Wrongful Dismissal Under Singapore Law: Key Considerations for Employers and Employees

Wrongful dismissal is a pressing concern for both employers and employees in Singapore. A dismissal is considered wrongful when it breaches the terms of an employment contract or fails to comply with statutory requirements under Singapore law. Recent legal developments and cases have provided further clarity on what constitutes wrongful dismissal and the rights of affected parties. This article aims to provide an overview of the concept, the legal framework, and key considerations for employers and employees.

What Constitutes Wrongful Dismissal?

Under Singapore law, wrongful dismissal occurs when an employer terminates an employee without just cause or excuse. It can take various forms, such as termination in violation of the employment contract terms or dismissal without following due process. Examples of wrongful dismissal include:

• Dismissal without Notice of Termination: Employers must provide a notice period or payment in lieu as outlined in the employment contract. For employees covered under the Employment Act, the statutory minimum notice period is typically one day to four weeks, depending on the employee’s length of service. Failing to comply with this requirement may result in a claim of wrongful dismissal.
• Dismissal without a Fair Inquiry for Misconduct: When dismissing an employee for misconduct, such as theft or insubordination, employers must conduct a fair inquiry before termination. A fair inquiry involves presenting the allegations to the employee and allowing them an opportunity to respond. A lack of such inquiry can lead to a finding of wrongful dismissal, even if the employee may have committed the misconduct in question.
• Dismissal with Immediate Effect: The Act allows for dismissal without notice in cases of gross misconduct. However, the burden lies on the employer to justify the termination. Failure to substantiate the grounds for immediate dismissal can render it wrongful.

Performance Improvement Plan

One of the prudent ways to prevent unfair termination or premature dismissal by employers is to consider the implementation of Performance Improvement Plan (PIP). A  PIP is a structured process used by employers to address and improve on employee’s underperformance through clear goals and necessary support. PIP is a common workplace tool in Singapore, though it is not legally required under the employment laws of Singapore or mandated by the Ministry of Manpower of Singapore. While Singapore’s employment laws, primarily the Employment Act 1968, provides a framework for fair treatment and termination procedures, they do not specifically require employers to implement PIPs. Instead, PIPs are adopted voluntarily by companies as a best practice to ensure transparency, fairness, and due process when managing underperformance.

The use of PIPs by firms reflects a commitment to providing employees with an opportunity to improve before considering more severe actions, such as termination. The practice of using PIP aligns with the broader principles of fair, responsible and progressive workplaces envisioned by the TAFEP. By setting clear expectations, providing support, and monitoring progress, PIPs help employers to assist employees in overcoming performance challenges. This can be particularly important in avoiding premature disputes or claims of unfair dismissal, as it shows that the employer has acted in good faith.

However, the effectiveness of a PIP depends entirely on how it is designed and implemented. A poorly executed PIP may be perceived as a mere formality or a precursor to termination, which can damage employee morale and trust. To be genuinely useful, a PIP should have clear, measurable objectives and not be a moving target. Ideally, both employer and employee should collaborate in designing the PIP to ensure it is a fair assessment rather than an impossible obstacle course. If a PIP outlines a clear path for improvement, it can serve as a valuable tool for both the employee and the employer while potentially preventing wrongful dismissal.

Legal Framework Governing Wrongful Dismissal

Employment Act  1968 (EA)

The Employment Act governs the majority of employment relationships in Singapore, covering all employees except for seafarer, domestic worker and statutory board employee or civil servant. For cases of wrongful dismissal, the Act outlines key provisions, including:

1. Notice of Termination: Employers must adhere to the notice period specified in the employment contract or pay compensation in lieu of notice. Failure to do so may be considered wrongful dismissal.
2. Disciplinary Process: If an employee is dismissed due to misconduct, employers are expected to conduct a fair inquiry before termination. The lack of such an inquiry could lead to a finding of wrongful dismissal.
3. Grounds for Dismissal: The employer must provide justifiable reasons for the dismissal, especially if it is with immediate effect. This requirement helps ensure transparency and fairness.

Tripartite Guidelines on Fair Employment Practices

While not legally binding, the Tripartite Guidelines issued by the Ministry of Manpower (MOM), the National Trades Union Congress (NTUC), and the Singapore National Employers Federation (SNEF) serve as an important reference for fair employment practices. The guidelines emphasize non-discriminatory practices and fair treatment of employees, advising employers to provide clear reasons for termination. Non-compliance with these guidelines can adversely affect the employer’s standing in wrongful dismissal claims.

Employment Claims Tribunals (ECT)

Employees who believe they have been wrongfully dismissed can seek recourse through the Employment Claims Tribunals (ECT). The ECT provides a streamlined process for resolving disputes related to salary and wrongful dismissal claims. Notably, before filing a wrongful dismissal claim with the ECT, employees must first attempt mediation through the Tripartite Alliance for Dispute Management (TADM). If the mediation is unsuccessful, a claim can then be filed with the ECT, but this must be done within four weeks of the mediation’s failure.

Employer’s Guide: Best Practices to Avoid Wrongful Dismissal Claims

To minimize the risk of wrongful dismissal claims, employers should follow these best practices:

1. Document Performance Issues: Maintain a record of any performance-related issues and communicate them clearly to the employee before considering termination.
2. Adhere to the Disciplinary Process: Conduct a fair and transparent inquiry when dismissing employees for misconduct, ensuring that they have an opportunity to respond.
3. Provide Clear Termination Reasons: Clearly state the reasons for dismissal and ensure they are legitimate, non-discriminatory, and consistent with the employee’s performance and conduct.

Employee’s Guide: What to Do If You Suspect Wrongful Dismissal

Employees who believe they have been wrongfully dismissed should consider the following steps:

1. Review the Employment Contract: Understand the terms of your employment contract, including employee rights, notice periods and grounds for termination.
2. Seek Advice Early: Consult a lawyer or approach Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP) for advice on your options and the strength of your case.
3. Seek Mediation or File a Claim: Approach the Tripartite Alliance for Dispute Management (TADM) for mediation. If mediation is unsuccessful, consider filing a claim with the ECT.
4. Document the Circumstances: Keep a record of any communication related to your dismissal, including emails, warning letters, and termination letters.

Conclusion

Wrongful dismissal carries substantial legal and financial risks for both parties. Employers can mitigate disputes by maintaining fair and transparent practices, while employees should be informed of their rights and recourse options in cases of unfair treatment. A clear understanding of the legal framework and adherence to best practices can help both employers and employees navigate the complexities of termination under Singapore law.

For more information or legal advice on wrongful dismissal, feel free to reach out to us at RBN Chambers LLC.