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Singapore: Wrongful Dismissal Claims What We Now Know

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When the Employment Act (Amendment) Bill (“EA“) was released in October 2018 (click here to read more), the issue that sparked the most discussion was the ability for an employee to bring wrongful dismissal claims against the employer (i.e., a claim that the dismissal was “without just cause or excuse”). While it was clear from the proposed amendments the circumstances in which an employee could bring a wrongful dismissal claim – effectively, all circumstances – there was little guidance on the circumstances in which an employee could bring a successful wrongful dismissal claim.

Now that the amended EA is in effect (from 1 April 2019), two questions continue to be relevant: (i) what constitutes a wrongful dismissal and, conversely, what constitutes an “acceptable” ground for dismissal, and (ii) what are the possible outcomes of a successful wrongful dismissal claim?

Both the Tripartite Guidelines on Wrongful Dismissal1 and further amendments to the Employment Claims Regulations2 released earlier this month provide some helpful guidance on the above issues. However, as is the case with most newly established regimes, employers may expect to continue to encounter some degree of uncertainty when dealing with a wrongful dismissal claim under the EA.

1. Recap: main changes to an employee’s wrongful dismissal rights

Previously (i.e., before 1 April 2019):

  • If an employee’s employment was terminated with notice or payment in lieu of notice, and the employer had not breached any term of the employment contract, an employee could only bring a wrongful dismissal claim, on the grounds that the dismissal was “without just cause or excuse”, if he was a particular type of employee3. Such a claim could only be brought before the Commissioner for Labour and not in the courts.
  • If an employee was summarily dismissed (i.e., terminated without any notice and without any payment in lieu of notice) or whose termination was not consistent with the terms of his employment contract, he would be able to bring a wrongful dismissal claim before the Commissioner for Labour only if he was a particular type of employee4, or (this applies to all employees) he would otherwise have grounds to bring a wrongful termination claim in the courts.
  • An employee who was compelled to resign as a result of conduct by the employer amounting to a fundamental breach of the employment contract could bring a constructive dismissal claim in the courts.

Currently:

  • If an employee was terminated with notice or payment in lieu of notice, and the employer had not breached any term of the employment contract, any employee can bring a claim on the grounds that the dismissal was “without just case or excuse”. Such a claim will have to be brought before the Employment Claims Tribunal (“ECT“) and be subject to the ECT claims procedure as well as certain claims limits (see Section C of our article below).
  • If an employee was summarily dismissed or whose termination was otherwise not consistent with the terms of his employment contract, any employee will have the option of either bringing a wrongful dismissal claim under the ECT regime or in the courts.
  • An employee who was compelled to resign as a result of conduct or omissions by the employer will have the option of either bringing a wrongful dismissal claim under the ECT regime or a constructive dismissal claim in the courts. Note that the threshold for bringing a wrongful dismissal claim where an employee involuntarily resigns (as a result of any conduct or omission by the employer) appears to be lower than in a common-law constructive dismissal claim (where an employer’s conduct must amount to a fundamental breach of the contract such that the employee can treat himself as having been constructively dismissed).

2. What is a “wrongful dismissal”?

Presumption that a dismissal with notice or payment in lieu of notice is not wrongful

As a general rule, if the dismissal was effected with notice (or payment in lieu of notice) in accordance with the terms of the employment contract and no reason was given for the dismissal, the Tripartite Guidelines on Wrongful Dismissal (the “Tripartite Guidelines“) indicate that such a dismissal will be presumed not to be wrongful, and the burden of proof will be on the employee to substantiate that the dismissal was wrongful. However, if the employer had given a reason for the dismissal, the burden of proof would then fall on the employer to substantiate the reason given.

This is interesting, as it addresses the issue of burden of proof where a wrongful dismissal claim is brought by an employee who was dismissed with notice or payment in lieu of notice. What happens then, if the employee was summarily dismissed? If the employee had brought a wrongful termination claim in the Singapore courts in the context of a summary dismissal, the burden of proof would have been on the employer to justify that there were grounds for summary dismissal (regardless of whether a reason was initially provided for the summary dismissal). It is not clear if this would continue to be the position where an employee brings a wrongful dismissal claim under the EA regime in respect of a summary dismissal. While the EA requires an employer to conduct due inquiry prior to summarily dismissing an employee, it does not require the employer to provide a reason for the summary dismissal.

