High Court warns that non genuine PIPs could breach the implied duty of mutual trust and confidence

A Performance Improvement Plan (PIP), sometimes referred to as a performance action plan, is often used by employers to identify an employee’s performance deficiencies and opportunities for improvement within their role.

However, a recent decision of the Singapore High Court has made it clear that the improper implementation of PIPs may expose employers to liability for breach of an implied term of mutual trust and confidence in the employment relationship.[1]

Background of the Case

The Claimant was employed by the Defendant, a multi-national software company, as its Head of Service Sales. The employment relationship soured after the Claimant sent aggressive and disrespectful correspondence to his colleagues, including personal attacks on some employees.[2]

After considering various options to terminate the claimant's employment, the Defendant eventually placed him on a 45-day PIP focusing on five key improvement areas: communication, alignment with senior leadership; leadership behaviour; team management; and improving the relationship with another team of the Defendant.[3]

While the Claimant's supervisors considered that he performed well during the PIP, they nevertheless doubted that he was genuine and sincere in changing his behaviour. After the PIP ended, the Defendant therefore terminated the Claimant's employment with notice, in accordance with the Claimant's employment contract.

The Claimant proceeded to file a claim in the High Court, alleging that the Defendant terminated his employment pursuant to an unlawful means conspiracy, or alternatively, a lawful means conspiracy. He also alleged that the Defendant had breached implied terms in relation to his employment contract, including an implied term of mutual trust and confidence. In total, the Claimant claimed almost SGD 5,000,000 in damages, including loss of earnings, damages for pain and suffering, and injury to reputation.[4]

Breach of Implied Term of Mutual Trust and Confidence

The High Court dismissed the claims of unlawful means conspiracy and lawful means conspiracy, as it recognised that the employment contract allowed the Defendant to terminate the employment relationship at any time, for any reason or for none. The Defendant would have only needed to resort to a conspiracy if there were no mechanism to terminate the employment contract. In any case, the High Court was not convinced that the alleged conspirators intended to cause damage or injury to the Claimant, which is an essential element of a conspiracy claim.

However, the High Court agreed that there was an implied term of mutual trust and confidence in the employment contract, which was justified based on precedents, as well as principle and policy considerations. This implied term included a duty not to behave in an intolerable or wholly unacceptable way.[5] In particular, an employer should 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”.[6]

On the facts of the case, the Court held that the Defendant had behaved in an intolerable or wholly unacceptable way. It had pre-judged the Claimant because he was not given a genuine opportunity to improve and rectify his poor behaviour.[7] The Defendant's management had intended to terminate the Claimant's employment even before the PIP was implemented. Even though the Claimant's conduct improved during the PIP, this did not change the views of his superiors, who pushed ahead with the decision to terminate his employment. The Defendant also failed to document the Claimant's progress during the PIP, and did not document the outcome of the PIP nor communicate it to the Claimant.[8]

The Court concluded that the outcome of the PIP was "pre-ordained" and the Claimant was "doomed to fail".[9] This ran counter to the very nature of a PIP, which is to provide a structured plan for an employee to improve his or her performance.[10]

The Defendant was therefore found to have breached the implied term of mutual trust and confidence. However, the Claimant was only awarded nominal damages of SGD 1,000, as he could not prove that the Defendant's breaches had caused him damage.

Takeaways for Employers

PIPs remain a useful tool in an employer's arsenal when faced with underperforming employees. Nevertheless, employers should only place an employee on a PIP where the company genuinely intends to provide opportunities for improvement and to support the employee in performing better at work. Employers should also document the progress and outcome of the PIP diligently, as well as any conversations with the employee regarding the PIP, in case there is any dispute over what transpired between the parties.

Employers should be mindful that under Singapore law, there is no obligation to place an underperforming employee on a PIP. If an employer is of the view that an employee is simply not a good fit for the organisation, it has the option of terminating the employee's employment with notice, or by paying salary in lieu of notice. Based on the Tripartite Guidelines on Wrongful Dismissal, dismissals with notice are presumed not to be wrongful, as both employee and employer have the right to contractually terminate the employment with notice.

Special thanks to our trainee Phoebe Goh for her contribution to the article.

[1] Prashant Mudgal v SAP Asia Pte Ltd [2026] SGHC 15 (the "Judgment")

[2] Judgment at [43]

[3] Judgment at [48]

[4] Judgment at [59-60]

[5] Judgment at [179]

[6] Judgement at [171] citing Lord Steyn’s formulation in Malik v Bank of Credit and Commerce International SA (in compulsory liquidation) [1998] AC 2

[7] Judgment at [188-189].

[8] Judgment at [223]

[9] Judgment at [217]

[10] Judgment at [202]