EMPLOYMENT ACT

The employees listed in the First Schedule of the Employment Act 1955 include:
Any person, irrespective of his occupation, who has entered into a contract of
service and his monthly waes do not e!ceed "#1,5$$%$$&
Any person who, irrespective of the amount of his monthly waes, who has
entered into a contract of service of which:'
i% (e is enaed in manual la)our includin such la)our as an artisan or
apprentice&
ii% (e is enaed in the operation or maintenance of any mechanically
propelled vehicle used for the transport of passeners or oods or for
reward or for commercial purposes&
iii% (e supervises or overseas other employees enaed in manual la)our
employed )y the same employer&
iv% (e is enaed as a domestic servant%
The Employment Act 1955 re*uires contracts of service e!ceedin one month to )e in writin%
This is evident from s%1$+1, which states as follows:
-A contract of service for a specific period of time e!ceedin one month or for the performance
of a specified piece of wor., where the time reasona)ly re*uired for the completion of the wor.
e!ceeds or may e!ceed one month, shall )e in writin%/
Essentially, a contract of service is a contract )etween an employer and an employee under
which the employee arees to wor. for the employer% 0nder the Employment Act 1955 a
contract of service is defined as, -any areement whether oral on in writin and whether e!press
or implied, where)y one person arees to employ another as his employee and that other
arees to serve his employer as employee and includes an apprenticeship contract%/
0nder the 1ndustrial "elations Act 1923, such a contract is referred to as a -contract of
employment/ which is defined as, -any areement whether oral or in writin and whether e!press
or implied where)y one person arees to employ another as a wor.man and that other arees
to serve his employer as a wor.man%/
1t has enerally )een accepted that there is no distinction )etween the two phrases%
See: American International Assurance Co Ltd and Dato Lam Peng Chong & Others (Award
275 of 1!!"%
1t is important to distinuish )etween a contract of service and a contract for services% 4nly a
contract of service5employment will ive rise to an employer5employee relationship, which is
reulated )y the Employment Act 1955 and the 1ndustrial Act 1923% Further such
employer5employee relationship must e!ist )efore an employer can )e made vicariously lia)le
for the nelient acts of his employee done in the course of his employment%
The contract for services, on the other hand, is very different from that of the contract of
service5employment% 1t does not create an employer5employee relationship and does not
therefore come within the purview of the Employment Act and the 1ndustrial "elations Act%
1
1nstead it creates only a contractual relationship )etween an employer and an independent
contractor%
067E" 8(AT 91"90#STA69ES 9A6 A 946T"A9T 4F SE":19E ;E TE"#16ATE7 ;<
E1T(E" T(E E#=>4<E" 4" E#=>4<EE ?
8here a contract of service is considered )ro.en, an employer can dismiss an employee% A
contract of service is considered to have )een )ro.en when an employee has )een
a)sent from wor. for more than @ consecutive wor.in days without prior leave from
the employer or without informin or attemptin to inform the employer at the earliest
opportunity durin such a)sence with reasona)le e!cuse%
An employer may terminate the contract of service where the employee is found uilty of
misconduct, misdemeanor or nelience%
An employee has the riht to terminate the contract of service, where an employer fails to pay
waes within seven days after the waes period%
A contract of service can also )e terminated without notice :
)y payin to the other party or indemnity in lieu of notice
if there is a willful )reach )y the other party of a term or condition of the contract of
service
8here the contract of service has e!pired or wor. )ein completed, the contract may also )e
terminated% 8ritten notice )ein iven )y either party may also terminates a contract of service%
PAYMENT OF WAGES
18. Wage period
+1, A contract of service shall specify a wae period not e!ceedin one month%
+@, 1f in any contract of service no wae period is specified the wae period shall for the
purposes of the contract )e deemed to )e one month%
19. Time of paymen of !age"
Every employer shall pay to each of his employees not later than the seventh day after the last
day of any wae period the waes, less lawful deductions, earned )y such employee durin
such wae period:
=rovided that if the 7irector Aeneral is satisfied that payment within such time is not reasona)ly
