in such salary period;
(d) any person specified in the First Schedule;
(e) any person whom the Minister may, by notification in the Gazette, declare to be a workman for the purposes of this Act.
The phrase “managerial or an executive position” is not defined within the EA. The Ministry of Manpower website, however, discusses the meaning of “managers and executives” as such:29
Managers and executives are employees with executive or supervisory functions. These functions include the authority to influence or make decision on issues such as recruitment, discipline, termination of employment, assessment of performance and reward, or involvement in the formulation of strategies and policies of the enterprise, or the management and running of the business.
They also include professionals with tertiary education and specialised knowledge/skills and whose employment terms are comparable to those of managers and executives. Professionals such as lawyers, accountants, dentists and doctors whose nature and terms of employment are comparable to executives would generally be deemed as such, and hence they would not be covered under the Act.
Junior managers and executives earning $4,500 basic monthly salary and below are only covered partially on the basic payment of salary. All other provisions do not apply to them.
Under the EA, the employer must have conducted “due inquiry” into the alleged misconduct before the employer can summarily dismiss the employee. It is not clear whether such “due inquiry” under s 14(1) of the EA would involve the application of natural justice principles, eg audi alteram partem. Otherwise, it would be merely a unilateral investigation on the part of employer at its sole discretion. There is an old Singapore Court of Appeal decision which has held that natural justice principles do not apply to a dismissal for misconduct, and that decision was in the context of a dismissal under s 14 of the EA.30 However, the Court there31 relied on an old Privy Council decision which arose from Singapore that was decided in a context of an employment contract not governed by the EA or any legislation; the ratio of this decision would at best be that there is no right of natural justice when an employee is dismissed at common law (as opposed to under s 14 of the EA which clearly provides for “due inquiry”).32 The Singapore High Court also held that “due inquiry” under the EA did not require that the employer hears the employee’s defence.33 No authority was referred to in the Court’s decision on that point. In contrast, legal authorities from other jurisdictions suggest that legislatively stipulated “due inquiries” by an employer into alleged misconduct on the part of employees would be subject to natural justice principles.34 The present state of Singapore law on “due inquiry”, therefore, pales in comparison to that in our sister jurisdictions. The purpose of legislatively requiring “due inquiry” would be arguably defeated if the employer could conduct its inquiry in any way it deems fit.
The significance of s 14 of the EA is that a dissatisfied employee has the right to complain to the Minister of Manpower. On this, the Singapore Court of Appeal in Lim Tow Peng and another v Singapore Bus Services Ltd [1974-1976] SLR(R) 673 (CA) stated at [17] and [19]:
Section 14 of the Act gave a dissatisfied employee the right to complain to the Minister. It was a right to object to an unfair dismissal. The section did not give him any other right. It did not confer on an employee any status. It did, of course, indirectly restrict the employer’s right to dismiss in that the dismissal could be inquired into and overruled by the Minister if a complaint was made to him. It gave the Minister, not the courts, the power to order reinstatement of the employee; Section 14 of the Act was not mandatory. An employer was not obliged to comply with s 14 but if he disregarded s 14 and dismissed an employee without an inquiry, as was the case here, the dismissal could be inquired into and reinstatement with full pay ordered by the Minister which could not be challenged in any court. The effect of s 14 was that a dismissal without notice before due inquiry was wrongful and not that it was ineffective or null and void …
The real benefit conferred on an employee by s 14 is the right to complain to the Minister and the power conferred on the Minister to order reinstatement regarding an unfair dismissal. The appellants in this case, for some undisclosed reason, chose not to exercise this right.
With regard to the above judicial statement, it is difficult to appreciate how a dismissal can be wrongful but not ineffective. Perhaps all that such a proposition was meant to do was to nonetheless deem such an acrimonious employment relationship terminated and entitle the employee to certain monetary compensation. Further, it is to be queried if s 14(5) of the EA, ie “[t]he decision of the Minister on any representation made under this section shall be final and conclusive and shall not be challenged in any court”, is constitutionally valid.35 Such legislative provisions (in contexts other than involving national security, which raises the issue of non-justiciability) remains to be tested. However, s 14(5) of the EA does not preclude the Minister’s decision from judicial review by the courts. The Singapore High Court in Stansfield Business International Pte Ltd v Minister for Manpower (formerly known as Minister for Labour) [1999] 2 SLR(R) 866 (HC) held at [21] that “if the process by which the Minister reaches his decision is in breach of the rules of natural justice, s 14(5) would not be effective to oust the jurisdiction of the court”. The Court thus held at [26] that when the Minister investigates into a complaint made under s 14 of the EA, the following rules of natural justice must apply:
firstly, that a party is told of the case he has to meet and of the allegations made against him; secondly, that he is given not only a fair opportunity to put his own case, but also a fair opportunity to correct or contradict the case and the allegations of the other party; thirdly, if a significant point is to be taken against him by the tribunal, he should have a similar opportunity.
