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Malaysia

February 05, 2024

By Paul Hastings Professional

Back to International Employment Law

Malaysia

KEY DEVELOPMENTS FOR 2024

Trade Union (Amendment) Bill

There have been amendments made to the Trade Union Act 1959 (the “Act”) by way of the Trade Union (Amendment) Bill (the “Bill”). The Bill was passed by the House of Representatives on 10 October 2023, but awaits further tabling in the Senate. The Bill seeks to remove restrictions on the formation of a trade union based on a particular establishment, trade, occupation or industry, and would allow for trade unions to be set up by workers within the same establishment, trade, occupation or industry. There are several key takeaways (amongst the myriad of amendments) from the Bill. First, in line with the notion of freedom of association, workers can exercise the freedom to establish or join any trade union of their choice. Second, the age of a union membership has been lowered from 16 to 15, in line with the minimum age of employment as provided for in the Children and Young Persons (Employment) Act 1966. Third, the timeframe for registration of a trade union is extended from one month to six months from the date the trade union is established. Fourth, the Director General of Trade Union has the power to conduct investigations and enforcement under the Act.

Judicial and procedural developments

Clarity has been provided by the recent Court of Appeal decision in 7-Eleven Malaysia Sdn Bhd v Ashvine Hari Krishnan [2023] 3 MLJ 469, in deciding that a civil suit cannot brought by an employee seeking monetary compensation consequent of wrongful dismissal / loss of employment, as the same should by pursued by way of a complaint made to the Industrial Court, else this would usurp the jurisdiction of the Industrial Court. Meanwhile, the Court of Appeal in its decision in Ace Holdings Bhd v Norahayu Bt Rahmad & Anor [2023] 4 MLJ 768 ruled that the Industrial Court must adopt a joint hearing approach (to hear any preliminary objections at trial) rather than allow for a staggered hearing for disposal of preliminary points of law or objections raised, on the rationale that this saves time, effort, and legal expenses for all concerned.

Legislative proposals regarding better benefits and safeguards for employees

The Malaysian Government in its 2024 budget has set out several proposals focused on social protection, women’s employment rights, and gig workers. In relation to social protection, the monthly wage ceiling for Social Security Organisation (“SOCSO”) contribution will be increased from RM5,000 to RM6,000. The Employees Provident Fund (“EPF”) is considering the setting up of a flexible third account, whereby the members can have access to the account at any time, in order to strengthen workers’ retirement savings. Separately, to encourage women to return to the workforce in the labour market, as well as to alleviate the financial burden of providing childcare, the Government will be providing an extension on the tax incentives offered to women who intend to return to work until 31 December 2027. Additionally, an income tax exemption limit on childcare allowances received by employees or paid directly by employers to childcare centres, was increased from RM2,400 to RM3,000. Finally, to enhance the welfare of gig workers and to offer a greater social safety net against unforeseen employment injuries, including occupational diseases and accidents during work-related activities, and to support the continuous education and skill development of gig workers via micro-credential skill training programmes, an allocation of RM100 million will be provided to support the Self-Employment Social Security Scheme (SKSPS). An allocation of RM35 million to finance training fees and income replacement incentives for up to 9,000 gig workers attending a ‘Career Building Programme’ will be made.

With thanks to Ng Jing Yi and Wong Kah Hui of Messrs KH Wong & Co for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2023

Employment (Amendment of First Schedule) Order 2022

The Employment (Amendment of First Schedule) Order was gazetted on 15 August 2022, and will come into force on 1 January 2023. As a result of the Order, it appears that employers will need to reassess existing employment contracts and overtime policies to ensure compliance with the Employment Act.

Employment (Amendment) Act 2022

The proposed amendments to Malaysia’s Employment Act, which was due to have come into force on 1 September 2022, has been deferred to 1 January 2023.

