1

SKRINE 1

Do interns, casual workers, secondees, outsourced workers and SL1M have any legal recourse for IR issues and what are the employer’s responsibilities towards them?

2 April 2019

By Siva Kumar Kanagasabai

SKRINE 2

DEFINITION OF AN EMPLOYEE

Under the relevant Acts of Malaysia

2

SKRINE 3

EMPLOYMENT ACT 1950 (“EA”)

!  An employee is defined in Schedule 1, as one who has entered into a contract of service with an employer where one’s wages do not exceed RM2000.00 a month or, irrespective of amount of wages earned in a month, who is engaged in manual labour, apprentice, operation of a vehicle, or supervises employees engaged in manual labour or a domestic servant.

SKRINE 4

EMPLOYMENT ACT 1950 !  part-time employee means a person included in the First Schedule whose average

hours of work per week is more than 30% but do not exceed 70% of the normal hours of work per week of a full-time employee employed in a similar capacity in the same enterprise.

!  “contract of service” means any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee and includes an apprenticeship contract.

!  An “apprenticeship contract” is defined as a written contract for no less than 2 years for training of an apprentice.

3

SKRINE 5

INDUSTRIAL RELATIONS ACT 1967 (“IRA”)

! Defines workman as any person, including an apprentice, employed under a contract of employment to work for hire or reward.

SKRINE 6

EMPLOYEES’ SOCIAL SECURITY ACT 1969 (“SOCSO”)

!  Defines employee as any person who is employed for wages under a contract of service or apprenticeship with an employer, whether the contract is expressed or implied or is oral or in writing, on or in connection with the work of an industry.

!  This does not apply to: - i.  casual workers, ii.  domestic servants, iii.  tributers, and iv.  persons in the armed forces or police.

4

SKRINE 7

EMPLOYEES’ SOCIAL SECURITY ACT 1969

An employee includes someone: - i.  who is directly employed by the principal employer on any work,

incidental or preliminary to or connected with the work of the industry regardless of whether the work is done on the premises or elsewhere;

ii.  who is employed through an immediate employer of the industry or under the supervision of the principal employer;

iii.  whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service.

SKRINE 8

The owner of an industry or the person with whom an employee has entered into a contract of service or apprenticeship and includes: -

!  a manager, agent or person responsible for the payment of salary or wages to an employee;

!  the occupier of a factory.

!  means a person who has undertaken the execution on the premises where the principal employer is carrying on his trade or business, profession, vocation, occupation or calling;

!  a person under the supervision of the principal employer or his agent, of the agent, of the whole or any part of any work which is ordinarily part of the work of the trade or business, profession, vocation, occupation or calling, of the principal employer or is preliminary to the work carried on in, or incidental to the purpose of, any such trade or business, profession, vocation, occupation or calling;

PRINCIPAL EMPLOYER AND IMMEDIATE EMPLOYER DEFINED UNDER THE SOCSO

Principal Employer Immediate Employer

5

SKRINE 9

!  the legal representative of a deceased owner or occupier;

!  Any government in Malaysia, department of any such government, local authority or statutory body and, where an employee is employed with any such government, department, authority or body or with any officer on behalf of any such government, department, authority or body, the officer under whom such employee is working.

!  a person by whom the services of an employee who has entered into a contract of service with him are temporarily lent or let on hire to the principal employer.

PRINCIPAL EMPLOYER AND IMMEDIATE EMPLOYER DEFINED UNDER THE SOCSO

Principal Employer Immediate Employer

SKRINE 10

EMPLOYMENT PROVIDENT FUND ACT 1991 (“EPF”)

!  Defines an employee as any person, not being a person of the descriptions specified in the First Schedule, who is employed under a contract of service or apprenticeship, whether written or oral and whether expressed or implied, to work for an employer.

6

SKRINE 11

Common Theme Among the Various Acts

!  In order for one to be considered as an employee under the Acts, there must be a contract of service between the person being hired and the person hiring.

!  The most authoritative precedent on the test to determine whether a person is engaged as an employee is the Federal Court case of Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia [1995] 3 MLJ 369.

SKRINE 12

Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia

The Federal Court in Hoh Kiang Ngan stated that: -

“the correct test to be applied in determining whether a claimant is a workman under the Act is that enunciated by Chang Min Tat FJ in Dr A Dutt v Assunta Hospital [1981] 1 MLJ 304 at 311. We accordingly hold that a workman under the Act is one who is engaged under a contract of service. An independent contractor who is engaged under a contract for services is not a workman under the Act. We take this view because it provides, as earlier observed, for a flexible approach to the determination of the question. It is fairly plain to see why flexibility is achieved by having resort to this test.”

