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LABOURS LAW IN MALAYSIA

Musbri MohamedDIL; ADIL ( ITM )Pursuing MBL ( UKM )

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What is labour law?

Labour law is laws and regulations that governs both the employment and industrial relations sectors.

Purposes:

To regulate the relationship between employer and employee – individual and collective.To determine the rights and liabilities of parties.To prevent and settle trade disputes. To give remedy.

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What is employment law?

Laws and regulations that regulate the relationship between employer and individual employee. Grounded on a contract of service. Originates from the concept of master and servant.

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What is industrial relations law?

Laws and regulations that regulates the relationship between employer and trade union. Grounded on a collective agreement.

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History of labour law in Malaysia:

Labour Ordinance 1912: Federated Malay States1920: Straits Settlement.Regarding immigration; conditions of work; housing;health etc.

Sources of labour law:

Common law: its contribution and application; Civil Law Act.Legislation: several statutes as passed by Parliament.Case-law: the industrial court and civil courts.

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Characteristics of labour law:

Basic legislation.Social welfare legislation.Freedom of contract.Government intervention.“Labour law is not the answer to all problemsat workplace” .Labour law: in favour or employer or employee?

“LABOUR IS NOT A COMMODITY”

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The relevant institutions:

The Ministry of Human ResourceThe Labor OfficeThe Trade Union DepartmentThe Industrial Relations DepartmentThe Labor CourtThe Industrial CourtThe employment sectors:Private sector – several acts; eg. Employment Act 1955Public service – Federal ConstitutionStatutory bodies – specific acts; eg Akta Badan Berkanun

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Employment Act 1955Industrial Relation Act 1967Trade Union Act 1955Children and Young Persons Act 1966.Workmen’s Compensation Act 1952The workers Minimum Standards of Housing And Amenities Act 1990The Wages Councils Act 1947Employees’ Social Security Act (SOCSO)Employees Provident Fund Act 1991(EPF)Occupational Safety and Health 1994Factories and Machinery Act 1967Human Resource Development Act 1992

The relevant statutes:

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EMPLOYMENT ACT 1955

Prescribes the minimum standard of terms and conditions of employment for employees in the private sector.It protects employees in matter such as payment of wages, hours of work, sick leave, annual leave, maternity leave, termination benefits, etc.Applies only in Peninsular of Malaysia.Covered Employees employed under a contract of service Enforced by the Department of Labor.

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Under Malaysian law, s 14(1) of the Employment Act 1955 (EA) requires a domestic inquiry to be held for employees covered by the EA, before an employer carries out any disciplinary action. Therefore, this section envisages the principles of natural justice to be observed in employment disciplinary actions. Although the High Court in Milan Auto Sdn Bhd v Wong Seh Yuen (Milan Auto) [1994] 2 MLJ 135 viewed s 14(1) EA as a mandatory provision, the Federal Court, the highest civil court in Malaysia, on appeal [1995] 3 MLJ 537 and in the case of Wong Yuen Hock v Syarikat Hong Leong Assurance Sdn Bhd and another appeal [1995] 2 MLJ 753 , ruled that s 14(1) EA does not require a mandatory inquiry for all private sector employees.

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The Federal Court in Wong was concerned that if the Industrial Court ordered that the employee be reinstated to his former position due to the fact that the dismissal was carried out in breach of natural justice, the employer who had breached the due inquiry requirement could easily remedy that procedural breach by holding an inquiry and nonetheless proceed to dismiss the employee as the misconduct would already have been proven at the trial.

In the words of Mohd Azmi FCJ:

In our opinion, the effect of any breach of natural justice shouldbenefit the workman and not the party in breach. Thus, where on merits,the workman had clearly been dismissed with just cause or excuse, andnatural justice had been sufficiently complied with by the Industrialourt, what real benefit would there be for him to be told that becauseof failure to hold a domestic inquiry, he had to go back and face anunhappy management, who as a matter of course, could remedy theprocedural breach and dismissed [sic] him for the second time? Wefailed to see how such delay and duplicity of proceedings could beinterpreted as contributing towards industrial peace and harmony ...

