Written by: Mark Ong
Tasos Mansour/Unsplash
Summary
In light of the recent decision of Dong Wei v Shell Eastern Trading (“Dong Wei”) [1] and the latest amendments to Singapore’s Employment Act 1968 (Cap.91) (“EA”), this article provides a brief updated overview of the laws regarding corporate investigations, suspensions and ns of employees. It then outlines the practical steps which corporations in Singapore (“Corporations”) could prudently take in similar circumstances based on the prevailing legal authority and material business-related considerations.
Introduction
This article first establishes the objective/scope of the discussion and addresses the relevant assumptions before turning to examine the practical implications of Dong Wei and recent legal developments. Having noted the significance of these points, it then attempts to detail the steps Corporations can take and risks they should consider if caught in scenarios analogous to Dong Wei’s.
Objective and Scope of Discussion
Following the titular case, it is now well-established that an obligation of mutual trust and confidence in an employer-employee relationship exists as a result of an implied term in employment contracts. Notably, under a highly fact-specific analysis, the court held that breaches of this obligation are to be determined objectively, with regard to whether the challenged acts are supported by reasonable and proper cause. With the much-needed light shed by the SC in Dong Wei, this article attempts to synthesise the legal guidance provided by the court, recent legal developments outside the judgement, and relevant business-related considerations. Its focus is limited to the Singapore context and scenarios which follow the general pattern of investigation, suspension and termination of employees.
Key Assumptions
Based on the standard form of employment contracts, it is assumed that most of these contracts express contractual provisions on suspensions during investigations and terminations for cause (e.g, by notice or payment in lieu). However, provisions relating to specific contractual terms, or policies regarding investigations are not assumed.
Legal Analysis of Dong Wei
Background of the case
Dong Wei, a senior freight trader, who was directly under his line manager, Ming Way, was subject to a Business Integrity Department (BID) investigation by his employer, Shell Eastern, following a complaint by a third party, Vitol, who alleged that he proffered services of a friend’s shipping company to a Vitol trader. It is noted that Dong Wei, at the time, had a history of compliance missteps.
While conducting the investigation and for some time after its conclusion, Shell Eastern suspended Dong Wei from work. Additionally, the investigation outcome was not disclosed to Dong Wei, even upon his request. During Dong Wei’s suspension, a reputable news source, S&P Global Platts, reported that Shell Eastern was investigating corruption charges against one of its employees.
Under the terms of the employment contract, Shell Eastern terminated Dong Wei with three months’ notice and explicitly stated that it was not a direct consequence of the BID investigation but a holistic consideration of previous events which made the employment relationship untenable. On the grounds of conspiracy, negligence, vicarious liability and crucially, the breach of the implied term, Dong Wei filed claims against his former employer.
Key Point 1 – Threshold for Breach of Implied Terms
Following the UK judgement in Malik[2], and the Singapore High Court case of Cheah Peng Hock[3], it is well-established that under Singapore law there exists an implied term of mutual trust and confidence in employment contracts.[4] However, as noted in the latter case, this is subject to express terms to the contrary.
Regarding this implied term, the starting position is that an employer must not, without reasonable and proper cause, conduct itself in a manner that is calculated and objectively likely to destroy the relationship of confidence and trust between an employer and employee.[5] This obligation extends to anything which affects the continuation of the relationship, and therefore may overlap with a constructive dismissal of an employee. Furthermore, as Ding notes,[6] subjective loss of confidence is not an essential element of the breach and neither are the employer’s intentions and motives.[7] Lastly, even if the conduct is damaging to the relationship of trust and confidence, it will not be in breach of the implied term if it was supported by reasonable and proper cause.[8]
Dong Wei suggests that this assessment is largely fact-sensitive and a question of degree, based on a cumulative series of acts. However, it is noted that the parties may exclude or modify the implied term’s content with an express provision.[9]
Key Point 2 – Employee Investigations
On the method of employee investigations, contrasting Hameed[10] and McNeil[11], the court held that a minimum standard of fairness is required of an employer within the implied obligation of mutual trust and confidence. By this standard of fairness, employees should be clearly and formally informed of the investigation and be given a fair opportunity to respond to allegations made against them. Furthermore, corporate procedures such as restricting interactions between complainants/witnesses with investigators and the use of an independent investigator should be adopted to avoid the implication that the process was impartial or has amounted to a ‘hatchet job’.
