I.

EMPLOYMENT CONTRACTS
II. DISCIPLINARY PROCESS, DOMESTIC
INQUIRIES & GRIEVANCE PROCEDURE
III. REPRESENTATION, CONCILIATION
PROCESS & OTHER REMEDIES
IV. LAW OF UNFAIR DISMISSAL
V. SEXUAL HARRASMENT

CPD CAMP
Janice Anne Leo
Partner,
Messrs Shook Lin & Bok
Employment Law and Practice Under
The Malaysian Legal System
A legally regulated employer-employee
relationship that fosters industrial
harmony.
The constitutionally protected right to
work and statutory minimum terms and
conditions of employment.
Industrial relations system that eschews
industrial grievance by the prevention
and settlement of disputes.
Some Fundamentals

Freedom to hire but not the freedom to fire.

Termination simpliciter v Termination for just cause or excuse.

Collective bargaining through industry specific trade unions and in-house

unions.

An established dispute prevention and resolution system that incepts at the

Ministry of Labour and culminates in the Courts (the Industrial Court and
the Civil Courts).
Key Employment Legislations (1)

Employment Act 1995

The Employment Act 1955 sets of the minimum

terms & conditions of employment. The 1955
Act however generally only covers employees
who earn RM2,000.00 per month and below.
The 1955 Act is frequently treated as a
guideline by many employers to provide
minimum terms and conditions of employment.
Key Employment Legislations (2)

Industrial Relations Act 1967

The IRA 1967 provides for the prevention

and settlement of disputes or differences
arising from the employment relationship.
Representations on Dismissals. Section
20(1) provides that where a workman has
been dismissed without just cause or
excuse, he may make a representation to the
DGIR in writing within 60 days to be
reinstated to his former position.
Key Employment Legislations (3)

Malaysian employers may dismiss an

employee only for just cause or excuse.
If an employer is not able to establish just
cause or excuse, the dismissal will be
unlawful.
Just cause or excuse includes poor
performance, misconduct and
retrenchment.
60 days requirement is mandatory.
Key Employment Legislations (4)

Trade Unions Act 1959

Defines trade unions, regulates their
composition/ membership and details
their rights/power/duties.
Public sector and private sector
dichotomy.
Trade Unions must be registered by the
DGTU.
Regulates the right to strike and
lockouts (Section TUA 1959).
Key Employment Legislations (5)

Employees Provident Fund Act 1991

Establishes a provident fund for

employees retirement.
For employees under contract of
service/apprenticeship (unless excluded
under Sch. 1) who receive wages (as
defined in Section 2)
Present rate of contribution under Sch. 3
the Act : Employer (13%) and Employee
(6.5%).
Key Employment Legislations (6)

Employees Social Security Act 1969

SOCSO Act does not apply to

employees with wages that exceed
RM3,000.00.
Covers employment injuries or
occupational diseases.
Present rate of contribution under
Sch. 3.
Introduction (1)

The employment contract/contract of service

may be written/oral and expressed/implied.

?? Who is the employer?

A wide answer, including e.g. agents, managers
etc.
Section 29 IRA designed to cover persons holding
the purse strings in dismissal cases.
Introduction (2)
Who is an
employee/workman?
Anyone who has a contract of service
with the employer.

The EA excludes certain categories of

employees but the IRA includes all
employers in the private sector.

However, critical that there should be a

contract of service.
Contracts of service vs. Contract for
services
Person engaged under contract of service is an
employee.
Essentially the contract dictates WHAT work is to
be carried and HOW it is to be done.
Only employees/workman are protected by
employment law i.e. EA 1955 and IRA 1967.
Persons providing services are considered as
independent contractors and NOT
employees/workman.
Essentially contract for services dictates WHAT
work is to be carried out but not HOW it is to be
done.
Fixed term contract of service (1)
a fixed termmeans a term which has a
defined beginning and a defined end
Fixed term contracts may be based either on
fixed period of time or on a specific job or
assignment.
Han Chiang High School/Penang Han Chiang
Associated Chinese Schools Association &
National Union of Teachers in Independent
School, West Malaysia [(1988) 2 ILR 611]
The great thing is to make sure that the case is a
genuine one..... employees have to be protected against
being deprived of their rights through ordinary
employments being dressed up in the form of temporary
fixed-term contracts.
Fixed term contract of service (2)
Han Chiang Principle If the position to which an
employee is appointed is permanent in nature, and the
employee is employed on a succession of fixed term
contracts in the same position, the contract would be
deemed as a permanent contract and not a fixed term
contract.
Thus the non-renewal of the contract will be deemed
as an unfair labour practice and struck down by the
Court.
Permanent contract cannot be dressed up as a fixed
term contract.
Remedies for breach of fixed term
contract
Lilly Industries (M) Sdn Bhd v. Billy Wayne
Selsor [2006] 3 ILR 1507
Reinstatement or compensation in lieu of reinstatement and back
wages are not appropriate remedies.
Reinstatement or compensation in lieu of reinstatement and
back wages are not appropriate remedies.

