INDUSTRIAL COURT OF MALAYSIA CASE NO, 13 (3)/2—848/2014 BETWEEN KESATUAN KEBANGSAAN PEKERJA-PEKERJA PERUSAHAAN LOGAM AND SOUTHERN STEEL MESH SDN. BHD, AWARD NO. 708 OF 2017 BEFORE : Y.A. TUAN EDDIE YEO SOON CHYE ~ CHAIRMAN EN. MATKAR BIN SIWANG -EMPLOYEES' PANEL EN, TIU KWE YEE -EMPLOYERS' PANEL VENUE + Industrial Court Malaysia, Kuala Lumpur DATE OF REFERENCE + 17.10.2014 DATES OF MENTION + 03.12.2014; 08.01.2015; 09.02.2015; 09.03.2015; 09.04.2015; 13.04.2015; 13.05.2015; 17.06.2015; 06.08.2015; 21.09.2015; 02.11.2015; 24.11.2015; 14.01.2016. DATE OF HEARING + 02.10.2015. COMPANY'S SUBMISSIONS FILED + 02.10.2015; 26.10.2015. UNION'S SUBMISSIONS FILED : 02.10.2015; 02.11.2015, REPRESENTATION : G. Rajasekaran, Executive Secretary MIEU (Metal Industry Employees’ Union). Representative for the Union. Dato! T, Thavalingam (Lisa Tan with him) of Messrs Lee Hishamuddin Allen & Gledhill. Solicitors for the Company. REFERENCE: This is a Ministerial reference made under section 26(2) of the Industrial Relations Act 1967 (Act 177) dated 17 October 2014 arising out of the trade dispute between Kesatuan Kebangsaan Pekerja-Pekerja Perusahaan Logam (hereinafter referred to as the “Union”) and Southern Steel Mesh Sdn. Bhd. (hereinafter referred to as the “Company”).AWARD 1, This is a Ministerial reference made under section 26(2) of the Industrial Relations Act 1967 (Act 177) dated 17 October 2014 arising out of the trade dispute between Kesatuan Kebangsaan Pekerja-Pekerja Perusahaan Logam (hereinafter referred to as the “Union") and Southern Steel Mesh Sdn. Bhd. (hereinafter referred to as the “Company”). 2. The Honourable President of the Industrial Court directed that this case be transferred from Court 3 to this division on 27 May 2015. The hearing of this trade dispute was held in the technology court on 2 October 2015. Both parties filed their Written Submissions and Bundle of Authorities on the even date. Subsequently the Company's counsel and the Metal Industry Employees’ Union (MIEU) representative filed their respective Additional Written Submissions on 26 October 2015 and 2 November 2015 respectively. When the case was called for mention 14 January 2016, both parties requested the case to be closed for handing down of the Award by the hearing Panel. The parties subsequently filed the Agreed Articles to the Collective Agreement on 7 March 2017. 3. The instant trade dispute relates the proposals relating to the terms and conditions for a new collective agreement in the 9" Collective Agreement between Kesatuan Pekerja-Pekerja Perusahaan Logam and the Southern Steel Mesh Sdn. Bhd. The articles in dispute to be adjudicated by this Court are Article 4 (a) & (d) “Duration 2and Termination of Agreement”, Article 16 (b) (v), (vi) and (vii) “Salary scales”, Article 17 (b) “Hours of Work”, Article 19 “Shift Allowance”, Article 20 (a)"Weekly Rest Day’, Article 26 (c) and (e) “Medical Attention’, Article 27 (a) and (d) (iv) “Retirement/Retirement Benefits”, Article 32 “Existing Benefits”, Article 33 “Bonus”, Article 34 “Exclusion Clause", Article 35 (a) “Transport Subsidy”, Appendix A “Salary Structures” and Appendix C "Salary Adjustment’, AMENDED STATEMENT OF CASE 4. The Union pray that the Court awards the new terms and conditions as proposed by the Union as reflected in Appendix 1 (Agreed Articles and Salary Scales) and Appendix 2 (Disputed Articles). STATEMENT IN REPLY 5. The Company wishes to maintain the articles from the previous collective agreement for the duration of 1 January 2010 — 31 December 2012 (Cognisance No. 302/2010) except the disputed articles as stated in paragraph 3. The Company proposes the Court to hand down an Award in terms of the Company's counter proposals for a new collective agreement which are fair, reasonable and equitable. 6. The Company contended that the Court must have due regard to public interest, the financial implications and effect of the Award on the economy of the country and ‘on the industry concerned and also to the probable effect in related or similar industriesas required by section 30 (A) of the Industrial Relations Act 1967. THE UNION'S CASE 7. The Union's witness is Singaravel a/! Sinnaian (UW1) who is the Secretary of the Factory Committee, Metal Industry Employees' Union. UW1 commenced employment in the Company on 11 July 2002 as a QC Technician and had participated in the negotiation of the collective agreement for the duration from 1 January 2013 to 31 December 2015. UW1 produced his witness statement marked as UWS1. UW1 referred to a letter dated 24 March 2014 (UB4) signed by Hashim Bin Mohd. Yusoff Senior Manager of Human Resource to the Secretary General of MIEU in respect of the Company's proposals on the collective agreement where the Union was not agreeable. In respect of the shift allowance (Article 19), UW1 was asked to provide justification for the increase but was unable to show shift allowances of factories from similar industry. In respect of the request by the Union to increase the medical cost in Article 26 (e) to RM 500 from RM 150, UW1 conceded that the increase with Goods and Sales Tax has yet to be implemented. In respect of Article 27 (d)(iv), reference was made to the Financial statements for FY ended 30 June 2012 (COB page 77) where the Company incurred loss and it was suggested that the request to increase the retirement benefits to 10% was deemed unreasonable. UW1 in reply agrees to maintain the 6% retirement benefits. In respect of the bonus clause in Article 33 UW1 conceded that the payment of bonus was non contractual