The Civil Court recently struck down a claim for wrongful dismissal brought by an employee who was dismissed before his employment began. The Court ruled that termination procedures and outcomes are the same during both pre-probationary and probationary periods. This may be the first time that a Maldives court has taken this stance and that too at odds with the respective common law position. This post critiques the Court’s interpretation of the employment contract as flawed both conceptually and legally.
Facts
In January 2019, Mr. Jagath Kumara Meyn entered into an employment contract with Emil Resort Private Limited for the position of General Manager.[1] The contract stated that Mr. Meyn would start working for Emil Resort on 15 February 2019 (“start date”) and that his probationary period would begin on that date. However, Emil Resort terminated Mr. Meyn’s employment on 7 February 2019 citing the probationary clause in the contract. As a result, Mr. Meyn filed a claim for wrongful dismissal and damages against Emil Resort, with representation from our team.
Summary of arguments
Mr. Meyn argued that his dismissal under the probation clause was a breach of contract, as he had not yet started working at the time of his dismissal. He also argued that the contract did not grant the employer the right to terminate the contract before the start date, and thus, his dismissal was wrongful.
In defense, Emil Resort claimed that Mr. Meyn was dismissed during the probationary period, and that he had begun his employment from the date of signing the contract by attending meetings with senior officials of Emil Resort and by sending an organigram and posting for job recruitments on his LinkedIn page.
Mr. Meyn denied starting his employment and stated that he was on a break since signing the contract because his employment had not started then. He also stated that all expenses incurred during this time were paid for by him, including expenses for attending meetings and staying in Male’. He explained that he only attended the meetings in response to requests from Emil Resort, as he felt forced to do so because he was afraid of losing his yet-to-start job. He also argued that if he had indeed started working, as Emil Resort claimed, he would have been paid according to the contract for the days he worked, but no payment was made, even after his dismissal.
Emil Resort disputed Mr. Meyn’s claim that he felt compelled and stated that he had started working under free will. To support this argument, Emil Resort stated that Mr. Meyn was frequently traveling for personal reasons during this time. Whilst this justification is self-contradictory, Emil Resort did not present any other justification for this argument. Additionally, Emil Resort did not comment on Mr. Meyn’s claims about expenses and non-payment of salary.
Civil Court’s inquiry
Based on the arguments presented, it seemed that two distinct issues arose for the Court’s inquiry before it could make a decision on damages. These issues were whether Mr. Meyn had started employment and whether his dismissal before the start date constituted a breach of contract. The Court did examine both of these issues, however, at varying degrees.
The Court first examined whether Mr. Meyn’s dismissal before the start date constituted a breach of contract. It is important to note that the Court’s decision in the case was based on its examination of this issue.
At the outset, the Court noted that the contract between Mr. Meyn and Emil Resort did not specifically address the issue of dismissal during the period between the date of signing the contract and start date. Having made this observation, the Court argued that if Mr. Meyn’s dismissal occurred a week later than it actually did, his probationary period would have begun and the dismissal would have been lawful. Here, the Court did not provide any further explanation as to how this hypothetical argument is relevant to the issue at hand.
The Court then acknowledged that the contract allowed the employer to dismiss the employee without cause and notice during the probationary period, and emphasized that it is a period preceding permanent employment. As such, the Court concluded that it was illogical to suggest that the rule for dismissal in the pre-probationary period should be any different from the rule for dismissal during the probationary period. Here, it is striking that such an interpretation was cast upon the contract without considering the applicable rules of contractual interpretation and principles of contract law.
The Court then looked into whether Mr. Meyn had started his employment. It found that he had not denied doing some work or posting on his LinkedIn for job recruitments, but he did not confirm the posts were made at the request of Emil Resort. Even if he was forced to, the Court found it would be likely that it would be seen as him starting work. This is a dangerous conclusion as it seems to suggest that performance obtained through coercion, or any form of duress is valid. In principle, employment law prohibits such performance.[2] Here, the Court’s examination of the issue was brief and incomplete as it failed to address the arguments relating to expenses, non-payment of salary, and Mr. Meyn being on a break during the period in question.
The Court then emphasized that the contract allowed termination without cause during the probationary period and subsequently concluded that there was no basis to interpret that termination in the pre-probationary period (for which the contract is silent) and termination in the probationary period are distinct situations with differing outcomes.
Based on this interpretation, the Court ruled that Mr. Meyn was not wrongfully dismissed.
Interpretation riddled with conceptual flaws
The main effect of the Court’s interpretation is that it had implied a term into the contract regarding termination during the pre-probationary period. The manner in which this was done by the Court is riddled with conceptual flaws.
