LEGAL FRAMEWORK OF BUSINESS ABUS011-3-2

EMPLOYMENT LAW

Employment Lawy By virtue of s2(1) of the Employment Act 1955

(EA 1955) : "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 agrees to serve his employer as an employee and includes an apprenticeship contract

Employment LawContract of Service and Contract for Services y When a problem in a work relationship results in court action, the courts will establish the existence of a contract of service/ employment before they consider the specifics of a case y In investigating the legal relationship, a 'contract of service' is taken to denote employment. A 'contract for service' does not involve employmenty

Employment Lawy There are several common-law 'employment' tests

to assist the court in determining the existence of a contract of service i.e. - the control test - integration test - multiple test - economic reality test - mutual obligation test

Employment Lawy The Control test y In the first instance, the courts investigate if the user of

labour has the 'right to control' the worker. They will look at the work relationship for indicators of control y Employees Provident Fund Board v Bata Shoe Company (Malaya) Ltd (1968) - the Court of Appeal upheld the decision of the High Court that shop managers were employees of Bata due to the considerable control which the company had over the shop managers

Employment Law- however there was no relationship of employer and

employee between the Bata Shoe Co. (M) Ltd and the salesmen employed by the shop managers of the company. Under the agreement between the company and the managers, the managers were given power to employ persons to assist them and it was stated that the managers would be responsible for payments under the Employment Provident Fund Ordinance

Employment Lawy Integration Test y The integration test seeks to test if the worker is 'part

and parcel' of the business organization, and also involves study of each and every specific situation y Stevenson, Jordan and Harrison Limited v MacDonald and Evans (1952) - it was stated under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it"

Employment Lawy Employees Provident Fund Board v MS Ally &

Co Ltd (1975) - In this case, the Federal Court applied the test in Stevenson, Jordan and Harrison Limited v MacDonald and Evans and found that working assistants who conducted and managed the business of M S Ally &Co Ltd and were rewarded by a share of the profits were employees of M S Ally

Employment Lawy Multiple Test y

The central elements of the multiple test are: 1. Did the worker undertake to provide his/her own work and skill in return for remuneration? 2. Was there a sufficient degree of control to enable the worker fairly to be called a servant? 3. Were there any factors inconsistent with the existence of a contract of service? 4. What factors would definitely negate the existence of a master/servant relationship? If there are none, then there is a presumption that, because the worker could be a servant, he should be so considered

Employment Lawy Ready Mixed Concrete (South East) Ltd. v

Minister of Pensions and National Insurance (1968) - the plaintiff was in the business of making and selling ready mixed concrete - the company had engaged an independent haulage contractor to deliver the concrete to customers but that contract was terminated and RMC decided to introduce a scheme whereby concrete was delivered by owner-drivers working under written contracts

Employment Law- the owner-drivers entered into a hire purchase agreement with Ready Mix Finance Ltd to purchase a lorry but the mixing equipment on the lorry was the companys property - in 1965 the company asked the Minister of Social Security for a determination of the employment status of one of the owner- drivers, Mr Latimer - held: Mr Latimer was a small business man and not a servant. He concluded that the contract was not one of service but of carriage.

Employment Lawy Economic Reality Test y The economic reality test focuses on the inconsistency

of seeking a profit from doing the work with doing the work as an employee y What really distinguishes employees from independent contractors, it was said in a number of cases, is that the independent contractor is working in the hope of making a profit rather than merely for a wage or salary

Employment Lawy Market Investigations Ltd. v Minister of Social

Security (1969) - Market Investigations Ltd was a market research company - it employed a small number of full-time interviewers but, for the most part, drew on a panel of casual interviewers and the case concerned this latter group - the question arose whether an interviewer, Mrs Irving who was engaged on a casual basis, was employed under a series of contracts of service or under a series of contracts for services

Employment Law- the facts found included - during a period of 81 weeks Mrs Irving worked for 61 full days and 8 half days and was paid on a daily basis plus expenses - the contract did not provide for time off, holidays or sick pay - interviewers were free to work for other firms during this period - the company thought they could not dismiss Mrs Irving in the middle of an assignment

Employment Law- held that Mrs Irving was employed under a series of contracts of service. The court said inter alia, The fundamental test to be applied is this: Is the person who has engaged himself to perform these services performing them as a person in business on his own account? If the answer to that question is 'yes' then the contract is a contract for services. If the answer is 'no' then the contract is a contract of service..

