LABOURS LAW IN MALAYSIA

Musbri Mohamed
DIL; ADIL ( ITM )
Pursuing MBL ( UKM )

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2
What is labour law?

Labour law is laws and regulations that

governs both the employment and industrial
relations sectors.

Purposes:

To regulate the relationship between

employer and employee – individual and
collective.
To determine the rights and liabilities of
parties.
To prevent and settle trade disputes.
To give remedy.

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What is employment law?

Laws and regulations that regulate the

relationship between employer and
individual employee. Grounded on a
contract of service. Originates from the
concept of master and servant.

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What is industrial relations
law?

Laws and regulations that

regulates the relationship
between employer and
trade union. Grounded on a
collective agreement.

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History of labour law in Malaysia:

Labour Ordinance 1912: Federated Malay States

1920: Straits Settlement.
Regarding immigration; conditions of work;
housing;
health etc.

Sources of labour law:

Common law: its contribution and application;

Civil Law Act.
Legislation: several statutes as passed by
Parliament.
Case-law: the industrial court and civil courts.

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Characteristics of labour law:

Basic legislation.
Social welfare legislation.
Freedom of contract.
Government intervention.
“Labour law is not the answer to all problems
at workplace” .
Labour law: in favour or employer or employee?

“LABOUR IS NOT A COMMODITY”

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The relevant institutions:

The Ministry of Human Resource

The Labor Office
The Trade Union Department
The Industrial Relations Department
The Labor Court
The Industrial Court
The employment sectors:
Private sector – several acts; eg. Employment
Act 1955
Public service – Federal Constitution
Statutory bodies – specific acts; eg Akta
Badan Berkanun

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 The relevant statutes:

Employment Act 1955

Industrial Relation Act 1967
Trade Union Act 1955
Children and Young Persons Act 1966.
Workmen’s Compensation Act 1952
The workers Minimum Standards of Housing And Amenities Act 1990
The Wages Councils Act 1947
Employees’ Social Security Act (SOCSO)
Employees Provident Fund Act 1991(EPF)
Occupational Safety and Health 1994
Factories and Machinery Act 1967
Human Resource Development Act 1992

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EMPLOYMENT ACT 1955

Prescribes the minimum standard of

terms and conditions of employment
for employees in the private sector.
It protects employees in matter such as
payment of wages, hours of work, sick
leave, annual leave, maternity leave,
termination benefits, etc.
Applies only in Peninsular of Malaysia.
Covered Employees employed under a
contract of service
Enforced by the Department of Labor.

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Under Malaysian law, s 14(1) of the Employment Act 1955
(EA) requires a domestic inquiry to be held for employees
covered by the EA, before an employer carries out any
disciplinary action. Therefore, this section envisages the
principles of natural justice to be observed in employment
disciplinary actions. Although the High Court in Milan
Auto Sdn Bhd v Wong Seh Yuen (Milan Auto) [1994]
2 MLJ 135 viewed s 14(1) EA as a mandatory provision,
the Federal Court, the highest civil court in Malaysia, on
appeal [1995] 3 MLJ 537 and in the case of Wong Yuen
Hock v Syarikat Hong Leong Assurance Sdn Bhd and
another appeal [1995] 2 MLJ 753 , ruled that s 14(1)
EA does not require a mandatory inquiry for all private
sector employees.

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Court ordered that the employee be reinstated to his former
position due to the fact that the dismissal was carried out in
breach of natural justice, the employer who had breached the
due inquiry requirement could easily remedy that procedural
breach by holding an inquiry and nonetheless proceed to
dismiss the employee as the misconduct would already have
been proven at the trial.

In the words of Mohd Azmi FCJ:

In our opinion, the effect of any breach of natural justice should

benefit the workman and not the party in breach. Thus, where
on merits,
the workman had clearly been dismissed with just cause or
excuse, and
natural justice had been sufficiently complied with by the
Industrial
ourt, what real benefit would there be for him to be told that
because
of failure to hold a domestic inquiry, he had to go back and face
an
unhappy management, who as a matter of course, could
remedy the
procedural breach and dismissed [sic] him for the second time?
We
failed to see how such delay and duplicity of proceedings could
be 12
interpreted as contributing towards industrial peace and
INDUSTRIAL RELATIONS ACT 1967

Governs the relationship between the employer and

the employees or trade union. It regulates the manner
and the methods which the employers and employees
adopt in their relationship.
Covering issues like recognition, collective bargaining
and collective agreement, trade disputes, conciliation,
strikes, lockout, etc.
applies in Malaysia.
Covered only workers in private sector.
Covered workers employed under a contract of
service.
Enforced by Dept of Industrial Relations.
No limitation of wages.