Now, contractual interpretation is not such a novel area in Maldives law that it would escape judicial familiarity. It is trite law that in cases of contractual disputes involving written contracts, the courts primarily rely on the contract that constitutes the agreement between the parties.[3] Along with the applicable laws and legal principles.[4] When a contract is silent on a particular issue, there are established guidelines for implying the intended conduct of the parties.[5] As stated in Premier Property Manager Pvt Ltd v. Mohamed Ibrahim Manik[6], when a contract is silent, the court’s implication on the intended conduct should be based on established laws or legal principles,[7] rather than arbitrary assumptions. It must be done where necessary and objectively.[8]
The exercise of interpreting employment contracts is not exempt from these rules of contractual interpretation. However, the Civil Court had overlooked these rules when it interpreted the contract.
To begin with, the Court failed to invoke a legal basis for its interpretation. As mentioned above, a court can imply a term into the contract where the basis for it lies in law or established legal principles. The Court neither cited any law or principle that supported its interpretation nor offered any justification for disregarding the laws applicable to the issue. In fact, the entire interpretation was solely founded on logic, which is a significant departure from the established rules of contractual interpretation.
The failure to provide a legal basis also raises the question of legitimacy. Judicial legitimacy, as widely accepted, is dependent on the exercise of public reason. Public reason demands judicial decisions to lay down the legal basis and the supporting facts of the holding. If a judicial decision ignores the laws and rules relevant to the dispute and relies solely on logic, it is no longer considered a valid exercise of public reason. Thus, the Court’s failure to state a legal basis calls into question the legitimacy of the entire decision.
Another fundamental oversight of the Court is that it failed to consider if the interpretation was necessary and reflected the intention of the parties. For a court to imply a term into the contract, such a term must be necessary and so obvious that it goes without saying.[9] A court also needs to assess the intention of the parties objectively before implying a term. To assess objectively, a court should consider the facts and background existing at the time the contract was made. Here, the task of the court is to arrive at the intention of the parties at the time the contract was made.[10]
The contract between Mr. Meyn and Emil Resort did not specifically address the possibility of dismissal during the period between the date of signing the contract and start date. The communications between the parties at the time of contract show that Mr. Meyn was headhunted for the position, a future start date was already mutually agreed upon and that he had already indicated that he would leave his existing job. Given this context, if a nosey, officious bystander, who happened to be walking past the contracting parties, had suggested that the contract include the possibility of termination without cause or notice before the start date, would the parties have immediately agreed? I do not believe so.
If the Civil Court had properly examined the facts, it would have recognized that the contract in question was drafted by the employer, as is typical with most employment contracts. An objective assessment would have shown that if Emil Resort had intended to maintain the right to terminate the contract without notice at any time after execution, it could have included a clause to that effect. The fact that such a clause was not included in the contract indicated that the parties intended to be bound by the contract during the pre-probationary period.
Here, the necessary and obvious inference is that no party will break their promises under the contract before the agreed time (the start date). Such an implication is necessary to give effect to the reasonable expectations of the parties, as an objective assessment reveals that the parties did not intend to maintain a right to terminate during the pre-probationary period.
Absurd result in law
The most problematic part of the Court’s decision is the interpretation itself. The notion that termination in the pre-probationary period is the same as termination in the probationary period conflicts with contract law principles. The top court had previously warned that implying conduct not addressed in the contract can lead to such legal absurdity and confusion, and therefore, should be approached with care.[11]
Exercising care in this case would require the Court to take into consideration the applicable laws to the dispute. Given the employment contract was silent on the issue at hand and the employment law stated no particular guidance on dismissal in the pre-probationary period, the Court should have found guidance from the principles of contract law.[12]
The contract in question allows for termination of the contract without cause and notice during the probationary period. If the contract was terminated during this period, such a termination will be valid in contract law. The contract, however, did not provide for termination in the pre-probationary period. If the employer terminates the contract during this period, it shows the employer’s clear intention not to be bound by the contract. In other words, termination would be a clear refusal to perform as agreed. This will be considered as a repudiation under section 20(a) of the Contract Act.[13] The result of the employer’s repudiation is the employee’s entitlement to sue for damages under section 23 of the Contract.[14]
Thus, at law, there is a significant distinction between termination during the pre-probationary period and the probationary period. Termination in the pre-probationary period creates the obligation or consequence of being liable for damages, while such an obligation does not arise for the employer during the probationary period. Hence, the Court’s assertion that there is no difference between the two periods is not accurate.
The Court’s interpretation is also at odds with the respective common law position. In common law jurisdictions, termination of employment contract before the start date is considered as a repudiation.[15] It has been recognised that an employee whose contract is ended before starting work can bring a claim for breach of contract[16] and that such an action may be construed as an anticipatory breach[17] as recognised in the hallmark case of Hochster v. de la Tour[18]. In some jurisdictions, courts have also recognised that in such instances, the employment contract carries an implied term that requires employers to give reasonable notice of termination or payment in lieu of reasonable notice.[19] With respect to the remedy available for an employee in this situation, it is commonly acknowledged that the remedy lies in the right to sue for damages in lieu of notice.[20]
While the same right to sue for damages is available under domestic law, the extent of damages that a court may award an employee in such a situation is an area that needs further legal development.
