Recent Singaporean case offers internal investigations insight for employers

In this case, the employee alleged that the employer had mishandled and breached certain implied duties under the employment contract while carrying out an internal investigation which, according to the employee, adversely impacted his career advancement.

In its decision, the court struck out the majority of the employee’s claims but allowed certain aspects to proceed. The court permitted claims that the employer failed to conduct the internal investigations and internal audit in a fair manner to proceed. Additionally, the employee was allowed to pursue allegations that the employer did not exercise contractual discretion fairly and reasonably in awarding bonuses and salary increases, and that procedural unfairness in the investigative process led to lost career opportunities for the employee.

Mayumi Soh, an expert in employment law at Pinsent Masons, said: “This decision sheds light on potential applicability of implied terms, which are not expressly stated within a contract but may still be enforceable, and highlights instances when employers may be held accountable for how they exercise discretion, even where contracts appear to grant absolute discretion.”

One of the claims by the employee centred around whether an implied term of mutual trust and confidence exists in employment contracts under Singapore law. The court noted that the issue of whether such an implied term exists in employment contracts currently remains unsettled under Singapore law, however, it indicated it remained an issue that can currently be argued.

The court declined to strike out all the employee’s claims relating to this issue, but the court narrowed the scope of the claims put forward by the employee, permitting him to proceed with the claim that the employer failed to conduct the 2018 internal investigations and audit fairly.

The court also declined to strike out the employee’s claim that that the employer had failed to exercise its discretion reasonably in awarding bonus and salary increments. Although the employment contract clearly stated that the employee did not have any contractual entitlement to bonuses or salary increases, and that the employer had the sole and absolute discretion to determine the same, the court found that the employer would “nonetheless owe implied obligations regarding the manner in which such discretion is exercised”.

“Whilst the broader question of whether a term of mutual trust and confidence should be implied into employment contracts under Singapore law continues to remain unsettled, this case serves as a cautionary reminder that the mere presence of wide contractual discretion does not absolve employers from the duty to act fairly and reasonably in the exercise of such discretion,” Soh said.