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Chapter 27

MalaysiaSiva Kumar Kanagasabai, Selvamalar Alagaratnam,

Sharmila Ravindran and Foo Siew Li*

* sivaKumarKanagasabaiandselvamalaralagaratnamarepartners,sharmilaRavindran isaseniorassociateandFoosiewliisanassociateatskrine.

I INTRODUCTION

Thebasisof the employment relationship inMalaysia is the contractof employmentbetweentheemployerandtheemployee.Hence,thecivilcourtshavejurisdictiontodealwithdisputesbetweenemployerandemployee,considering thematterpurely fromacontractualpointofview.

i Legislation

inordertoprovidetheemployeeswithadditionalprotection,Parliamenthasenactedvariouslegislation.Themainlegislationisasfollows.

The Employment Act 1955 (‘the EA’)TheEaprescribesminimumtermsandconditionsofemploymentforcertaincategoriesofemployeesandprovidesaprocessthatemployeesmayusetomakeclaimsforbreachofcontractornon-compliancewiththeprovisionsoftheEa.

an‘Eaemployee’referstoanypersonorclassofpersonswho,irrespectiveofhisoccupation,hasenteredintoacontractofservicewithanemployerandwhosemonth’swages do not exceed 1500 Malaysian ringgit, or any person who, irrespective of theamountofwagesheearnsinamonth:a isengagedinmanuallabourincludingsuchlabourasanartisanorapprentice;b isengagedintheoperationormaintenanceofanymechanicallypropelledvehicle

operatedforthetransportofpassengersorgoodsorforrewardorforcommercialpurposes;

c supervisesoroverseesotheremployeesengagedinmanual labouremployedbythesameemployerinandthroughouttheperformanceofwork;

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d isengagedinanycapacityonanyvesselregisteredinMalaysiaandwhoisnotanofficercertifiedundertheMerchantshippingactsoftheUnitedKingdomasamendedfromtimetotime,isnottheholderofalocalcertificateasdefinedinPartViioftheMerchantshippingOrdinance,1952,orhasnotenteredintoanagreementunderPartiiioftheMerchantshippingOrdinance,1952;or

e isengagedasadomesticservant.

The Industrial Relations Act 1967 (‘the IRA’)TheiRaprovidesfortheprotectionofrightsofworkersandemployersandtheirtradeunions, the process by which a trade union may claim recognition, the process forcollectivebargaining,themechanismforresolutionoftradedisputesandprotectsagainsttheunjustdismissalofworkmen.

a ‘workman’ refers to any person, including an apprentice, employed by anemployer under a contract of employment to work for hire or reward and, for thepurposesofanyproceedingsinrelationtoatradedispute,includesanysuchpersonwhohasbeendismissed,dischargedorretrenchedinconnectionwithorasaconsequenceofthatdisputeorwhosedismissal,dischargeorretrenchmenthasledtothatdispute.

The Trade Unions Act 1959 (‘the TUA’)TheTUaprovidesfortheregistration,constitution,rights,liabilitiesandmanagementoftradeunions.

The Employees Provident Fund Act 1991 (‘the EPFA’)TheEPFaprovidesformandatorymonthlycontributionsontheamountofwagestobemadebyboththeemployerandtheemployeetoagovernment-managedretirementfundona12:11percentofincomeratio(theemployercontributes12percentoftheincomeandtheemployeecontributes11percent).

The Employees Social Security Act 1991 (‘the SOCSO Act’)ThesOCsOactprovidesformandatorycontributionstobemadebyboththeemployeeandtheemployertoagovernment-managedprogrammeakintoaninsurancescheme,effectively foranyemployeewhohasever earned less than3,000Malaysian ringgit amonth.

The Occupational Safety and Health Act 1994Thisactfocusesonpreventivemeasuresandtheimpositionofgeneraldutiesonemployerstoensurethesafety,healthandwelfareofpersonsatwork.

ii Bodies

Thepowerandjurisdictiontoenforceemploymentlawslieswiththevariousbodies.

The Director General of Labour TheDirectorGeneraloflabourhas thegeneralpower toadminister and implementtheprovisionsoftheEamadethereunder.Thisincludes,asstatedearlier,theinquiryintocomplaintsmadebyemployeesforbreachofcontractornon-compliancewiththe

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provisionsoftheEaortheregulationsmadethereunderandhasthepowertoenterandinspectanyplaceofemploymenttodoso.TheDirectorGeneraloflabourmayalsoinvestigatepossibleoffencesundertheEaandcompoundsuchoffences.TheEavestspowerand jurisdiction in theDirectorGeneraloflabour todetermineanydisputebetweenanemployee andhis employer in respectofwagesor anyotherpaymentsduetosuchemployeeunderanytermofacontractofservicebetweensuchemployeeandhisemployerinrelationtoanemployeeearningupto5,000Malaysianringgitamonth.adecisionbytheDirectorGeneraloflabourmaybeappealedtotheHighCourt.

The Director General for Industrial RelationsThe Director General for industrial Relations generally has the duty to perform allfunctionsthatmaybenecessaryorexpedientforthepurposesofcarryingoutorgivingeffect to the provisions of the iRa, including receiving representations on dismissalsandtakingsuchstepsashemayconsidernecessaryorexpedientsothatanexpeditioussettlementthereofisarrivedat;orwheretheDirectorGeneralofindustrialRelationsissatisfiedthatthereisnolikelihoodoftherepresentationsbeingsettled,heshallnotifytheMinisteraccordingly. inaddition,he shall considerany tradedispute reported tohimandtakesuchstepsasmaybenecessaryorexpedientforpromotinganexpeditioussettlementthereof,whichshallincludetotheindustrialCourtforconciliation.

The Industrial CourtTheindustrialCourtwascreatedbytheiRatodealwiththefollowingtypesofclaims:a representations for reinstatement brought by a workman when the workman

considershimselftohavebeendismissedwithoutjustcauseorexcuse;b tradedisputesbetweenanemployerandhisworkmenwhichisconnectedwith

theemployment,non-employment,termsofemploymentorconditionsofworkofanysuchworkmen;

c claimsofnon-compliancebyonepartytoanawardhandeddownbytheindustrialCourtoracollectiveagreement;and

d applicationstointerpretcollectiveagreements.