In that case, the Court held that the procedure adopted by the Ministry of Manpower in investigating into a summary dismissal fell short of these natural justice requirements in that the employer was not told of the employee’s allegations as it was not given the employee’s statement and there was no practice of putting one party’s allegations to the other; instead, the inquisition was conducted by way of separate interviews with various parties.
Another important observation of s 14(1) of the EA is that the summary dismissal has to be on “grounds of misconduct inconsistent with the fulfilment of the express or implied conditions of his service”. (emphasis added) It is to be questioned whether the emphasised words add a gloss to “misconduct”, ie it is insufficient that there was misconduct; the misconduct must have amounted to a repudiatory breach of condition (express or implied) of the employment contract. There are, therefore, two possible ways to legally analyse plausible grounds for dismissal under s 14: (i) determine if the misconduct in question was the breach of an express or implied condition of the employment contract; or (ii) determine based on legal principles and precedents on the meaning of misconduct and the types of misconduct which could justify summary dismissal. The former approach requires an application of the principles laid down in RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd and another appeal [2007] 4 SLR(R) 413 (CA) regarding the determination of whether a term was a condition or not such that the breach of such a condition amounted to a repudiatory breach. This was the approach taken by the Singapore High Court in Cousins Scott William v The Royal Bank of Scotland plc [2010] SGHC 73 at [46]-[68]. Where the contract expressly stipulates a particular ground for dismissal, the issue would then be whether the misconduct falls within the scope of such a stipulated ground such as to justify dismissal.36 The latter approach is where the issue of “misconduct” is understood in the light of certain legal principles, specifically on misconduct in employment relationships; this approach was adopted in the Singapore High Court in Cowie Edward Bruce v Berger International Pte Ltd [1999] 1 SLR(R) 739 (HC), albeit not in the context of the EA. The two approaches are two sides of the same coin, ie the bottom-line under both approaches is that the misconduct must be so significant such as to “strike at the root of the contract”.37 Yet, it is perhaps helpful to adopt the legal reasoning processes under both approaches together when considering summary dismissal on the basis of misconduct. After all, the determination of whether a term (express or implied) is a condition of the employment contract has to be done with specific reference to the fact that it is an employment contract and not any commercial contract. Legal authorities that discuss the meaning of “misconduct” would, therefore, be significant. It is, therefore, pertinent to consider this below.
Misconduct
Based on a survey of legal authorities from Singapore and other common law jurisdictions, it appears that the following general principles could be gleaned of summary dismissal of employees on grounds of misconduct:
1. A legally valid dismissal of an employee has to be grounded on the employee’s repudiatory breach of the employment contract,38 or “strikes at the root of the contract of employment, that it destroys the confidence underlying such a contract”;39
2. The relevance and effect of the misconduct must be judged by reference to its effect on the employer-employee relationship or has to have a sufficient nexus with the employment relationship;40
3. The misconduct need not be in connection with the performance of the employee’s duties;41
4. Generally, conduct inconsistent with the fulfilment of the employee’s obligations to the employer would justify dismissal;42
5. If the misconduct in question was prejudicial or likely to be prejudicial to the interests or to the reputation of the employer, the misconduct could warrant dismissal;43
6. If the misconduct arose out of the work situation and had the potential to adversely affect the working environment, such misconduct could justify summary dismissal;44
7. An employer can rely on a certain misconduct in defence of any action for wrongful dismissal even if at the date of the dismissal, the misconduct was not known to him;45
8. It is a matter of degree in each case whether the act complained of is of the requisite gravity to justify dismissal;46
9. Account must be taken of the habits and attitude of the employer at the relevant time and cannot be judged totally in a vacuum.47
A brief survey of the following cases is pertinent to illustrate the above principles. More significantly, it also illustrates how the determination of misconduct, which is a question of fact, can be controversial, contested and unpredictable.
In the Singapore High Court decision of Teo Chew Seng v Singapore Anti-Tuberculosis Association [1968-1970] SLR(R) 653 (HC), the Court held that the employee’s circulation to the rest of the staff of a circular derogatory of the employer’s senior executive officer (representing that this officer was a schemer, fixer and dishonourable) amounted to misconduct that was incompatible with the continuance of the employee’s employment; no employer could reasonably have been expected to continue to employ such an employee.