The remainder wages that the employee would have received

as remuneration had the contract of employment not been
terminated.
Key Provisions of the Employment
Contract
Express terms Consensus bargaining
consensus or by power
operation of law.
Operation of Law
EA 1955

EPF Act 1991

SOSCO Act 1969

Employees within the EA Employees outside the
1955 EA 1955
Monthly basic salary Monthly basic salary more
than RM2,000.00
less than RM2,000.00
Terms and conditions of
Minimum terms of employment are decided by
employment are consensus between the
provided for in the EA contracting parties.
Terms and conditions implied
1955.
into the employment contract
Terms and conditions by operation of law.
implied into the
employment contract
by operation of law.
Employees under the Employment
Act 1955
Minimum terms and conditions of the employment governed
by EA 1955.
Retrenchment/termination benefits
Hours of work Section 60A Section 60J

Sick leave Section 60F Notice of termination Section 12

Holidays Section 60D Maternity benefits Section 37

Annual leave Section 60E

The provisions of EA 1955 are the bare minimum and

employees are encouraged to include superior terms and
conditions.
Implied terms (by law)

Implied terms exist in every contract of

employment.
Right to be given work (William Hill Ltd v. Tucker
[1997] ICR 291)
Mutual trust and confidence (Bina Goodyear Bhd v.
Subramaniam Kandiappan [2004] 3 ILR)
Duty of good faith and fidelity (See Cellular
Communications Network (M) Sdn Bhd v. Ilhami
Mohamad [2001] 1 ILR 233)
Duty to provide a safe working environment
Common terms & conditions
Job Title & Job title reflects the type of work done and
Description possibly the level of the position in an
organisation.

Commencement
and duration Fixed term contract or contract to continue
until employee reaches age of retirement.

Termination
notice
Ranges from one (1) month to six (6) month
depending on the nature of the
employment/profession.

Notice period stipulated in contract of service

dead letter for employers. Must be for just cause
or excuse.
Common terms in employment (1)

Ranges from three (3) months to six (6) months

depending on the nature of the
employment/profession.
PROBATION Expressly reserve the right to have the probation
period extended.
Employer may have separate notice periods for
probationers. Usually shorter notice period than for
confirmed employees.
NOTE The termination of the services of a
probationer (during probation) must be for just cause
or excuse.
Common terms in employment (2)

Gives the employer the right to transfer the employee

to a different department, subsidiary or location.
Transfer,
Mobility clause In Malaysia, even if a contract of employment does
or Relocation not contain an express clause, the employer has the
clauses
implied right to transfer an employee.
(See Ladang Holyrood v. Ayasamy a/l Manikam &
16 Others [(2004) 3 MLJ 339)
Transfer must be bona fide and must not result in a
reduction in terms of rank, seniority and/or benefits.
Confidential Information &
Confidentiality Clause (1)
A duty that imposes an obligation of confidence
as an express term of the contract of service (a
restrictive covenant) or arises out of an implied
term.
The obligation not to disclose information is
wider during the subsistence of the employees
contract of employment.
Whilst in employment, can lead to dismissal.
Upon cessation of employment, term is enforced
in a tortious action for breach of confidence. (see
Coco v. A.N. Clark (Engineers) Ltd (No. 2) [1969]
RPC 41).
Confidential Information &
Confidentiality Clause (2)
Confidentiality clauses cannot be used to
protect information which are found in
the public domain.
Confidential information must be
distinguished from general know-how.
Upon cessation of employment,
confidential information must have
quality of trade secrets to merit
protection.
Restraint of Trade Clause (1)

What is a restraint of trade clause?

To prevent an ex-employee from making use of or drawing on fund of
1 knowledge and experience or skills that he had acquired while working
for the former employer.

2 However, restraint of trade covenants are unenforceable in

Malaysia by virtue of s. 28 Contracts Act 1950

The employer may impose a anti-competition clause during the currency

3 of the contract of service but not after the termination of the contract of
service (see Polygram Records Sdn Bhd v. The Search & Anor [1994] 3 MLJ
127).
Restraint of trade clause (2)

However in a recent case of Worldwide Rota Dies Sdn Bhd v. Ronald Ong
Cheow Joon [2010] 1 LNS 444 , the High Court enforced a restraint of trade
clause by adopting and introducing the common law reasonableness test in
construing the restraint of trade clause.

This represents a complete departure from Section 28 of the Contracts Act

1950.

It is arguably an erroneous decision.

