Singapore’s Tripartite Guidelines on Wrongful Dismissal – Managing Risk in a Termination Exercise

 

01 April 2019 marked a turning point in Singapore’s employment landscape. For the first time since the Employment Act (Cap. 91) (the “EA”) was introduced in 1968, all employees based in Singapore are now covered by the core protections contained in the EA.

An employee who considers that their termination (whether with or without notice) is “without just cause or excuse” can now file a claim with Singapore’s Employment Claims Tribunal (the “ECT”) seeking reinstatement or compensation. A dismissal without just cause or excuse is expressly recognized in the Employment Claims Act 2016 as a category of wrongful dismissal which falls within the ECT’s jurisdiction for dismissals taking effect after 1 April 2019.

To assist the ECT in adjudicating wrongful dismissal disputes, the Ministry of Manpower, together with the National Trade Unions Congress and the Singapore National Employers Federation, has released the Tripartite Guidelines on Wrongful Dismissal (the “Guidelines”). As the Guidelines are the ECT’s (and potentially, the Court’s) main point of reference when adjudicating a claim for dismissal without just cause or excuse, employers in Singapore should ensure that the principles in the Guidelines are adhered to when undertaking a termination exercise.

In the three months since the Tripartite Guidelines were introduced, we have seen a number of employers express concerns on the increased risks in terminating an employee. These concerns stem primarily from the extension of the ECT’s jurisdiction to cover wrongful dismissal disputes, which means that employees now have a low cost and speedy forum which is readily accessible; this can be contrasted against the situation previously where employees could have been deterred from bringing a civil claim due to the costs and time involved.

This article seeks to provide an overview of the Guidelines and guidance for employers undertaking a termination exercise in the new employment landscape.

Conducting a Termination Exercise

As a starting point, the Guidelines make clear that under Singapore law, both the employer and employee are entitled to terminate the employment relationship by giving the period of notice stated in the contract of employment (or paying in lieu). Importantly, the Guidelines state that termination with notice is presumed not to be wrongful and expressly recognises that an employer is not legally required to provide any reason for a termination. Employers should therefore consider carefully whether to provide a reason for dismissal as the Guidelines make clear that a termination with notice is wrongful if the reason provided by the employer is shown to be false or cannot be substantiated.

The Guidelines also recognise that a redundancy exercise that adheres to the Tripartite Advisory on Managing Excess Manpower and Responsible Retrenchment is unlikely to give rise to a successful claim for wrongful dismissal.

A termination will be regarded as wrongful if an employee is able to show that the termination is:

  • due to discrimination (on the grounds of age, race, gender, religion, marital status, family responsibilities or disability). This is the first time that Singapore’s employment legislation has recognized that an employee has the right to bring a legal claim if they feel they have been discriminated against

  • intended to deprive the employee of a benefit or entitlement, such as an end of year bonus

  • intended to punish the employee for exercising their employment rights, such as filing a mediation request, and declining to work overtime 

  • (without notice) on the grounds of misconduct, with no “due inquiry” or where the misconduct was unproven or turns out to be false. In a recent High Court case, an employee was awarded compensation equivalent to salary based on the amount of time that the Court assessed the employer would have taken, had it undertaken the inquiry

  • stated as being due to poor performance but which the employer is unable to substantiate because the underperformance has not been documented.

What is clear from the above is that where a reason for termination is provided by the employer, the employer bears the burden of substantiating the reason should a claim for wrongful dismissal arise. On the other hand, where no reason is provided and the employee is simply terminated by notice (or payment in lieu of notice), the burden of proving that the termination is wrongful shifts to the employee. The prudent approach may therefore be for employers to not provide any reasons at the point of termination, but at the same time ensure that they have a reason (that can be substantiated with documentary evidence) should a claim be brought by the employee.

Compensatory Framework For Wrongful Dismissal Claims

The framework for calculating compensation due in the case of a wrongful dismissal has now been introduced and gazetted in Singapore.

In summary, this framework provides that the compensation should consist of:

  • an amount representing the loss of income suffered, capped at three months of the employee’s base pay, and 

  • an amount reflecting the harm caused to the employee due to the wrongful dismissal. This is capped at two months of the employee’s base pay, but is subject to a 50% uplift / reduction depending on whether there are any aggravating/mitigating factors.

The above compensation is also subject to the ECT’s jurisdictional cap of SGD 30,000 (if mediation was first pursued by the employee – even where the employer does not agree to the mediation) or SGD 20,000.

This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document. Simmons & Simmons JWS Pte. Ltd. is registered and incorporated in Singapore as a Joint Law Venture under the Companies Act of Singapore. We are licensed to practise Singapore law in the permitted areas of legal practice according to section 130A(1) of the Legal Profession Act of Singapore. The permitted areas of legal practice excludes (according to Rule 3(1) of the Legal Profession (International Services) Rules 2008 of Singapore) areas such as constitutional and administrative law; conveyancing; criminal law; family law; succession law; trust law; and appearing or pleading in court.