CHALLENGES

& APPROACHES

MUTUAL
SEPARATIONS
Donovan Cheah,
Partner
Donovan & Ho

Zainon Ahmad v Padiberas Nasional

WHAT IS A Berhad [FC]

MUTUAL "...a separate and independent contract intended to

mutually override and terminate an existing contract of

SEPARATION
employment."

2
 HOW
MUTUAL IS
MUTUAL
"I had no choice but to agree to the mutual
separation."

"I was pressured into signing it."

"They would have fired me if I didn't accept."

Harpers Trading v Kesatuan

FORCED Kebangsaan Pekerja-Pekerja
Perdagangan
TO "if an employer offered the employee the alternatives of
"resign or be sacked" and, without anything more, the

RESIGN employee resigned, that would constitute a dismissal...

But where that willingness is brought about by some other

consideration... then it has to be said that he resigned
voluntarily because it was beneficial to him to so."

4
 SO HOW CAN IT GO WRONG?

INTENT PRESSURE PROCESS

Mutual separation not Unreasonable time frame Wrong timing
offered in good faith - ie: Employee pressured to agree Procedurally or conceptually
coupled with threat / to Cannot leave the room wrong
disguise an ulterior motive Threatened Unfair terms

What is the main factor that

GOOD motivated the offer and
acceptance of the mutual
FAITH & separation?

INTENT

6
 British School of Kuala Lumpur v
CASE Minister of Human Resources
Employee confronted over poor performance and given

LAW options:
1.improve performance or risk disciplinary action if poor
performance continues; or

2. voluntarily resign with added benefits

Employee chose to resign.

What kind of pressure?

PRESSURE Evidence of protests?
Negotiation?

8
 Law Ching Hock v. Malconrep
CASE Haulage (M) Sdn Bhd & Anor
Resignation letter drafted by the Company Company

LAW threatened to withhold wages if employee did not sign.

Lipo Corporation Berhad v.

CASE Mahkamah Perusahaan Malaysia
Employee confronted over alleged misconduct, and was

LAW advised to resign to avoid embarrassment.

Supervisor accompanied employee to his room to type out a

resignation letter, and another employee waited outside the
room to collect the letter.

10
 Dharmendar Singh Dalip Singh v.
CASE Yoon Wai Electrical (M) Sdn Bhd
Employee confronted over alleged misconduct, and was

LAW asked to resign. A prepared resignation letter was given to

him to sign. Company informed employee that a police
report would be lodged if the employee did not resign.

11

Omar Suhaimi Abu Hassan v Eastern

CASE Pacific Industrial Corporation Berhad
CEO alleged that his letter of resignation was pre-prepared

LAW by the Company and he was threatened to sign it. Company

alleged that CEO had misled them into believing he had
amicably agreed to separate, and had received compensation
in exchange. CEO was also later appointed as an
“independent advisor”.

12
 Woo Kit Seong v Synthes Malaysia
CASE Sdn Bhd
Dispute over employee’s performance as General Manager.

LAW Company initiated a discussion on mutual separation:

employee resigns in exchange for compensation. Employee
later alleged that if he did not agree to the mutual separation
he would be dismissed.

13

When should it be brought up?

TIMING & What’s the correct process? Is
there a one size fits all?
PROCESS

14
 Aezrine Shah Abdullah v. Fat Boys
CASE Records Sdn Bhd
Employee had 9 years of service with the Company.

LAW Employee was confronted over poor performance and

misconduct.

4 hour discussion in the meeting room relating to the

proposed separation. Employee eventually agreed to resign
in exchange for 2 months' severance pay.

15

Kuldip Singh Sarban Singh v. Ismeca

CASE Malaysia Sdn Bhd
Employee’s department was relocated back to Switzerland,

LAW so company alleged that the employee’s role was redundant.

Employee given two options: 1. Voluntarily resign; 2.

Mutual termination

16
 WHEN THINGS REALLY GO WRONG

UNFAIR DISMISSAL 17

An employee signs a mutual

WHAT separation agreement and keeps the
severance payment, yet goes on to
CAN file a complaint of unfair dismissal.

YOU What can employers do?

DO?

18
 British School of Kuala Lumpur v
CASE Minister of Human Resources
Employee negotiated her resignation with added financial

LAW benefits. She still proceeded to lodge an unfair dismissal

complaint. Minister decided to refer the matter to the
Industrial Court.

The Company filed for judicial review to quash the

Minister's decision.

19

Gary Underwood v Minister of

CASE Human Resources
Employee negotiated his resignation after admitting to

LAW misconduct (fighting in the office). He received severance

payments in exchange for his resignation.

After receiving the payment, he filed a complaint of

unfair dismissal.

20
 SOME TIPS

TONE PAYMENTS P&C

Think about the message you Staggered payments may Employees will still talk. Be
are sending and how you encourage employees to careful about setting
would react if you were in the comply with the terms of the unwanted precedents.
employee's shoes. Employees mutual separation.
who think they are treated
poorly will retaliate.

21

THANK
DONOVANCHEAH
PARTNER

DONOVAN & HO
ADVOCATES AND SOLICITORS

YOU.
15-2, OVAL DAMANSARA
685 JALAN DAMANSARA
60000 KUALA LUMPUR

DONOVAN@DNH.COM.MY

22