practica)le, he may, on the application of the employer, e!tend the time of payment )y such
num)er of days as he thin.s fit%
#$. Paymen on norma% erminaion of &onra&
The waes, less lawful deductions, earned )y )ut not yet paid to an employee whose contract of
service terminates in accordance with section 11 +1, or of section 1@ shall )e paid to such
employee not later than the day on which such contract of service so terminates%
@
#1. Paymen on erminaion of &onra& in "pe&ia% &ir&'m"an&e" and on (rea&) of
&onra&
+1, 8here an employer terminate the contract of service of an employee without notice in
accordance with section 1B +1, or +@, and section 1C+1, +a, D
+a, the waes, less any deductions which the employer is entitled to ma.e under section @C,
earned )y such employee up to and includin the day immediately precedin the day on which
the termination of the contract of service ta.es effect& and
+), in addition, where the employer terminates the contract of services under section 1B +1,, the
indemnity paya)le to the employee under that su)section, shall )e paid )y the employer to the
employee not later than the day on which such contract of service is so terminated%
+@, 8here an employee terminates his contract of service with an employer without notice in
accordance with section 1B +1, or +@, or section 1C +B,, the waes, less any deductions which
the employer is entitled to ma.e under section @C, earned )y such employee up to and includin
the day immediately precedin the day on which the termination of the contract of service ta.es
effect shall )e paid )y the employer to the employee not later than the third day after the day on
which the contract of service is so terminated%
##. Limiaion on ad*an&e" o emp%oyee"
6o employer shall durin any one month ma.e to an employee an advance or advances of
waes not already earned )y such employee which e!ceeds in the areate the amount of
waes which the employee earned in the precedin month from his employment with such
employer, or if he has not )een so lon in the employment of such employer, the amount which
he is li.ely to earn in such employment durin one month, unless such advance is made to the
employee ''
+a, to ena)le him to purchase a house or to )uild or improve a house&
+), to ena)le him to purchase land&
+c, to ena)le him to purchase livestoc.&
+d, to ena)le him to purchase a motorcar, a motorcycle or a )icycle&
+da, to ena)le him to purchase shares of the employerEs )usiness offered for sale )y the
employer&
+e, for any other purpose ''
o +i, in respect of which an application in writin is made )y the employer to the
7irector Aeneral&
o +ii, which is, in the opinion of the 7irector Aeneral, )eneficial to the employee&
and
B
o +iii, which is approved in writin )y the 7irector Aeneral, provided that in rantin
such approval, the 7irector Aeneral may ma.e such modifications thereto or
impose such conditions thereon as he may deem proper&
+f, for such other purpose as the #inister may, from time to time, )y notification in the
AaFette, specify either enerally in respect of all employees, or only in respect of any
particular employee, or any class, cateory or description of employees%
#+. Wage" no d'e for a("en&e from !or, )ro'g) impri"onmen or aendan&e in &o'r
8aes shall not )ecome paya)le to or recovera)le )y any employee from his employer for or
on account of the term of any sentence of imprisonment underone )y him or for any period
spent )y him in custody or for or on account of any period spent )y him in oin to or returnin
from prison or other place of custody or for or on account of any period spent )y him in oin to,
attendin )efore or returnin from a court otherwise than as a witness on his employerEs )ehalf%
-E-.CT/ONS F0OM WAGES
#1. La!f'% ded'&ion"
+1, 6o deductions shall )e made )y an employer from the waes of an employee otherwise than
in accordance with this Act%
+@, 1t shall )e lawful for an employer to ma.e the followin deductions:
+a, deductions to the e!tent of any overpayment of waes made durin the immediately
precedin three months from the month in which deductions are to )e made, )y the
employer to the employee )y the employerEs mista.e&
+), deductions for the indemnity due to the employer )y the employee under section 1B
+1,&
+c, deductions for the recovery of advances of waes made under section @@ provided
no interest is chared on the advances& and
+d, deductions authoriFed )y any other written law%
+B, The followin deductions shall only )e made at the re*uest in writin of the employee:
