Chapter 7: Employment Law

Chapter 7:

Employment Law

Application of EA 1955

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• The Employment Act 1955 is applicable in West

Malaysia only - a different Act covers Sabah and

Sarawak.

• One of the labour laws that governs many aspects

of the relationship between employer and

employee.

• Among others, EA sought to:– defines the contract of service and the manner of

termination

– sets the minimum terms and conditions of employment

– prescribe the course of action for employer and employee in

times of disputes

– regulates payment of wages and deduction

– provide mechanism for enforcement of the provisions


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There are different categories and extent of protection as

provided by the EA 1955 i.e.:-

1. Full Protection (First Schedule - Sec 2(1))

• any employee whose wages does not exceed RM2000 per

month (from the previous RM 1500, with effect from 1st April

2012)

• any employee who is engaged in manual labour irrespective

of the amount of wages

• any employee engaged in operating or maintaining any

mechanically propelled vehicle operated for transport of

passenger or goods/ for reward / for commercial purposes

• the direct supervisor of any manual labour, regardless of

amount of wages

• any employee who is employed in any vessel registered in

Malaysia, who is not a duly certified officer, regardless of

amount of wages earned.


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2. Partial Protection

a) Domestic servant, regardless the amount of wages earned are

NOT covered by

• Sec 12 - entitlement to minimum notice for termination of

service

• Sec 14 - domestic inquiry and disciplinary action

• Sec 16 - entitlement to minimum days of work

• Part IX - entitlement to maternity benefits

• Part XII - entitlement to minimum benefits and payment

• Part XIIA - entitlement to Termination and Layoff benefits

b) Any employee who earns more than RM2000 but up to RM5000 -

not entitled to any benefits provided by the EA but by SEC 69B is entitled to seek the intervention of the Labour Office to enforce the terms and conditions of employment of his contract of service.

Contract of Service

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Contract of Service (CoS)

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• Sec 2 - contract of service means any agreement,

whether oral or in writing and whether express or implied,

whereby one person agrees to employ another as an

employee and that other agree to serve his employer as

his employee and includes an apprenticeship contract.

• A contract of service may be oral or in writing, but under

the following terms must be Rule 5 (b) and 8 Employment

Regulations 1957 given to an employee in writing on or

before the commencement of his employment ;

◦ i) name of employee/NRIC

◦ ii) occupation or appointment

◦ iii) wage rates (excluding allowances)

◦ iv) allowances payable and rates

◦ v) rates for overtime work


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• Implied Terms in a CoS are terms which the law

assumes to be known by both the employer and

employee - essential to facilitate the smooth running

of the business. e.g:

– to work diligently and honestly

– to be punctual

– to obey all lawful orders, instructions, regulations

etc

– not to be absent without leave

– not to commit fraud or criminal breach of trust

• Express conditions on the other hand are those

expressly stated in the contract, job description,

company handbook or manual, circulars, memos etc.


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• However by Sec 10 - a contract of service for a specific

period of time exceeding one month or for the

performance of a specified piece of work which is likely

to take more than a month to complete - MUST be in

written form.

• The terms and condition of a CoS which are less

favourable than those stipulated in the EA - will be null

and void but those which are more favourable are

allowed – must not contravene any express prohibition

under the Act.

• A CoS cannot in any way restrain an employee from

joining a Trade Union, join in the activities or organizing

the formation of a TU.


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• In every written CoS- manner, in which the contract may

be terminated by either party, must be set out.

• The EA allows for the employer and employee to agree

upon the notice period between themselves provided

that:

– the period agreed upon is the same for both parties

– such provision for notice is put in writing

• If either party wants to terminate the CoS - give notice

of his intention to do so in the agreed period as stated in

the CoS.


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• If there is no such provision included in the CoS, then the

notice period SHALL NOT BE LESS THAN i.e. the minimum

of:

– 4 weeks notice if employed less than 2 years

– 6 weeks notice if employed for more than 2 years but

less than 5 years

– 8 weeks notice if has been employed for more than 5

years

• Usually the notice period contained in the CoS comes into

play when the employee wants to resign from his job.

• However in case of termination - the notice period

required may differ according to the ground for

termination.