and there was no proof that bonus paid by the Company was unfair and discriminatory. In respect of increase of transport subsidy from RM3.50to RM4,00, the Company provides free transportation and UW1 was unable to produce any documents to show Company in similar industry giving RM5.00. transport allowance. UW1 disagrees that the proposal by the Company in respect of Appendix C (Salary) was fair and reasonable. THE UNION'S SUBMISSIONS 8. Article 4 (a) & (b): The Union submits both parties agreed that the new collective agreement will commence from 1 January 2013 to 31 December 2015. Reference was made to the case of Kesatuan Kebangsaan Pekerja-Pekerja Perdagangan v. Kumpulan O'Connor's (M) Sdn. Bhd. [Award No. 1343 of 2009] where the Court decided that the retrospective effective date of the collective agreement is 1 November 2006 upon the expiry of the previous collective agreement which expired on 31 October 2006. 9. Article 16 (b)(v), (vi) & (vii) salary scales: The Union contended that the Company agreed to maintain these provisions to enable the parties to settle the minimum and maximum rates under the salary scales. The clauses were first included in the collective agreement at the Company's request in order to limit payment for ‘overtime work. 10. Article 17 (b) Hours of Work: The Union submitted that the Company agreed to maintain this clause which have existed in the collective agreement and before anychanges are made, it is good industrial relations practice in accordance with the Code of Conduct for Industrial Harmony that due consultation with the Works Committee are conducted. 11. Article 19 Shift Allowance: The Union submits that that the quantum of shift allowance has remained unchanged since 2006, The purpose of the shift allowance is to compensate workers for having to work irregular hours which not only cause a major inconvenience to those involved but also affect their health. Due to their rotating shifts these workers have to take their meals outside their home and shift allowance is partly intended to compensate them and the cost have increased considerably in the past six years, 12. Article 26 (c) & (e) Medical attention: The Union contended that the Company's proposal to reduce the maximum liability of the Company from RM 3,500 to RM 1,500 per annum is without justification at the time when cost of medical expenses has considerably escalated. The Union's proposal to increase the quantum from RM 150.00 per employee per year to RM 500 is fair and reasonable in view of the considerable increase in the cost of outpatient consultation and treatment. 13. Article 27 (a) & (d) (iv) Retirement/Retirement Benefits: The Union submits that employees should be allowed the option to retire at any time after attaining the age of 50. The Company is engaged in steel mesh production requiringheavy manual work and employees may opt to retire early due to poor health and such employees should not be deprived of the retirement benefits. The quantum of retirement benefits to be increased in order to provide employees and their dependants a reasonable standard of living. 14. Article 32 Existing Benefits: This clause is to ensure that any benefits the Company practised in addition to the terms and conditions stipulated under the collective agreement will be continued. 15. Article 33 Bonus: The Union submits that there ought to be a fixed contractual of at least 1.5 month's salary annually and the Company can give additional amount based on the employee's appraisal. There is currently no provision for a contractual bonus. Employees are paid up to 1.75 months based on the employer's discretion whereas the managerial and executive staff are given 1 month to 3 months bonus. This practice has led to employees feeling discriminated and demotivated. The Union referred to the case of Kesatuan Pekerja-Pekerja Padiberas Nasional Berhad (Bernas) Semenanjung Malaysia v. Padiberas Nasional Berhad (Bernas) [Award No. 1499 of 2014] where the Court decided that the annual contractual bonus shall be one month's salary as this would provide some flexibility to the Company to reward highly productive and efficient employees at higher levels of annual discretionary bonus be it at their pleasure and within their financial capability.16. Article 34 Exclusion clause: The Union contends that the new term should benefit all employees who were in employment on the effective date of this agreement. The conclusion of the new agreement has been delayed inordinately and it is not fair to deny the benefits provided under the new collective agreement to employees who had left the Company prior to the date of conclusion of the agreement, 17. Article 35 (a) Transport Subsidy: The Union submits that an increase of RM 1.50 was to cover the increase costs, The current rate of RM 3.50 was fixed six years ago. The Company has offered to increase the current rate of RM 3.50 to RM 4.00. 18. Appendix C Salary Adjustments: The Union submits that all employees should be compensated fairly and equitably on the quantum of adjustment based on a percentage of each employee's salary to ensure due consideration of employees seniority, skill development and responsibility. The Union submits that an 8% salary adjustment is justified based on the increase in the Consumer Price Index (CP!) since December 2009, The Union's proposal for a salary adjustment is affordable and within the capacity of the Company based on the Company's Financial Statement for the year 2012, 2013 & 2014. The Union referred to the case of Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia v. BCB Berhad (Prime City Hotel) [Award No, 566 of 2014] where the Industrial Court decided that every employee shall be given an immediate increment of 7% of his basic salary based‘on the last three years of the CPI which is 7.34%. THE COMPANY'S CASE 19. The Company's witness is Muhammad Khizam Bin Abdul Aziz (COW1) who is the Human Resources Manager. COW referred to his witness statement produced as COWSI. This is a trade dispute relating to the proposals for the terms and conditions of the 9" Collective Agreement. 