TheindustrialCourtderivesitspowersandfunctionsfromtheiRaandoperatesasaquasi-judicialbody.itwillissueanawardinrelationtothedisputeorissuebroughtbeforeit,accordingtoequity,goodconscienceandthesubstantialmeritsofthecasewithoutregard to technicalities and legal form.1an awardof the industrialCourt is bindingonthepartiestoadispute,thesuccessors,assigneesortransfereesofanyemployerortradeunionwhichispartytothedisputeandallworkmenwhowereemployedintheundertakingtowhichthedisputerelates.2

inrelationtotradedisputes,theindustrialCourtshallhaveregardforthepublicinterest,thefinancial implicationsandtheeffectoftheawardontheeconomyofthe

1 section30(1)and(5)oftheiRa.2 section32oftheiRa.

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country andon the industry concerned, and also to theprobable effect in relatedorsimilarindustries.3

TheawardoftheindustrialCourtmaybechallengedbywayofajudicialreviewapplicationtotheHighCourtonthegroundsthat,inmakingitsaward,theindustrialCourthascommittedanerroroflaw.QuestionsoflawarisingfromtheproceedingsmayalsobereferredtotheHighCourtundersection33aoftheiRabutsuchapplicationsareuncommon.

The Director General of Trade UnionsTheDirectorGeneralofTradeUnionsisresponsibleforthegeneralsupervision,directionandcontrolofallmattersrelatingtotradeunionsthroughoutMalaysia.

The Employee’s Provident Fund BoardTheEmployee’sProvidentFundBoardshallhavesuchpowersandshallperformsuchdutiesasaregivenorimposedundertheEPFa,andmayemployandpayagents,advocatesandsolicitors,bankers,stockbrokersoranyotherpersons,totransactanybusinessordoanyactrequiredtobetransactedordoneintheexerciseofitspowersorinthecarryingoutofitsdutiesorforthebettercarryingintoeffectofthepurposesoftheEPFa.

The Social Security Organisation BoardThe social security Organisation Board has the power of general direction andsuperintendenceof theschemeofsocialsecurityadministeredbythesocialsecurityOrganisationunderthesOCsOact.

II YEAR IN REVIEW

in2009and2010,thegovernmentmadesignificantmovestoamendthemainlabourlawsinMalaysianamely,theEaandtheiRa.amongtheproposedamendmentstotheEaincludeprovisionsinrelationtosexualharassmentwhiletheproposedamendmentstotheiRaincludeaprovisionthatprecludesemployeesearningsalariesabove10,000Malaysian ringgitpermonth fromseeking redress fordismissalwithout just causeorexcuseundersection20oftheiRa.

Theseproposedamendmentshavebeenmetwithresistancefromvariousinterestgroupsandhaveyettocometofruition.TheEaamendmentBillwhichhadbeentabledforreadingbeforeParliamentin2010wasabruptlywithdrawn,becauseseveralchangesweretobemadetotheBill.

itisinterestingtonotethat,from2008onwards,therehasbeenadropinthenumberofcasesreferredbytheMinistertotheindustrialCourtsundersection20oftheiRaforclaimsofunjustdismissal,i.e.from2,346casesbeingreferredin2007to665casesin2008,and647casesin2009.ThishasoccurredfollowingtheappointmentofanewMinisterofHumanResources in2008whohasencouraged settlementand

3 section30(4)oftheiRa.

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conciliationbeforetheDirectorGeneralofindustrialRelationsandcarefulscrutinyofthemeritsofeachunresolvedrepresentation.

amongthenoteworthyhottopicsforemploymentlawinMalaysiain2010,thereis the introductionof thePersonalDataProtectionact2010 (‘PDPact’)whichwaspassedbyParliamentinJune,buthasnotyetcomeintoforce.WeanticipatedetailedguidelinesorregulationstobeissuedbytheMinistrywithregardtothisPDPactinthenearfuture.atthisstage,itisunclearwhetherthePDPactwouldapplytoemployeeinformation.

in addition, the Whistle-blower Protection act 2010, which seeks to combatcorruptionandotherwrongdoingsbyencouragingandfacilitatingdisclosuresofimproperconductaswellasprotectingthepersonsmakingthosedisclosures(includingemployees)fromdetrimentalaction,cameintooperationon15December2010.However,atthisstage,itisstilltooearlytocommentonhoweffectivetheactisgoingtobeinachievingitsaims.

III SIGNIFICANT CASES

TheFederalCourtcaseofRanjit Kaur S Gopal Singh v. Hotel Excelsior (M) Sdn Bhd4 concerned an executive in the Food & Beverage Department at a hotel who wassuspendedpendingadomesticinquiryintoseveralchargeslevelledagainsther,includingher refusal to wear her uniform, her habitual lateness, her failure to submit medicalchitspromptlyonoccasionswhenshetookmedicalleaveandherfailuretoinformherimmediatesuperiorpromptlythatshehadtakenmedicalleave.shewasfoundguiltyofthefourchargesandwasdismissed.

ThiscaseissignificantbecausetheFederalCourtessentiallyclarifiedtwoquestionsof law that apply inmost industrial relationsmatters.Firstly, theFederalCourtheldthat,wherethefindingsoftheindustrialCourthadbeenarrivedatbytakingirrelevantmattersintoconsideration,andfailingtotakerelevantmattersintoconsideration,suchfindingsarealwaysamenabletojudicialreview.

secondly,theFederalCourtalsoheldthatpleadingsintheindustrialCourtareasimportantasinthecivilcourts,topreventtheelementofsurpriseandtoprovideroomfortheotherpartytoadduceevidenceoncethefactoranissueispleaded.TheindustrialCourt’sdutytoactaccordingtoequity,goodconscienceandthesubstantialmeritsofthecasewithoutregardtotechnicalitiesandlegalformundersection30(5)oftheiRadoesnotgivetheindustrialCourttherighttoignoretheindustrialCourtRules1967madeundertheiRa.

inDynamic Plantations Bhd v YB Menteri Sumber Manusia & Anor,5theFederalCourtdecidedtwoimportantpoints:(1)recognitiontoatradeunionbytheemployercanbegivenbyconduct;and(2)onceanemployer isamemberof theTradeUnionof Employers which has given recognition to aTrade Union of Employees and hasconductedcollectivebargainingwiththattradeunion,itcannotclaimthatithasnot

4 Ranjit Kaur S Gopal Singh v. Hotel Excelsior (M) Sdn Bhd [2010]8ClJ629.5 Dynamic Plantations Bhd v. YB Menteri Sumber Manusia & Anor [2010]2ClJ525.