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• Where the grounds for termination is related to retrenchment

due to:

– closure of business

– shrinkage of operation, restructuring or reorganization

– change in the business ownership (sale, merger, takeover

etc)

– refusal of the employee to accept a transfer that he is not

contractually bound to

• Then the law requires that a notice to be served to the

employee and the period must NOT BE LESS than those

prescribed by Sec 12 (2) regardless of anything contained in

the CoS.

• If any party fails to provide any notice of termination - must

pay the other indemnity in lieu of notice i.e. one day’s wage

for each day of notice short of the required period.


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• The requirement of notice may be waived :

– if the party who is supposed to receive it agree to waive

his rights.

– in the case of the dismissal for misconduct of the

employee.

– in situation where the termination is caused by willful

breach. of the CoS by either party e.g.:

➢Employee AWOL for more than 2 consecutive days -

Sec 15 (2).

➢Employer not pay wages according to the law - Sec

15(1).

➢Employee terminate contract due to immediate threat

to the safety of him and his family.

Breach of Contract

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Breach of Contract

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• A breach of the CoS does not necessarily lead to

termination of the employment - depends on the

circumstances of the breach.

• Sec 13 (2) EA allows either party to terminate the

contract without notice in the event of WILLFUL

breach of the contract by the other party.

Breach of Contract

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• Breach of Contract also may occur under any one of the

following reasons:

– Sec 14(3) - employee may terminate contract without

notice in case of threat to the safety of himself and his

family (disease or violence) which the employee did

not undertake to run.

– Sec 15(1) - employer breach contract if not pay

wages in accordance with Part III.

– Sec 15(2) - employee breach contract if AWOL for

more than 2 consecutive days.

– Sec 16(2) - employer breach contract if not provide

work.

– Sec 60 F (2) - employee absent on sick leave without

being certified by a registered medical practitioner.

Probationary Period

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Probationary Period

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• Probationary period is for employer to test / assess the

suitability of the employee for the assigned to him -

aptitude, attitude, ability and adaptability.

• A probationer should be supervised closely during

this period - given guidance, advice and correction

to enable him to meet the needs and expectation of

the company.

• The law is silent on the duration of the probation

period - however the norm in the private sectors - 3

months for non-executive position and 6 months for

executive and managerial positions.

Probationary Period

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• The period may also be extended to a further 1 - 3

months or depending on the discretion of the

employer - but the probationer must be informed of

this extension BEFORE the end of the initial probation

period.

• The employee also should be informed of the specific

areas where the employer would like him to improve

on his performance - to enable him to defend himself

and strive to meet the expected goals.

• At the end of the probation period - if the employee

turns out to be unsuitable for the job - then the

employer has the right to terminate his service at the

end of the period and NOT before.

i.e. the probationer has no lien on his post.

Probationary Period

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• The test of suitability to the company’s satisfaction -

subjective but should be reasonable , not arbitrary.

• The termination too should not be mala fide - must be

with just cause

• A probationer so terminated can question the

decision through Sec 20 of the Industrial Relations Act

1967

• If the probationer commits misconduct - may be

dismissed AFTER due inquiry even before the end of

the probation period.

Probationary Period

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• Where a probationer continues in employment after

expiry of the probation period, the question is

whether, in law, he or she is deemed to have been

confirmed?

• This was settled by the Federal Court in K.C.MATHEWS

v. KUMPULAN GUTHRIE SDN BHD [1981] 2 MLJ 320 and

V.SUBRAMANIAM v. CRAIGIELEA ESTATE [1982] 1 MLJ

317. ; where it was held that if, after the expiry of the

stipulated probation period, no action is taken by the

employer either by way of confirmation or by way of

termination, an employee continues to be in service

as a probationer.

Probationary Period

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• A probationer under any other circumstances is

considered an employee and if comes under the

purview of the EA - should be entitled to all the

minimum benefits stipulated by the Act.

• Pakir Abdul Jalil v. Sykt Shell Refinery Co. Bhd

• Khaliah Abas v Pesaka Capital

Wages and Benefits

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Wages and Benefits

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• Sec 2 EA - Wages means basic wages and all other

payments in cash payable to an employee for

work done in respect of his CoS, but does not

include :-

▪ value of accommodation, food, fuel, light and

water

▪ employer’s contribution to EPF, pension, any

funds or schemes

▪ travel allowances

▪ expenses and claims

▪ gratuity and annual bonus

Payment of Wages

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• Payment of wages - paid into an employee’s bank

account or financial institution under the BAFIA Act

within 7 days after the last day of any wage

period.

