When is a Mutual Separation Regarded as a Retrenchment Threat?

In the case of Teh Yet Poh v Tropicana Shared Services Sdn Bhd [2025] 2 ILR, the Industrial Court sent a clear message to all employers:

A mutual separation scheme (MSS) is not ‘mutual’ if it is signed under pressure!

In this case, the claimant was a long serving employee who had just been promoted to Senior Manager. Less than 2 months into her promotion, the claimant was informed that her position had become redundant. 

She was then offered a mutual separation scheme (MSS). 

In simple terms, she was informed to resign and accept the MSS, or be retrenched. 

She pleaded to the company to consider not retrenching her as her work and job scope still exists within the Company. 

The claimant after being repeatedly pressured, resigned, and accepted the MSS payment. She claimed to have done so under pressure.

The Company, on the other hand claimed:

• That the redundancy was genuine as the company were facing financial difficulties and had to undergo restructuring

  
  

• The MSS was voluntary

• The claimant was given sufficient time to consider the offer

• She accepted the MSS payment and therefore the agreement was mutual.

The Industrial Court held:

• If the message is effectively ‘accept MSS or be retrenched, it constitutes a retrenchment threat.

• A retrenchment threat or forced MSS if proven, is regarded as unlawful dismissal under s.20 of the Industrial Relations Act 1967.

• While the company claimed redundancy due to financial constraints, the company failed to produce any evidence (apart from witnesses) in support of any financial losses or any accounting details on the cash flow of the Company.  

• The sudden decision to reorganise and regard the claimant as redundant was not clearly explained by the Company.

• The Company left the claimant with no choice but to accept the MSS.

In closing, the Industrial Court commented:

“In a nutshell, this court can describe what happened to the claimant in the company. The claimant, a long-serving employee of the company, past the COVID-19 pandemic, was given praise, promotion, salary increase, bonus and in many words promised of a big and brighter future in the Company. She goes home in jubilation at the prospect of serving the company in her newly promoted senior position for a long time only to be told surprisingly within a short period of less than 2 months by a well-organised and resilient company that she had now suddenly become redundant and will be offered a MSS as an exit plan… The MSS was involuntarily executed by the claimant upon the insistence of the Company. Thus, the claimant has succeeded in proving that she was dismissed by way of a forced resignation and was also forced to accept the MSS.”

The Court found the Company’s abrupt declaration of redundancy and forcing a MSS as unfair dismissal.

Like this topic? The inaugural E2 HR/IR Conference 2026 will feature a powerful session titled:

“Exit Package or Legal Trap: How your seemingly safe MSS could backfire”.

Join us on 11-13 May 2026 as a leading lawyer unpacks real Industrial Court cases and the do’s and don’ts HR must know before implementing a MSS. In today’s day and age, restructuring, redundancy planning or MSS exits is not one to be missed!

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