In addition, the presumption that the dismissal was not wrongful would only apply if no reason was provided for the dismissal with notice. It is not clear how this rule is intended to apply in practical terms. In practice, most employees are likely to question an employer’s decision to terminate their employment and are unlikely to be satisfied with the response that the employer is merely exercising its contractual right of termination. If the termination notice does not formally state a reason for the dismissal but the employee’s manager or the relevant Human Resource representative hints at the reason (or reasons) during the termination meeting, would this still be considered a case of there being no reason provided for the dismissal? How far is the principle intended to stretch? These are questions which we hope will be answered in time to come as the wrongful dismissal claims regime matures.

Finally, notwithstanding the above principle, we would highlight that an employer should continue to identify a reason (and ensure that it has sufficient evidence in support of such reason) before deciding to execute a termination, even if such reason is not communicated to the employee. Even if it is established that the burden of proof is on the employee to demonstrate that the dismissal is wrongful, an employer would then be required to defend against the allegations made by the employee, and would find it helpful if it could establish that there had been a legitimate ground for dismissing the employee.

Examples of circumstances where the dismissal is not wrongful

Based on the illustrations provided in the Tripartite Guidelines, we understand that dismissals are considered legitimate in the following circumstances (assuming the employer is able to substantiate the relevant ground for termination):

  1. where the employee commits misconduct (including but not limited to theft, dishonest or disorderly conduct at work, insubordination, or bringing the organisation into disrepute) – it is stated in the Tripartite Guidelines that misconduct is the only permissible ground for summarily dismissal;
  2. where the employee commits poor performance – it is suggested that the poor performance will need to be documented in the employee’s performance reviews and the employee must have failed to improve despite being given a reasonable opportunity to do so; and
  3. where there is redundancy, e.g., where the employer has excess manpower, the company is undergoing restructuring, the old job no longer exists, or the employee’s job scope has changed – it is suggested that it would not amount to redundancy if the employer hires a replacement for the position.

Examples of circumstances where the dismissal is wrongful

The Tripartite Guidelines provides the following examples of circumstances where the dismissal is wrongful:

  1. the dismissal was due to discriminatory reasons, e.g., because of the employee’s age, race, gender, religion, marital status, family responsibilities, or disability;
  2. the dismissal had the purpose of depriving the employee of benefits or entitlements which the employee would otherwise have been eligible for (e.g., maternity benefits); and
  3. the dismissal was for retaliatory reasons, e.g., to penalize an employee for exercising his or her right (e.g., filing a claim with the ECT).

Why are the Tripartite Guidelines relevant?

The Tripartite Guidelines will be referred to by ECT adjudicators and mediators when assessing a wrongful dismissal claim. As there is currently little to no case law on what gives rise to a wrongful dismissal claim under the EA, the Tripartite Guidelines is the best source of guidance available on how a wrongful dismissal claim will be adjudicated, and the steps which an employer can take to mitigate the risks of a successful wrongful dismissal claim.

We would caveat that it is likely that the examples provided in the Tripartite Guidelines are intended to serve as illustrations and are not intended to constitute an exhaustive or closed list.

3. Possible outcomes of a successful wrongful dismissal claim

We are aware that in a wrongful dismissal claim, an employee can seek either of the following remedies:

  1. reinstatement and a back-payment of wages which would have been due had the employee not been dismissed; or
  2. monetary compensation (capped at S$20,000 or S$30,000 if the employee seeks assistance from a trade union in the dispute) – note that these monetary caps may be doubled if the employee files both a wrongful dismissal claim and a salary-related claim.