20, Article 4 (a) & (d) Duration and Termination of Agreement: The Company proposed that the effective commencement date of the Collective Agreement should not be earlier that 17 April 2014 (which is 6 months before the date of reference on 17 October 2014) to ensure that it will not expire so soon on 31 December 2015 and continue to run for the next 3 years. 21. Article 16 (b)(v), (vi) & (vii) salary scales: The Company proposed to delete these clauses as employees have reached the maximum salary scales and should Not continue to receive adjustment, salary increments and allowance as it will defeat ‘the purpose of having a minimum and maximum salary structure in line with the principle of ‘rate for the job' where the rate of the job must commensurate with the academic qualifications and experience of the workman within the similar industry and location,22. Article 17 (b) Hours of Work: The Company proposed to delete the clause ‘any changes to these hours will be made in consultation with the Union Works Committee’. To meet the operational and business requirements, the Company requires the flexibility to make changes to the hours within the agreed working hours (in compliance with the collective agreement) without having to consult the Union. The Company is prepared to give a concession that the Union and the workers will be notified of the changes in the hours of work. 23, Article 19 Shift Allowance: There is no basis to increase the shift allowances and overall the Company is paying a higher shift allowance rate when compared to other companies in the similar industry and location. 24. Article 26 (c) & (e) Medical attention: The Company proposed the removal of the second paragraph in clause (c) as the majority of the employees have opted for the medical insurance which is more beneficial. The Company proposes to offer all employees medical coverage for outpatient treatment from the Company's panel clinic of up to RM 1,500 per annum, The Company submits that there is no basis to increase the claims for clinical consultation for spouse and dependants from RM 150.00 to RM 500.00 per year. 25. Article 27 (a) & (d) (iv) Retirement/Retirement Benefits: For Clause (a), the Company Is agreeable to increase the retirement age to 60 years in compliancewith the statutory law and the optional retirement should remain at 50 years. For Clause (d)(iv) the Company disagree with the Union's proposal to increase the retirement benefits from 6% to 10% of the last drawn salary. The Financial Statements for 2012 - 2014 show that the Company suffered losses of RM 914,386.00. 26, Article 32 Exis ‘ing Benefits: This clause is redundant as there are currently no existing benefits which are not covered under the Collective Agreement. All terms and conditions of service should be negotiated as between the Company and the Union. 27. Article 33 Bonus: The Company proposed to maintain the current clause where bonus payments are made at the discretion of the Company based on the Company's and employee's performance, The payment of bonus is a matter of the Company's discretionary prerogative where the primary objective is to share with deserving and well performing employees the profits of its business operations for the financial year. 28, Article 34 Exclusion Clause: The Company proposed that since this matter was referred to the Industrial Court, the effective commencement date of the Collective Agreement should be no earlier that 23 April 2014 (which is 6 months before the date of reference on 23 October 2014) to ensure that it will not expire so soon on 31 December 2015 and continue to run for the next 3 years.29. Article 35 (a) Transport Subsidy: The Company proposed the increase of the transport subsidy from the current rate of RM 3.50 to RM 4.00. The purpose of this clause Is to subsidise the employee's transport cost. The Union has not provided any justification for seeking the increase in the transport subsidy. The Company provides free transportation to employees who wish to opt for this. 30. Appendix C Salary Adjustments: The Company's proposal as annexed in Appendix C is based on sustainable affordability and in line with the Company's desire to maintain internal equity within its business units of similar industry. The Company does not have the financial capacity to accede to the Union's proposal to increase the salary adjustment as the Company suffered losses of RM 914,386.00. THE COMPANY'S SUBMISSIONS 31, The Company submits that there is no basis for the Collective Agreement to have a retrospective effect. In the case of Fima Bulking Services Sdn. Bhd. v. Kesatuan Kebangsaan Pekerja-Pekerja Perdagangan [1996] 2 ILR 1690 where the Industrial Court decided as follows: “In this case it will not fair not to backdate the award at all. Both parties have asked the Court to take into account factors which can affect the decision on salary revision that occurred up to 1996. The union had calculated the increase in CPI to 1995 and the company had asked the Court to consider the salary revisions granted in 1995 and 1996. Therefore on the issue the effective date of this award the Court rules that it will be effective from the date of the award.”32. In the case of Bukit Jambul Development Sdn. Bhd. v. Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar Dan Restoran, Semenanjung Malaysia [2005] 2 ILR 937 at page 932 as follows: “This case is not one that falls within the exception to the proviso to s. 30(7) of the Industrial Relations Act 1967. As the date of the Ministerial Reference is 19 April 2004, then, to keep within the time frame provided in that section, the court cannot order a retrospective date any earlier than 20 October 2003. In coming to a decision as regards the effective date the court has considered the company's arguments for a prospective implementation date, The court has carefully weighed the merits of such argument, namely greater stability in the relationship between the parties and computational difficulties vis a vis the rights of the workmen to have new collective agreement in force upon the expiry of the previous one. The court has also considered that a prospective implementation date may have the undesired effect of making it unattractive and acting as a disincentive for the hotel to speedily conclude negotiations for a new collective agreement.” 33. The Company submits that employees who have reached the maximum salary ought not to be given increments as this would defeat the purpose of having a minimum and maximum salary structure, 34. The Company submits Article 17 (b) that the Company requires the flexibility to make changes to the hours of work with the agreed working hours without having to consult the Union in order to meet the operational and business requirements. The Company is prepared to give a concession that the Union and the workers be notified of the changes in the hours of work.35. As for medical attention (Article 26) a majority of the employees have opted for the medical insurance which is more beneficial to them. The Company proposes to offer all employees medical coverage for outpatient treatment from the Company's panel clinic up to RM 1,500 per annum. The Union has not provided any justification to increase the claims for clinical consultation for spouse and dependants from RM 150 to RM 500 per year. 36. The Company agrees in regards to Article 27 (a) to increase the retirement age to 60 years in compliance with the statutory law. In respect of Article 27 (d)(iv), the Company proposes to maintain the current clause as the Company does not have the financial capacity to increase the retirement payments from 6% to 10% as proposed by the Union. In the case of Kolej Tunku Abdul Rahman v. Kesatuan Kakitangan Akademik Kolej Tuanku Abdul Rahman (1991) 2 ILR 971, the Industrial Court decided that employees in the private sector by way of collective bargaining get in addition some retirement benefits which depends largely on the employers capacity to pay. 37. The Company submits that Article 32 on existing benefits is a redundant clause as there are currently no existing benefits not covered under the collective agreement. All terms and conditions of service should be negotiated between the parties.38. The Company submits that the present Article 33 on bonus should be maintained where payment of bonuses are given at the Company's discretion based on the Company's and employees’ performance and therefore obligatory and not contractual on the part of the Company. 39. The Company had proposed an increase in the transport subsidy from RM 3.50 to RM 4.00 to subsidise the employee's transport costs. The Company does not have the financial capacity to increase the subsidies and allowances. 40. As for salary adjustment, the Company proposes a fixed adjustment according to the grade. This adjustment is based on sustainable affordability and to maintain internal equity within its business units of similar industry. The Company does not have the financial capacity to accede to the Union's proposal to increase salary adjustment to 8% which is without justification. The Industrial Court in the the case of Malayan Commercial Banks Association v. National Union of Bank Employees [1982] 1 TLR (Rep) 531 at page 533 where Harun Hashim J decided as follows: “Salary increase in the private sector, however, are further subject to the ‘employer's ability to pay, the salary levels in related or similar industries and its effect on the economy of the country as a whole. Taking all these factors into account, the parties at the negotiating table should discuss in terms of a percentage increase.” 41. In the the case of O.Y.L. Condair Industries Sdn. Bhd. v. Kesatuan Pekerja-Pekerja Perusahaan Letrik [1999] 1 ILR 889 at page 533 where the 15Industrial Court decided as follows: “The company's unwillingness to pay the salary increase was not due to its current profit margin, but in relation to its fears that the current economic slowdown will affect its future profits. Taking this into consideration, and s, 30(4) of the Industrial Relations Act 1967, the salary scales were to be increased by 7.5% only.” THE LAW 42. _ In the the case of Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar Dan Restoran Semenanjung Malaysia v. Hotel Equatorial (M) Sdn Bhd [2010] 2 ILR 463 at page 474 where the Industrial Court was guided by the principles enunciated in the case of Penfibre Sdn Bhd, Penang v. Penang & S. Prai Textile & Garment Industries Employees’ Union [1986] 1 ILR 323 @ 329 as follows: “It is well established in industrial law that in deciding on the question of wage structure and wage increases, the court has to take into account the following factors: (a) Wages and salaries prevailing in comparable establishments in the same region; (b) Any rise in the cost of living since the existing wages or salaries were last revised; and (©) The financial capacity of the company to pay the higher wages/increases.” 