Constructive Dismissal Malaysia: Meaning, Examples & What To Do

Have you ever felt so uncomfortable at work that you had no choice but to quit?

Maybe your boss suddenly cut your salary without any explanation. Or your role was quietly changed to something you never agreed to. Or you were sidelined, ignored, or made to feel unwelcome — until leaving felt like the only option.

If this sounds familiar, what happened to you might actually be constructive dismissal.

And in Malaysia, it's taken very seriously by the law.

What Is Constructive Dismissal?

Constructive dismissal happens when an employee is forced to resign because the employer made the working conditions so unbearable that staying was no longer a reasonable option.

In simple terms:

The employee technically resigns
But the employer’s actions pushed them to leave
The law may treat it as if the employer dismissed them

The key legal framework in Malaysia comes from the Industrial Relations Act 1967.

Under Section 20, employees who believe they were dismissed without just cause or excuse, including through constructive dismissal, may file a claim at the Industrial Court.

Malaysian courts have consistently recognised constructive dismissal as a form of unfair dismissal, even though the employee technically resigned voluntarily.

Simple definition: Constructive dismissal = employer behaves unfairly → employee has no reasonable choice but to resign → law may treat it as dismissal.

Why Does Constructive Dismissal Matter?

Some people think: “If the employee resigned, why is it the employer’s problem?”

Here’s why it matters:

For Employees

Employees should understand their rights because:

Resigning does not always remove legal protection
Employers cannot pressure employees into quitting unfairly
Employees may still file claims at the Industrial Court

Employees generally have 60 days from their last working day to file a representation under Section 20 of the Industrial Relations Act 1967.

For Employers & HR Teams

Constructive dismissal claims can seriously affect businesses.

Possible consequences include:

Reinstatement of employees
Back wages
Compensation payments
Legal expenses
Reputational damage
HR management challenges

For SMEs and growing companies in Malaysia, even one Industrial Court case can consume significant time and resources.

Common Examples of Constructive Dismissal in Malaysia

This is where it becomes practical.

What situations may actually amount to constructive dismissal?

Salary Cut Without Consent

An employer suddenly reduces salary without obtaining proper employee agreement.

Example

Aiman earns RM4,500 per month. Without warning, his employer reduces his salary to RM3,000 due to “restructuring.”

Aiman disagrees with the reduction and resigns.

This may amount to constructive dismissal because salary is a fundamental term of employment.

Demotion Without Justification

Being moved into a lower role or stripped of responsibilities without proper explanation.

Example

Sarah is a Marketing Manager. After returning from maternity leave, she is reassigned as a Marketing Coordinator with no managerial responsibilities.

No discussion. No explanation.

She resigns shortly after.

This could potentially support a constructive dismissal claim.

Forced Transfer to Another Location

Transfers may become problematic if they are unreasonable or not supported by the employment contract.

Example

Raj works in Kuala Lumpur. His employer suddenly instructs him to relocate to Sabah within two weeks despite there being no transfer clause in his contract.

Raj resigns because the relocation is unreasonable for his family situation.

Toxic or Hostile Work Environment

Bullying, harassment, humiliation, or discrimination may also contribute to constructive dismissal.

Example

Mei’s supervisor repeatedly humiliates her during meetings. She complains to HR several times, but no action is taken.

The behaviour continues for months until she resigns.

Removing Job Responsibilities

An employer gradually removes important responsibilities until the employee feels sidelined.

Example

Danial is a Senior Finance Executive. Over time, all meaningful responsibilities are transferred to junior staff.

Eventually, he is left doing filing and basic administrative work.

Failure to Pay Salary Properly

Late salary payments or unpaid wages may breach Malaysian employment laws and contribute to constructive dismissal claims.

Constructive Dismissal vs Unfair Dismissal

Many Malaysians confuse these two terms.

Here’s the difference:

Matter	Constructive Dismissal	Unfair Dismissal
Who leaves the company?	Employee resigns	Employer terminates employee
Why does it happen?	Employer’s conduct forces resignation	Employer dismisses employee directly
Legal protection	Industrial Relations Act 1967	Industrial Relations Act 1967
Possible claim?	Yes	Yes

Bottom Line

Both situations may still be considered dismissal without just cause or excuse under Malaysian employment law.

How to Prove Constructive Dismissal in Malaysia

Employees cannot simply resign and automatically win a claim.

There are several important elements that usually need to be proven.

Step 1: Show There Was a Breach of Contract

The employee must show that the employer breached a fundamental term of employment.

Examples include:

Salary
Job scope
Workplace dignity
Working conditions
Employment benefits

Step 2: Show the Breach Was Serious

Minor workplace disagreements are usually not enough.

The breach must be serious enough that a reasonable employee could no longer continue working.

Step 3: Show the Resignation Was Caused by the Breach

The resignation must clearly be connected to the employer’s conduct.