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recognisedthattradeunionmerelybyceasingtobeamemberoftheTradeUnionofEmployers.

inthecasebeforethecourt,theemployer,DynamicPlantationswasamemberofaTradeUnionofEmployersknownastheMalayanagriculturalProducersassociation(‘MaPa’).

MaPa had recognised and conducted collective bargaining with the NationalUnionofPlantationWorkers(‘NUPW’)andhadenteredintofivecollectiveagreementswhichwerebindingonitsmembersincludingDynamicPlantations.DynamicPlantationssubsequentlyceasedtobeamemberofMaPa.WhenNUPWinvitedthemtoconductcollectivebargaining,DynamicPlantationsdeclinedandsaidthattheyhadnotdirectlyrecognisedNUPW.TheirdisputewiththeNUPWoverthecollectivebargainingwasreferredbytheMinisterofHumanResourcestotheindustrialCourtforadjudicationasatradedispute.

Dynamic Plantations challenged the Minister’s decision on grounds that inthefirstplace, ithadnotevendirectly recognisedNUPWandtherefore, the issueofconductingcollectivebargainingdoesnotarise.

The Federal Court held that Dynamic Plantations had by conduct recognisedNUPW as a trade union of its employees. This is because Dynamic Plantations wasexpresslynamed as a consentingmember ofMaPa in the collective agreements andtherewasnotjustonecollectiveagreementbutaseriesoffiveinsuccession.

IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP

i Employmentrelationship

anemploymentcontractcanbemadeorallyorinwriting.inthecaseofEaemployees,section10oftheEarequiresacontractofserviceexceedingonemonthtobeinwriting.asforemployeeswhofalloutsidethescopeoftheEa,awrittenemploymentcontractisrecommendedasitwouldbetterdefinetherelationshipbetweentheparties.

it ispossible tohavefixed-termemployment contracts.There isno legislationmandatingamaximumperiodforfixed-termcontractsbut,inpractice,theyrarelyexceedthree years.However, for thepurposes of a claim fordismissalwithout just cause orexcuse,theindustrialCourtwillenquireintowhetherthefixed-termcontractisgenuineorapermanentcontractdisguisedasafixed-termcontract.inthatregard,thepurposeofthefixed-termcontract,thenatureoftheworkcarriedoutbytheemployee,thestatusoftheemployeeandthenumberofrenewalswill,amongotherthings,befactorsthatwillinfluencetheindustrialCourt.

savethattheEarequiresthateverywrittenemploymentcontractmustcontaina clause setting out the manner in which the contract may be terminated by eitherparty6,partiesarefreetosetoutsuchtermsastheymayagreeinthewrittenemploymentcontract.

in that regard, it is recommended that the employment contract shouldstipulateinwritingtheessentialterms,includingjobtitle,probationaryperiod(ifany),

6 section10(2)oftheEa1955.

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remuneration,manneroftermination,transferclause,hoursofwork,andbenefitssuchasleaveentitlementsandretirementage(ifany).

also, any termor conditionof a contractof servicewhichprovides a termorconditionofservicewhichislessfavourabletoanEaemployeethanatermorconditionofserviceprescribedbytheEashallbevoidandofnoeffect,andthemorefavourableprovisionshallreplaceit.

The employment contract should be executed by the parties prior to thecommencement of the employment. However, the execution of the contract post-commencementofemploymentwillnotbedeemedinvalidbythatreasonalone.

Thetermsofemploymentmaybevariedbythemutualagreementoftheemployerand the employee. However, as the agreement to amend or change the employmentcontractortermsofemploymentconstitutesaseparatecontractinitself,therehastobeconsiderationflowingbetweentheparties.

Theemployermaynotunilaterally imposechanges thataredetrimental to theemployee,evenifitreservestherighttodoso.

ii Probationaryperiods

Probationaryperiods are permittedunderMalaysian law.The lawdoesnot prescribeamaximumprobationperiod.inpractice,aperiodofbetweenthreetosixmonthsiscommon.Theagreementmayalsohaveprovisionsforanextensionoftheprobationaryperiod where the employer may extend the initial probationary period for a furtherperiodorperiods.

an employee on probation enjoys the same protection from dismissal as apermanentorconfirmedemployeeinthatheorshemaymakeaclaimforreinstatementduetodismissalwithoutjustcauseorexcuseundersection20oftheiRa.

Thenoticeperiodforterminationofanemployeeunderprobationwouldbeasstipulatedinthecontractofemploymentandoftenrangesfrom24hourstotwoweeks.

iii Establishingapresence

aforeignemployermayhireemployeestocarryonbusinessinMalaysiawithoutbeinglocallyincorporatedorregisteringabranchoffice.However,theyshouldensurethattheactivitiesoftheemployeedonotresultintheforeignemployercarryingonbusinessinMalaysia.

Foreign companies may recruit employees through an agency or other thirdparty.

a foreign employer that isnotofficially registered inMalaysiamay engage anindependentcontractortoactonitsbehalfinMalaysia.

anindependentcontractorwillnotnormallycreateapermanentestablishmentoftheforeignemployer.Thisisparticularlythecasewheretheindependentcontractorcarriesonbusinessinitsownnameandchargesafeeatarm’slengthfortheuseofitsservicesbytheforeignemployer.

if the foreign employer is found tobe carryingonbusiness inMalaysia, thenit must either locally incorporate or register a foreign branch, otherwise it will becommittinganoffenceundertheCompaniesact1965.

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amongthestatutorybenefitsthatarisewhenanemployerhiresemployees,thereisthemandatorymonthlycontributionsontheamountofwagestobemadebyboththeemployerandtheemployeetoagovernment-managedretirementfundona12:11percentofincomeratiopursuanttotheEPFa.inaddition,thesOCsOprovidesformandatory contributions to be made by both the employee and the employer to agovernment-managedprogrammeakintoaninsurancescheme,effectivelyforemployeeswhohaveeverearnedlessthan3,000Malaysianringgitamonth.