• Employee must be given a written statement of the

wages paid to them.

• Sec 18 - a CoS should state a specific wage period

which should not exceed one month - if the CoS

not mention the period - law deems it to be one

month.

• i.e. wages may be paid daily, weekly or fortnightly.

Payment of Wages

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• Sec 19 - latest time for wages to be paid - not later

than the 7th day after the end of the specified

wage period.

• Employers are not encouraged to give advance to

their workers - such payment however is still

allowed but strictly regulated.

Payment of Wages

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• Payment of wages on normal termination of contract

- i.e.:-

– due to contractual expiry of the contract of a

specific period

– due to the completion of work of a specific nature

– retrenchment

– dismissal due to misconduct

– termination due to breach of contract

– resignation with proper notice

– resignation without notice or sufficient notice by

paying indemnity in lieu of notice.

Payment of Wages

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• MUST be paid on the last day of his service with the

company.

• If the resignation is without notice and without

paying indemnity in lieu of notice - not later then 3

days after the last day.

• Also applicable to termination by willful breach

and due to fear of safety of his own self and family.

Deduction of Wages

• Overpayment of wages

• Indemnity in lieu of notice

• Recovery of advance

• Lawful deductions – EPF, SOCSO, EIS etc

ALLOWED DEDUCTION

◦ Payment of subscription or entrance fees, loan installments, interest or other dues payable to registered union, co-op or loan society

• Recovery of advance made for the purpose of buying shares in the employer’s company

DEDUCTION WITH EMPLOYEE’S

CONSENT

• Deduction in respect of payments to 3rd party on behalf of the employee

DEDUCTION BY WRITTEN REQUEST

WITH DG PERMISSION

Deduction of Wages• Sec 24 (8) - the total amount that an employer can

deduct in a month from the employee’s wages must

not exceed 50% of that month’s pay.

• However the 50% limit can be exceeded in case of :-

– payment of indemnity in lieu of notice under Sec

13 (1).

– recovery of any monies due to the employer from

the final payment of wages upon the termination

of the CoS.

– up to 75% for the repayment of housing loan with

the written approval from the DG.

Deduction of Wages

• Priority of Wages

– If an employer is forced by a court to sell of

property and assets to pay of debts, employees

who have not been paid their wages will receive

priority over other secured creditor (e.g.

mortgagor, charger, lien holder).

– However the maximum that may be claimed is

only the sum of 4 month’s wages.

Working Hours

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Working Hours

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DURATION

• 8 hours per day, max of 10 hours in spread over period

• 48 hours per week

DURATION

• not more than 5 consecutive hours in a day - with a rest / break of not less than 30 minutes - if less than 30 min - not counted as break

DURATION

• An employee can be asked to work an hour longer than the 8 hrs. without getting OT payment - but given time -off to replace the time worked.

Working Hours

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• However - there are exceptions to the time limit

above in case of :

– accident, actual or threatened, in or with

respect of his workplace

– performance of work that is essential to the life of

the community

– interruption of work that is not foreseeable

– urgent work to be done to a machinery or plant

– performance of work essential to the defense or

security of Malaysia

– work in any industrial undertaking essential to the

economy of Malaysia or other essential service

defined by IRA 1967.

Overtime

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• Overtime - means work done in excess of the

normal hours of work

• For work carried out in excess of the normal hours -

the employee shall be paid overtime rates

• Overtime hours is limited to max 4 hours daily and

not exceed an aggregate of 104 hours in a month.

• Calculation of ORP (wages) for one day for the

following purpose:-

– maternity leave, public holiday , annual or sick

leave

➢for monthly rated employee - Monthly wages

/26

➢for weekly rated employee - Weekly wages/6

Overtime > RATES FOR DIFFERENT DAYS

NORMAL WORKING DAY

1.5 x normal hourly rate

REST DAY

2 x normal hourly rate

PUBLIC HOLIDAY

3 x normal hourly rate

Rest Day and Leave

• Sec 59 - an employer must allow a worker to have one

whole day of rest every week - if not - commit an

offence.