If the employee continues working for too long after the incident, the court may view it as acceptance of the situation.

Step 4: Resign Promptly

Employees should generally resign within a reasonable period after the breach occurs.

Waiting too long may weaken the case.

Step 5: File a Claim Within 60 Days

Employees generally have 60 days from their last working day to file a representation under Section 20 of the Industrial Relations Act 1967.

Missing the deadline may disqualify the claim completely.

Who Has the Burden of Proof?

In constructive dismissal cases, the employee usually carries the initial burden of proof.

This means the employee must first show:

The employer committed a serious breach
The resignation happened because of that breach

The employer may then defend or justify their actions during Industrial Court proceedings.

Can Employees Resign Immediately?

In some situations, yes.

If the employer’s conduct is extremely serious, employees may resign immediately and pursue a constructive dismissal claim.

However, employees should:

Keep proper documentation
Save emails and messages
Record incidents carefully
Seek HR or legal advice if possible

Resigning emotionally without evidence can weaken a case significantly.

Red Flags Employees Should Watch Out For

Not sure if what’s happening qualifies as constructive dismissal?

Here are some warning signs.

Salary reduced without agreement
Sudden demotion without explanation
Job responsibilities removed unfairly
Workplace bullying or humiliation
Unreasonable transfer
Exclusion from meetings or projects
Pressure to resign
Delayed salary payments

If several of these happen together, employees should seek professional HR or legal advice before resigning.

Signs Your Company May Be at Risk of a Constructive Dismissal Claim

Employers and HR teams should also recognise potential risks early.

Common Employer Mistakes

Changing employment terms without consent
Ignoring employee grievances
Allowing toxic management behaviour
Poor communication during restructuring
Unfair transfers or demotions
Delayed salary payments
Lack of HR documentation

Many constructive dismissal claims happen because managers act emotionally or too quickly without understanding legal consequences.

What Employers Can Do to Avoid Constructive Dismissal Claims

Most constructive dismissal disputes are preventable with proper HR practices.

Get Written Consent Before Changing Employment Terms

Always obtain written agreement before changing:

Salary
Job scope
Work location
Employment benefits

Unilateral changes are one of the most common causes of constructive dismissal claims.

Have Clear HR Policies

Employers should maintain clear policies on:

Transfers
Performance management
Salary revisions
Workplace grievances
Harassment complaints

Investigate Complaints Quickly

Ignoring employee complaints may increase company liability.

Keep Proper Documentation

Documentation is extremely important in Industrial Court disputes.

Maintain records for:

Warnings
Performance reviews
Salary discussions
Transfers
Complaints
Disciplinary actions

Train Managers Properly

Many constructive dismissal cases happen because managers lack HR or employment law knowledge.

Basic HR training can help reduce unnecessary legal risks.

Consult HR or Legal Professionals Before Major Decisions

A quick consultation before making major employment changes may prevent months of legal disputes later.

Constructive Dismissal Prevention Checklist for Employers

Obtain written consent before salary changes
Document transfers and role changes
Investigate grievances promptly
Train managers regularly
Maintain proper HR records
Communicate restructuring clearly
Seek HR or legal advice before major employment decisions

What Happens After Filing a Claim?

Here’s a simplified overview of the process in Malaysia.

Stage	What Happens
Employee resigns	Due to employer conduct
File representation	Within 60 days
Conciliation meeting	Industrial Relations Department attempts settlement
Industrial Court hearing	If settlement fails
Court award	Compensation or reinstatement may be granted

Depending on the complexity of the dispute, the process may take several months or longer.

Disclaimer

This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please consult a qualified employment lawyer or HR professional.

FAQs

What is constructive dismissal in Malaysia?

Constructive dismissal happens when an employee resigns because the employer seriously breached the employment contract or created unbearable working conditions.

Can I claim constructive dismissal if I resigned?

Yes. Employees may still file a claim if the resignation happened because of the employer’s conduct.

How long do I have to file a constructive dismissal claim in Malaysia?

Employees generally have 60 days from their last working day to file a representation under Section 20 of the Industrial Relations Act 1967.

Can I resign immediately for constructive dismissal in Malaysia?

In some situations, yes. However, employees should gather evidence and understand their legal position before resigning.

What are common examples of constructive dismissal?

Examples include:

Salary cuts without agreement
Unfair demotion
Workplace harassment
Forced transfers
Removal of job responsibilities
Unpaid salary

What compensation can employees receive?

Depending on the case, successful claims may result in:

Back wages
Compensation
Reinstatement

How can employers avoid constructive dismissal claims?

Employers should:

Communicate properly
Follow HR procedures
Avoid sudden employment changes
Investigate grievances fairly
Keep proper documentation

Managing Employees in Malaysia?

Avoid costly workplace disputes by following proper HR practices and building a stronger company culture.

With AJobThing, Malaysian employers can hire better talent, manage recruitment more efficiently, and support healthier workplaces from the start.