Tangentially related is the issue of non-disclosure of the investigation. The court held that despite Shell’s statement that Dong Wei would be informed of the investigation’s outcome[12], under a strictly objective analysis, non-disclosure was not likely to damage the relationship of trust and confidence in the employment relationship despite the plaintiff’s subjective expectations.[13]
Key Point 3 – Employee Suspensions
On employee suspensions, the same standard of fairness applies. Read in conjunction with Gogay[14] and Agoreyo[15], the judgement suggests that suspensions supported by reasonable and proper cause will not breach this standard. This largely turns on the credibility of the relevant allegations’ sources in the company’s contemplation of employee suspension. As such, companies should conduct a preliminary inquiry into the allegations before acting on the information.
Tangentially related are scenarios which concern administrative leave or paid leave of absences that fall short of suspension. Since these acts against employees effectively resemble suspensions, the implied term may similarly apply here. As such, to eliminate all uncertainty, preliminary inquiries based on the allegations before acting on it through any form of imposed leave is advised.
Key Point 4 – Employee Terminations
On employee termination, the court held that the termination of employment contracts under the contractual provisions was not in breach of the implied term. Side-stepping the inconsistent UK judgements on the overriding status of the implied term[16], the court followed Cheah Peng Hock and the majority judgement in Johnson[17] and reasoned that the implied terms should not undermine the status of express terms.[18] This is in line with the established canons of contractual construction wherein implied terms should not defeat the express bargain between parties. Accordingly, it held that the express provision giving Shell the right to terminate the contract with notice modified the implied term’s content[19], and thus averted any issue of breach altogether. Although the court did not have to rule on the implications if no express provision had been provided, it stated that following Johnson, the implied term might not apply to dismissal due to the statutory overlap with the UK Employment Act which effectively resembles Singapore’s EA.
Key Point 5 – Protection of Employee Reputation
On the protection of employee reputation, following James-Bowen[20] and Crossley[21], the reticence of Shell Eastern when approached by S&P Global Platts on the reporting of the relevant story was held not to have amounted to a breach of the implied term since no duty to combat misinformation or safeguard an employee’s reputation existed via an importation by the implied term. Furthermore, the obligation imposed by the implied term extended only to the duty not to act in a corrupt or dishonest manner, which Shell’s failure to correct inaccuracies in Platt’s report did not breach.[22]
Recent Legal Developments
Since the 2019 amendments to the EA post-dated the events of the case, they were not considered by the court. This article attempts to highlight their significance in future instances.
Amendments on termination
Under s14 of the EA, an employee ostensibly has statutory grounds to claim that a contractual termination with notice qualifies as wrongful, provided that it is without ‘just cause or excuse’. Furthermore, reading the Tripartite Guidelines on Wrongful Dismissal 2019 in conjunction with the statutory provision, termination with notice may be considered to be wrongful if a reason that is given is subsequently proven to be false, or is found to be discriminatory.[23] Given the tension between the employer’s contractual rights to terminate and the operation of the highlighted provisions, uncertainty in this area of the law persists.
Furthermore, as Ding notes[24], although the issue of the implied term having overriding status under UK law was noted and side-stepped by the SC in Dong Wei, suggesting that the Singapore courts still generally prioritise and enforce the express bargain of parties in contract[25], it remains to be seen whether obligations under the implied term concerning termination could still be imported as overriding ones via s14 of the EA.
Amendments on suspensions
Under ss14(1) and 14(8) of the EA, employers have the statutory right to suspend employees for a period not exceeding one week. For longer periods, approval must be granted by the Commissioner following an employer’s application. It is noted that under s14(8)(b), during the suspension for an inquiry the employer must pay the employee at least half of his/her salary. Taken collectively, given that employers will generally have a basis for suspension following the approval of the Commissioner, employee suspensions are now unlikely to be caught by the implied term. However, mechanisms such as administrative leave or paid leave of absence should still be approached with caution.
Potential Future Legislation
New legislation might change the legal position concerning the obligations of employers under the implied term. Since Aedit Abdullah J deferred the issue to Parliament in Dong Wei[26], the current position in law is still that broad obligations related to natural justice, due process, and the safeguarding of employee reputation are not imported by the implied term.
Final Remarks
In light of the recent clarity provided by the SC, Corporations now have the requisite legal framework to make an informed decision following the receipt of employee-related complaints. Although these actions will still have to be weighed alongside business-related considerations such as financial costs and public optics, and might have to be wholly reassessed following the implementation of future legislation, the calculus that the Corporations can undertake is clear for now.