Purpose behind the two periods vary
The Civil Court had concluded that it was illogical to suggest that the rule for dismissal in the pre-probationary period should be any different from the rule for dismissal during the probationary period. In other words, they are to be treated as one and the same, giving rise to identical consequences. By relying on this argument, the court seems to have committed the fallacy of weak analogy by comparing two things that are not really alike. Merely because the pre-probationary period also precedes permanent employment much like the probationary period, they are not the same thing nor does it give rise to similar outcomes.
Here, the Court seemed to argue that there is no logical reason for employees to have greater protections during the pre-probationary period than during the probationary period. The Court is mistaken in this assumption, as the issue at hand is not about having better rights, but rather the specific rights and obligations that are associated with the purpose of each of these two periods set in the contract.
The case of Buchanan v. Introjunction Ltd in the Supreme Court of British Columbia offers valuable insight on this issue. In this case, the employee was dismissed from his employment under the probation clause before he had even started working. The employer attempted to use the probation clause to argue that that it was illogical for the employee to have better rights before he began working, as the employer had an unfettered right to terminate the employee without notice and cause once the probationary period began. However, the Supreme Court rejected this argument, stating that the purpose of the probationary period is for the employer to conduct a good faith assessment of the employee’s suitability for the job. Therefore, while the employer is not required to provide a reason for termination during this period, the employer has a duty to conduct a good faith assessment of the employee’s suitability.
In contrast, there may be a number of reasons behind a pre-probationary period. An employer may hire an employee in advance and set a future start date for the employer to get ready or for the employee to relocate to the new job location. The rights and obligations that arise in this situation are vastly different from that in the probationary period. While it is open for an employer to change its mind during this period based on its business and staffing needs, it cannot escape committing a breach of the contract if the contract does not allow for termination during this period.
Conclusion
The Civil Court’s decision is an illustrative example of how contractual interpretation can create absurd results in law if proper care is not exercised by the courts. The decision sets a dangerous precedent in terms of employee dismissal and also opens for debate the direction at which the law must progress in the future.
[1] The exact date on which the contract was signed was a matter of dispute between both parties in the Civil Court but nonetheless the parties did not dispute that an employment contract was signed between them.
[2] Section 3, Employment Act.
[3] See Maldives Supreme Court’s decision in Premier Property Manager Pvt Ltd v. Mohamed Ibrahim Manik [2022] SC 60 at para 21.
[4] Ibid.
[5] [2022] SC 60 at para 22.6.
[6] [2022] SC 60.
[7] [2022] SC 60 at para 22.6(1).
[8] [2022] SC 60 at para 22.6(2).
[9] This is the officious bystander test espoused in Maldives Supreme Court’s decision in Premier Property Manager Pvt Ltd v. Mohamed Ibrahim Manik [2022] SC 60 at para 22.6.
[10] [2022] SC 60 at para 22.6(2).
[11] [2022] SC 60 at para 22.6.
[12] It is well-established that when interpreting employment contracts, basic principles outlined in the Contract Act should be applied. For example, in Maldives Supreme Court’s decision in Shahuruyaz Latheef v. GMR Male’ International Airport Pvt Ltd (2012/SC-A/14) and Maldives High Court’s decision in Maldives Post Ltd v. Azmath (2019/HC-A/234) in assessing the obligation of performance under the employment contract, courts relied on section 20(a) of the Contract Act. Similarly, in Maldives Supreme Court’s decision in Islanders Education Pvt Ltd v. Aminath Shizleen (2020/SC-A/67) where the employment contract was silent on the amount of damages, section 23 of the Contract Act was relied on to construct the contract.
[13] Section 20(a) of the Contract Act requires a party to perform as agreed in the contract unless the other party releases him from that particular obligation or accepts an alternative way of performing that obligation.
[14] In the concurring opinion of Justice Suood in Islanders Education Pvt Ltd v. Aminath Shizleen (2020/SC-A/67) at para 12, where a party breaches the contract, it is evident from section 23 of the Contract Act that the innocent party is entitled to the right to sue for damages.
[15] See for example, the decision of the Supreme Court of British Columbia in Buchanan v. Introjunction Ltd, 2017 BCSC 1002 and UK Employment Appeal Tribunal’s decision in Sarkar v. South Tees Acute Hospitals NHS Trust [1997] UKEAT.
[16] Sarkar v. South Tees Acute Hospitals NHS Trust [1997] UKEAT.
[17] Supra, note 12.
[18] [1853] 2 E & B 678.
[19] See for example Buchanan v. Introjunction Ltd, 2017 BCSC 1002 and DeGagne v. City of Williams Lake 2015 BCSC 816.
[20] Ibid.