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Subject to a minor exception in favour of Sabah and
Sarawak, the Malaysian Constitution has assigned the
entire labour relations power to the central government to
the exclusion of the constituent units. Thus all matters that
concern trade unions, labour and industrial disputes,
welfare of labour and social security, are contained in the
Federal List. The same also applies to matters like trade,
industry and commerce, external affairs, implementation of
treaties and agreements, internal security and preventive
detention, all of which affect labour and industrial relations
laws and practices either directly or indirectly .

The constitutional distribution of labour relations power just

described is a further testimony to the assertion that the
federal system in Malaysia has created a very strong
centre. In the context of labour relations, the apparent
advantage is the uniformity of labour laws applicable
throughout the country.

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TRADE UNION ACT 1959

To control unions movement in

Malaysia.
Roles in register newly formed unions,
de-register unions, check union’s
accounts and to investigate any
complaints against the unions.
Applies throughout Malaysia.
Covered unions in private and public
sector.
Enforced by Dept of Trade Unions.

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Freedom of association is one of the rights that a
written constitution normally guarantees and in
Malaysia the Federal Constitution in its art 10(1)
(c) guarantees all citizens the right to form
associations. Associations in this constitutional
context may be referred to all general
associations or groupings, which may include
labour organisations or trade unions. It may be
argued that although there is no specific
reference to the right to form a trade union in
the constitution, it may be submitted that art
10(1)(c) is equally applicable to the right of
workers to form a trade union.

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In Malaysia, the constitution guarantees to Malaysian
citizens the right to form associations. This right is however
narrower in scope when compared with the scope of
similar right under the Indian Constitution. The protection
afforded to freedom of association under the Malaysian
Constitution is liable to abridgement by parliament
whenever it considers doing that to be necessary or
expedient in the interests of public defence, public order or
public morality. Such abridgement may or may not be
reasonable. If a judgment of Malaysian High Court is
anything to go by, the fundamental right to form
association does not include the right to manage the
association so formed. This means that some members of
an association may be excluded by law from the right to
participate in some of its activities.

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WORKMEN’S COMPENSATION ACT
1952

Provides for compensation by employers

to workers injured in the workplace or in
the course of carrying out their work.
Covered only Foreign Workers.
Enforced by Labor Department.
Employer is required to buy an
insurance policy from a panel of
registered company to cover his
liabilities under the act.

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TYPES OF EMPLOYEES COVERED UNDER THE WCA

The act not cover those employees specified below :-

Any person employed otherwise than by way of

manual labor whose earning exceed RM 500 a
month.
Casual worker.
Domestic servant
Armed forces / police officer
Civil servant

Unlike an ordinary commercial contract resulting

from an exercise of free bargaining power, in
employment, individual employees rarely have
bargaining power. The doctrine of freedom of
contract merely enables the superior in strategic
strength, namely, the employer, to dictate the terms.

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AMOUNT OF COMPENSATION of death

60 months’ earnings or RM 18,000

(whichever is less). Plus RM 7,000 under
Skim Pampasan Pekerja Asing.

If no dependants, only the actual amount of

funeral expenses or RM 1,000 (whichever
less) paid to undertaker.

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CHILDREN AND YOUNG
PERSONS ACT 1966

Stipulates the type of employment

under which children and young
persons may be employed.
Enforced by Labour Department.

A “child” means a person under

14 years old.

“Young Person” a person of 14

and above but below 16 years old.

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EMPLOYMENT OF CHILD

No child can be engaged in any employment except :-

Involving light work in any undertaking carried out by

his family.
In any public entertainment, in accordance with the
term and conditions of a license granted for the
purpose under that act.
Employment requiring him to perform work approved
or sponsored by the federal government, state
government, and carried out in any school, training
institution or training vessel.
Employment as an apprentice under a written
apprenticeship contract approved by the D.G of
Labor.