7

SKRINE 13

Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia It further states that:-

“In all cases where it becomes necessary to determine whether a contract is one of service or for services, the degree of control which an employer exercises over a claimant is an important factor, although it may not be the sole criterion. The terms of the contract between the parties must therefore first be ascertained. Where this is in writing, the task is to interpret its terms in order to determine the nature of the latter’s duties and functions. Where it is not then its terms must be established and construed. But in the vast majority of cases there are facts which go to show the nature, degree and extent of control. These include, but are not confined, to the conduct of the parties at all relevant times. Their determination is a question of fact. When all the features of the engagement have been identified, it becomes necessary to determine whether the contract falls into one category or the other, that is to say, whether it is a contract of service or a contract for services.”

SKRINE 14

Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia

! “contract of service”/ “contract of employment” v “contract for services” / independent contractor

! In order to determine whether a contract is one of service or for services, the degree of control which the company exercises over the individual is an important factor.

8

SKRINE 15

Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia

In the event of a dispute, the Industrial Court will examine all facts and circumstances which include, but is not limited to: -

! nature of the work performed by the individual; and

! the degree and extent of control exercised by the employer over the individual (e.g. the right to work for others or exclusive relationship).

SKRINE 16

Other Considerations !  Length of time/period in which the individual performed the work (Employees

Provident Fund Board v MS Ally & Co Ltd [1975] 2 MLJ 89); !  whether what was done under the engagement was an integral part of the

employer’s business or merely ancillary to it. Contract FOR service, although done for the business, is not integral but an accessory to it (Lian Ann Lorry Transport and Forwarding Sdn Bhd v Govindasamy [1982] 2 MLJ 232);

!  whether the individual was treated the same as other permanent employees in the Company;

!  stipulation as to working hours, overtime, holidays, benefits such as medical expenses (Chin Chen Fui v Majlis Perbandaran Sandakan [1998] 1 MLJ 448);

!  party which provide the tools and equipment and who bears the risk of loss and the chance of profit;

9

SKRINE 17

Other Considerations

Cont’d

!  Method of payment and whether there is any obligation to work only for that employer;

!  Arrangement of income tax, EPF, and SOCSO deductions & contributions which indicate a employment relationship; and

!  Right of termination e.g. misconduct

!  How parties have described themselves in the contract is relevant but not conclusive

E.g. AIA v Lam Peng Chong [1999] 2 MLJ 547 (Agency Manager found to be workman)

SKRINE 18

C A T E G O R I E S O F W O R K E R S A N D T H E CLASSIFICATION OF AN EMPLOYEE

10

SKRINE 19

A. INTERNS/APPRENTICE

!  Intern : “a student or trainee who works, sometimes without pay, in order to gain work experience or satisfy requirements for a qualification”

!  Apprentice : a person who is learning a trade from a skilled employer, having agreed to work for a fixed period at low wages.

!  Some Acts specifically include apprentice as employee but make no mention of intern.

SKRINE 20

A. INTERNS

Australia !  In Australia, a range of indicators are used to assess if an employment

relationship exists key of which are:- (a) the intention to enter into an agreed arrangement to do work for the employer; (b) a commitment by the person to perform work for the benefit of the business or organisation as opposed to for his own benefit; and (c) an expectation that the person receive payment for their work.

11

SKRINE 21

A. INTERNS

Australia !  In Pacesetter Homes Pty Ltd v Australian Builders Labourers

Federated Union of Workers (WA Branch) (1994) 57 IR 449, 455 :- “in cases where the length of work experience is longer and where more work is required to be undertaken than when the period that the work experience person is able to observe the teacher is of a short duration, and where the tuition is in fact scant, then the real intention may be that a person is an employee and a contract of employment may be found, notwithstanding that the label “work experience” is applied to that arrangement.”

SKRINE 22

A. INTERNS

United Kingdom

!  In the UK, if an intern does regular paid work for an employer, they qualify as an employee and are eligible for employment rights.

!  The recognised exceptions are in circumstances when a person undergoing a student internship or a school work experience placement, is a voluntary worker or he does only shadowing.

12

SKRINE 23

B. CASUAL WORKERS AND PART-TIME WORKERS

! A casual worker is someone who is only called when required and when there is work to be given.