Taxesaredeductedat source inaccordancewith thescheduleofMonthlyTaxDeductions or other methods approved by the Director General pursuant to Rule 3incomeTax(DeductionfromRemuneration)Rules1994.

V RESTRICTIVE COVENANTS

Under theContractsact1950, every agreementbywhich anyone is restrained fromexercising a lawful profession, trade or business of any kind, is to that extent void.Therefore, it followsthatnon-competeclauses inanemploymentcontractduringthepost-contractual period are void in law, but these clauses are enforceable while theemploymentcontractsubsists.Restrictivecovenantclausesthatstatethatanemployeeisnottosolicitclientsandemployeesofhisorheremployerarelikelytobeenforceableiftheyarereasonable.

VI WAGES

i Workingtime

TheEaprovidesthatanEaemployeeshallnotberequiredtoworkmorethaneighthoursadayormorethan48hoursaweekormorethanfiveconsecutivehourswithoutabreakofatleast30minutes.anEaemployeewhoworkslessthaneighthoursinoneormoredaysinaweekmayberequiredtoworkinexcessofeighthours(butnotmorethanninehours)ontheremainingdaysoftheweekprovidedhistotalworkinghoursintheweekdonotexceed48hours.shiftworkersmayberequiredtoworkmorethaneighthoursinadayormorethan48hoursinaweekprovidedthattheaveragenumberofhoursworkedover anyperiodof threeweeksdoesnot exceed48hoursperweek.Nonetheless,noEaemployeeshouldberequiredtoworkmorethan12hoursaday.

EveryEaemployeeshallbeentitledtoonewholerestdayineachweek.inthecaseofshiftworkers,acontinuousperiodofnotlessthan30hoursshallconstitutearestday.

EaemployeesmaynotcontractoutoftheserestrictionsonworkinghoursthatareprescribedbytheEa.Fornon-Eaemployees,theworkinghoursaresubjecttocontractbetweentheparties.

Therearenolimitsontheamountofnightworkthatmaybeperformed.However,there is a provision in the Ea that generally prohibits women from working in any

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industrialoragriculturalundertakingbetween10p.m.and5a.m.orcommencingworkforthedaywithouthavinghadaperiodof11consecutivehoursfreefromsuchwork.7

ii Overtime

Eaemployeesarebylawentitledtoovertimepay.Foranyovertimeworkcarriedoutinexcessof the ‘normalhoursofwork’, theEaemployee shallbepaidnot less thanoneandahalftimeshishourlyrateofpayirrespectiveofthebasisonwhichhisrateisfixed.‘Normalhoursofwork’meansthenumberofhoursofworkasagreedbetweenanemployerandtheEaemployeeinthecontractofservicetobetheusualhoursofworkperday.suchhoursofworkshallnotexceedthelimitsofhoursprescribedintheEa.

if anEa employeepaidon amonthlybasisworksonhis orher rest day, theemployeeshallbepaidasfollowsinadditiontohisorhernormalremuneration:a foranyperiodofworkwhichdoesnotexceedhalfhisnormalhoursofwork,

wages equivalent tohalf theordinarydaily rateofpay forworkdoneon thatday;

b foranyperiodofworkwhichismorethanhalfbutwhichdoesnotexceedhisnormalhoursofwork,oneday’swagesattheordinaryrateofpayforworkdoneonthatday;and

c foranyworkcarriedoutinexcessofthenormalhoursofworkonarestdayataratewhichisnotlessthantwotimeshishourlyrateofpay.

ifanEaemployeepaidonamonthlybasisworksonapublicholiday, theemployeeshallbepaidtwodayswagesattheordinaryrateofpay,regardlessofwhethertheperiodofworkdoneonthatdayislessthanthenormalhoursofwork.Foranyovertimeworkcarriedoutbyamonthly-paid employee in excessof thenormalhoursofworkonapublicholiday,theemployeeshallbepaidataratewhichisnotlessthanthreetimeshishourlyrateofpay.

Thehourlyrateofpay iscalculatedonthebasisofanEaemployee’sordinaryrate of pay (‘ORP’) divided by his normal hours of work. For employees paid on amonthlybasis,theORPiscalculatedbydividingthemonthlyrateofpayby26days.Thecomputationdiffersforemployeesengagedonadaily,hourlyorotherrateofpay.

Themaximumlimitonovertimeworkis104hoursinanymonth.Paymentforovertimeworkandthecalculationofthesamefornon-Eaemployees

isnotmandatoryandissubjecttothecontractofemployment.

VII FOREIGN WORKERS

PursuanttotheEa,anemployermustprepareandkeeponeormoreregisterscontaininginformationregardingeachemployee.Theserecordshavetobeavailableforinspectionfornotlessthansixyearsaftertheirrecording.

7 section34Ea.

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anemployerwhoemploysaforeignemployeemust,within14daysoftheemployment,furnishtheDirectorGeneraloflabourwiththeparticularsoftheforeignemployee.8

Whenever required to so do by the Director General, an employer must alsofurnishreturnsofparticularsrelatingtotheemploymentofitsforeignemployees.9

Therearecurrentlynonumericallimitationsandthenumberofforeignworkersthatcanberecruitedwoulddependonvariousfactorssuchasthecapitalisationoftheemployerandtheavailabilityoflocalworkers.

aforeignworkerisallowedtoworkinMalaysia,inthefirstinstance,forthreeyears.asubsequentextensionoftwoyearsmaybepermitteduponapplicationbytheemployer.Thereafter, theemployerhas to send the foreignworkerback tohisorhercountry of origin at the expense of the employer. The permit of the foreign workershouldberenewedannuallywiththepaymentofalevy.section55Boftheimmigrationact1959providesthatanyemployerwhoemploysoneormorepersons,otherthanacitizen,whoisnotinpossessionofavalidpassshallbeguiltyofanoffenceandshall,onconviction,beliabletoafineofnotlessthan5,000Malaysianringgitortoimprisonmentforatermnotexceeding12monthsortoboth,foreachsuchemployee.iftheemployerhasemployedmorethanfivesuchemployees,theemployershall,onconviction,beliabletoimprisonmentforatermnotlessthansixmonthsbutnotmorethanfiveyearsandshallalsobeliabletowhippingofnotmorethansixstrokes.Wheretheoffenceiscommittedbyabodycorporate,anypersonwhoatthetimeofthecommissionoftheoffencewasamemberoftheboardofdirectors,amanager,asecretary,orapersonholdingasimilarofficeorpositionshallbeliabletothesamepunishment.