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INDUSTRIAL RELATIONS ACT 1967

Governs the relationship between the employer and the employees or trade union. It regulates the manner and the methods which the employers and employees adopt in their relationship.Covering issues like recognition, collective bargaining and collective agreement, trade disputes, conciliation, strikes, lockout, etc.applies in Malaysia.Covered only workers in private sector.Covered workers employed under a contract of service.Enforced by Dept of Industrial Relations.No limitation of wages.

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Subject to a minor exception in favour of Sabah and Sarawak, the Malaysian Constitution has assigned the entire labour relations power to the central government to the exclusion of the constituent units. Thus all matters that concern trade unions, labour and industrial disputes, welfare of labour and social security, are contained in the Federal List. The same also applies to matters like trade, industry and commerce, external affairs, implementation of treaties and agreements, internal security and preventive detention, all of which affect labour and industrial relations laws and practices either directly or indirectly .

The constitutional distribution of labour relations power just described is a further testimony to the assertion that the federal system in Malaysia has created a very strong centre. In the context of labour relations, the apparent advantage is the uniformity of labour laws applicable throughout the country.

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TRADE UNION ACT 1959

To control unions movement in Malaysia.Roles in register newly formed unions, de-register unions, check union’s accounts and to investigate any complaints against the unions.Applies throughout Malaysia.Covered unions in private and public sector.Enforced by Dept of Trade Unions.

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Freedom of association is one of the rights that a written constitution normally guarantees and in Malaysia the Federal Constitution in its art 10(1)(c) guarantees all citizens the right to form associations. Associations in this constitutional context may be referred to all general associations or groupings, which may include labour organisations or trade unions. It may be argued that although there is no specific reference to the right to form a trade union in the constitution, it may be submitted that art 10(1)(c) is equally applicable to the right of workers to form a trade union.

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In Malaysia, the constitution guarantees to Malaysian citizens the right to form associations. This right is however narrower in scope when compared with the scope of similar right under the Indian Constitution. The protection afforded to freedom of association under the Malaysian Constitution is liable to abridgement by parliament whenever it considers doing that to be necessary or expedient in the interests of public defence, public order or public morality. Such abridgement may or may not be reasonable. If a judgment of Malaysian High Court is anything to go by, the fundamental right to form association does not include the right to manage the association so formed. This means that some members of an association may be excluded by law from the right to participate in some of its activities.

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WORKMEN’S COMPENSATION ACT 1952

Provides for compensation by employers to workers injured in the workplace or in the course of carrying out their work.Covered only Foreign Workers.Enforced by Labor Department.Employer is required to buy an insurance policy from a panel of registered company to cover his liabilities under the act.

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TYPES OF EMPLOYEES COVERED UNDER THE WCA

The act not cover those employees specified below :-

Any person employed otherwise than by way of manual labor whose earning exceed RM 500 a month. Casual worker.Domestic servantArmed forces / police officerCivil servant

Unlike an ordinary commercial contract resulting from an exercise of free bargaining power, in employment, individual employees rarely have bargaining power. The doctrine of freedom of contract merely enables the superior in strategic strength, namely, the employer, to dictate the terms.

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AMOUNT OF COMPENSATION of death

60 months’ earnings or RM 18,000 (whichever is less). Plus RM 7,000 under Skim Pampasan Pekerja Asing.

If no dependants, only the actual amount of funeral expenses or RM 1,000 (whichever less) paid to undertaker.

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CHILDREN AND YOUNG PERSONS ACT 1966

Stipulates the type of employment under which children and young persons may be employed.Enforced by Labour Department.

A “child” means a person under 14 years old.

“Young Person” a person of 14 and above but below 16 years old.