! A part-time worker is someone who is given an employment contract but only works for a specific number of hours within the week.

! The EA : part-time workers are considered as employees however the position of casual workers are not as clear with reference to the Acts.

SKRINE 24

C. EMPLOYEES UNDER SECONDMENT

Comex Services Asia Pacific Region, Miri v. Grame Ashley Power [1987] 2 ILR 34 (Award No. 224 of 1987) sets out the position of a seconded employee that such an employee will remain the employee of the original company so long as:- !  the contract is not terminated;

! a new contract is not made and the employee continues to be in employment of the original employer, even if the employer orders the employee to do certain work for another person, the employee still continues to be in his employment;

!  the 3rd party may exercise control and direction in the doing of the thing which the employee was hired for on behalf of employer

13

SKRINE 25

C. EMPLOYEES UNDER SECONDMENT

Cont’d

! If an employee fails to carry out directions, 3rd party cannot dismiss him and can only complain to the actual employer.

! The right of dismissal is vested in the employer. ! Payment of wages and exercise of control may rest with the hirer but

the right of dismissal remains with the employer.

SKRINE 26

D. OUTSOURCED EMPLOYEES

!  The general position of employees who are outsourced to a company requiring their services is that they usually remain the employees of the company outsourcing them.

!  However, the test of whether an employment relationship exists is that of substance and not form.

!  Hence, if the employer on paper is only supplying employees and effective control is exercised by the company receiving the employees, an employment relationship could exist with the company receiving the outsourced labour.

14

SKRINE 27

E. SL1M

!  This is known as Skim Latihan 1 Malaysia and was launched in 1 June 2011 by the Malaysian Government to raise the standard of employability amongst graduates.

!  The objective of SL1M is to train and develop Malaysian graduates to acquire both soft skills and on the job skills for employment readiness.

SKRINE 28

E. SL1M

!  The companies who register to be part of the program are called as Host Companies.

!  Host Companies under SL1M are :-

i.  Not required to pay salaries to the candidates however are encourage to provide a minimum of RM500.00 as allowance.

ii.  Need not provide an official letter of appointment to the candidates. iii.  To provide on-the-job training (“OJT”) or coaching relevant to the functional

area and may offer the candidate full time employment at the end of the OJT (subject to the candidate’s performance)

15

SKRINE 29

E. SL1M

!  Based on the EA, candidates under the SL1M would not be considered as employees as it is less than 2 years.

!  However they may be considered as apprentices under the EPF and SOCSO Acts.

SKRINE 30

F. ARE DIRECTORS EMPLOYEES?

!  In the past, in Inchcape Malaysia Holdings Bhd. v R B Gray & Anors. [1985] 2 MLJ 297 it was held that directors cannot be considered as a workman as being an Executive Director of the Company, one will have the distinct functions as the directing mind in the Company and therefore cannot be classified as a workman under the IRA.

!  However Inchcape was overruled subsequently by the Federal Court in Hoh Kiang Ngan.

16

SKRINE 31

F. ARE DIRECTORS EMPLOYEES?

!  In the case of Menteri Sumber Manusia v John Hancock Life Insurance (Malaysia) Bhd & Another appeal [2007] 1 CLJ 366 the Court of Appeal considered the claimant as a workman under s 20 of the IRA stating that:-

“there was no provision under the Companies Act 1965 or the IRA which precludes an employee holding the position of Managing Director, Chief Executive Officer or any other executive position engaged under a contract of employment with a company from challenging his dismissal or removal by the company through adoption of its members’ resolution in a general meeting.”

SKRINE 32

THE EFFECT OF THE GIG ECONOMY ON CLASSIFICATION OF EMPLOYEES

17

SKRINE 33

Uber B.V and others v Aslam and others UKEAT/0056/17/DA

United Kingdom !  The Courts considered Uber drivers as employees of Uber on the

basis that although the contracts between Uber and the driver are designed to make them appear to be self employed, a consideration of all the circumstances of the case determined that they were employees.

SKRINE 34

Uber B.V and others v Aslam and others UKEAT/0056/17/DA !  Uber’s argument was that the drivers were principals in separate contracts with its

passengers as and when they agreed to take a trip. !  This argument was rejected by the Court as :-

i.  the drivers could neither obtain passengers’ contact details nor provide their own;

ii.  Drivers had to accept 80% of their trips of their driver status account would be lost;

iii.  There was personal performance by the Uber drivers in which substitution was not allowed.