PursuanttotheWorkmen’sCompensationact1952,employersmustensurethatforeignworkersareinsuredwithadesignatedinsurerwithrespectofemploymentinjuryand permanent disablement. Generally, employers do not have to contribute to theEmployeesProvidentFundforforeignworkers.However,iftheforeignworkerselecttocontribute,theemployer’sshareoftheircontributionis5Malaysianringgitpermonth.ForeignworkerswholeaveMalaysiapermanentlyareallowedtocompletelywithdrawtheircontributionswhenleaving.

Fortaxpurposes,anindividualistreatedasaresidentifheisphysicallypresentinMalaysiainaparticularcalendaryearfor182daysormore.Howeverifhisperiodofstayislesshemaystillberesidentifcertainconditionsaresatisfied.

The entire Ea is equally applicable to foreign workers and local employees.However,therearecertainprovisionsthatarespecificallyinrespectofemployerswithforeignworkers,forexample,theissuanceoftheCertificateofRegistrationofForeignWorkers pursuant to section 60K Ea and the prohibition of discrimination againstforeignworkersorlocalemployeespursuanttosection60lEa.

8 section60K(1)Ea.9 section60K(2)Ea.

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VIII GLOBAL POLICIES

internaldisciplinerulesarenotrequiredbylaw.ifsuchrulesareissued,employeesdonothavetoapproveoragreetothemandthereisnorequirementfortherulestobefiledwithorapprovedbygovernmentauthorities.

There are no mandatory rules regarding discrimination, sexual harassment, orcorruption.However,therearecodessuchastheCodeofConductforindustrialHarmonyandtheCodeofPracticeonthePreventionandEradicationofsexualHarassmentintheWorkplacewhich,althoughnotlegally-binding,provideusefulguidelinesthatemployerswouldbeprudenttofollow.

Thereisnorequirementfortheseinternaldisciplinerulestobewritteninthelocallanguage(i.e.,inMalay).However,itisrecommendedthattheybewritteninMalayandEnglishwhentheemployeesdonothaveagoodcommandofEnglish.

Notificationoftherulestotheemployeeissufficientbutitisrecommendedthattherulesbesignedbytheemployeetoindicatethattheyhavereceivedorbeennotifiedofthem.

The internaldiscipline rules areoften setout inahandbookdistributed toallemployees.Wherethereisarecognisedunion,therulesaresometimesalsoprovidedforinthecollectiveagreement.Therulesmayalsobesetoutontheemployer’sintranetbutitisimportantthatthereisevidencethattheemployeehasbeennotifiedoftheserules.

The disciplinary rules may be incorporated into the employment contract.alternatively,theymaybecontainedinaseparatedocument.

IX EMPLOYEE REPRESENTATION

EmployeesarepermittedtoformtradeunionswhichmustberegisteredwiththeDirectorGeneralofTradeUnions.amemberofaregisteredtradeunionmustbeabovetheageof16.

The Director General ofTrade Unions may refuse to register a trade union ifheissatisfiedthatthereisinexistenceatradeunionrepresentingtheworkmeninthatparticularestablishment,trade,occupationorindustryandifitisnotintheinterestsoftheworkmenconcernedthattherebeanothertradeunioninrespectthereof.inaddition,theDirectorGeneralofTradeUnionswillrefusetoregisteratradeunionifheisoftheopinionthat:a thetradeunionislikelytobeusedforunlawfulpurposesorforpurposescontrary

toorinconsistentwithitsobjectsandrules;b anyoftheobjectsofthetradeunionareunlawful;c theobjects, rules andconstitutionof the tradeunionconflictwith anyof the

provisionsoftheTUaoritsregulations;d thenameunderwhichthetradeunionistoberegisteredisidenticaltothatof

anyother existing tradeunion,or sonearly resembles thenameof suchothertradeunionas, intheopinionof theDirectorGeneral, is likelytodeceivethepublicorthemembersofeithertradeunionoris,intheopinionoftheDirectorGeneral,undesirable,unlessthetradeunionaltersitsnametooneacceptabletotheDirectorGeneral.

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Thetradeunionneeds tobe recognisedby theemployer.Thepurposeofaclaim forrecognitionistoenablethetradeunionofworkmentocommencecollectivebargainingwiththeemployerortradeunionofemployers.10anyclaimforrecognitionbyatradeunionofworkmenshallbesubstantiallyinaprescribedformandshallbesignedbyaresponsibleofficerofsuchtradeunion.11

No trade union of workmen whose membership consists of a majority whoare not employed in a managerial, executive, confidential or security capacity mayseekrecognitionorserveaninvitationforcollectivebargaininginrespectofworkmenemployedinanyoftherolesmentionedsupra.12

Thereisnoratioofrepresentativestoemployeesrequired.The election procedures for representatives essentially follow the union

constitution.Thelengthofarepresentative’stermisalsoinaccordancewiththeunionconstitution.

section5(1)(c)oftheiRaprohibitsanydiscriminationinregardtoemployment,promotion,anyconditionofemploymentorworkingconditionsonthegroundthatanemployeeisorisnotamemberorofficerofatradeunion.Hencetherepresentativesof a tradeuniondonothave any additional rights.However, toprotect tradeunionrepresentativesandmembersinthecourseofcarryingouttheirduties,sections21and22oftheTUaprovidethatnolegalproceedingshallbeactionableinanycivilcourtagainstanyofficerormemberofatradeunioninrespectofanyactdoneincontemplationorinfurtheranceofatradedisputeorinrespectofanytortiousactallegedtohavebeencommittedbyoronbehalfofthetradeunion.

Oncethetradeunionisrecognised,collectivebargainingmustbedonewiththetradeunionandtheemployermustcomplywiththetermsoftheCollectiveagreement.anemployershallgrantleaveofabsencetoaworkmanintendingtocarryouthisdutiesortoexercisehisrightsasanofficerofatradeunionifthedurationoftheleaveappliedforisreasonable.

