In Malaysian employment law, constructive dismissal remains a highly litigated area—particularly in cases involving employee transfers. The recent Court of Appeal decision in Saharunzaman Barun v Perodua Sales Sdn Bhd & Other Appeals [2025] CLJU 3 serves as an important reminder that employers must manage transfers within the boundaries of the employment contract. This case involved three long-serving employees who challenged their transfer instructions, eventually claiming they were constructively dismissed.

Facts of the Case

The dispute arose when three employees of Perodua Sales Sdn Bhd, each with between 9 and 22 years of service, were informed that Nagoya Automobile Malaysia (NAM) would be taking over the operations of their respective branches. NAM offered each employee a two-year fixed-term contract, effectively ending their permanent employment status.

The employees objected, but Perodua Sales insisted that they accept the offer, issuing a Notice of Transfer on 27 September 2017, which required them to report to distant branches—specifically in Kota Kinabalu, Kuching, and Kuala Terengganu—within three days. After their appeals for nearby transfers were denied, show-cause notices were issued to them on 9 October 2017, accusing them of insubordination.

Ultimately, the employees treated themselves as constructively dismissed on 24 October 2017 and lodged a claim with the Director General of Industrial Relations.

Legal Issue

The central issue before the Court of Appeal was whether the transfer arrangement constituted a fundamental breach of the employment contract, thereby justifying the employees’ claim of constructive dismissal.

Court of Appeal’s Decision

The Court of Appeal ruled in favour of the employees, holding that Perodua Sales Sdn Bhd’s actions amounted to a fundamental breach of the employment contract. Instead of facilitating a legitimate transfer while preserving the employees’ existing rights, the employer attempted to unilaterally change the terms of employment. The Court found it unacceptable that the employees were forced to resign from their permanent roles and accept fixed-term contracts with no guarantee of continued employment—either with NAM or Perodua.

The Court also rejected the argument that the employees were bound to accept the transfers simply because other staff had done so. The employer’s conduct demonstrated an intention not to be bound by the original terms of the employment contract, thereby justifying the employees’ decision to walk away and claim constructive dismissal.

Moreover, the extremely short three-day notice to report to distant locations was deemed wholly unreasonable, particularly given the significant personal and logistical impact such relocations would entail.

Conclusion

The Court concluded that the employer had breached the employment contracts by attempting to change the employees’ terms unilaterally, and the employees were justified in treating themselves as constructively dismissed.

Key Takeaways for Employers

1. Transfers Must Comply with Employment Contracts: Employers must ensure that any internal transfers or secondments are in accordance with the original terms of employment. Changes such as a move from permanent to fixed-term status, especially without consent, can constitute constructive dismissal.
2. Provide Adequate Notice and Support: Transfers to distant branches must be reasonable, with sufficient notice and genuine consultation with the affected employees.
3. Grievance Procedures Are Crucial: Employers should implement and maintain transparent grievance mechanisms to address employee concerns early and prevent disputes from escalating into legal claims.

By respecting the contractual rights of employees and managing transfers responsibly, employers can minimize the risk of constructive dismissal claims and ensure better employee relations.

For legal advice or further information on employment disputes, please contact Lawyer Khoo at [email protected].