Key takeaways

• The SGHC has reaffirmed that there is an implied term of mutual trust and confidence in all employment contracts, unless parties expressly exclude or modify it. A breach of this implied term is independently actionable. The determination of whether there has been a breach involves an objective consideration of the impact of the employer’s act(s), either individually or cumulatively, on the employee.
• In the context of employee investigations and suspensions, this implied term requires a minimum standard of fairness but does not impose broader or more onerous obligations on the employer. For instance, this implied term does not import all the obligations of natural justice or due process obligations that may apply in other contexts, including informing of investigation outcome or suspending and investigating allegations against employees in a particular way. 
• When conducting investigations, employers should ensure that procedures do not amount to "a hatchet job” where the outcome is effectively predetermined against the employee.
• Employers are not under a general implied duty of care to protect their employees from economic or reputational harm, though there are certain exceptions (e.g., where the employer acts in a corrupt manner, which undermines the employee's future job prospects). In the same vein, employers are not under a duty to combat misinformation or correct market rumors about an employee, even if they may be in better position to do so.
• The SGHC has signalled in no uncertain terms that the imposition of broader obligations of mutual trust and confidence on employers should be left to legislation, as it would be too onerous to employers if such obligations are left undefined and open-ended.

Background 

The plaintiff, Dong Wei, was a Senior Freight Trader of the first defendant, Shell Eastern Trading (Pte) Ltd ("Shell"). The second defendant was Lim Ming Wei ("Lim"), Dong Wei’s manager in Shell. As a result of certain representations made to Lim, Shell became concerned that Dong Wei had placed himself in a position of conflicts of interest by promoting a friend's shipping company, and had disclosed exclusive information meant for Shell to a third party shipowner, also owned by his friend.

Shell’s Business Investigation Department (BID) commenced an investigation and suspended Dong Wei from work pending the outcome. The notification letter informing Dong Wei of the suspension stated that he would be informed of the outcome when the investigation was completed. 

In its subsequent investigation report, the BID concluded that the investigation was “inconclusive.” Shell withheld the investigation outcome from Dong Wei and the latter remained suspended. During the period of Dong Wei's suspension, an article was released by S&P Global Platts ("Platts"), alleging that Shell was investigating "claims of unethical dealings including charges of corruption... and at least one employee has been asked to take leave pending further investigation." Platts confirmed that neither Shell nor Lim was the source of its information relating to the article.

Shell later exercised its contractual right to terminate Dong Wei with three months’ notice, explaining that the decision to terminate was not a direct consequence of the latest investigation but rather a result of the events over the last few years that led Shell to conclude that Dong Wei and Shell could no longer continue to work together. Despite the Plaintiff's insistence on being informed of the investigation outcome, his requests were repeatedly denied by Shell. 

After termination, Dong Wei sought employment from other firms in the industry but was rejected by four companies. Dong Wei alleged that he was rejected because of the negative publicity generated by the Platts article, and because Shell had not provided a letter clarifying the outcome of its investigations against him.

Dong Wei then commenced proceedings against Shell in the SGHC for, among other matters, breach of the implied term of mutual trust and confidence found in his employment contract. For the purposes of this article, we will focus on the SGHC's observations in respect of this particular claim.

Decision of the SGHC  

Mutual trust and confidence in the context of suspensions and investigations

The SGHC affirmed that Singapore law recognises an implied term of mutual trust and confidence ("Implied Term") in all employment contracts, unless the parties expressly exclude or modify it. The SGHC noted that the formulation of the Implied Term is as follows: an employer shall not, without reasonable and proper cause, conduct itself in a matter calculated and likely to destroy or seriously damage the relationship of confidence and trust between the employee and employee. 

In respect of the formulation above, the SGHC noted as follows:

1. Proof of an employee's subjective loss of confidence in the employer is not an essential element of the breach, and the employer's intention and motives are not determinative or even relevant.
2. Even if the employer's conduct has a severe impact on the relationship of trust and confidence, the employer will not be in breach of the implied term if the employer's conduct is supported by a reasonable and proper cause.

