Terminations for cause: setting a high bar?

The case of Wong Sung Boon v Fuji Xerox Singapore Pte Ltd and another [2021] SGHC 24 ("Fuji Xerox") follows a reasonably familiar factual pattern. Against the backdrop of accounting irregularities discovered by a company, an anonymous whistleblower tip-off implicates a senior employee, who is then investigated by external auditors at the company's behest. The employee fails to provide full cooperation. Adverse findings are subsequently made and the employee is dismissed summarily for gross misconduct.

The aggrieved (now former) employee might then sue for wrongful dismissal, and pursue related claims - for example, of conspiracy to injure, and inducement of breach of contract, against the company and its parent. In this case before the High Court in Singapore, the claims of conspiracy and inducement of breach were dismissed as baseless, but the High Court found that the employee had been wrongfully dismissed and awarded damages of approximately S$1.4 million (approximately, US$1 million).

The wrongful dismissal claim

On the facts, even though the employee's actions had breached internal process and policies (amongst other things, he had failed to comply with internal processes in the course of directing the company to enter into areas of business outside of its core areas, and had exposed it to unnecessary liability), those acts were subsequently ratified by the company. Accordingly, they could not be used to justify gross misconduct, or, therefore, summary dismissal.

As an aside, the High Court also observed that the termination notice provided no reasons for the summary dismissal beyond re-stating the contractual provisions in the employment contract which permitted the company to dismiss the employee summarily. These events took place in 2017, before the publication of the Tripartite Guidelines on Wrongful Dismissal, but that is not impactful:the failure to provide specific reasons for the dismissal would almost certainly again result in the dismissal being considered wrongful today pursuant to the Tripartite Guidelines.

The quantum of damages

In determining the quantum of damages, the High Court affirmed the well-established "minimum legal obligation" rule. This rule assumes that the employer would have lawfully terminated the employment in a manner which is the least costly or most beneficial to it, and assesses the damages payable on that basis. In this case, the least costly option would have been for the company to terminate the employment by paying salary in lieu of notice.

While the S$1.4 million awarded to the employee appears high, the amount consisted solely of contractual payments to which the employee was entitled; a sizable contractual end-of-term payment formed the majority of the award.

Key takeaways

There are various points stemming from the decision which are of general applicability, and which employers in Singapore should note:

• There is a right to dismiss summarily under the Employment Act and at common law for gross misconduct and other reasons, and employment contracts commonly have provisions reflecting this right. However, any contractual provision which does not reflect the statutory and common law position cannot lawfully be relied on by the employer.

• Only a serious breach of contract, policy, work rules or other similar document will automatically give rise to the right to dismiss an employee summarily. Fuji Xerox is a perfect illustration of the well-established point that there is a high evidentiary bar to be met for summary dismissal. Employers should carefully consider whether the grounds of dismissal are supported by all the facts. Even where investigations have been undertaken, employers should still carefully consider the findings, and not simply assume they can rely on them as the sole justification for the summary dismissal. The courts and tribunals in Singapore, and elsewhere such as in Hong Kong, can be expected to construe any ambiguity or doubt over the evidence, in favour of the employee.

• In Fuji Xerox, the company's ability to prove its case was significantly hampered by the fact that its available witnesses were not its employees and did not have direct knowledge of the relevant events. Before commencing any litigation or taking any action which could result in litigation, employers should carefully assess the sufficiency and strength of the available evidence. Having appropriate witnesses give evidence will - obviously - be crucial. Employers should consider these factors at the outset and determine whether their witnesses will be able to present the best evidence at trial. Fuji Xerox also illustrates that employers should not assume that its-house counsel would be suitable witnesses, especially when those personnel were not personally involved in the relevant events.

• The Employment Act now requires an employer to conduct a due inquiry before summarily dismissing an employee for serious misconduct. While the procedural aspect of the employee's dismissal was not examined in detail in Fuji Xerox, the High Court nevertheless noted that the employee may not have had the chance to respond properly to the allegations against him; he had left halfway through one interview as he felt unwell. Employers should note the importance of allowing an employee a chance to respond to the allegations put to him or her as part of the requirements for the conduct of a due inquiry.