Understanding Mutual Separation Schemes

In B. Braun Medical Industries Sdn. Bhd. v Mugunthan a/l Vadiveloo (2024), the Federal Court considered the enforceability of an MSS agreement and whether accepting the MSS agreement under threat of dismissal could constitute dismissal without valid reason or excuse in the form of a ‘forced termination’.

    

The Supreme Court held that even if the employee signed the MSS voluntarily, the court still has the authority to examine the background to the signing of the MSS to determine whether the employee was indirectly pressured.

    

In reaching its decision, the Federal Court examined the behaviour of the employer, which offered the employee two options. The first was to enter into an MSS with a higher remuneration package and the second was to be dismissed with a lower remuneration package. This behaviour by the employer indicates that indirect pressure was put on the employee to enter into the MSS. Therefore, the MSS is invalid and the termination of the employment relationship is unfair.

    

The Federal Tribunal's decision highlights the importance of ensuring that MSS agreements are entered into voluntarily and without any pressure. It serves as a reminder to employers to reconsider the way they negotiate in order to avoid any implications of indirectly pressuring an employee.​