When Process Matters: Judicial Scrutiny of Employer Decision-Making

In Prashant Mudgal v SAP Asia Pte Ltd [2026] SGHC 15 (“Mudgal”), the Singapore High Court affirmed that the implied term of mutual trust and confidence forms part of employment contracts under Singapore law. Prior to this decision, earlier case law had suggested that the existence of such an implied term remained an open question. This created some uncertainty as to whether the doctrine formed part of Singapore law.

Beyond ruling on this question, this decision carries a broader practical significance for employers. The High Court’s reasoning demonstrates that even where an employer retains a contractual right to terminate the employment contract, the Court may scrutinise the employer’s internal decision-making processes and workplace procedures when assessing whether the implied duty of mutual trust and confidence has been breached.

In this article, we summarise the key aspects of the decision and examine how it underscores the Court’s willingness to scrutinise internal employment processes in subsequent litigation.

Background 

The Claimant, Mr Mudgal, was employed by the Defendant as its “Head of Services Sales” for a line of business concerning cloud-based management software.

Following internal disputes in the organisation, Mr Mudgal was placed on a 45-day performance improvement plan (“PIP”) on 21 March 2019 and his employment was ultimately terminated on 21 November 2019.

Mr Mudgal brought proceedings against his employer alleging that it had, amongst other things, breached the implied term of mutual trust and confidence by acting in an intolerable or wholly unacceptable way by deciding that he failed the PIP before it ended and issuing a notice of termination to him.

The decision of the High Court

The High Court held that the implied duty of mutual trust and confidence existed in employment contracts in Singapore based on precedent, principle and policy. The implied duty of mutual trust and confidence has been defined as an obligation imposed on an employer that it shall not without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.

The High Court found that Mr Mudgal was placed on the PIP without its employer intending  the PIP to be a genuine opportunity for Mr Mudgal to improve because the employer already had the end-game of terminating Mr Mudgal’s employment in mind.

The High Court held that such dishonest conduct by the employer had no reasonable and proper cause and would, on any objective view, be calculated and likely to destroy or seriously damage the relationship of confidence and trust between an employer and employee. Accordingly, the High Court held that the employer breached the implied term of mutual trust and confidence.

For clarity, the High Court confirmed that

1. the implied term of mutual trust and confidence is not meant to restrict or fetter an employer’s right to terminate an employment contract according to its terms; and
2. parties are free to modify or exclude the operation of such an implied term by express words to that effect in an employment contract.

Accordingly, in this case, there was nothing inherently wrong in the employer’s decision to terminate Mr Mudgal’s employment in accordance with the terms of his employment contract, which permitted the employer to terminate his employment at any point in time. However, it was the employer’s conduct before the termination of Mr Mudgal’s employment which was problematic. 

Although the High Court found that the employer had breached its implied duty of mutual trust and confidence, Mr Mudgal ultimately was only granted nominal damages as he was unable to prove that the financial and reputational losses which he claimed were caused by such breach.

Process scrutiny

A notable feature of the decision is that the High Court in assessing whether the implied duty of mutual trust and confidence had been breached, examined the documentary evidence relating to the employer’s internal deliberations and the sequence of events leading up to Mr Mudgal’s termination.

In particular, the High Court scrutinised all the surrounding documentary evidence pertaining to the PIP including the following:

• the internal discussions and decisions prior to the placement of Mr Mudgal on the PIP;
• the timing of the PIP relative to termination deliberations;
• whether the PIP was intended to be a structured plan for Mr Mudgal to improve his performance; and
• whether the formal HR process of placing Mr Mudgal on the PIP was aligned with the employer’s end-goal.

Key Takeaways 

Flowing from the above, the following practical takeaways are noteworthy:

1. Processes should be genuinely implemented: Where employees are placed on performance improvement plans, they should operate as genuine opportunities for improvement rather than purely procedural steps. In this regard, realistic improvement goals and timelines should be provided.
2. Document internal processes: Employers should maintain contemporaneous records to evidence that performance improvement plans have been adopted in good faith, periodic reviews were conducted and document any feedback tracking the employee’s progress.
3. Avoid pre-judged outcomes: Where a performance improvement plan is adopted, decision makers should remain open-minded until the plan concludes.
4. Consider if performance improvement plans are truly necessary: Where an employer has already concluded that the employment relationship should come to an end, it may be preferable to rely on contractual termination provisions in the employment contract rather than implementing performance management processes which may be scrutinised as lacking authenticity.
5. Training HR and management: Senior leaders and HR personnel should undergo sufficient training in order to understand the legal risks of procedural unfairness.

Conclusion

Mudgal serves as an important reminder that contractual termination rights do not insulate employers from judicial scrutiny of their conduct leading up to termination. Where performance management processes such as PIPs are implemented, courts may closely examine whether those processes were genuine opportunities for improvement or merely procedural steps towards a predetermined outcome.

Employers should therefore ensure that workplace processes are implemented in good faith and supported by contemporaneous documentation, particularly where those processes may later form part of the evidential record in employment litigation.