Some key takeaways from the Employment (Amendment) Act 2022 are as follows:

Presumption of employment - The “presumption of employment” may arise although there is an absence of a written contract of services subject to meeting of certain criteria.
Employment of women - There is to be an improvement with respect to the role of women in the workplace.
Working hours - The maximum working hours is now reduced from 48 hours to 45 hours. Any work performed outside of usual working hours entitles the employee to overtime payment.
Flexible working arrangement - An employee now may submit an application in writing to the employer to vary the hours / days / place of work in relation to his employment.
Sick / hospitalisation leave - Allows employees to an additional 60 days of paid hospitalisation leave, in addition to the 14 to 22 days of paid sick leave (depending on length of service).
Employment / termination of foreign employee - Prior approval from the Director General must be obtained by the employer in order to employ foreign employee. The employer shall inform the Director General as to the termination of employment of foreign employee.
Discrimination in employment - The Director General is empowered to inquire into and decide on any dispute between an employee and his employer in respect of any matter relating to discrimination that occurs after the employment relationship has been entered into. However, it does not cover discrimination in respect of refusal of employment or non-employment.
Notice for sexual harassment - An employer is required to conspicuously exhibit a notice against sexual harassment in the place of employment to raise awareness on sexual harassment. However, there is no specific form or manner as to how the notice should be worded. There is also no requirement for the employer to establish any anti-sexual harassment policy.
Forced labour - Any employer who threatens, deceives or forces an employee to carry out any activity, service or work and prevents that employee from proceeding beyond the place or area where such activity, service or work is carried out, commits an offence and shall, on conviction, be liable to a fine not exceeding RM100,000 or to imprisonment for a term not exceeding 2 years or to both.

Employers should take heed as to providing steps necessary to comply with the amended Act.

Anti-sexual harassment bill

The Anti-Sexual Harassment Bill has been passed by parliament and the Bill will be gazetted for enforcement once it receives royal assent.

The Bill provides for:

a right of redress for any person who has been sexually harassed;
the establishment of the Tribunal for Anti-Sexual Harassment; and
the promotion of awareness and prevention of sexual harassment.

The takeaways from the Bill are:

A definition is provided as to what can amount to “sexual harassment”.
The establishment of a 12-member Tribunal for Anti-Sexual Harassment (“Tribunal”), with Tribunal proceedings to be conducted in accordance with a written procedure to be determined and published by the Tribunal’s President, to hear and determine any sexual harassment complaints made by any person;
The limitation period for sexual harassment complaints is set at six years from the date on which the alleged harassment occurred; and an award (with written reasons and any findings of facts or recommendations) is to be made within 60 days from the date of the Tribunal hearing.
Orders that can be made include ordering the issuance or publication of a statement of apology to the complainant and/or to pay compensation or damages in an amount not exceeding RM250,000. Failing to comply with a Tribunal award within 30 days amounts to a criminal offence.

The Bill will likely lead to a review of existing laws and policies in relation to sexual harassment such as the Penal Code, the Employment Act 1955, the Communications and Multimedia Act 1998 and the Regulations of Public Officers (Conduct and Discipline) 1993.

With thanks to Ng Jing Yi and Wong Kah Hui of Messrs KH Wong & Co for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2022

Increase in claims alleging unfair selection for retrenchment

The COVID-19 pandemic has adversely impacted the global economy, including the business performance of companies in Malaysia. Local employers who face financial difficulties and/or business uncertainties have taken the opportunity to restructure and downsize their workforce by way of retrenchment. This has raised the issue as to whether the retrenchment exercises carried out by such employers are genuine.

The number of complaints filed in the Industrial Relations Department has seen a steady increase, on the basis of unfair selection for retrenchment following the Covid-19 outbreak. The Court of Appeal in Malaysia has in the case of Ng Chang Seng v. Technip Geoproduction (M) Sdn Bhd & Anor reemphasized and set out the key legal principles for retrenchment.

For an employer to justify dismissal on the basis of redundancy, the following criteria ought to be satisfied:

There must be actual redundancy;
There must be fair selection of the employee for retrenchment; and
A fair procedure must be carried out before the retrenchment exercise takes place.

Employers should take note of the key principles of retrenchment and observe the Code of Conduct of Industrial Harmony (especially clauses 20 – 24) when carrying out a retrenchment exercise. The Court of Appeal in Ng Chang Seng v. Technip Geoproduction (M) Sdn Bhd & Anor is of the view that although the Code has no force of law, the same “is still the gold standard by which a company’s action may be measured against to see if the whole exercise of retrenchment had been carried out bona fide and that every attempt had been made to explore alternatives before the termination on account of retrenchment.”