+a, deductions in respect of the payments to a reistered trade union or co'operative
thrift and loan society of any sum of money due to the trade union or society )y the
employee on account of entrance fees, su)scriptions, instalments and interest on loans,
or other dues& and
+), deductions in respect of payments for any shares of the employerEs )usiness offered
for sale )y the employer and purchased )y the employee%
+C, The followin deductions shall not )e made e!cept at the re*uest in writin of the employee
and with the prior permission in writin of the 7irector Aeneral:
C
+a, deductions in respect of the payments into any superannuation scheme, provident
fund, employerEs welfare scheme or insurance scheme esta)lished for the )enefit of the
employee&
+), deductions in respect of repayments of advances of waes made to an employee
under section @@ where interest is levied on the advances and deductions in respect of
the payments of the interest so levied&
+c, deductions in respect of payments to a third party on )ehalf of the employee&
+d, deductions in respect of payments for the purchase )y the employee of any oods of
the employerEs )usiness offered for sale )y the employer& and
+e, deductions in respect of the rental for accommodation and the cost of services, food
and meals provided )y the employer to the employee Eat the employeeEs re*uest or
under the terms of the employeeEs contract of service%
+5, The 7irector Aeneral shall not permit any deduction for payments under su)section +C,+e,
unless he is satisfied that the provision of the accommodation, services, food or meals is for the
)enefit of the employee%
#2. Wage" o (e paid in %ega% ender
+1, E!cept as otherwise e!pressly permitted )y this Act, the entire amount of the waes earned
)y, or paya)le to, any employee in respect of any wor. done )y him shall )e actually paid to him
in leal tender, and every payment of, or on account of, any such waes made in any other form
shall )e illeal, null and void%
#2A. Paymen of !age" )ro'g) (an,
+1, 6othin in section @5 +1, shall operate so as to render unlawful or invalid any payment of
waes )y the employer to the employee with the employeeEs written consent in any of followin
ways ''
+a, payment into an account at a )an. or a finance company licensed under the ;an.in
and Financial 1nstitutions Act 19G9 in any part of #alaysia )ein an account in the name
of the employee or an account in the name of the employee Hointly with one or more
other persons&
+), payment )y che*ue made paya)le to or to the order of the employee%
+@, The consent of the employee under this section may )e withdrawn )y him at any time )y
notice in writin iven to the employer% Such notice shall ta.e effect at )ut not )efore the end of
the period of four wee.s )einnin with the day on which the notice is iven%
W3AT /S T3E NOT/CE PE0/O- 0E4./0E- TO TE0M/NATE A CONT0ACT OF SE05/CE 6
An employee may resin )y ivin notice of resination or termination to the employer to
terminate the contract of service% An employer may also dismiss an employee )y
ivin notice of termination to such employee% 1n )oth situation, the lenth of notice
shall )e the same pursuant to the contract of service%
5
8here the period of notice of termination is not specified in the contract of service, the notice
period shall )e as follows :
less than @ years of service ' minimum C wee.s
@ years or more )ut less than 5 years of service ' minimum 2 wee.s
5 years of service or more ' minimum G wee.s
OT3E0 T3AN TE0M/NAT/ON7 W3AT ACT/ONS CAN AN EMPLOYE0 TA8ES AGA/NST AN
EMPLOYEE ON T3E G0O.N-S OF M/SCON-.CT ON T3E PA0T OF T3E
EMPLOYEE 6
8here an employee is found uilty of misconduct )y an employer, the employer may ta.e the
followin actions :
downrade the employee
impose any other lesser punishment as the employer considers Hust and fit
There are three remedies availa)le to an employee who has )een unHustly dismissed% These
are:
+i, reinstatement
+ii, compensation in lieu of reinstatement and
+iii, re'enaement%
These remedies may )e e!plained as follows:
+i, "einstatement%
This is a remedy )y which an employee who has )een unHustifia)ly dismissed is put )ac. into
the position that he would have )een in if he had not )een so dismissed% Thus, when an
employee is reinstated he would )e entitled to occupy the same position that he occupied
)efore and would )e entitled to receive arrears of salary from the time he was dismissed
until the time of reinstatement% (is status and other privilees are a)solutely restored%
+ii, 9ompensation in lieu of reinstatement%
Sometimes, the court may award the employee compensation in lieu of reinstatement% This