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EMPLOYMENT OF CHILD

No child can be engaged in any employment except :-

Involving light work in any undertaking carried out by his family.In any public entertainment, in accordance with the term and conditions of a license granted for the purpose under that act.Employment requiring him to perform work approved or sponsored by the federal government, state government, and carried out in any school, training institution or training vessel.Employment as an apprentice under a written apprenticeship contract approved by the D.G of Labor.

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EMPLOYMENT OF YOUNG PERSON

Any employment mentioned under the child involving light work whether or not the undertaking is carried out by his family.Employment as domestic servant.Employment in any office, shop( including hotels, bars, restaurants and stalls), factory, workshop, store, theatre, cinema, club or association.Employment in an industrial undertaking suitable to his capacity.Employment on any vessel under the personal charge of his parent or guardian.

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Female “young Person” employment

No female young person may be engaged in any employment in hotels, bars, restaurants, boarding houses or clubs unless under the management or control of her parent or guardian or with approval of the D.G Labor.

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WORKING DAYS

A child or young person is permitted 6 days per week.A child is not permitted to work between 8 p.m. to 7 a.m. ( but not apply to any child engaged in any public entertainment. Working hours for childrenA maximum of 3 consecutive hours with at least rest 30 minutes.Not more than 6 hours per day, or 7 hours including the hours spent at school.

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Working hours for young person

A maximum of 4 consecutive hours with a rest at least 40 minutes.Not more than 7 hours per day or 8 hours is young person is an apprentice.If attending school, not exceed 8 hours

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WORKERS MINIMUM STANDARD OF HOUSING ACT 1966.

Workers’ housing provided by employers which are situated outside the limits of majlis perbandaran, majlis bandaran must comply with the minimum standards laid down in the act.

Applies especially to workers’ housing in plantation estates.

Enforced by Labor Department

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EMPLOYEES’ SOCIAL SECURITY ACT 1969 ( SOSCO )

Provides benefits to workers and their dependants in the event of work-related accidents .Applies throughout of Malaysia.Enforced by Dept of Socso.

The contract of employment is not simply a commercial exchange in the market place of goods and services. This doctrine paid no attention to social and economic pressures forcing a person to enter into a contract of employment. Lord Hanley LC had succinctly noted this in 1762, in the case of Vernon v Bethell (1762) 2 Eden 110, 113; 28 ER 838, at 839 where his Lordship stated: "necessitous men are not, truly speaking free men, but to answer a present exigency, will submit to any terms that the crafty may impose upon them".

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Employees that are not covered by the ACT.

Any person whose wages exceed RM 3,000 a month ( 1 May 2005 )Any person whose employment is of casual nature and who is employed otherwise than for the purposes of the employer’s industry.A domestic servant.Malaysian Armed ForcesAny police officerAny person detained in any prison, Henry School, approved school, detention camp, mental hospitalAll nomadic aboriginesAny person who employed principally for the purpose of catching fish in maritime water, or employed in any capacity on board any vessel used principally for such purpose.All agriculture workers who are employed for the purpose of cultivating, upkeeping and harvesting paddy.

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CATEGORIES OF SCHEME

Employment Injury Insurance Scheme and Invalidity Pension Scheme. Below 55 years oldEmployment Injury Insurance Scheme. above 55 years old. (contribution is made by the employer only)

BENEFITS OFFERED UNDER Employment injury insurance scheme

Temporarily disabled – 80 % from average daily wages for each day of disablement. If the daily rate is below RM 10.00, the employee will be paid minimum rate of RM 10.00. The max is RM 52.00 if the wage exceeds RM 1,900 per month.Permanent disabled – 90 % of the average daily wage for life. Minimum RM 10.00

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EMPLOYEES PROVIDENT FUND ACT 1991 (EPF)

Purpose is to ensure workers are not destitute once they retire from work.Stipulates compulsory savings which will help employees or their dependants financially at their retirement, death or disability. All employers and employees must make monthly contributions.Minimum contribution of 12 % by the employer and 11 % by the employee.Categories of employees precluded from compulsory contribution. ExpatriatesDomestic servantsSelf-employed person including partners who receive salaries from partnershipEmployees under 16 years old

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DEFINITION OF WAGES UNDER EPF ACT.