The amendments to the Employment Claims Regulations 2017 have clarified in very broad terms how the ECT will assess an award for monetary compensation. In determining the amount of compensation to be awarded in a successful wrongful dismissal claim (subject to the overall monetary cap), the ECT will take into account:

  • the claimant’s loss of income, capped at 3 months of the claimant’s gross rate of pay on the date of dismissal; and
  • the harm caused to the claimant as a result of the wrongful dismissal, which will in turn be subject to a cap of 2 months of the claimant’s gross rate of pay on the date of dismissal, unless it is assessed that such amount should be increased or decreased according to the following factors:
    • aggravating factors: (a) the conduct of the wrongful dismissal in a humiliating or degrading manner, or in a manner which caused physical harm; (b) any false accusation or allegation made by the employer against the claimant being used as a ground for dismissal; or (c) any deliberate act of the employer to adversely affect the claimant’s prospect of any subsequent employment; and
    • mitigating factors: (a) any misconduct or poor performance of the claimant; or (b) any insubordination by the claimant.

However, there continues to be very limited information available on the remedy of reinstatement. It remains unclear when and how the ECT will decide that reinstatement should be awarded.

4. What does this mean for your business?

Be aware that when carrying out a termination in Singapore, it is no longer sufficient to comply with the terms of the employment contract. Your business will always be exposed to the risk of a wrongful dismissal claim. To mitigate against a successful wrongful dismissal claim, ensure that any termination decision is supported by a legitimate ground and that you will be in a position to substantiate such ground should an employee file a claim.

Prior to unilaterally reducing an employee’s benefits or other terms of employment, be mindful that if an employee resigns in response, this could lead to a wrongful dismissal claim. Therefore, consider obtaining consent to any negative change even if your contract or policy contains a unilateral variation clause.

As the wrongful dismissal claims regime is new, continue to keep a look out for further updates and guidelines released by the Ministry of Manpower or the Tripartite Alliance for Fair and Progressive Employment Practices which may help shed light on some of the questions which currently remain unanswered.

If you have any specific concerns as to how your business may be impacted by the issues discussed in this article, please feel free reach out to any member of the team.

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Celeste Ang is a principal in Baker McKenzie's Singapore office. Celeste Ang’s practice encompasses corporate litigation and arbitration, both domestic and cross-border. She also has significant experience advising clients on compliance and regulatory issues in the context of investigations, and on a wide range of employment and employment-related issues. Celeste is ranked by Chambers Asia Pacific in the areas of litigation and employment and by Chambers Global in the area of litigation. She is described as "very smart, very innovative - a good example of someone who thinks outside the box" and "very technically competent, very thorough and very responsive" by clients.

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Kelvin Poa is a principal in Baker McKenzie's Singapore office. He is an investment fund corporate and regulatory professional, and leads the Firm's Asia Pacific Private Equity group. He draws on his extensive background in private equity — and proficiency in fund formation and structuring — to deliver innovative and workable solutions for clients. He advises leading private equity and real estate houses to find ‘fund compatible’ structures for their investment acquisitions, restructurings and exits — and assists asset management clients to navigate transformational transactions or complex reorganisations successfully. Kelvin is recognised by leading legal directories for his experience in fund formation.

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Clarence Ding is a senior associate in Baker McKenzie's Singapore office. His practice encompasses general civil and commercial litigation, with an emphasis on employment law, white-collar crime and fraud. Clarence regularly advises clients on compliance-related issues, as well as both internal and external investigations.

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Ng Zhao Yang is a local principal in the Employment Practice Group of Baker McKenzie Wong & Leow in Singapore. He has over 10 years of experience advising regional and multinational clients on employment law and immigration matters in Singapore. He has been recognised as an “Up and Coming” individual by Chambers & Partners Asia-Pacific 2023 in the Singapore Employment: Domestic category. Clients who spoke to Chambers described him as "an outstanding resource" and "Highly recommend(ed)." He is also recognised as a “Next Generation Partner” by The Legal 500 Asia Pacific 2023 in the Singapore Labour and employment: Local firms category.

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Jingyi Wang is an associate in Baker McKenzie's Singapore office.

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