43. The Industrial Court in the the case of Kesatuan Pekerja-Pekerja Perkilangan Perusahaan Makanan v. Network Food Industries Sdn Bhd [2013] 4 ILR 644 at page 663 made reference to the High Court decision in the case ofSarawak Commercial Banks Association v. Sarawak Bank Employees’ Union [1990] 1 LNS 19; [1990] 2 MLJ 315 at page 319 as follows: “It is to be noted that the Act does not specify the formula for the computation on the rates of pay and the legislature thought it best to leave it to the Industrial Court to find the basis for such computation as can be seen from s. 30 (4) and (5) which read: (4) _ In making its award in respect of a trade dispute, the court shall have regard to the public interest, the financial implications and the effect of the award on the economy of the country, and on the industry concerned, and also to the probable effect in related or similar industries. (5) The court shall act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal form.” 44, The Industrial Court in the case of Hagemeyer Industries (M) Sdn Bhd v. National Union of Petroleum And Chemical Industry Workers [1983] 1 ILR 325 at page 341 decided as follows: “We agree that we have to take into consideration the financial capacity of the company when we determine the wage scales. It will not be in the interest of the Union that, by fixing a wage scale beyond the capacity of the employer to pay, some of its members are perforce to leave their employment. And it is, in our view, our responsibility to keep the entire work force in employment, especially in times of world economic recessions, and not to make any award which causes unemployment to some." 45. In the case of Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar Dan Restoran Semenanjung Malaysia v. Hotel Equatorial (M) Sdn Bhd [2010] 2 ILR 463 at page 465 where the Industrial Court decided as follows:*(2). On the salary structure, the Union sought for an immediate 6% across the board whilst the hotel argued that the increment should be 4.5%, In this case, the hotel had not pleaded its inability or incapacity to pay and had only been concerned with payroll costs which had been steadily increasing since 1996. Therefore the hotel had not been suffering from any financial incapacity that it had been unable to pay an increase in salaries or other benefits or at all. The formula based on the CPI had merely been a guideline and the court could award 2/3 of the CPI. Thus bearing this in mind together with the fact that Melia Kuala Lumpur was giving 5% and Mutiara Kuala Lumpur was giving 4% for their immediate increments, the figure of 5% would be deemed fair for both parties.” 46. The Industrial Court decided in the case of Kesatuan Pekerja-Pekerja Perusahaan Membuat Tekstil & Pakaian Pulau Pinang Dan Seberang Perai v. Far East Cotton Industries (M) Sdn Bhd [2007] 3 ILR 411 at pages 412, 414 & 415 as follows: “[3] The company could not afford further increases in the salaries of their employees. The audited accounts of the company that had been submitted into Court had to be accepted, as the union had not challenged it, These reports clearly showed that the losses suffered by the company had totally wiped out the paid up capital of the company. The company's future was indeed bleak. The auditor's comments confirmed this when they stated that there was substantial doubt as to whether the company would be able to continue as an ongoing concern, It would be far better to allow the company a breathing period to recover its losses, rather than to force them to close down their operations totally, which would have far more damaging repercussions to the employees of the company. [8] The only issue here is for the court to determine the financial capacity of the company. The issue is of paramount importance to the whole dispute of the 2™ Collective Agreement between the parties. [9] Of the three factors above, the company's financial capacity to pay is the deciding and limiting factor in dealing with wage increases and other 18employees! benefits. Other factors may provide prima facie justification but increase in wages will normally be awarded only within the limits of the company's financial capacity. If the court were to proceed to award the increases of the wages despite the company's shaky financial position it might result in the possibility of the company to close its business. This would lead to a disastrous effect of all the employees losing their jobs.” 47. In case of Malayan Commercial Banks Association v. National Union of Bank Employees [1982] MLLR 246, the Industrial Court decided at page 247 as follows: “In the private sector, salaries are reviewed once every three years. Where the increases sought are on grounds of an increase in the cost of living, the review should be based on the increase that has actually taken place since the last review in order to determine what salaries should be paid during the next three years. In determining the new salaries, however, no account should be taken if possible increases that might occur during the next three year period. There are two reasons why we should not take into account future