means that instead of reinstatin the employee, the court orders that he )e iven compensation%
This may )e necessary where the court finds that reinstatement is li.ely to produce neative
results to the employer% 0sually the compensation that is so paya)le will )e at the rate of one
month/s pay for each year of service su)Hect to a ma!imum of @C months%
+iii, "e'enaement%
"e'enaement or re'employment means that the employee is iven an opportunity to come
)ac. and wor.% (e may not )e iven the same position and he will not )e entitled to any arrears
of salary% (e will lose his past service% 0pon re'enaement his service starts afresh%
2
9a: The term -lay'off/ refers to a situation where an employee has not )een a)le to provide his
employee with the .ind of wor. the employee was employed to do, and the employee/s
remuneration is dependent on )ein provided with such wor.%
"edundancy, on the other hand, refers to a situation where an employer has surplus of la)our
and has to downsiFe his la)our force%
9(: 9i: A -lay'off/ may )e said to occur in the circumstances stated in "eulation 5+1, of the
Employment +Termination and >ayoff ;enefits, "eulations 19G$ +"evised 19GB,, i%e, where:
+1, The employer does not provide wor. for the employee on at least a total of 1@ normal
wor.in days within any period of four consecutive wee.s& and
+@, The employee is not entitled to any remuneration under the contact for the period or periods
+within such period of four consecutive wee.s, in which he is not provided with wor.%
(owever, in determinin whether an employee has )een laid'off, any period durin which an
employee is not provided with wor. as a result of a rest day, a pu)lic holiday, sic. leave,
maternity leave, annual leave, any other leave authoriFed under any written law, or any leave
applied for )y the employee and ranted )y the employer, shall not )e ta.en into account%
9ii: A redundancy may )e said to occur in the circumstances mentioned in s%1@ +B, of the
Employment Act 1955 i%e% where:
+1, The employer has ceased, or intends to cease to carry on the )usiness for the purposes of
which the employee was employed&
+@, The employer has ceased or intends to cease to carry on the )usiness in the place at which
the employee was contracted to wor.&
+B, The re*uirements of that )usiness for the employee to carry out wor. of a particular .ind
have ceased or diminished or are e!pected to cease or diminish&
+C, The re*uirements of that )usiness for the employee to carry out wor. of a particular .ind in
the place at which he was contracted to wor. have ceased or diminished or are e!pected to
cease or diminish%
-i"mi""a% of Mi"&ond'&
IThe )urden of provin that the dismissal of a wor.man is with Hust cause or e!cuse is on the employer% The
standard of proof is on the )alance of pro)a)ilities% The employer must convince the 9ourt that the punishment was
proportionate to the nature and *uality of the alleed wrondoin %%% %
E#isconductE connotes to conduct that is inconsistent with the fulfillment of the e!press or implied conditions of
service%
Aenerally, there are two )road cateories of misconduct:
#inor #isconduct& and
Aross #isconduct
3
Some e!amples of minor misconduct are:
;ein late
0sin a company vehicle for unauthorised personal uses
6ot performin to ade*uate5satisfactory standards
Some e!amples of Aross #isconduct:
A)usive ;ehaviour or violence
Theft or fraud
Alcohol or dru a)use
7iscrimination or harassment
7eli)erately damain company e*uipment5property
Seriously )rea.in health and safety reulations
Serious 6elience
Serious insu)ordination
#isuse of an oranisations property or name
Serious )reach of confidence
J#isconductJ refers to conduct so seriously in )reach of the accepted practice that, )y standards of fairness and
Hustice, the employer should not )e )ound to continue the employment +see #$ari%at &enderaan 'ela$u &elantan
#dn( )hd( *( +rans,ort -or%ers .nion K199$L 1 #>M 5,%
J#isconductJ connotes an act of non'disciplinary )ehaviour +see #ulna$ah /0( 'ohd( Isa *( #e%olah &ana%1%ana%
Pe%a% #elangor & Anor K1999L 2 9>M @BC,%
Section 1C+1, of the Employment Act 1955 provides as follows:
An employer may, on the rounds of misconduct inconsistent with the fulfilment of the e!press or implied
conditions of his service, after due in*uiry:
+a, dismiss without notice the employee&
+), downrade the employee& or
+c, impose any other lesser punishment as he deems Hust and fit, %%% %
1n the case of +a$lor *( Parsons Pee2les 3e I )ruce Pee2les Ltd% K19G1L 1 1">" 119 the Employment Appeal
G