The frequency that representatives must meet also depends on the unionconstitution.

X DATA PROTECTION

i Requirementsforregistration

ThePDPactrecentlypassedbyParliamentisnotyetinforce.atthispoint,employeeinformationhasverylimiteddataprotection.itisunclearwhetherthePDPactappliestoemployeeinformationandthefollowingwrite-upisontheassumptionthatitapplies.

section 2 of the PDP act provides that the act applies to any person whoprocesses and any person who has control over or authorises the processing of, anypersonal data in respect of commercial transactions. as the data must be in respectof commercial transactions, therehasbeen somedebate as towhether the employer-employeerelationshipwillbecoveredbythePDPact.Thiswillonlybecomeclearonce

10 Ibid,section3(2).11 industrialRelationsRegulations2009,section3(1).12 section9(1)industrialRelationsact1967.

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thegovernmentprovidesfurtherlegislationorguidelinesonthisact.Fornow,itwouldbe prudent to assume that the new data protection provisions apply to employmentcontractsanditisonthatbasisthattheinformationinfraisprovided.

as long as the employer processes any personal information of its employeeswithinthescopeofthePDP,theyareboundbythePDP.TheemployerisrequiredtoregisterwiththePDPCommissioniftheyfallwithintheclassofdatausersrequiredtoberegisteredasdatausersunderthePDPact.

Theemployerisrequiredtoinformthe‘datasubject’,inthiscasetheemployee,oftheparticularinformationthatisbeingprocessed,forexamplehisname,addressandidentificationnumber.

Employeeconsentisnecessaryfortheprocessingofhisorherpersonaldatasaveinthefollowingsituations:a theperformanceofacontracttowhichthedatasubjectisaparty;b the takingofsteps,atthedatasubject’srequest,withtheviewofenteringintoa

contract;c compliancewithanylegalobligationtowhichthedatauseristhesubject,other

thanacontractualobligation;d protectingthevitalinterests,namelymattersrelatingtothelife,deathorsecurity

ofthedatasubject;e theadministrationofjustice;orf theexerciseofanyfunctionsconferredonanypersonunderanylaw.

The PDP act also sets out certain parameters for the processing of personal data. itprovidesthatsuchdatamaynotbeprocessedunless:a itisforalawfulpurposedirectlyrelatedtotheactivityofthedatauser;b itisnecessaryforordirectlyrelatedtothatpurpose;andc thedataisnotexcessiveforthatpurpose.

additionalandmorestringentconditionsare imposed for theprocessingof ‘sensitivepersonaldata’,

an employer has to give the right of access to the employee in the event theemployeewantstoview,updateorcorrecthisorherowninformation.

Theemployer shall takepractical steps toprotect theemployee’spersonaldatafrom any loss, misuse, modification, unauthorised or accidental access or disclosure,alterationordestructionbyensuringthatthereareadequatetechnicalsecuritymeasuresincorporatedintothesystemwherethepersonaldataisstored.

ii Cross-borderdatatransfers

ThePDPactdoesnotpermitadatausertotransferanypersonaldatatoaplaceoutsideMalaysia unless it is to such a place specified by the Minister and published in theGazette.TherearecertaincircumstancesspecifiedinthePDPactwherepersonaldatacanbetransferredoutofMalaysia,i.e.,wherethedatasubjecthasgivenconsenttothetransfer,ifthetransferisnecessaryfortheperformanceofacontractbetweenthedatasubjectanddatauser,orthetransferisforthepurposesoflegalproceedingsorobtaininglegaladvice.

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Employeeconsentisalsoneededforcross-borderdatatransfersbytheemployerunlessanexceptionapplies.

safeharbourprinciplesdonotexistinthePDPact.assuch,thereisnoneedforemployerstoregisterorgetrecognitionfromtherelevantauthoritytoshowthattheirdataprotectionpolicyisincompliancewithsafeharbourprinciples.

Employersdonotneedtohaveanyjoint-useragreementsinplace.Theonusison theemployers toobtainconsent fromtheemployees for such transferofpersonaldata. However, it is always advisable for the employers to ensure that the receivingpartyprovidesawarrantythattheywillcomplywithanydataprotectionundertakingwhichtheemployershavegiventotheiremployees(includingnottofurthertransferthepersonaldatatootherthirdpartieswithoutobtainingconsentfromtheemployees)andtorequirethereceivingpartytoalsoprovideanindemnityforsuchwarranty.

Generally,personaldatacannotbetransferredoutofMalaysiaexceptincertaincircumstances.Forinstance,toacountrywhichhasbeenspecifiedaspermittedbytheMinister,whereconsentoftheemployeeordatasubjecthasbeenobtained,orwherethetransferispursuanttoacontract,etc.

shouldtherebecontinuousonwardtransferafterthat,forinstancefromMalaysiatotheUnitedstatesofamerica,andonwardstotheUnitedKingdom,thishastobespeltoutinthenoticeandconsent.ThismeansthattheemployeehastobenotifiedthathisorherdatawillbetransferredoutofMalaysiaandthentotheUnitedstatesofamericaandthentotheUnitedKingdom,andtheemployeewouldhavetoconsenttothat.

iii Sensitivedata

sensitivedatawouldincludedataonthephysical,mentalhealthorcondition,politicalopinions,religiousbeliefsorothersimilarbeliefsofadatasubject,thecommissionorallegedcommissionofanoffencebyadatasubject,andanyotherdatadeclaredbytheMinistertobesensitivepersonaldata.

The General Principle prohibits a data user from processing a data subject’spersonal data except with the data subject’s explicit consent. additional and morestringentconditionsareimposedfortheprocessingof‘sensitivepersonaldata’,

iv Backgroundchecks

There are no restrictions or prohibitions against background checks on prospectiveemployees.anemployerorprospectiveemployermayeitherconductitsownchecksorhireathirdpartytodoso.

Generally, theemployermaybeable todocreditchecksonanemployeewithlicensedCreditReportingagencies inMalaysia.Ontheotherhand,criminal recordschecksaremoredifficulttodobecausetheyrequirethecooperationandassistanceofthepolice.