New laws which will enhance family friendly rights and increase awareness of sexual harassment in the workplace

There have been several bills which if they are given legislative effect are likely to be of future significance.

The Employment (Amendment) Bill 2021

The Employment (Amendment) Bill 2021 (Bill) had been tabled for a first reading on 25th October 2021. There are 45 provisions which will amend and add to the current Employment Act 1955. Some takeaways from the Bill are as follows:
1. Pregnancy and maternity
  The Bill proposes changes in relation to pregnancy and maternity protection for employees, namely
  - Extension of maternity leave from 60 days to 90 days; and
  - Prohibition of the termination of a female employee who is pregnant or suffering from a pregnancy-related illness, unless the termination is for misconduct, wilful breach of the employment contract, or business closure, in which case the employer bears the burden of proof to show that the termination is not pregnancy-related.
2. Working hours
  The Bill proposes to cut the maximum working hours for employees from 48 hours to 45 hours.
3. Flexible working arrangement
  The Bill proposes that an employee may request a flexible working arrangement from their employer in writing, allowing them to change their working hours, days, or location. The employer must inform the employee within 60 days as to whether the employee’s application is approved or not. In the case of a refusal, the employer must state the ground for such refusal.
4. Notice on sexual harassment
  The Bill proposes requiring businesses to post a publicly visible notice at work at all times to promote public awareness of sexual harassment. The Bill also proposes an increase to the fine payable by the employer should there be a failure, amongst others, to enquire into complaints of sexual harassment.
5. Forced labour
  The Bill proposes to outlaw forced or bonded labour by making it an offence for an employer to threaten, deceive or force an employee to carry out any activity, service or work and prevent that employee from proceeding beyond the place or area where such activity, service or work is carried out.
6. Gig workers
  The Bill proposes the insertion of Section 101C, which proposes to create a presumption of employment in the event there is an absence of a written contract of services relating to any category of employee if certain elements are satisfied. The presumption of employment under Section 101C would bring a gig worker within the meaning of an "employee" under the Employment Act 1955 and by extension, within the definition of a "workman" under the Industrial Relations Act 1967. This would give a gig worker all the benefits currently enjoyed by an employee and a workman such as entitlement to annual leave, sick leave, the mandatory contributions towards the Employees Provident Fund and the right to not be unfairly dismissed. The implementation of Section 101C could mean that certain companies may decide to terminate their operations in sectors where they are unable to absorb the gig workers (who may be presumed as employees) into their current financial scheme, due to the statutory obligations placed on an employer-employee relationship. In terms of liability, companies will also be vicariously liable for any tort/wrongdoing committed by the gig worker during his course of employment.
The Introduction of Anti-Sexual Harassment Bill 2021

The Anti-Sexual Harassment Bill 2021 (Bill 2) had been tabled for a first reading on 15th December 2021. Bill 2 is aimed at providing a right of redress for any person who has been sexually harassed, to promote the awareness of sexual harassment, and other related matters.

Some takeaways of Bill 2 include the following:
- Bill 2 defines what can amount to sexual harassment; and
- Bill 2 establishes a Tribunal for Anti-Sexual Harassment (Tribunal), which is to have jurisdiction to hear and determine any complaint of sexual harassment made by any person.

No requirement for employee to plead reinstatement in unfair dismissal claims

The necessity of pleading reinstatement in an Industrial Court action, which had not previously been expressly considered and decided on by the superior courts in Malaysia (i.e. the Federal Court), has now been clarified in the recent decision of the Court of Appeal in Sanbos (M) Sdn Bhd v Gan Soon Hua (“Sanbos”). This case has decided that the Industrial Court does not “cease to have ‘substantive’ jurisdiction merely because the remedy of reinstatement was not pleaded or asked for at the hearing”.

The Courts have acknowledged that the Industrial Relations Act 1967 (“IRA 1967”) “is a beneficent social legislation meant to provide better remedies for employees than that granted under common law”, and hence “reinstatement, a statutorily recognized form of speciﬁc performance, has become a normal remedy and this coupled with a full refund of his wages could certainly far exceed the meagre damages normally granted at common law”.

The failure/omission to plead for reinstatement by the employee in his/her representations to the Director General of Industrial Relations (“DGIR”) and/or Statement of Case does not limit the jurisdiction of the Industrial Court to hear the dispute. Accordingly, it has been affirmed that the Industrial Court when hearing the dispute can under Section 30(6) of the IRA 1967 exercise a wide discretion to grant relief to the aggrieved employees.