• The rest day may be any day of the week - not

necessarily on Sunday and may be on a different day

each week.

• If the rest day is not fixed on the same day each week

, the employer needs to inform the worker beforehand

at the beginning of the month through a roster (which

should be maintained for up to 6 years for inspection

by LO)

• The rest day of all the employee may be the same or

different e.g: by rotation.

Rest Day and Leave

• If more than one day is given as rest day - the last of

such days will be the de facto rest day.

• Rest day cannot be counted into annual leave but for

workers on maternity leave, sick leave or disablement

leave - not entitled to any additional days as rest day

leave.

• For a shift worker - the rest day should be a minimum

30 hours

• If a public holiday falls on a rest day, then the next

working day shall be considered as a public holiday.

• With the 1998 amendment - an employer may now let

the worker accumulate his rest days for the month and

enjoy it in a stretch.

Rest Day and Leave

• Once a rest day has been fixed - cannot be changed

by the employer or the employee.

• A shift worker can be compelled to work on rest day

but not a non-shift worker except for cases under Sec

60 (1).

• If the employee is required to work on a rest day, the

amount of wages to be paid shall be:-

– for daily rated workers

➢1-day wages if work 1/2 day or less

➢2 times daily wages if exceed 1/2 day

– for monthly rated workers

➢1/2 ORP if work not exceed 1/2 normal hours

➢1-day ORP if work not exceed normal hours

Public Holidays

• Sec 60D - an employee should enjoy at least ELEVEN

(11) paid public holidays out of which FIVE (5) will be

compulsory i.e. :

– Merdeka Day

– Agong’s Birthday

– The State Sultan’s Birthday or Hari Wilayah for FT

– Labour day

– Malaysia Day

Public Holidays

• The other 6 days - up to discretion of the employer to

choose from the list of gazetted public holidays or may

choose any other day as a paid public holiday.

• If employee asked to work on public holiday, the

wages to be paid:

– for daily rated workers

➢2 days wages even if work less than normal hour

+ public holiday pay

– for monthly rated workers

➢ 2 days wages at ORP even if work less than

normal hours

Annual Leaves

• Sec 60E - an employee entitlement to paid annual

leave AFTER every 12 months of continuos service is :-

– 8 days if has served the same employer <2 years

– 12 days if has served the same employer >2 but < 5

years

– 16 days if has served the same employer >5 years

• However - if the employee AWOL and without

reasonable excuse for more than 10% of the working

days within the 12 months - not entitled to AL

• The paid annual leave to which the employee is

entitled is in addition to his rest days and public

holidays.

Annual Leaves

• The leaves must be taken within the preceding 12

months of service - if not may be forfeited.

• The unconsumed leaves however may be carried

forward provided does not violate the minimum

number of days (follow established policy or by mutual

consent)

• The employer too may make payment in lieu of leave

with the written consent of the employee.

• If employee gets sick leave / maternity leave on

annual leave - the latter is cancelled.

Annual Leaves

• If the contract of service is terminated by either party.

• (except under Sec 14.1.a for misconduct) and there is

a balance from the annual leave - the employee will

get his ORP for every day of the unutilized leaves.

• An employee may use the balance of his annual

leave to offset the whole or part of the required notice

period of his resignation.

• An employee’s entitlement to annual leaves is not as

of right. Have to obtain permission from the employer -

failure to obtain such consent is a fundamental

breach of contract.

Sick Leaves

• Sec 60 F - an employee after examination by a panel

doctor (or other registered GP under special

circumstances) is entitled to paid sick leave of:-

a) Without hospitalization

– 14 days - service < 2 years

– 18 days - service >2 but < 5 years

– 22 days - service > 5 years

b) With hospitalization - 60 days inclusive of the days

mentioned above.

Sick Leaves

• Unlike annual leaves - sick leave does not require

qualifying period of 12 continuous months of service to

be entitled for it.

• Sick leaves - includes leave granted by dentist.

• Sick leaves cannot be brought forward, or pro rated

for the year if an employee joins the company in the

middle of the year.

• An employee is not entitled to paid sick leave when :-

– under maternity leave AND receiving maternity

allowances.