possibilities. Firstly, itis difficult to predict the future. If the practice is allowed, it may well be argued that the economic forecast is a downward trend, recession, even depression in which event, salaries should be reduced not increased. Secondly, if current salaries already include an element of inflation in future, the salary levels of the past should be discounted to the extend of the forecast.” DECISION 48. Prior to the hearing of this trade dispute, parties successfully negotiated a settlement in furtherance of the disputed articles in the Collective Agreement namely Atticle 17 (b) Hours of Work, Article 20 (a) Weekly Rest Day, Article 26(c) Medical Attention and Appendix A Salary Structure.49, To regurgitate, both parties resolved all the 37 articles as filed in the Agreed Articles (as annexed to this Award) except the following Articles viz. Article 4 (a) & (d) Duration and Termination of Agreement, Article 16 (b) (v), (vi) and (vii) Salary scales, Article 19 Shift Allowance, Article 26 (c) & (e) Medical Attention, Article 27 (a) and (d) (iv) Retirement/Retirement Benefits, Article 32 Existing Benefits, Article 33 Bonus, Article 34 Exclusion Clause, Article 35 (a) Transport Subsidy and Appendix € Salary Adjustment. Article 4 (a) & (d): Duration and Termination of Agreement. 50. The provision on the commencement of a collective agreement is found in s. 30 (7) of the Industrial Relations Act 1967 which reads as follows: “An award may specify the period during which it shall continue in force, and may be retrospective to such date as is specified in the award: Provided that the retrospective date of the award may not, except in the case of a decision of the Court under section 33 of an order of the Court under section 56 (2) (c) or an award of the Court for the reinstatement of a workman on a reference to it in respect of the dismissal of a workman, be earlier than six months from the date on which the dispute was referred to the court.” 51, The High Court in the case of Sarawak Commercial Banks Association v. Sarawak Bank Employees' Union [1990] 1 LNS 19; [1990] 2 MLJ 315 at pages 317 and 318 decided as follows: “For myself I would read the word ‘may’ as discretionary and at most, directory and I say so for the following reasons: 20(2) The restriction imposed on the power to make the award retrospectively is applicable only in respect of cases where the parties do not agree on the effective date of the agreement. This is obvious as if the parties took time to settle the dispute on some substantial matters but agreed on the date of its implementation and thereby finally referred the dispute under s. 26(2) of the Act to the Minister of Labour late, then the whole scheme will be defeated especially in view of the fact that this agreement is to be a continuation of the previous agreement. In my view this will be in conflict with s, 30(5) which reads: The Court shall act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal form. Here the Industrial Court has the power to make a retrospective order of the award though restricted to not earlier than six months from the date on which the dispute was referred to the Industrial Court.” 52. The Union referred to the case of Bukit Jambul Hotel Development Sdn Bhd v. Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar Dan Restoran, Semenanjung Malaysia [2005] 2 ILR 927 where the Industrial Court decided as follows: “Where the ideal situation does not materialise, a situation will arise where the court will have to determine the effective date of the new collective agreement. In so doing the court is bound by the provision of s. 30(7) of the Industrial Relations Act 1967. This case is not one that falls within the exception to the proviso to s. 30(7) of the Industrial Relations Act 1967, As the date of the Ministerial Reference is 19 April 2004, then, to keep within the time frame provided in that section the court cannot order a retrospective date any earlier than 20 October 2003. In coming to a decision as regards the effective date the court has considered the company's arguments for a prospective implementation date, The court has 21carefully weighed the merits of such argument, namely greater stability in the relationship between the parties and computational difficulties vis-a-vis the rights of the workmen to have a new collective agreement in force upon the expiry of the previous one. The court has also considered that a prospective implementation date may also have the undesired effect of making it unattractive and acting as a disincentive for the hotel to speedily conclude negotiations for a new collective agreement.” 53. The Industrial Court in the case of National Union of Hotel, Bar & Restaurant Workers v. Casuarina Beach Hotel Sdn, Bhd., Penang [1981] MLLR 233 decided as follows: “Be that as it may, once the dispute is referred to us the Court is bound by the provisions of Section 30(7) IRA which limits backdating to not more than six months from the date of reference by the Minister.” 