With this being a Court of Appeal decision, there is every possibility that the same issue may be appealed to the Federal Court of Malaysia. Employers should note that even if reinstatement is not pleaded by the dismissed employee, it would appear that based on Sanbos, the Industrial Court will still have jurisdiction to hear the matter on its merits, and may include in its award any remedy including reinstatement of the dismissed employee to his former employment.

Introduction of new Housewife Social Security Scheme

On 9 August 2021, the Minister of Human Resources announced the introduction of “Skim Keselamatan Sosial Suri Rumah” (Housewife Social Security Scheme) (“Scheme”). The aim of the Scheme is to provide protection to housewives who are involved in domestic incidents or suffering from disabilities. A draft Housewife Social Security Bill is undergoing redrafting by Ministry of Human Resources and the Attorney General's Chambers Malaysia. There is no set timeline for the tabling of the bill.

The Scheme covers domestic incidents, whereby housewives can make claims under the Scheme should there be an accident or illness suffered, or occurrence of death. This is in recognition of the contribution of housewives towards the development of family and nation as a whole.

Once the Housewife Social Security Bill has been finalised for the purposes of tabling to Parliament, a more definitive proposal will be arrived at as to whether employers will be required to, as a matter of law or voluntarily, provide contributions towards this Scheme by way of a supplement or allowance to existing pay packages.

KEY DEVELOPMENTS FOR 2021

Modification to the Industrial Relations Act 1967

In light of the COVID-19 Pandemic, the Temporary Measures For Reducing The Impact Of Coronavirus Disease 2019 (Covid-2019) Act 2020 ("Covid Act"), was gazetted on 23 October 2020.

S. 39 and 40 of Covid Act, which is treated as having come into operation on 18 March 2020, provides for a modification to the Industrial Relations Act 1967 ("IRA 1967").

The provision extends the statutory periods set out in the IRA 1967 by excluding the period from 18 March 2020 to 9 June 2020 in the calculation of statutory limitation periods.

The relevant limitation periods affected are:

Section 9(3) of the IRA 1967: the 21-day period for an employer or a trade union of employers to accord recognition or notify the trade union of workmen concerned in writing of the grounds for not according such recognition.
Section 9(4) of the IRA 1967: 14-day period for a trade union of workmen to make any report of non-recognition or non-compliance to the Director General for Industrial Relations ("DGIR").
Section 20(1A) of the IRA 1967: 60-day period for any aggrieved employee to file his unfair dismissal claim to the DGIR.

Modification to the Private Employment Agencies Act 1981

Sections 41 and 42 of the Covid Act which is treated as having come into operation on 18 March 2020 provides for a modification to the Private Employment Agencies Act 1981 ("PEAA").

Under the PEAA, a private employment agency requires a valid license to carry on recruiting activity, and the period for an application to renew the said license is "at least sixty (60) days before the expiry date." The private employment agency commits an offence under the PEAA if it operates without a valid license under the act.

The modification excludes the period from 18 March 2020 to 9 June 2020 from the calculation of the period for an application to renew a license. This in effect allows private employment agencies more time for renewal applications.

New rules for Employees' Minimum Standards of Housing Accommodations and Amenities

The Employees' Minimum Standards of Housing Accommodations And Amenities (Accommodation And Centralized Accommodation) Regulations 2020 was gazetted on 28 August 2020, and came into force on 1 September 2020.

Kindly refer to the link (due to the length of the regulations) for the specification of the employee's accommodation which is to be complied with by the Employer and/or the accommodation provider from 1 September 2020:

http://www.federalgazette.agc.gov.my/outputp/pua_20200828_PUA%20250.pdf

These new rules were introduced by the Human Resources Ministry following the COVID-19 outbreak, as a measure to reduce the spread of the virus in cramped and congested accommodation.

Maximum rental or charges for accommodation provided by employer

The Standards of Housing Accommodations And Amenities (Maximum Rental Or Charges For Accommodation) Regulations 2020 was gazetted on 28 August 2020, and came into force on 1 September 2020.