– on leave while receiving compensation for

disablement benefit under WCA.

– on leave while receiving payment from SOCSO for

temporary disablement.

Sick Leaves

• An employee who absents himself on sick leave which

is not certified by a registered medical practitioner or

a medical officer or a dental surgeon OR which is

certified by such registered medical practitioner or

medical officer or dental surgeon, but without

informing or attempting to inform his employer of such

sick leave within forty-eight hours of the

commencement thereof, shall be deemed to absent

himself from work without the permission of his

employer and without reasonable excuse for the days

on which he is so absent from work.

Employment of Women

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Employment of Women

• Employers must abide by several rules regarding the

employment of female employee.

• Sec 34 -

– no female worker allowed to work in any industrial /

agricultural venture between 10.00pm and 5.00am.

– No female employee can start work without having

a rest period of 11 consecutive hours.

• However the DG may exempt any female employee

from the restriction on working hours , but not the rest

period

• Sec 35 - female workers cannot work underground i.e.

mining activities

Maternity Leave

• All female employee are entitled to 60 days of

maternity leave for each birth.

• Up to 30 days of this leave may be taken before giving

birth.

• During this period of leave, the employee is entitled to

receive maternity allowances provided several

conditions are fulfilled.

• ** You need to understand the difference between

maternity leave and maternity allowances

During this period, the employee is entitled to

receive maternity allowances provided :

Maternity Leave

There is birth of child/children after 22 weeks of pregnancy

The female employee have no more than FIVE (5) surviving children at that time

Have been employed by the employer in the 4 months immediately before the confinement

Employed for at least 90 days in the 9 months immediately before the confinement

• If maternity leave taken earlier than 30 days before

giving birth - the leave will be considered as medical

leave, annual leave or sick leave.

• If after 60 days, the employee is still absent because

she is medically certified to be unfit for work - her

service cannot be terminated until after 90 days from

the end of the maternity leave.

• A female worker too cannot be dismissed without just

cause during her maternity period.

Maternity Leave

Termination and Lay-off Benefits

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• Provided for under the ‘Employment (Termination

and Layoff Benefits) Regulations 1980.

• An employer becomes liable to pay these benefits

when he terminates the services / lay-off any

employee who has served him continuously for 12

months.

• Lay-Off generally means any period where work is

not provided when the employer is obliged to do so

and the employee is not paid during such idle

period.


• For the purpose of determining eligibility to receive

benefit means:

✓ A total of 12 normal working days without work, in

any consecutive period of 4 weeks and during

which the employee is not paid

• A company may lay-off or retrench some or all of its

employee for any reasons e.g :

✓ management or financial problems, shortage of

raw material, breakdown of machinery or

prolonged power failure, reorganization,

amalgamation, shutdown ordered by local

council etc.


• Regulation 4 excludes the following employee from

getting the benefits:

➢ those terminated on grounds of retirement upon

reaching the age -where such age is provided for in

the CoS

➢ those terminated due to misconduct

➢ those who resigned voluntarily

➢ those who is terminated but the contract is renewed

immediately / engaged in new contract not less

favorable than the previous one - 4(2)

➢ those who refuses offer to re-employ /renew contract

made more than 7 days before the existing CoS ends -

4(3)

➢ those who leaves the job before the expiry of the

notice period without prior consent from employer and

not paying indemnity in lieu of notice.


• Regulation 6 - Amount of termination / lay-off benefits

due:

➢ < 2 years -10 days wages for each year of service for

➢ >2 but < 5 years - 15 days wages for each year of

service

➢ > 5 years - 20 days wages for each year of service

• The amount above is to be pro-rated for any incomplete

year and includes any indemnity, annual leave balance

etc which is due to the employee.


• Payment of the benefits must be made within 7 days from

the termination date.

• CASES:

➢ See Fatt v. Harper Gilfillan (1980)

❖ the average daily wages in a particular month

should be arrived at by dividing the amount of

wages by the total number of days in the month.

➢ Abdul Azizi Atan v. Ladang Rengo Malay States❖ acquisition of share holding of a company does

not constitute a change in the ownership of the

company.


End of Slides

Chapter 7: Employment Law

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Transcript of Chapter 7: Employment Law