54, The duration of the previous Collective Agreement was from 4 January 2010 - 31 December 2012 (Cognisance No. 302/2010). The Union submits both parties agreed that the new collective agreement will commence from 1 January 2013 to 31. December 2015. However, it was in evidence that UWL conceded that the delay in the collective agreement (Article 4) leading to the reference of the trade dispute to the Industrial Court dated 17 October 2014 was not caused by the Company. The Company proposed that the effective commencement date of the 9” Collective Agreement should be no earlier that 17 April 2014 (which is 6 months before the date of reference on 17 October 2014) to ensure that it will not expire so soon on 31 December 2015 and continue to run for the next 3 years. The Court had considered both the submissions on Article 4 (2) in respect of the Duration and Termination of Agreement, Accordingly, 22the decision made would be in the best interest of the parties and it augurs well for industrial harmony between the Union and the Company to have the effective date retrospective within the purview of section 30(7) of the Industrial Relations Act 1967. commencing from 1 May 2014 to 30 April 2017. Consequently, in respect of Article 4 (d) either party may serve on the other not less than three (3) calendar months’ notice in writing to negotiate on new terms and conditions of employment and and other related matters but no such notice shall be given before 1 February 2017. Article 16 (b)(v), (vi) & (vii) salary scales. 55. The Union contended that the Company agreed to maintain these provisions to enable the parties to settle the minimum and maximum rates under the salary scales. The clauses were first included in the collective agreement at the Company's request in order to limit payment for overtime work. However, the Company proposed to delete these clauses as employees have reached the maximum salary scales and should not continue to receive adjustment, salary increments and allowance as it will defeat the purpose of having a minimum and maximum salary structure in line with the principle of ‘rate for the job’ where the rate of the job must commensurate with the academic qualifications and experience of the workman within the similar industry and location. 56. In the case of Kesatuan Pekerja-Pekerja Perkilangan Perusahaan Makanan v. Network Food Industries Sdn. Bhd. [2013] 4 ILR 644 at page 667 as follows: “The court did not accept the union's proposal that the employees who have 23reached their maximum salaries be allowed to receive a salary on a personal-to- holder basis after the salary adjustment if it exceeded the maximum salary. In Kesatuan Sekerja Pembuatan Barangan Galian Bukan Logam v. MCIS Safety Glass Sdn, Bhd. [2010] 2 LNS 1104 (Award No. 1104 of 2010) this division of the Industrial Court had accepted such a proposal and had given one annual increment to employers who had reached their maximum salaries. Since then, the High Court has held in 7Hi-Wall (Malaysia) Sdn. Bhd, v. Paper and Paper Products Manufacturing Employers’ Union and Mahkamah Perusahaan Malaysia (R2-25-115-2011) that there is no basis for such a proposal.” 57. Accordingly, the Court having considered the existence of the salary structure in respect of the annual increment as set out in Appendix A (UB1 page 47) outlining the Salary Structure for Worker and Staff based on Category and Grading, the Union's proposed clauses in Article 16 (v), (vi) & (vil) as reflected in UBL page 15 shall be deleted and not to be incorporated into the current Collective Agreement. Article 17 (b) Hours of Work 58. Both parties are agreeable that "The Company shall notify the employees, from time to time the actual time they are required to work and stop work and the actual time for meal/tea breaks.” Further, the Union proposed that “Any changes to these hours will be made in consultation with the Union Works Committee.” 59, Before the Court, the Company is prepared to give a concession that the Union and the workers will be notified of the changes in the hours of work. The Company requires the flexibility to make changes to the hours within the agreed working hours in 24order to meet the the business and operational requirements. Therefore, the Court did not accept the Union's proposal on the second limb to Article 16 (b) for changes to the working hours to be made in consultation with the Union Works Committee. Article 19 Shift Allowance 60. The Union submits that that the quantum of shift allowance has remained unchanged since 2006. COW1 in his evidence states that there is no basis to increase the shift allowances and overall the Company is paying a higher shift allowance rate when compared to other companies in the similar industry and location. UW1 in his cross-examination referred to the Comparative Table (UB3) where current provision in the Collective Agreement states as follows: “An employee who works on a shift schedule of at least two (2) shifts shall be paid the following shift allowance - 1% shift - RM 3.00 per shift 2" shift - RM 4.50 per shift 3° shift - RM 6.50 per shift.” 61. The Union proposed 1* shift (RM 5.00 per shift), 2” shift (RM 7.00 per shift) and 3" shift (RM 10.00 per shift) whilst the Company proposed the current provision of the shift allowances be maintained without any amendment, The Comparative Table made reference to the shift allowances to collective agreements between The Metal Industry Employees’ Union (MIEU) and Southern Steel Berhad where the afternoon shift (RM 4.50) and night shift (RM 6.50), MIEU and Southern PC Steel Sdn. Bhd. where the morning shift (RM 3.50), afternoon shift (RM 4.50) and night shift (RM 6.50) and lastly 25MIEU and Bekaert Southern Wire Sdn. Bhd. where the shift allowances are the same as Southern PC Steel. 