THE UPDATE SCOOP (#8/2025)
“Shock & Awe” Strategy Rendering MSA Invalid | Employment Law
By TAY & HELEN WONG – 7 August, 2025
Employers who are planning to enter into mutual separation agreement (MSA) or implement mutual scheme of separation (MSS) are advised to read the Court of Appeal’s decision in Fatimah Noordin v Carsem (M) Sdn Bhd & Anor [2025] which set out highly relevant principles on the enforceability of a MSA. In this case, the appellant (the Claimant) was a section manager in the company’s HR department who had returned to work after two weeks of annual leave. She was given a letter with the title “mutual separation agreement” (MSA) which stipulated her last day on the next day and she would be paid RM50,000. She signed the letter but the company did not pay the amount. The reason given was that the company found that she had committed fraud which had caused losses to the company. The company filed a civil suit in the Sessions Court against the Claimant for damages and account of secret profits.
The Claimant’s unfair dismissal complaint was dismissed by the Industrial Court (IC). Her judicial review application (JRA) was also unsuccessful at the High Court (HC). She however succeeded at the Court of Appeal (COA) which ruled that she had discharged the burden (legal and evidential) to prove, on a balance of probabilities, that she had not signed the MSA voluntarily on the following grounds:
(i) Before the Claimant returned to work, the company had already decided to dismiss her – the Company’s premeditated plan;
(ii) The MSA was prepared by the company without any prior notice to the Claimant when the company could have easily given advance notice if it wanted to in good faith;
(iii) The Claimant was not given a period of reasonable time to consider its contents or to get legal advice regarding its effect or to discuss its content with her spouse, immediate family members, close colleagues and friends;
(iv) The company had deliberately chosen the day she returned to work as part of its ‘shock and awe’ strategy to force the Claimant to sign the MSA on that very day; and
(v) After she had signed the MSA, she was asked to leave the company premises on the same day despite the last day as stated in the MSA on the next day.
It is germane to note that the COA remarked that if the Claimant had been afforded an opportunity to negotiate by the company, it would be difficult, if not impossible, for the Claimant to discharge the burden of proof that she had not signed the MSA voluntarily.
The COA had also considered the quantum of her salary, the length of her service (more than 14 years), her age with 2 years left to retirement and absence of any show cause letter regarding her work performance and any domestic inquiry with regard to misconduct allegedly committed by her to find that it was highly improbable for her to have signed the MSA voluntarily. On the contrary, it was probable for the company to have coerced the Claimant to sign the MSA.
The COA was also mindful of the fact that the Claimant’s signature paragraph stated that she had “read, understood and agreed to the terms set out” in the MSA, that she did not raise any objection or protest after signing the MSA and that she occupied a senior position in the HR department. However, based on the facts and evidence as summarized in (i) to (v) above and other reprehensible conduct of the company, the COA was not persuaded that the Claimant had voluntarily signed the MSA.
In concluding, the COA stated that they were not condoning an employee’s fraud, secret profits, misconduct and/or disciplinary infraction which the employer may pursue by conducting a “due inquiry”. The employer cannot unlawfully dismiss the employee under the guise of a MSA.
The appeal was allowed, the HC’s decision set aside, the JRA allowed and the IC’s award quashed. She was awarded full 24 months as compensation for back-wages. She was not allowed any compensation in lieu of reinstatement as she had attained retirement age.
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Tags: [mutual separation agreement] [involuntary resignation] [shock and awe]