Includes all forms of remuneration in money due to employee under his contract of service of apprenticeship. Includes bonus or allowancesExcludes service charge, tip or valuntarily given by a customer. Overtime paymentGratuityRetirement benefit

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HUMAN RESOURCES DEVELOPMENT ACT 1992 (HRDF)

Employers are required to contribute 1 percent of their pay roll to this fund every month. (basic pay + fix allowances)Manufacturing sector – 50 workers and above or 10 workers for services sector.Approved training is conducted the company can claimed for reimbursement of the costs involved.

APPROVED TRAINING Any training of Skill upgradingAt least 7 hoursMaximum RM 1,000 each participantInternal training RM 3,500 per day

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Occupational Safety and Health 1994 (OSHA)

Applies throughout of Malaysia to all industries and sectors.Duties of employers are responsible to provide a workplace which without risk to health.The obligation extends to :

Ensuring proper arrangements for the use or operation, handling, storage and transport of plant and substancesThe provision of information, training and supervision to ensure safety of the employees.The maintenance of the place of work and its entrances and exits.The provision of adequate welfare facilities for workers.

Employer with more than 5 employees is required to prepared a written statement of his safety and health policy.Any accident must be reported to the DOSH.

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FACTORIES AND MACHINERY ACT 1967

Provides the protection of workers from the hazards of industrial work, including occupational diseases.Set the minimum standards for healthy and safe work.Enforced by the DOSH

THE WAGES COUNCILS ACT 1947

To set such minimum wages in certain industries.The wages councils currently in existence are in the following industries :

Cinema workers;Shop assistants;Hotel and catering industry workersPort stevedores.

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CONTRACT OF EMPLOYMENT

A consensual relation between two parties involving anexchange: work in return for pay.

Otto Khan Freund: “In its inception, it is an act of submission, in its operation it is a condition of subordination, however much The submission and subordination may be concealed by that indispensable figment of the legal mind known as the ‘contract of employment’. The main object of labour law has always been … to be a countervailing force to counteract the inequality of bargaining power which is inherent and must be inherent in the employment relationship”.

O Kahn-Freund, "Legal Framework", in A Franders and H A Clegg (eds), The System of Industrial Relations in Great Britain (Oxford: Blackwell, 1954) 45. The application of contractual principles in employment relationships was enunciated by prominent English jurists of the early Nineteen Century such as by Bentham through his philosophy of 'the utilitarian principles' which enunciated the principle that the parties to a contract freely assume legal obligations, or by Sir Henry Maine through his theory of 'progressive society', namely, movement from 'status' to 'contract'.

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Workers and The Law, 3rd Edition, Sweet & Maxwell, 1986, p.110, Lord Wedderburn:-

“ The words 'contract of service' and 'employee' have significant legal implications. As the definition in the Act suggest, an employee or a workman must be under a contract of service. This is distinguished from a contract where the employer gets the work done by an independent or self-employed, contractor.”

The contract of employment, which is the product of the industrial revolution and the doctrine of laissez-faire as its justification, has been described as 'the cornerstone of the edifice of labour law. 

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UHG V DIRECTOR GENERAL OF INLAND REVENUE [1974] 2 MLJ 33

“compulsory statutory contributions and payment like provident fund,social security, workmen's compensation and pension schemes are payable by employers if the workers are employed”

The importance of freedom of contract is therefore closely linked to a free enterprise capitalist system and together they work to create ideals of a working class. This is based on the whole idea of profit making. The belief was that an individual should strive to maintain his own interest and at the same time the interest of the community.