In deciding on the degree of obligations imposed on an employer in respect of suspensions and investigations in particular, the SGHC took guidance from English and Singapore cases. The SGHC noted that the Implied Term requires employers to do the following: 

• When investigating complaints against employees, employers must clearly inform the employees of charges levelled against the latter and give them the opportunity to rectify any problems or clarify any misunderstandings; 
• Employers must ensure that investigations are not a “hatchet job” where the outcome is preordained against the employee or are so unfair as to destroy the basis of any expected continuation of the employment relationship. Examples of this would include having investigators who are partial against the employee or who uncritically accept statements from witnesses who have a strong motive to implicate the employee in question. 
• Employers must rely on clear credible source(s) of information when deciding whether to suspend employees. Suspending an employee as part of a “knee-jerk” reaction in response to an unclear or unspecific allegation with dubious credibility may fall below the minimum level of fairness required of an employer.

That said, the SGHC noted that the Implied Term does not import all the obligations of natural justice or due process obligations that may apply in other contexts, including the following:

• Informing an employee of the investigation outcome
• Suspending and investigating allegations against employees in a particular way; in particular, the SGHC cited a case where it was not a breach of the Implied Term to suspend an employee as a precautionary measure before a full investigation was completed.

Shell did not breach the Implied Term 

While the SGHC accepted that the state of Singapore law as regards the Implied Term would extend to regulate an employer's conduct in suspending and investigating employees, it did not accept that it would apply in the broad manner as advocated by Dong Wei.

On the facts of the case, Shell did not breach the Implied Term for the following reasons: 

1. There was no mismanagement of the investigation by Shell.
2. There were adequate and reasonable explanations for the non-disclosure of the investigation outcome and the suspension of Dong Wei. 
3. The Implied Term does not import any duty to combat misinformation or to take reasonable care to safeguard an employee’s reputation.
4. There was an express termination clause in the employment contract. 

In particular, the SGHC noted the following: 

• With respect to the way the investigation was conducted: (i) Lim was not improperly involved in, and did not improperly influence the investigation; (ii) there was no pre-judgment  ̶  the BID had reached its conclusion in a logical and sensible manner; (iii) Dong Wei had been provided with a fair opportunity to respond to the allegations made against him, which he did in fact make use of and; (iv) Shell had not unnecessarily prolonged investigations  ̶  the investigation took several months because the BID was determined to leave no stone unturned and to communicate its findings clearly. The BID was not acting in bad faith. 
• It was reasonable to withhold the investigation outcome from Dong Wei due to the confidentiality of the investigation and the fact that it was inconclusive and irrelevant to Shell’s decision to terminate Dong Wei’s employment. Suspending Dong Wei was justified as it was the third time Dong Wei was subject to an internal investigation, and a warning letter had previously been issued to him pursuant to an investigation just a year before.
• Shell had no duty to combat misinformation pertaining to employees or to take reasonable care to safeguard an employee’s reputation or economic interests, save for the exception that employers are under a duty not to act in a corrupt manner, which would clearly undermine the employee’s future job prospects.   
• The express termination clause in Dong Wei's employment contract allowed for termination of employment upon provision of notice. The Implied Term cannot override express terms. 

Conclusion

The SGHC's ruling and observations provide important guidance to employers conducting internal investigations and considering suspensions. 

That said, it is important to note that the decision is presently pending appeal before the Singapore Court of Appeal (SGCA), and employers in Singapore will no doubt be watching keenly to see whether the SGCA would affirm the decision of the SGHC or endorse the broader imposition of duties on employers. The SGHC's observation on leaving the imposition of broader obligations on the part of the employer to legislation is also noteworthy. Whether the Singapore Parliament will step in to legislate express duties as a consequence of this decision (or that of the SGCA) remains to be seen.

For further information and to discuss what this development might mean for you, please get in touch with your usual Baker McKenzie contact.

*****

Baker McKenzie Wong & Leow is a member firm of Baker & McKenzie International, a global law firm with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner or equivalent in such a law firm. Similarly, reference to an "office" means an office of any such law firm. This may qualify as "Attorney Advertising" requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.