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EMPLOYMENT OF YOUNG PERSON

Any employment mentioned under the child

involving light work whether or not the
undertaking is carried out by his family.
Employment as domestic servant.
Employment in any office, shop( including
hotels, bars, restaurants and stalls), factory,
workshop, store, theatre, cinema, club or
association.
Employment in an industrial undertaking
suitable to his capacity.
Employment on any vessel under the personal
charge of his parent or guardian.

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Female “young Person” employment

No female young person may be engaged

in any employment in hotels, bars,
restaurants, boarding houses or clubs
unless under the management or control
of her parent or guardian or with approval
of the D.G Labor.

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WORKING DAYS

A child or young person is

permitted 6 days per week.
A child is not permitted to work
between 8 p.m. to 7 a.m. ( but
not apply to any child engaged
in any public entertainment.
Working hours for children
A maximum of 3 consecutive
hours with at least rest 30
minutes.
Not more than 6 hours per day,
or 7 hours including the hours
spent at school.

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Working hours for young person

A maximum of 4 consecutive hours with a

rest at least 40 minutes.
Not more than 7 hours per day or 8 hours is
young person is an apprentice.
If attending school, not exceed 8 hours

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WORKERS MINIMUM STANDARD OF HOUSING
ACT 1966.

Workers’ housing provided by employers which

are situated outside the limits of majlis
perbandaran, majlis bandaran must comply with
the minimum standards laid down in the act.

Applies especially to workers’ housing in

plantation estates.

Enforced by Labor Department

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EMPLOYEES’ SOCIAL SECURITY ACT 1969
( SOSCO )

Provides benefits to workers and their dependants in

the event of work-related accidents .
Applies throughout of Malaysia.
Enforced by Dept of Socso.
The contract of employment is not simply a commercial
exchange in the market place of goods and services.
This doctrine paid no attention to social and economic
pressures forcing a person to enter into a contract of
employment.
Lord Hanley LC had succinctly noted this in 1762, in
the case of Vernon v Bethell (1762) 2 Eden 110,
113; 28 ER 838, at 839 where his Lordship stated:
"necessitous men are not, truly speaking free men, but
to answer a present exigency, will submit to any terms
that the crafty may impose upon them".

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Employees that are not covered by the ACT.

Any person whose wages exceed RM 3,000 a month ( 1 May 2005 )

Any person whose employment is of casual nature and who is
employed otherwise than for the purposes of the employer’s
industry.
A domestic servant.
Malaysian Armed Forces
Any police officer
Any person detained in any prison, Henry School, approved school,
detention camp, mental hospital
All nomadic aborigines
Any person who employed principally for the purpose of catching
fish in maritime water, or employed in any capacity on board any
vessel used principally for such purpose.
All agriculture workers who are employed for the purpose of
cultivating, upkeeping and harvesting paddy.

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CATEGORIES OF SCHEME

Employment Injury Insurance Scheme and Invalidity Pension

Scheme. Below 55 years old
Employment Injury Insurance Scheme.
above 55 years old. (contribution is made by the employer
only)

BENEFITS OFFERED UNDER Employment injury insurance

scheme

Temporarily disabled – 80 % from average daily wages for

each day of disablement. If the daily rate is below RM 10.00,
the employee will be paid minimum rate of RM 10.00. The
max is RM 52.00 if the wage exceeds RM 1,900 per month.
Permanent disabled – 90 % of the average daily wage for
life. Minimum RM 10.00

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EMPLOYEES PROVIDENT FUND ACT 1991 (EPF)

Purpose is to ensure workers are not destitute once they retire

from work.
Stipulates compulsory savings which will help employees or their
dependants financially at their retirement, death or disability.
All employers and employees must make monthly contributions.
Minimum contribution of 12 % by the employer and 11 % by the
employee.
Categories of employees precluded from compulsory contribution.
Expatriates
Domestic servants
Self-employed person including partners who receive salaries
from partnership
Employees under 16 years old

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DEFINITION OF WAGES UNDER EPF ACT.