Collective Agreement (1)
Terms and conditions may also be
expressly incorporated in the contract of
employment by a reference to a
Collective Agreement.
A Collective Agreement is a document
that contains the terms and conditions of
employment of a group of workmen.
Once entered into and taken cognisance
by the Industrial Court, binds all
employees within the scope of the
Collective Agreement.
Collective Agreement (2)

Section 17 of the IRA 1967:-

1) A collective agreement which has been taken

cognizance of by the Court shall be deemed to be an
award and shall be binding on
a) the parties to the agreement including in any case
where a party is a trade union of employers, all
members of the trade union to whom the
agreement relates and their successors, assignees
or transferees; and
b) all workmen who are employed or subsequently
employed in the undertaking or part of the
undertaking to which the agreement relates.
Collective Agreement (3)
2) As from such date and for such period
as may be specified in the collective
agreement it shall be an implied term of
the contract between the workmen and
employers bound by the agreement that
the rates of wages to be paid and the
conditions of employment to be
observed under the contract shall be in
accordance with the agreement unless
varied by a subsequent agreement or a
decision of the Court.
Procedures for handling misconduct
Investigate report or allegation of misconduct received.

Issue notice of show cause seeking explanation from

employee.
Collate evidence (investigation report, interview
witnesses/complainant etc).
If sufficient evidence, prepare for domestic inquiry. This is
followed by notice for domestic inquiry and charges of
misconduct.
Conduct domestic inquiry.

Depending on outcome/findings of inquiry, management

to proceed with appropriate punishment.
Procedures for handling misconduct
Notice to show cause
Asking employee to explain the allegations levelled
against him.
Set out the allegation/misconduct without being too
legalistic and must be specific as possible.
Show cause may be combined with the letter of
suspension for a specified period of time. (Normal
period of suspension - 14 days)
Give sufficient time to reply seven (7) days is the
norm, and consequences of failure to reply.
Notice of Inquiry & Charges of
Misconduct
If explanation is unsatisfactory, inquiry
should be convened.

Ample notice to employee.

Charges of misconduct must be

included in notice.

Employee must be warned of

consequences of failure to attend
inquiry.
Disciplinary Procedures (1)

Due Inquiry/Domestic Inquiry

S. 14 of EA 1955 stipulates:-
Termination of contract for special reasons
1. An employer may, on the grounds of misconduct
inconsistent with the fulfilment of the express or
implied conditions of his service, after due inquiry
a) dismiss without notice the employee;
b) down grade the employee; or
c) impose any other less punishment as he deems
just and fit...
Disciplinary Procedures (2)

Failure to hold a domestic inquiry is not fatal and a

mere procedural irregularity (See Dreamland Corp (M)
Sdn Bhd v. Choong Chin Sooi & Anor [1988] 1 CLJ
39).
Defect in natural justice at original hearing could be
cured at the Industrial Court.
Industrial Court would conduct a rehearing.
Good industrial practice to hold one in line with
procedural fairness and natural justice.
Need for due inquiry may be dispensed with in cases
of admission to the misconduct.
What is appropriate punishment?

The type of punishment must be commensurate to

the seriousness of the misconduct.

Depends entirely on the particular facts and

circumstances of the case for example:-
Nature of the misconduct;
Type of industry;
Scope and duties of the employee;
Length of employees service;
Employees disciplinary record prior to the current misconduct.
Forms of Punishment/Disciplinary
action
Warnings;

Transfer/relocation of duties;

Downgrading/demotion;

Suspension of the employees participation in the

performance pay schemes;

Deferment of annual increment/cancellation of annual

increment;

Dismissal.
The Representation and Conciliation
Process
60 days from date of dismissal to lodge
unfair dismissal complaint to Industrial
Relations Department.
Mandatory conciliation process found in the
IRA 1967.
Conciliation meetings.
Amicable settlements.
In the event conciliation fails, the
dispute will be referred to the Minister
of Human Resources.
Claims in civil courts

Claim for wrongful dismissal Section 33A IRA

Dismissed employee may An application to the

initiate an action in the Industrial Court to refer
civil courts but relief is questions of law arising
limited to the unpaid from Award to the High
notice period under the Court.
contract of service (see
Mohd bin Ahmad v. Yang Di
Pertua Majlis Daerah
Jempol, Negeri Sembilan
[1997] 2 MLJ 361).
Judicial Review
Primary mode of challenge of Industrial
Court Awards.
But a limited challenge/cannot disturb
findings of fact (Section33B IRA).
In practice, difficult to overturn award.
Complaint to the Labour Court (1)

Inquiry conducted by Director General of Labour

under Part XV of the Employment Act 1955
(Labour Court).
Under Section 69 of EA 1955, the Labour Court
has power to inquire and decide on cases such
as:-
i. Claims for wages and payments contractually due
under the EA 1955, for example unpaid contractual
bonus, termination and lay off-benefits, overtime,
maternity allowances etc.
Complaint to the Labour Court (2)

ii. Dismissal actions taken by the employer under

Section 14(1) of the EA 1955.
iii. Claims by an employee against any person liable
under Section 33 of the EA 1955.
However, Labour Court has no jurisdiction to hear or
decide dispute which is pending inquiry or proceedings
under Industrial Relations Act 1967 or dispute that has
been referred to or is pending in any proceedings before
the Industrial Court.