62. Having considered the submissions of both the Union and the Company and in the light of shift allowances of the three related companies as reflected in the comparative table in U3, the Court is unanimous in deciding that the shift allowance be increased from RM 3.00 to RM 3.50 per shift for the 1* shift. However, the shift allowances for the 2 and 3" shift be maintained at the rate of RM 4.50 per shift and RM 6.50 per shift respectively. Article 26 (c) & (e) Medical attention 63. The Union contended that the Company's proposal to reduce the maximum liability of the Company from RM 3,500 to RM 1,500 per annum is without justification at the time when cost of medical expenses has considerably escalated. The Union's proposal to increase the quantum from RM 150 per employee per year to RM 500 is fair and reasonable in view of the considerable increase in the cost of outpatient consultation and treatment. 64. On the other hand, the Company proposed removal of the second paragraph in clause (c) as the majority of the employees have opted for the medical insurance which is more beneficial, The Company proposes to offer all employees medical coverage for outpatient treatment from the Company's panel clinic of up to RM1,500 per annum. 26The Company submits that there is no basis to increase the claims for clinical consultation for spouse and dependants from RM 150.00 to RM 500.00 per year. 65. The Court will make a decision which is fair, reasonable and equitable in respect of Article 26 (c) & (2). ‘The Court is inclined to agree with the Company's proposal that the second paragraph to Article 26 (c) be deleted as reflected in the Comparative Table of Disputed Articles annexed to the witness statement (COWS1). The second paragraph to Article 26 (c) is substituted with the clause as follows: “All employees are entitled for outpatient treatment from Company's panel clinic up to RM 1,500 per annum.” 66. In respect of Article 26 (e), the Union's proposed to increase the quantum from RM 150 to RM 500 per employee per year in view of the considerable increase in the cost of outpatient consultation and treatment. The Company submits that there is no basis to increase the claims for clinical consultation for spouse and dependants from RM 150.00 to RM 500.00 per year, The Court's decision is to allow the claims for clinical consultation for one legal spouse and dependent children of an employee to the aggregate of RM 150 to RM 250 per employee per calendar year. Article 27 (a) & (d) (Iv) Retirement/Retirement Benefits 67. The Union submits that employees should be allowed the option to retire at any time after attaining the age of 50. The Company is engaged in steel mesh production requiring heavy manual work and employees may opt to retire early due to poor health 27and such employees should not be deprived of the retirement benefits, The quantum of retirement benefits to be increased in order to provide employees and their dependants a reasonable standard of living. The Company agrees in regards to Article 27 (a) to increase the retirement age to 60 years in compliance with statutory law. In respect of Article 27 (d)(iv), the Company proposes to maintain the current clause as the Company does not have the financial capacity to increase the retirement payments from 6% to 10% as proposed by the Union. The Company's profits have been on the decline and in the financial year ended 30 June 2012 the Company had suffered losses of RM 914,386.00. 68. Accordingly, the Court will now make a decision which is fair, reasonable and equitable in respect of Article 27 (a) & (d) (Iv) having considered submissions of both parties respectively. Consequently, Clause (a) to Article 27 shall read as follows: “all employees shall retire at the age of sixty (60) years. However, all employees can optionally retire at fifty (50) years.” 69. In respect of Article 27 Clause (d) paragraph (Iv), the Company shall contribute retirement benefit of six percent (6%) of the last drawn basic annual salary only for every year of completed service and proportionately for any completed month, The Court hereby maintained the status quo of the current provision in view of the inability of the Company to show their financial capacity. The Company's profits have been on the decline and in the financial year ended 30 June 2012 the Company had suffered losses of RM 914,386.00. 28Article 32 Existing Benefits 70. The Company contended that this clause is redundant as there are currently no existing benefits which are not covered under the Collective Agreement. The Court finds no merits in the submissions of the Company. Accordingly Article 32 shall be maintained as this Clause will ensure that any benefits the Company practised in addition to the terms and conditions stipulated under the collective agreement continues. Article 33 Bonus 71. The Union contended that there ought to be a fixed contractual of at least 1.5 month's salary annually and the Company can give additional amount based on the employee's appraisal. There is currently no provision for a contractual bonus. The Company contended that the present Article 33 on bonus should be maintained where payment of bonuses are given at the Company's discretion based on the Company's and employees’ performance and therefore obligatory and not contractual on the part of the Company. Bonus payments has been defined by the High Court in the case of UMW Toyota (M) Sdn. Bhd. v. Chow Weng Thiem [1996] 5 MLJ 678 at page 679 as follows: “A bonus is a gift or gratuity as a gesture of goodwill, and not enforceable, or it may be something which an employee is entitled to on the happening of a condition precedent and is enforceable when the condition is fulfilled. Since bonus was a form of gratuitous payment of a discretionary nature, the respondent was not entitled to it as of right.” 29