PursuanttotheBankingandFinancialinstitutionsact1989,noemployerwouldbeabletoobtainoraccessanyinformationinrelationtoitsemployee’sfinancialaffairs.

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XI DISCONTINUING EMPLOYMENT

i Dismissal

section20oftheiRaprovidesaprocedurewhicheffectivelyrequiresanemployertoonlydismissanemployeewhenthereisjustcauseorexcuse.Thefailuretohavejustcauseandexcusefordismissalcanresultintheemployerbeingorderedtoreinstatetheemployeewithbackwagesortopaytheemployeecompensationinlieuofreinstatement.TheiRadoesnotdefine‘justcauseorexcuse’butmisconduct,breachofcontract,redundancy,retirement(pursuanttothetermsofthecontract)andclosurecanconstitutejustcauseorexcusefordismissal,ifsubstantiated.

Theemployerisonlyrequiredtonotifyagovernmentauthorityiftheterminationisduetoredundancy,voluntaryseparationscheme(‘Vss’),temporarylay-offorclosureofbusiness.

Theemployermustnotify the tradeunion if it is required todo sounder thecollectiveagreement.

There isno socialplan required.When the termination isdue to redundancy,the lawrequires that itbedoneasa last resortandwherethere is suitablealternativeemployment,theemployeeoughtnottobeterminated.intheeventthattheemployeeisretrenched,thentheCodeofConductforindustrialHarmonyrequiresthatemployeeswhoareretrenchedbegivenpriorityofengagementorre-engagementasfaraspossibleby the employerwhenhe engagesworkers.There isnoprescribed time limiton thisrequirement,burordinarilyoneyearisconsideredreasonable.

ForEaemployees,intheabsenceofaspecificprovisiononlengthofnoticeorwheretheemployeeisterminatedduetoredundancy,theminimumlengthofnoticeisasfollows:a fourweeks’noticeiftheemployeehasbeenemployedforlessthantwoyears;b sixweeks’noticeiftheemployeehasbeenemployedformorethantwoyearsbut

lessthanfiveyears;c eightweeks’noticeiftheemployeehasbeenemployedforfiveyearsormore.

Fornon-Eaemployees,thenoticeperiodandpaymentinlieuofnoticedependsonthetermsoftheemploymentcontract.

asstatedearlier, theiRahascreatedaprocedurewhicheffectivelyprotectsanemployeeorworkmanfrombeingdismissedsavewithjustcauseorexcuse.additionally,the following sets out some additional protection given to certain categories ofemployees.

afemaleEaemployeemaynotbedismissedfromemploymentonthegroundsthatshehasremainedabsentfromworkaftertheexpiryofmaternityleave(whichshallnotbelessthan60daysfromthedateofchildbirth)ifherabsenceisduetoanillnesscertifiedbyamedicalpractitionerarising fromherpregnancyandconfinement.Thisprotectionextendsfor90daysaftertheexpiryofhermaternityleaveperiod.

section5(1)(d)oftheiRaprovidesthatnoemployermaydismissaworkmanbyreasonthattheworkmanisorproposestobecome,orseekstopersuadeanyotherpersontobecome,amemberorofficerofatradeunionorparticipatesinthepromotion,formationoractivitiesofatradeunion.

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section10(2)oftheiRaalsoprovidesthatnoemployermaydismissaworkmanonce a trade union of workmen has served a claim for recognition on the employerexcept in limited circumstances such as dismissal on disciplinary grounds, medicallyboardingout,orretirement.

Pursuanttosection59(1)oftheiRa,itisalsoanoffencetodismissaworkmanbyreasonthattheworkmanis,orproposestobecome,amemberofatradeunionorofanassociationthathasappliedtoberegisteredasatradeunion;isentitledtothebenefitofacollectiveagreementoranaward;orhasappearedorproposestoappearasawitness.

For Ea employees, the Employment (Termination and lay-Off Benefits)Regulations1980provides forpaymentof terminationbenefitsupontermination foranyreasonotherthaninlimitedsituations,suchasbywayofretirement,ongroundsof misconduct and resignation. These regulations only apply to Ea employees. Thequantumpayableisasfollows:a 10days’wagesforeachyearofservicewheretheemployeehasworkedlessthan

twoyears;orb 15days’wagesforeachyearofservicewheretheemployeehasworkedformore

thantwoyearsbutlessthanfiveyears;orc 20days’wagesforeachyearofservicewheretheemployeehasbeenemployedfor

fiveyearsormore;andd pro-ratedforanyincompleteyearofservice.

as for non-Ea employees, under the Code of Conduct for industrial Harmony, theemployershouldpayreasonableredundancybenefitswhenretrenchinganemployee.inMalaysia,thetrendisgenerallytopayatleastonemonth’ssalaryforeachyearofserviceasatermbenefit.

Partiescanenterintoasettlementagreement.However,theemployeemaystillclaimthathehadbeenforcedintotheagreementandmakeaclaimfordismissalwithoutjustcauseorexcuseundersection20oftheiRa.anemployee isnotestoppedfrombringingaclaimundersection20oftheiRaongroundsthathehasenteredintoanagreementinfullandfinalsettlementofallhisclaimswithhisemployer.

ii Redundancies

To terminate an employee contract for redundancy, an employee must be shown toberedundant, the selectionmustbe inaccordancewithgenerallyacceptedprocedureandtheremustbecompliancewiththeCodeofConductforindustrialHarmonyandanycollectiveagreementortermofcontract.itdoesnotmakeadifferenceiftherearemultipleredundancies(seesub-section(i),supra).

The notification obligations, rights to rehire, notice requirements, severancerequirementsandotheraspectsofdismissalarethesameasforalldismissals,assetforthsupra.

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XII TRANSFER OF BUSINESS

ina transferofbusiness situation,Regulation8of theEmployment (Termination&lay-OffBenefits)Regulations1980appliestoEaemployees.Regulation8ofthesaidRegulationsprovidesasfollows:(1) Whereachangeoccurs(whetherbyvirtueofasaleordispositionorbyoperation

oflaw)intheownershipofabusinessforthepurposesofwhichanemployeeisemployedorofpartofsuchbusiness,theemployeeshallnotbeentitledtoanyterminationbenefitspayableunderthesaidRegulationsif,withinsevendaysofthechangeofownership,thepurchaserofthebusinessofferstocontinuetoemploytheemployeeontermsandconditionsnotlessfavourablethanthoseunderwhichtheemployeewasemployedbythevendorandtheemployeeunreasonablyrefusestheoffer.