18

SKRINE 35

Pimlico Plumbers Ltd v Smith [2018] UKSC 29

!  This position seems to be consistent in the UK with the recent Supreme Court case of Pimlico.

!  The main issue was whether Mr. Smith was an employee of Pimlico Plumbers or an independent contractor.

!  The Supreme Court found that Mr. Smith was an employee of Pimlico on the basis that the dominant feature of Mr Smith's contracts with Pimlico was an obligation of personal performance (i.e. no substitution) and control

SKRINE 36

Pimlico Plumbers Ltd v Smith [2018] UKSC 29

!  It was also found that the Company’s tight control over Mr. Smith was reflected in its requirements that he should wear the branded Pimlico uniform; drive its branded van, to which Pimlico applied a tracker; carry its identity card; closely follow the administrative instructions of its control room and appearance must be “clean and smart”.

!  The severe terms as to when and how much it was obliged to pay him, on which it relied, betrayed a grip on his economy inconsistent with his being a truly independent contractor.

19

SKRINE 37

Addisson Lee v Gascoigne UKEAT/0829/17LA

!  Similarly, in the case of Addisson Lee v Gascoigne UKEAT/0289/17/LA in the UK where the claim by a cycle courier was for 1 weeks' holiday pay.

!  The Employment Tribunal judge found for the Claimant asserting that when he was logged on to Addison Lee's app, through which he received his courier jobs, he had to be willing and available to work. He could not decline the jobs he was given and was therefore under a sufficient degree of employer control to warrant worker status.

SKRINE 38

Addisson Lee v Gascoigne UKEAT/0829/17LA

!  The decision given by the Tribunal's shows its readiness to use the reality of the working situation to trump contractual terms. This does create significant uncertainty for businesses operating within such sectors, who must now undertake a similar assessment of working reality rather than relying on their own contractual terms.

20

SKRINE 39

Mr. Michail Kaseris v Rasier Pacific V.O.F (Uber) FWC 6610 Australia ! The approach in Australia is different where it found that Uber drivers

were not considered employees of Uber. The basis for its reasoning summarily that:-

i.  Control – that Mr. Kaseris had complete control in providing services, deciding when to log onto the Uber app, and when to accept and reject rides.

ii.  Equipment – Mr. Kaseris had to provide his own vehicle, phone and mobile data and even funded his own insurance.

SKRINE 40

Mr. Michail Kaseris v Rasier Pacific V.O.F (Uber) FWC 6610 Australia iii.  Uniform – the Service Agreement prohibited Mr. Kaseris from wearing

a uniform or displaying the Uber logo on his car. iv.  Tax – Mr. Kaseris had to register for GST and was responsible for

other tax liabilities. v.  Service Agreement – it described Uber as a payment collection agent

and provider of technology services. vi.  Payment and benefits – Mr. Kaseris received a proportion of the fee

charged for each trip, and did not receive employment benefits such as leave.

21

SKRINE 41

WHAT IF YOU ARE WRONG ABOUT THE EXISTENCE OF AN EMPLOYMENT RELATIONSHIP?

! Can be found to have committed offences under EPF Act, SOCSO Act, National Wages Consultative Council Act (minimum wages) etc.

!  EPF and SOCSO can bring claims for unpaid contributions, dividends & interest

! Can lead to tsunami of claims from existing employees about their statutory rights as employees

SKRINE 42

CAN YOU BE LIABLE EVEN IF YOU ARE NOT AN EMPLOYER? !  Even though a Company may not be the employer of the employee, it may still face

risks under the IRA of being joined in proceedings. !  In Asnah Ahmad v Mahkamah Perusahaan Malaysia [2015] 3 CLJ 1053, the Court

of Appeal decided that 3rd parties can be joined in proceedings and be made liable to pay an award of the Industrial Court notwithstanding that they are not the employer when there is “reasonable factual” or “legal nexus” between the employee and that third party.

!  The Court ordered the joinder of a new shareholder of the employer who had taken over control of the effective management of the employer company after the employee was dismissed and other banks connected with the new shareholder

22

SKRINE 43

CONCLUSION

!  Employers should conduct risk assessment to determine if those whom they have classified as contractors/non-employees could be employees.

!  The classification of employees in the age of the gig economy adds to uncertainty as new ways of working /earning an income arise and the law learns to deal with it.

SKRINE 44

THANK YOU

SIVA KUMAR KANAGASABAI PARTNER, SKRINE

skk@skrine.com +603 – 2081 3828