The regulations provide for a maximum rent or charges for accommodation that may be collected under Subsection 24G(1) of the Standards of Housing Accommodations And Amenities Act 2020 by an employer from an employee, being RM100.00.

KEY DEVELOPMENTS FOR 2020

The passing of Industrial Relations (Amendment) Bill

The Industrial Relations (Amendment) Bill 2019 ("Bill") was passed on 19 December 2019. The Bill is still awaiting royal assent at the time of writing and will then be gazetted and come into operation on a date appointed by the Minister of Human Resources ("Minister").

Key takeaways from the Bill include the following:

Representation during conciliation for unfair dismissal: The amendment allows for the appointment of a person other than an advocate and solicitor to represent the employer and/or workman in reconciliation meetings in the event of an unfair dismissal claim, subject to approval by the Director General of the Industrial Relations.
Referral of unfair dismissal claims to Court: The amendment provides that the Director General of the Industrial Relations ("DGIR") will replace the Minister of Human Resources in referring unfair dismissal claims to the Industrial Court where the DGIR is satisfied that there is no prospect of settlement.
Sole bargaining rights: The Bill introduced sole bargaining rights, allowing employees to decide which trade union (if there is more than one) is granted the right to represent employees in negotiations with the employer. An application in writing is made to Director General of Industrial Relations to determine which trade union is given the sole bargaining rights in the event no agreement is reached amongst employees. The sole bargaining rights granted is valid for three (3) years unless the relevant trade union ceases to exist.

Minimum Wages Order 2020

The Minimum Wages Order 2020 ("Order") was implemented on 1 February 2020. Key takeaways from the Order are as follows:

the minimum wage rate in the area specified in the Schedule of the Order is RM1,200.00 per calendar month;
the minimum wage rates in areas that are not specified in the Schedule of the Order is RM1,100.00 per calendar month; and
the Order has no application to a domestic servant as defined under relevant law.

Minimum standards of housing and amenities for workers of all industries

The Worker's Minimum Standards of Housing and Amenities (Amendment) Act 2019 ("Act") was gazetted on 23 September 2019 and came into force on 1 June 2020.

Prior to the enactment of the Act, the minimum standard for housing and amenities prescribed in The Worker's Minimum Standards of Housing and Amenities Act 1990 only applied to the agricultural and mining industries.

A key takeaway from the Act is that it extends the application of the minimum standards for housing and amenities to all industries if employers wish to provide accommodation for their employees. If so, employers or centralised accommodation providers must apply for a Certificate for Accommodation before providing accommodation to employees.

Malaysia Budget 2020

With a view to providing better benefits and protections for employees, the following proposals were put forward by the Government during the delivery of the Malaysia Budget 2020:

to increase maternity leave from 60 days to 90 days from 2021;
to extend the eligibility for overtime allowance from those with an income of less than RM 2,000.00 to those with an income of less than RM 4,000.00 per calendar month; and
to improve protection and procedures for the handling of sexual harassment complaints in the workplace.

Prioritisation of local workforce to reduce unemployment

With the advent of COVID-19 and rising unemployment rates, the Minister of Human Resources has announced that employers must advertise all vacancies on the JobsMalaysia Portal for at least 30 days before hiring a foreign worker or expatriate. This is to provide enough time for the Department/Agency under the Ministry of Human Resources to match the job against and prioritise local jobseekers. The Minister of Human Resources has emphasised that where there is a potential retrenchment, the 'foreign worker first out' approach should be taken.

With thanks to Ong Jian Nee, Low Jia Juan and Wong Kah Hui of Messrs KH Wong & Co. for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2019

New minimum wage to be implemented

On 20 July 2018, the Ministry of Human Resource announced that the Minimum Wage Order has been gazetted which will mean that the minimum wage increment to RM 1,500.00 will be standardised nationwide.

The implementation of the new rate is to be carried out in stages.

Under the Employment Act 1955, and the Sabah Labour Ordinance as well as the Sarawak Labour Ordinance there ought to be differentiation based on nationalities or discrimination based on local verses foreign workers.