In the Singapore Court of Appeal decision of Port of Singapore Authority v Wallace John Bryson [1979-1980] SLR(R) 670 (CA), the Court held at [8]-[9] that a harbour pilot’s involvement in a hit-and-run accident (for which he was charged for but his conviction was set aside on appeal) was not misconduct that was incompatible with the due or faithful discharge of the employee’s duty qua his employment as a harbour pilot and which could reasonably be said to seriously prejudice or interfere with or detrimentally affect the employer’s (PSA) interests. (It should be noted that the latter grounds for dismissal was expressly stipulated in the employment contract.) This case perhaps illustrates how subjective such a determination could be, since it is arguable that a harbour pilot’s recklessness in operating a vehicle could prejudice the reputational interests of the employer.
In the Wellington Court of Appeal case of Smith v The Christchurch Press Co Ltd [2001] 1 NZLR 407 (“Smith v The Christchurch Press Co Ltd”),48 an employee was held by the Court to have been validly dismissed for sexual misconduct, in that the employee had sexual relations with another employee outside the office during lunch hours. The Court held that it was valid because the misconduct was an issue concerning two employees, arose out of the work situation and had the potential to adversely affect the working environment. The Court further held that actual adverse effect on the employment situation did not need to be demonstrated to provide justification for dismissal.
The Court in Smith v The Christchurch Press Co Ltd considered that “[t]o justify dismissal, there had to have been a clear relationship between the conduct and the employment”. This includes considerations of:
1. The impact or potential impact of the conduct on the employer’s business, including the question of bringing the employer into disrepute;
2. The incompatibility of the conduct with the proper discharge of the employee’s duties;
3. The impact upon the employer’s obligations to other employees; or
4. The undermining of the trust and confidence between employer and employee.
In contrast, it was held in the Ontario High Court decision of Reilly v Steelcase Canada Ltd (1979) 26 O.R. (2d) 725 103 D.L.R. (3d) 70449 that an employee’s adulterous relationship with the wife of a fellow employee was not “in modern times” sufficient cause for dismissal, because the interests and reputation of the employer had been unaffected. However, it is significant that the test that the Court applied to determine the issue was whether the conduct in question, for which the employee was dismissed, was prejudicial or likely to be prejudicial to the interests or to the reputation of the employer.
It is important to bear in mind that the determination of such issues must be made with reference to the specific context, taking into account social-political values and social mores and their impact on the particular employer in question. Thus, in Re Board Of School Trustees Of School District No. 34 (Abbotsford) And Shewan et al. [1986] B.C.J. No. 3256 26 D.L.R. (4th) 54 (British Columbia Supreme Court),50 the Court considered it relevant in its determination that the conduct of the employee (in this case, a teacher) would be deemed improper moral conduct in the local community (which the Court noted would have been different if it were a different environment, eg a certain other urban city), that such misconduct would lower the esteem that the community (including the students) held of the employer (the school), because the school set a standard that the community found unsuitable; accordingly, such misconduct justified dismissal.
Yet, in a Supreme Court of Queensland, Court of Appeal decision, Moreton Bay College v Teys BC200811476; [2008] QCA 422,51 the Court held that a principal’s extra-marital relationship with the mother of a student was not sufficient misconduct to found a dismissal. (This was a principal of a Christian college.) The Court noted that the employment contract did not specifically state such conduct as grounds for dismissal and that the employment contract did not refer to any Christian values or principles.
In another (rather infamous) Australian decision, Orr v University of Tasmania (1957) 100 C.L.R 526, the Court held that the university professor’s seduction of and sexual affair with a student and the circumstances in which this occurred entitled the university to dismiss him summarily.
In the Supreme Court of New South Wales decision of Randall v Aristocrat Leisure Ltd (2004) BC200406880,52 the Court held that an employee’s substantial wrongful conduct that is inconsistent with the fulfilment of his or her obligations to the employer validly justifies dismissal amounting to an act of repudiation of the employment contract. Further, the employee’s intentions with regard to the misconduct are important in determining the existence of the misbehaviour that justifies dismissal.
Conclusion
The significance of the above cases is that they illustrate how thorny issues of employee’s misconduct can be. While parties may have various reasons for wanting to terminate an employment relationship, it should be borne in mind that termination of employment contract or summary dismissal of an employee for misconduct should be done in accordance with the employment contract. Where the contract is silent with regard to the specific alleged misconduct in question, there may be potential problems of actions of wrongful dismissal or complaints made under s 14 of the EA. Further, the uncertainty of the present state of law in respect of an implied duty on employer to not terminate employment contracts in bad faith or the scope of the implied term of trust and confidence with respect to termination of employment poses further snares and traps when an employment relationship sours. It would be prudent for employers or employees to obtain legal advice in such contentious circumstances.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.