Includes all forms of remuneration in money due to

employee under his contract of service of
apprenticeship. Includes bonus or allowances
Excludes service charge, tip or valuntarily given by
a customer.
Overtime payment
Gratuity
Retirement benefit

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HUMAN RESOURCES DEVELOPMENT ACT 1992 (HRDF)

Employers are required to contribute 1 percent of their pay

roll to this fund every month. (basic pay + fix allowances)
Manufacturing sector – 50 workers and above or 10 workers
for services sector.
Approved training is conducted the company can claimed for
reimbursement of the costs involved.

APPROVED TRAINING
Any training of Skill upgrading
At least 7 hours
Maximum RM 1,000 each participant
Internal training RM 3,500 per day

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Occupational Safety and Health 1994 (OSHA)

Applies throughout of Malaysia to all industries and sectors.

Duties of employers are responsible to provide a workplace which
without risk to health.
The obligation extends to :

Ensuring proper arrangements for the use or operation,

handling, storage and transport of plant and substances
The provision of information, training and supervision to
ensure safety of the employees.
The maintenance of the place of work and its entrances and
exits.
The provision of adequate welfare facilities for workers.

Employer with more than 5 employees is required to prepared a

written statement of his safety and health policy.
Any accident must be reported to the DOSH.

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FACTORIES AND MACHINERY ACT 1967

Provides the protection of workers from the hazards of

industrial work, including occupational diseases.
Set the minimum standards for healthy and safe work.
Enforced by the DOSH

THE WAGES COUNCILS ACT 1947

To set such minimum wages in certain industries.

The wages councils currently in existence are in the
following industries :

Cinema workers;
Shop assistants;
Hotel and catering industry workers
Port stevedores.

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CONTRACT OF EMPLOYMENT

A consensual relation between two parties involving an

exchange: work in return for pay.

Otto Khan Freund: “In its inception, it is an act of submission, in its

operation it is a condition of subordination, however much The
submission and subordination may be concealed by that indispensable
figment of the legal mind known as the ‘contract of employment’. The
main object of labour law has always been … to be a countervailing
force to counteract the inequality of bargaining power which is
inherent and must be inherent in the employment relationship”.
O Kahn-Freund, "Legal Framework", in A Franders and H A Clegg
(eds), The System of Industrial Relations in Great Britain (Oxford:
Blackwell, 1954) 45. The application of contractual principles in
employment relationships was enunciated by prominent English
jurists of the early Nineteen Century such as by Bentham through
his philosophy of 'the utilitarian principles' which enunciated the
principle that the parties to a contract freely assume legal
obligations, or by Sir Henry Maine through his theory of 'progressive
society', namely, movement from 'status' to 'contract'.

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The contract of employment, which is the product of
the industrial revolution and the doctrine of laissez-
faire as its justification, has been described as 'the
cornerstone of the edifice of labour law. 

Workers and The Law, 3rd Edition, Sweet &

Maxwell, 1986, p.110, Lord Wedderburn:-

“ The words 'contract of service' and 'employee' have

significant legal implications. As the definition in the Act
suggest, an employee or a workman must be under a
contract of service. This is distinguished from a contract
where the employer gets the work done by an
independent or self-employed, contractor.”

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UHG V DIRECTOR GENERAL OF INLAND
REVENUE
[1974] 2 MLJ 33

“compulsory statutory contributions and

payment like provident fund,social
security, workmen's compensation and
pension schemes are payable by
employers if the workers are employed”

The importance of freedom of contract is therefore

closely linked to a free enterprise capitalist system and
together they work to create ideals of a working class.
This is based on the whole idea of profit making. The
belief was that an individual should strive to maintain his
own interest and at the same time the interest of the
community.