Employment Lawy Mutual Obligation Test y It is said that the relationship of employer and employee

cannot exist unless the employer perceives and acts on an obligation to supply work and the worker feels obliged to undertake any work offered y Mutuality of obligation can be an important question where casual working is involved

Employment Lawy Terms and Conditions in Contract of Service y A contract of service may be oral or in writing, but

under Rule 5(b) and 8 Employment Regulations 1957 the following terms must be given to an employee in writing on or before the commencement of his employment: - Name of employee and National Registration Identification Card No - Occupation or appointment

Employment LawWage rates (excluding other allowances) Other allowances payable and rates Rates for overtime work 0ther benefits (including approved amenities and services) - Agreed normal hours of work per day - Agreed period of notice of termination of employment or wages in lieu - Number of days of entitlement to holidays and annual leave with pay and - Duration of wage period

Employment Lawy Duties of Employer y The duties of an employer may be summarized as

follows: - To pay employees - To give holidays & holiday pay - To provide sick pay - To allow maternity leave - To comply with the Employment Act - To provide a safe working environment

Employment Law- To comply with Health & Safety Regulations - To indemnify losses & liabilities incurred while employee is carrying out dutiesy The employer has NO duty:

- To provide work - To protect employees property

Employment Lawy Duties of Employee y The duties of an employee include:

- To use reasonable care & skill in work - To carry out lawful & reasonable instructions - To give faithful service - Not to disclose trade secrets or confidential information

Employment Lawy There are four ways in which a contract of employment

may come to an end: 1. Resignation - termination with/without notice on the part of the employee, due to the cause that the employer by his or her conduct, in breach of the contract, has shown an intention not to be bound by the contract Section 12(1) EA 1955 2. Dismissal termination with/without notice by the employer - Section 12(1) EA 1955 Either party to a contract of service may at any time give to the other party notice of his intention to terminate such contract of service

Employment Law3. Expiry of fixed term employment - A limitedterm contract is a contract for a fixed term or the performance of a specific task, or one which ends when a specified event does or does not occur - Section 11(1) EA 1955 A contract of service for a specified period of time or for the performance of a specified piece of work shall, unless otherwise terminated in accordance with this Part, terminate when the period of time for which such contract was made has expired or when the piece of work specified in such contract has been completed

Employment Law4. Mutual agreement to terminate employment - Section 10 EA 1955 In every written contract of service a clause shall be included setting out the manner in which such contract may be terminated by either party in accordance with this Part

Employment Lawy Grounds for dismissal

1. Operational reasons, provided the requisite notice periods are complied with - s12(3) EA 1955 states: where the termination of service of the employee is attributable wholly or mainly to the fact that(a) the employer has ceased, or intends to cease to carry on the business for the purposes of which the employee was employed

Employment Law

(b) the employer has ceased or intends to cease to carry on the business in the place at which the employee was contracted to work (c) the requirements of that business for the employee to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish

Employment Law(d) the requirements of that business for the

employee to carry out work of a particular kind in the place at which he was contracted to work have ceased or diminished or are expected to cease or diminish (e) the employee has refused to accept his transfer to any other place of employment, unless his contract of service requires him to accept such transfer or

Employment Law(f) a change has occurred in the ownership of the business for the purpose of which an employee is employed or of a part of such business, regardless of whether the change occurs by virtue of a sale or other disposition or by operation of law

Employment Law

the employee shall be entitled to, and the employer shall give to the employee, notice of termination of service, and the length of such notice shall be not less than that provided under subsection (2) (a), (b) or (c), as the case may be, regardless of anything to the contrary contained in the contract of service

Employment Law2. If an employee is absent for more than two consecutive working days, without leave or reasonable excuse, then his or her employment may be terminated - s15(2) EA 1955 states: An employee shall be deemed to have broken his contract of service with the employer if he has been continuously absent from work for more than two consecutive working days without prior leave from his employer, unless he has a reasonable excuse for such absence and has informed or attempted to inform his employer of such excuse prior to or at the earliest opportunity during such absence

Employment Law3. Dismissals on the grounds of misconduct are possible without notice, but only after due inquiry by the employer s14(1) EA 1955: 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) downgrade the employee or (c) impose any other lesser punishment as he deems just and fit, and where a punishment of suspension without wages is imposed, it shall not exceed a period of two weeks

Employment Lawy Syarikat Kenderaan Melayu Kelantan Sdn. Bhd.

v Transport Workers Union (1990) - held : "Misconduct" refers to conduct so seriously in breach of the accepted practice that, by standards of fairness and justice, the employer should not be bound to continue the employment

Employment Lawy Generally, there are two broad categories of misconduct:

- minor misconduct; and - gross misconduct y Some examples of minor misconduct are: - being late - using a company vehicle for unauthorized personal uses - not performing to adequate/satisfactory standards

Employment Lawy Some examples of gross misconduct are:

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abusive behaviour or violence theft or fraud alcohol or drug abuse discrimination or harassment deliberately damaging company equipment/property seriously breaking health and safety regulations serious negligence serious insubordination misuse of an organisations property or name serious breach of confidence

Employment Lawy Taylor v Parsons Peebles Ne I Bruce Peebles Ltd

(1981) - held: in determining the reasonableness of an employer's decision to dismiss, the proper test is not what the policy of the employer was but what the reaction of a reasonable employer would be in the circumstances taking account of the employee's length of service and previous record.. y This principle has been employed in a local case of Jye Tai Precision Industrial (M) Sdn. Bhd v Victoria Arulsamy (2001)

Employment Lawy The burden of proving that the dismissal of a

workman is with just cause or excuse is on the employer.The standard of proof is on the balance of probabilities.The employer must convince the Court that the punishment was proportionate to the nature and quality of the alleged wrongdoing ... . - Halsbury's Laws of Malaysia

Employment Lawy Remedies for Dismissal y The central pieces of legislation governing the

termination of employment in Malaysia are: - the Employment Act, 1955 (EA)(as amended) - the Industrial Relations Act, 1967 (as amended) (IRA) and - the Employment (Termination and Lay-Off Benefits) Regulations, 1980 (as amended)

Employment Lawy Also important are:

- the common law, as developed by Industrial and Appeal Courts - collective agreements and - individual contracts of service

Employment Lawy The EA applies to all employees, irrespective of their

occupation, who are paid less than a specified rate (First Schedule, EA, as amended by the EA Amendment Act, 1980 - whose earnings do not exceed RM1,500.00 a month and all manual workers irrespective of their earnings. y The IRA applies to all workmen and defines workman widely, to include any person employed by an employer under a contract of employment, including apprentices (sec. 2, IRA).

Employment Law

y The Employment (Termination and Lay-off Benefits)

Regulations apply to all employees with at least one year of service, except outworkers (secs. 3 and 7 of the Regulations).

Employment Lawy Termination Benefits y The Employment (Termination and Lay-Off

Benefits) Regulations, 1980 Reg4 says that an employee shall be entitled for termination benefits payments where his contract of service is terminated for any reason whatsoever otherwise than - upon attaining the age of retirement - by the employer, on the ground of misconduct after due inquiry; - voluntarily by the employee other than under s13(2) or for the reason under S 14(3)

Employment Law y s13(2) EA 1955 states: Either party to a contract of service may terminate such contract of service without notice in the event of any wilful breach by the other party of a condition of the contract of service y s14(3)EA 1955 states : An employee may terminate his contract of service with his employer without notice where he or his dependants are immediately threatened by danger to the person by violence or disease such as such employee did not by his contract of service undertake to run

Employment Lawy s.20 IRA 1967 allows the workman to make a

representation where he considers that he has been dismissed without just cause or excuse y Where there has been a termination due to misconductthe failure of conducting due inquiry prior to the termination is a statutory breach the employer is not exempted from paying termination benefit

Employment Lawy Reinstatement y This is the primary relief conferred on the Industrial

Court by the Industrial Relations Act 1967 (IRA) y The Industrial Court is to inquire into an employees representation to be reinstated on the basis that he considers himself to have been dismissed without just cause or excuse

Employment Lawy The Industrial Relations Department then may attempt

to settle the dispute, including by conciliation y When the trust of the employer/employee relationship has broken down, reinstatement would not be proper a remedy by the Court held in Kulim Club v GobinathVassu [2003] y If no settlement is possible, the Department will report the matter to the Minister, who may refer the matter to the Industrial Court

Employment Lawy Compensation y In Malaysia, whenever reinstatement is impracticable,

the Industrial Court will award the complainant compensation in lieu of reinstatement, which is given at the usual rate of one months salary for each completed year of service y The Industrial Court has the discretion to award a greater amount having regard to the particular facts, circumstances and substantial merits of the case under s.30(5) of the Industrial Relations Act, 1967

Employment Lawy Further, the Court may award back wages from the

date of the dismissal to the date of conclusion of the hearing, subject to a maximum of 24 monthsy Action in the Labour Court y The employee may also seek unpaid wages or

notice payments in the Labour Court while retaining the right to bring proceedings, such as for breach of contract or wrongful dismissal, in the civil courtsy Action for wrongful dismissal y The employee may choose to proceed in the civil courts

in an action for wrongful dismissal or breach of contract