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SAEMAH ABU SAID V. DANZAS AEI (MALAYSIA) SDN BHD INDUSTRIAL COURT, KUALA LUMPUR;JALALDIN HUSSAINAWARD NO. 1218 OF 2009 [CASE NO: 25(21)/4-695/04]15 OCTOBER 2009

Standard Of Proof

It is a principle of industrial relations jurisprudence that in a dismissal case, the employer must produce convincing and cogent evidence that the workman committed the offence or offences he is alleged to have committed for which he has been dismissed. The burden of proof lies on the employer. He is obliged to prove his case on a balance of probabilities. It is for him to adduce evidence that the workman was dismissed for just cause or excuse.From the totality of the above evidence, the court finds on a balance of probability that the claimant's position as a Customer Service Manager was no longer required by Nokia. The company then had reason to terminate the claimant's employment not only by reason that the contract had came to an end and the implants' employment can be terminated but also by p. 16 para. 2 of the Terms and Conditions the claimant's position as a Customer Service Manager is no longer required.

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Colgate Palmolive (M) Sdn Bhd v. Yap Kok Foong [1998] 2 ILR 965 (Award 368 0f 1998) , it was held as follows:

In a s.20 reference, a workman's complaint consists of two elements: firstly, that he has been dismissed, and secondly that such dismissal was without just cause or excuse. It is upon these two elements being established that the workman can claim his relief, to wit, an order for reinstatement, which may be granted or not at the discretion of the Industrial Court. As to the first element, industrial jurisprudence as developed in the course of industrial adjudication readily recognizes that any act which has the effect of bringing the employment contract to an end is a 'dismissal' within the meaning of s.20.

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LOW AH HENG V. CARTRADE SDN BHD INDUSTRIAL COURT, KUALA LUMPURFREDRICK INDRAN XA NICHOLASAWARD NO. 940 OF 2009 [CASE NO: 10(23)/4-868/07]30 JULY 2009From the total evidence that had been adduced in this case, the company had established on a balance of probability, the appropriateness of its actions against the claimant. The claimant himself had positively admitted to substantial and material elements of the allegation of conflict of interest and had by this shown his betrayal of the trust and confidence reposed in him by the company. His transfer to Petaling Jaya had not been of any significance to the issue at hand because he had remained an employee of the company and his offer to have his wife removed from the partnership had been "too little, too late". The misconduct perpetrated by the claimant had fully justified his dismissal .

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In the case of Stamford College v Lai Fook Seng [1994] 2 ILR 679 ( Award No. 357 of 1994) , the court succinctly stated as follows:

It is well established that a contract of employment is a contract of confidence and trust. Sometimes it is called a contract of fidelity. What it means is that the employee must not place himself in a position where his interest conflicts with the interest of his employer. Some contracts make such provisions. However it is equally established in law that such term is implied in a contract of employment.The law and authorities are clear in that placing oneself in a conflict of interest situation is a serious misconduct which warrants nothing less than the punishment of dismissal.

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Projek Lebuhraya Utara-Selatan Bhd v. Ahmad Nazir Hussein [2000] 1 ILR 189 (Award No 47 of 2000) it was held:

In the light of the decision in Ferodo's case, the company had the reason or cause to terminate the claimant's services due to his failure and carelessness in carrying the trust reposed in him in protecting and taking care of the safety of company's property ...

And in Ferodo Ltd. v. Barnes [1976] IRLR 39 quoted with approval in the above said case, it was held that:It must be remembered that in dismissing an employee ..., the employer need only satisfy himself at the time of the dismissal, there were reasonable grounds for believing that the offence put against the employee was committed. The test is not whether the employee did it but whether the employer acted reasonably in thinking the employee did it and whether the employer acted reasonably in subsequently dismissing him.

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In Western Excavating (ECC) Ltd. v. Sharp [1978] IRLR 27, Lord Denning observed the following:

If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed.