Proposed amendments to the Employment Act 1955

On 4 October 2018, the Ministry of Human Resources announced proposed changes to the Employment Act 1955. The proposed amendments have not been tabled in Parliament but the key amendments are as follows:

the definition of an employee will be amended and references to “domestic servants” will be changed to “domestic employees”;
employers will be prohibited from discriminating against job seekers or employees on the grounds of gender, religion, race, disability, language, marital status and pregnancy when determining who should be offered employment (including advertisement of the vacancy) or in the terms or conditions on which an offer is made;
pregnant employees will be entitled to 98 days of paid maternity leave and protected from termination during maternity leave;
employees will be allowed to request “flexible working arrangements" and employers can only refuse the request on certain grounds;
employers must investigate any complaint of sexual harassment, and cannot refuse on the basis that a prior inquiry found no sexual harassment, or the employer is of the opinion that the complaint of sexual harassment is frivolous, vexatious, or is not made in good faith;
a written code on the prevention of sexual harassment is to be prepared by the employer and placed in an open area at the place of work;
the Director General is to grant approval, for a job fair or carnival to be organised. The penalty for failing to have approval is a fine of up to RM10,000.00;
principals may be liable to pay the wages of contractors/subcontractors in certain situations; and
female employees will be permitted to be employed in any underground working, industrial or agricultural undertaking with no restrictions as to set times as to when female employees can work.

KEY DEVELOPMENTS FOR 2018

Employment Insurance System Bill 2017

Under Employment Insurance System (EIS) Bill, from 1 January 2018 employers and employees must each contribute 0.2% to the scheme. Employees who are retrenched will be given a portion of the insured salary from the 0.4% monthly contribution. All organisations and companies with 1 or more employees must comply with this new rule. Failing this, employers may be fined a penalty not exceeding RM10,000 or imprisonment for a term no more than 2 years, or both, upon conviction.

Retrenched workers will also be entitled to job training for re-employment. EIS covers employees who lose their job from voluntary or mandatory retrenchment, or those whose jobs become redundant due to business restructuring, downsizing or closure.

Private Employment Agencies (Amendment) Bill 2017

The Private Employment Agencies (Amendment) Bill 2017 will amend the Private Employment Agencies Act 1981, spelling out in more detail the license application procedure, the conditions and fees imposed and other related matters.

Among the amendments are a higher licence fee of RM500 from RM25 currently; and the introduction of a series of processing fees that ranges between RM50 and RM300 for procedures like application, licence renewal, branch licence application, and licence replacement.

Self-Employment Social Security Bill 2017

The Self Employment Social Security Bill 2017 which seeks to provide social security organisation (“Socso”) protection to self-employed persons was passed April 2017.

Socso protection will be provided to self-employed taxi drivers and e-hailing service providers before being extended to other sectors that are predominantly self-employed.

KEY DEVELOPMENTS FOR 2017

Consequential changes to labour laws from trade agreement

The Malaysian government has stated that it is looking to amend and complete domestic ratification of legal procedures for the Trans-Pacific Partnership Agreement by mid-2017. There will be amendments to labour laws (on eight pieces of legislations), policies and practices as a consequence.

KEY DEVELOPMENTS FOR 2016

Mandatory social security contributions for all employees

Social security contributions became mandatory for all employees regardless of salary. However, contributions will be capped at the monthly remuneration of RM4,000.

Increase in minimum wage

The Minimum Wages Order 2016 came into effect on 1 July 2016 and affects all private sector employees (except domestic helpers) with rates set at: RM1,000 per month or RM4.81 per hour for Peninsular Malaysia, and RM920 per month or RM4.42 per hour for Sabah, Sarawak, and Labuan.

Exemption of certain employers to minimum retirement age laws

Under the Minimum Retirement Age (Exemption) Order 2016, the Minister of Human Resources has issued several orders to exempt certain employers from legislation which would otherwise provide a minimum retirement age of 60 years. This also excludes those employed on a fixed term service contract for over 24 months and less than 60 months with a basic wage of RM20,000 per month or more.

Reduction in employees’ contribution towards retirement benefit scheme

There has been a reduction in the statutory contribution rate under the Employee Provident Fund (retirement benefit scheme) for employees (i) from 11% to 8% for employees below the age 60, and (ii) from 5.5% to 4% for employees above the age of 60, from March 2016 until December 2017. The contribution rate for employers, however, remains at the current rate.

With thanks to Jian Nee and Wong Kah Hui of Kadir & Andri Partners for their invaluable collaboration on this update.