(2) ifthepurchaserdoesnotoffertocontinuetoemploytheemployeeinaccordancewithparagraph(1),thecontractofservicewillbedeemedtohavebeenterminated,andconsequently,thevendorshallbeliableforthepaymentofallterminationbenefitsunderthesaidRegulations.

(3) WhereanofferbythepurchasertocontinuetoemploytheemployeeisacceptedbysuchemployeetheperiodofemploymentoftheemployeeunderthevendorshallforthepurposesofthesaidRegulationsbedeemedtobeaperiodofemploymentunderthepurchaserandthechangeofemployershallnotconstituteabreakinthecontinuityoftheperiodofhisemployment.

in the event that there is non-compliancewithRegulation8, theEa employeeswillbeentitled to the followingminimumamountof terminationbenefitspayableunderRegulation6oftheRegulations(tothosewhohavebeeninemploymentfor12monthsormore):a 10 days’ wages for every year of employment under a continuous contract of

serviceifhehasbeenemployedbythatemployerforlessthan2years;b 15 days’ wages for every year of employment under a continuous contract of

serviceifhehasbeenemployedbythatemployerfor2yearsormorebutlessthan5years;and

c 20 days’ wages for every year of employment under a continuous contract ofserviceifhehasbeenemployedbythatemployerfor5yearsormore.

Generallyforadministrativeeaseandtoavoidanyallegationsofdiscrimination,non-Ea employees are often dealt with in the same manner as Ea employees under thismethod.

XIII OUTLOOK

WiththeintroductionofthePDPact,itwouldbeprudentfororganisationstobeginlooking intocompliancewiththesaidactas theeffectof theact is far-reachingandwouldimpactorganisationsandindividualsalike.

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i MinimumWageBill

TheMinisterofHumanResourceshas indicated that theMinimumWageBill is settobetabledinParliamentin2011.Theintroductionofaminimumwageappearstobeintendedtoraisetheemployee’sstandardoflivingaswellassupporttheeconomictransformationplanswhichthegovernmentiscurrentlyundertaking.

ii RetablingoftheamendmentstotheEAandtheIRA

The proposed amendments to the Ea and iRa, including amendments on sexualharassmentandtheprotectionoftherightsofpregnantwomenanddomesticservants,arelikelytobelookedatagainaspendingBillsorfreshBillsarelikelytobere-tabledinthenearfuture.

iii TalentCorporationtoFightBrainDrain

aTalentCorporationhasbeenestablishedunderthePrimeMinister’sOfficeaspartofthegovernment’sinitiativetoincreaseandretaintalentedandhighlyqualifiedandskilledMalaysianswithinourcountry’sworkforce.

.

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SKRINE

UnitNo.50-8-1,8thFloor,WismaUOaDamansara,50,JalanDungunDamansaraHeights50490KualalumpurMalaysiaTel:+60320813999Fax:+60320943211skrine@skrine.comwww.skrine.com

SIVA KUMAR KANAGASABAI

Skrine

siva Kumar Kanagasabai is a Partner of skrine. He was admitted to practise as anadvocate&solicitoroftheHighCourtofMalayainMarch1995.HeistheHeadofskrine’sEmploymentpracticegroupwhichhasbeenrankedintier1bythelegal500.Hehaswideexperience inemployment law,administrative law,maritime lawandhealsohandlescivilcases.HehasactedforclientsinanumberofimportantcasesincludingbeforeMalaysia’shighestcourt.KumarislistedinChambersasia2008-2010asaleadinglawyerforEmploymentlaw.

Kumarhaspresentednumerouspapers at conferencesand seminars.He is theauthorofHalsbury’s lawofMalaysia – industriallaw&labourlaw (publishedbylexisNexis),theEmploymentlawPracticeinMalaysiaChapterforEmploymentlawClientstrategiesintheasia-Pacific(publishedbyaspatore),theMalaysianChapterofRestrictiveCovenantsandTradesecretsinEmploymentlaw(publishedbytheamericanBarassociation)andisaco-authorofthelawofDismissal(publishedbyCCH).

SELVAMALAR ALAGARATNAM

Skrine

selvamalar alagaratnam is a partner in the Dispute Resolution Division at skrine,Malaysiaandpossessesextensiveexperienceintheareasofadministrative,employmentandindustrialrelationsandemployment-relatedimmigration.selvamalarwasadmittedto practice as an advocate and solicitor of the High Court of Malaya in November1994.

selvamalar is listed in Chambers asia 2009 and 2010 as a leading individualforEmploymentlaw.sheisaMemberoftheMalaysianBarCouncil’sindustriallawCommittee,lawasia’slabourlawCommitteeandtheinternationalsocietyforlabourand social security law – Malaysian Chapter’s Protem Committee. Her publicationactivities include having presented several papers at various local and internationalconferences. selvamalar was also a co-author of the law of Dismissal, published byCommerceClearingHouse(CCH),MalaysiaCourtForms–Employmentlawsection,labourlawHandbook,andthelegalGuidetoEmployeeDisputeMalaysia.

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SHARMILA RAVINDRAN

Skrine

sharmilaRavindranwasadmittedtotheMalaysianBarinJanuary2004andiscurrentlyaseniorassociateintheDisputeResolutionDivisionatskrine.sharmilaRavindranhasgainedexperience invariousareasofcivilandcommercial litigationwithaparticularfocusonminorityshareholderdisputes,landdisputes,banking,tortanddefamation.

FOO SIEW LI

Skrine

siewliisanassociateintheDisputeResolutionDivisionofskrine.shegraduatedwithanllB(Hon)degreefromCardiffUniversityin2008andwascalledtotheMalaysianBarasanadvocateandsolicitoroftheHighCourtofMalayainseptember2010.siewlifocusesonallaspectsoflabourandemploymentrelatedmattersincludingemploymentlitigationandprovidingadviceonemploymentcontracts,voluntaryseparationschemes,dismissals,employeeinvestigationsandindustrialrelations.