Constructively dismissed

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In Woods v. W.M. Car Services Ltd. [1981] ICR 666, Justice Brown - Wilkinson said:

In our view it is clearly established that there is implied in a contract of employment a term that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: Courtaulds Northern Textile Ltd. v. Andrew [1979] IRLR 84. To constitute a breach of this implied term it is not necessary to show that the employer intended any repudiation of the contract: the tribunal's function is to look at the employer's conduct as a whole and determine whether it is such that its effect, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it; see British Aircraft Corporation Ltd v. Austin [1978] IRLR 347. The conduct of the parties has to be looked at as a whole and its cumulative impact assessed.

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In Wong Chee Hong v. Cathay Organisation (M) Sdn Bhd [1988] 1 CLJ 45 the Supreme Court stated the basic principles as follows:

The common law has always recognized the right of an employee to terminate his contract of service and therefore to consider himself as discharged from further obligations if the employer is guilty of such breach as affects the foundation of the contract or if the employer has evinced or shown an intention not to be bound by it any longer.

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In the Malaysian Court of Appeal decision of Anwar Abdul Rahim v. Bayer (M) Sdn Bhd [1998] 2 CLJ 197 at p. 205 the Court of Appeal observed that

"the proper approach in deciding whether constructive dismissal has taken place is not to ask oneself whether the employer's conduct was unfair or unreasonable (the unreasonableness test) but whether the conduct of the employer was such that the employer was guilty of a breach going to the root of the contract or whether he has evinced an intention no longer to be bound by the contract".

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Finally, on the issue of the burden of proof, it is trite law that it is on the employee to prove that he has been constructively dismissed.

Hence the claimant who seeks to establish a case of CD must prove the following:(i) That the company, by its conduct, has breached a term or terms of the contract of employment or has evinced an intention no longer to be bound by it;(ii) the breach must be a fundamental breach going to the root or foundation of the contract;(iii) he must leave in response to the breach and not for some unconnected reason; and(iv) he must not delay too long in terminating the contract in response to the company's breach, otherwise he may be deemed to have waived the breach.

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Malaysian workers however still enjoy such right under statutory provisions. For this, we may refer to relevant legislation such as the Industrial Relations Act 1967 where through ss 4 and 5, workers shall have the right to join a trade union and to participate in its lawful activities. Section 5 in particular renders any act of the employer unlawful for any act which is regarded as anti union discrimination . Cases heard by the Industrial Court under this section seemingly did not attract arguments of constitutional right instead they were just grounded on statutory right  . However, to say that freedom of association for trade union purposes is not a constitutional right would not be completely correct as art 10(3) states that 'restrictions on the right to form associations may also be imposed by any law relating to labour'. The existence of such qualification or limitation means that such right is in fact recognised as one of the enshrined fundamental liberties under the federal constitution except that other laws are capable of restricting it.

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The view that in Malaysia, the right to form labour unions is not fundamental may be doubted if one adverts his mind to an observation made (obiter) by Raja Azlan Shah FJ (as he then was) in the case of Non-Metallic Mineral Products Manufacturing Employees Union & Ors v South East Asia Fire Bricks Sdn Bhd [1976] 2 MLJ 67, p 69. According to the learned Federal Judge, 'Workers organisations cannot exist, if workers are not free to join them, to work for them and to remain in them. This is a fundamental right which is enshrined in our constitution and which expresses the aspirations of workmen. But then the learned judge made no specific reference to any relevant constitutional provision probably because he was making the statement just by the way.

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Recently the judicial reasoning in emerging labour law theory with constitutional principles are at its foundations. Although the Malaysian courts have not developed these doctrines fully and have not applied them consistently, it is apparent that the constitutional pronouncements have had a considerable impact on Malaysian labour jurisprudence.

As the courts continue to grapple with these new directions, it appears that the stage is being set for a movement away from contract to constitutional status in labour law theory.

It is possible to construct a judicially developed framework of constitutional rules and principles, which will provide the foundation for a new labour law, one that is founded on an amalgamation of the law of contract, constitutional law and administrative law.

Thank You.