Bibliography
Legislation and Legislative Instruments
Employment Act 1968
Employment Claims Act 2016
Tripartite Guidelines on Wrongful Dismissal 2019
Textbooks
Emir, Selwyn’s Law of Employment (21st edn, OUP 2020)
Legal Websites and Resources
Ang, Nair, ‘Singapore: Employment Investigations and Suspensions – What Are an Employer’s Duties and Obligations? (Baker McKenzie, 2021) <https://insightplus.bakermckenzie.com/bm/employment-compensation/singapore-employment-investigations-and-suspensions-what-are-an-employers-duties-and-obligations> accessed 14 Sep 2021
Chia, Ding, ‘The Implied Term of Mutual Trust and Confidence: Where to Set the Bar?’ (Simmons & Simmons, 2021) <https://www.simmons-simmons.com/en/publications/ckq25jfxe16e50a2839u7kv8a/the-implied-term-of-mutual-trust-and-confidence-where-to-set-the-bar> accessed 14 Sep 2021
Goh, Lee, ‘“The Minimum Content of Fairness” Required in Respect of Employee Investigations and Suspensions’ (Bird & Bird, 2021) <https://www.twobirds.com/en/news/articles/2021/singapore/the-minimum-content-of-fairness-required-in-respect-of-employee-investigations-and-suspensions> accessed 14 Sep 2021
Singapore Law Watch, Issue 22/2021 (Doc No. 100540) (A&G In-House Newsletter, June 2021)
Suressh, Leong, ‘E-briefing: Singapore High Court in Dong Wei v Shell Eastern Trading (Pte) Ltd and another [2021] SGHC 123 Recognises the Implied Term of Mutual Trust and Confidence in Employment Contracts in the Context of Investigations and Suspensions of Employees’ (Harry Elias Partnership, 2021) <https://www.harryelias.com/content/e-briefing-singapore-high-court-dong-wei-v-shell-eastern-trading-pte-ltd-and-another-2021> accessed 14 Sep 2021
[1] Dong Wei v Shell Eastern Trading [2021] SGHC 123.
[2] Malik v Bank of Credit and Commerce International SA [1998] AC 20.
[3] Cheah Peng Hock v Luzhou Bio-Chem Technology [2013] 2 SLR 577.
[4] See the obiter judgements in Wong Wei Leong Edward v Acclaim Insurance Brokers [2010] SGHC 352 and Brader Daniel John v Commerzbank AG [2014] 2 SLR 81 acknowledging the discussed implied term.
[5] Dong Wei, 32; Malik, 45.
[6] Chia Ding, ‘The Implied Term of Mutual Trust and Confidence: Where to Set the Bar?’ <https://www.simmons-simmons.com/en/publications/ckq25jfxe16e50a2839u7kv8a/the-implied-term-of-mutual-trust-and-confidence-where-to-set-the-bar> accessed 14 Sep 2021.
[7] Dong Wei, 38.
[8] Dong Wei, 44.
[9] Dong Wei, 40
[10] Hameed v Central Manchester University Hospitals NHS Foundation Trust [2010] EWHC 2009.
[11] McNeil v Aberdeen City Council (No 2) [2014] IRLR 113.
[12] Note: Shell failed to honor this assurance. [13] Dong Wei, 102-03. [14] Gogay v Hertfordshire County Council [2000] IRLR 703. [15] London Borough of Lambeth v Agoreyo [2019] IRLR 560. [16] It is noted that the court recognised the dissenting judgement of Lord Steyn in Johnson which stated that ‘express words or a necessary implication’ is required to displace the overarching obligation of the implied term. Imperial Group Pension Trust v Imperial Tobacco [1991] 1 WLR 589, United Bank Ltd v Akhtar [1989] IRLR 507 and Stevens v University of Birmingham [2016] 4 All ER 258 lend support to Lord Steyn’s analysis. [17] Johnson v Unisys Ltd [2003] 1 AC 518. [18] Dong Wei, 125. [19] Dong Wei, 127; it is noted that the implied term of mutual trust and confidence, as it relates to termination, imports the obligation to effectively require any termination to be on the basis of proper and reasonable cause.
[20] James-Bowen v Commissioner of Police of the Metropolis [2018] 1 WLR 4021. [21] Crossley v Faithful & Gould Holdings [2004] 4 All ER 447. [22] Cheah Peng Hock, 114; Malik, 42. [23] Under ss 25(4), 34A(2) of the Employment Claims Act 2016, the Tripartite Guidelines on Wrongful Dismissal will be regarded by the High Court on claims involving wrongful dismissal. [24] Ding (n 6). [25] Dong Wei, 127.