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SAEMAH ABU SAID V. DANZAS AEI (MALAYSIA) SDN BHD
INDUSTRIAL COURT, KUALA LUMPUR;JALALDIN HUSSAIN
AWARD NO. 1218 OF 2009 [CASE NO: 25(21)/4-695/04]
15 OCTOBER 2009
Standard Of Proof

It is a principle of industrial relations jurisprudence that in a

dismissal case, the employer must produce convincing and
cogent evidence that the workman committed the offence or
offences he is alleged to have committed for which he has
been dismissed. The burden of proof lies on the employer. He
is obliged to prove his case on a balance of probabilities. It is
for him to adduce evidence that the workman was dismissed
for just cause or excuse.
From the totality of the above evidence, the court finds on a
balance of probability that the claimant's position as a
Customer Service Manager was no longer required by Nokia.
The company then had reason to terminate the claimant's
employment not only by reason that the contract had came
to an end and the implants' employment can be terminated
but also by p. 16 para. 2 of the Terms and Conditions the
claimant's position as a Customer Service Manager is no
longer required.
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Colgate Palmolive (M) Sdn Bhd v. Yap Kok Foong [1998] 2
ILR 965 (Award 368 0f 1998) , it was held as follows:

In a s.20 reference, a workman's complaint consists of two

elements: firstly, that he has been dismissed, and
secondly that such dismissal was without just cause or
excuse. It is upon these two elements being established
that the workman can claim his relief, to wit, an order for
reinstatement, which may be granted or not at the
discretion of the Industrial Court. As to the first element,
industrial jurisprudence as developed in the course of
industrial adjudication readily recognizes that any act
which has the effect of bringing the employment
contract to an end is a 'dismissal' within the
meaning of s.20.

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LOW AH HENG V. CARTRADE SDN BHD
INDUSTRIAL COURT, KUALA LUMPUR
FREDRICK INDRAN XA NICHOLAS
AWARD NO. 940 OF 2009 [CASE NO: 10(23)/4-
868/07]
30 JULY 2009
From the total evidence that had been adduced in this
case, the company had established on a balance of
probability, the appropriateness of its actions against the
claimant. The claimant himself had positively admitted to
substantial and material elements of the allegation of
conflict of interest and had by this shown his betrayal of
the trust and confidence reposed in him by the company.
His transfer to Petaling Jaya had not been of any
significance to the issue at hand because he had
remained an employee of the company and his offer to
have his wife removed from the partnership had been
"too little, too late". The misconduct perpetrated by the
claimant had fully justified his dismissal .

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In the case of Stamford College v Lai Fook Seng [1994] 2 ILR
679 ( Award No. 357 of 1994) , the court succinctly
stated as follows:

It is well established that a contract of employment is a contract

of confidence and trust. Sometimes it is called a contract of
fidelity. What it means is that the employee must not place
himself in a position where his interest conflicts with the interest
of his employer. Some contracts make such provisions. However
it is equally established in law that such term is implied in a
contract of employment.
The law and authorities are clear in that placing oneself in a
conflict of interest situation is a serious misconduct which
warrants nothing less than the punishment of dismissal.

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Projek Lebuhraya Utara-Selatan Bhd v. Ahmad Nazir
Hussein [2000] 1 ILR 189 (Award No 47 of 2000) it was
held:

In the light of the decision in Ferodo's case, the company had

the reason or cause to terminate the claimant's services due
to his failure and carelessness in carrying the trust reposed in
him in protecting and taking care of the safety of company's
property ...

And in Ferodo Ltd. v. Barnes [1976] IRLR 39 quoted with

approval in the above said case, it was held that:
It must be remembered that in dismissing an employee ..., the
employer need only satisfy himself at the time of the
dismissal, there were reasonable grounds for believing that the
offence put against the employee was committed. The test is
not whether the employee did it but whether the employer
acted reasonably in thinking the employee did it and whether
the employer acted reasonably in subsequently dismissing
him.

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Constructively dismissed

In Western Excavating (ECC) Ltd. v. Sharp [1978]

IRLR 27,
Lord Denning observed the following:

If the employer is guilty of conduct which is a significant

breach going to the root of the contract of employment,
or which shows that the employer no longer intends to
be bound by one or more of the essential terms of the
contract, then the employee is entitled to treat himself
as discharged from further performance. If he does so,
then he terminates the contract by reason of the
employer's conduct. He is constructively dismissed.

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In Woods v. W.M. Car Services Ltd. [1981] ICR 666,
Justice Brown - Wilkinson said:

In our view it is clearly established that there is implied in a

contract of employment a term that the employers will not,
without reasonable and proper cause, conduct themselves in a
manner calculated or likely to destroy or seriously damage the
relationship of confidence and trust between employer and
employee: Courtaulds Northern Textile Ltd. v. Andrew
[1979] IRLR 84. To constitute a breach of this implied term it
is not necessary to show that the employer intended any
repudiation of the contract: the tribunal's function is to look at
the employer's conduct as a whole and determine whether it is
such that its effect, judged reasonably and sensibly, is such
that the employee cannot be expected to put up with it; see
British Aircraft Corporation Ltd v. Austin [1978] IRLR
347. The conduct of the parties has to be looked at as a whole
and its cumulative impact assessed.

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In Wong Chee Hong v. Cathay
Organisation (M) Sdn Bhd [1988] 1 CLJ
45 the Supreme Court stated the basic
principles as follows:

The common law has always recognized the

right of an employee to terminate his
contract of service and therefore to consider
himself as discharged from further obligations
if the employer is guilty of such breach as
affects the foundation of the contract or if the
employer has evinced or shown an intention
not to be bound by it any longer.

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In the Malaysian Court of Appeal decision of
Anwar Abdul Rahim v. Bayer (M) Sdn Bhd
[1998] 2 CLJ 197 at p. 205 the Court of Appeal
observed that

"the proper approach in deciding whether

constructive dismissal has taken place is not to ask
oneself whether the employer's conduct was unfair
or unreasonable (the unreasonableness test) but
whether the conduct of the employer was such that
the employer was guilty of a breach going to the
root of the contract or whether he has evinced an
intention no longer to be bound by the contract".

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Finally, on the issue of the burden of proof, it is trite law
that it is on the employee to prove that he has been
constructively dismissed.

Hence the claimant who seeks to establish a case of CD must prove

the following:
(i) That the company, by its conduct, has breached a term or terms
of the contract of employment or has evinced an intention no
longer to be bound by it;
(ii) the breach must be a fundamental breach going to the root or
foundation of the contract;
(iii) he must leave in response to the breach and not for some
unconnected reason; and
(iv) he must not delay too long in terminating the contract in
response to the company's breach, otherwise he may be deemed
to have waived the breach.

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Malaysian workers however still enjoy such right under
statutory provisions. For this, we may refer to relevant
legislation such as the Industrial Relations Act 1967 where
through ss 4 and 5, workers shall have the right to join a
trade union and to participate in its lawful activities. Section
5 in particular renders any act of the employer unlawful for
any act which is regarded as anti union discrimination . Cases
heard by the Industrial Court under this section seemingly did
not attract arguments of constitutional right instead they
were just grounded on statutory right  . However, to say that
freedom of association for trade union purposes is not a
constitutional right would not be completely correct as art
10(3) states that 'restrictions on the right to form
associations may also be imposed by any law relating to
labour'. The existence of such qualification or limitation
means that such right is in fact recognised as one of the
enshrined fundamental liberties under the federal
constitution except that other laws are capable of restricting
it.

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The view that in Malaysia, the right to form labour unions
is not fundamental may be doubted if one adverts his
mind to an observation made (obiter) by Raja Azlan
Shah FJ (as he then was) in the case of Non-Metallic
Mineral Products Manufacturing Employees Union &
Ors v South East Asia Fire Bricks Sdn Bhd [1976] 2
MLJ 67, p 69. According to the learned Federal Judge,
'Workers organisations cannot exist, if workers are not free
to join them, to work for them and to remain in them. This
is a fundamental right which is enshrined in our
constitution and which expresses the aspirations of
workmen. But then the learned judge made no specific
reference to any relevant constitutional provision probably
because he was making the statement just by the way.

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Recently the judicial reasoning in emerging labour law theory
with constitutional principles are at its foundations. Although the
Malaysian courts have not developed these doctrines fully and
have not applied them consistently, it is apparent that the
constitutional pronouncements have had a considerable impact
on Malaysian labour jurisprudence.

As the courts continue to grapple with these new directions, it

appears that the stage is being set for a movement away from
contract to constitutional status in labour law theory.

It is possible to construct a judicially developed framework of

constitutional rules and principles, which will provide the
foundation for a new labour law, one that is founded on an
amalgamation of the law of contract, constitutional law and
administrative law.

Thank You.

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