Tri)unal had held as follows:
I The 1ndustrial Tri)unal had erred in holdin that the respondents had acted reasona)ly in dismissin the appellant
in accordance with their policy of dismissin any employee who struc. another%
1n determinin the reasona)leness of an employerEs decision to dismiss, the proper test is not what the policy of the
employer was )ut what the reaction of a reasona)le employer would )e in the circumstances%
That the employerEs code of disciplinary conduct may or may not contain a provision to the effect that anyone
stri.in a )low would )e instantly dismissed therefore is not to the point%
That provision must always )e considered in the liht of how it would )e applied )y a reasona)le employer havin
reard to e*uity and the su)stantial merits of the case% That includes ta.in account of the employeeEs lenth of
service and previous record%
+the principle has )een employed in a local case of 4$e +ai Precision Industrial ('" #dn( )hd( 5( 5ictoria Arulsam$
K@$$1L @ 1>" CC5,
Con"r'&i*e -i"mi""a%
The doctrine of constructive dismissal in #alaysia has )een e!pounded in the Supreme 9ourt decision in -ong
Chee /ong *( Catha$ Organi6ation ('" #dn )hd K19GGL 1 9>M C5& +K19GGL 1 9>M +"ep, @9G,
The Supreme 9ourt e!plained that when an 1ndustrial 9ourt is dealin with a reference under s%@$ of the 1ndustrial
"elations Act 1923, the test for -constructive dismissal/ is what is referred to as the -contract test/ and not the
ne)ulous test of -unreasona)leness/
For an employee to claim constructive dismissal , the followin four conditions must )e met +see ;ryn =errinsE
1ndustrial "elations and Employment >aw,
There must )e a )reach of contract )y the employer% This may )e an actual )reach or any anticipatory
)reach&
That )reach must )e sufficiently important to Hustify the resination of the employee, or else it must )e the
last in a series of incidents, al)eit erroneous interpretation of the contract )y the employer, will not )e
capa)le of constitutin a repudiation in law&
he must leave in response to the )reach and not for some other, unconnected reason& and
he must not delay too lon in terminatin the contract in response to the employerEs )reach, otherwise he
may )e deemed to have waived the )reach and areed to vary the contract %%%
1f the employee leaves in circumstances where these conditions are not met, he will )e held to have resined and
there will )e no dismissal%
The principle has )een *uoted in numerous reported decisions on constructive dismissal such as in 7ng Lian
7nter,rise #dn )hd *( #te,henie Liew 8oong 'ing K1999L 1 1>" 53B,%
9
E!ample instances of 9onstructive 7ismissal:
(umiliation
7emotion
Transfer
"eduction in )enefits
9hane in terms of service
0emedie" for -i"mi""a% Wi)o' ;'" Ca'"e
9einstatement
This is the primary relief conferred on the 1ndustrial 9ourt )y the 1ndustrial relations act 1923 +1"A,%
The 1ndustrial 9ourt is to in*uire into an employee/s representation to )e reinstated on the )asis that he considers
himself to have )een dismissed without Hust cause or e!cuse%
The 1ndustrial 9ourt has no Hurisdiction to in*uire into the reference or to award any form of relief if the employee
does not wish to )e reinstated to his former Ho) +/olida$ Inn: &uching * Lee Chai #io% 7li6a2eth K199@L 1#>M @B$,
8hen the trust of the employer5employee relationship has )ro.en down, reinstatement would not )e proper a
remedy )y the 9ourt +&ulim Clu2 * ;o2inath 5assu K@$$BL 1 1>" @$3,
'onetar$ Com,ensation < 9einstatement
The Federal 9ourt in Dr( A Dutt * Assunta hos,ital K19G1L 1 #>M referred to and areed with the decision of the
(ih 9ourt in =enan in ;oon &wee ,ho$ * 4&P Coats ('" )hd K19G1L @ #>M1@9, e!pressly held that:
9ompensation could )e awarded to a wor.man who had )een dismissed without Hut cause or e!cuse%
This sayin, reinstatement is thus not the only remedy ranted )y the court%
As per s% B$+2, of the 1ndustrial "elation Act 1923 that Iin ma.in its award, the 9ourt shall not )e restricted to the
specific relief claimed )y the partiesNO
'onetar$ Com,ensation onl$
The 9ourt may also award )ac. waes with compensation in lieu of reinstatement, even thouh they are poor
su)stitute compared to reinstatement +#ama #u2ur #()( * &andasam$ a=l Athia,,an > &el*in K1991L @ 1>" 3BCa,
1n the assessment of compensation in lieu of reinstatement, the court ta.es into account the followin:
4ne months/ waes for each completed year of service +International Planned Parenthood 8ederation *
+uan #$ed adam al14afri K19G@L @ 1>" 112), %
1$
;ac. pay to )e from the date of dismissal to the date of conclusion of hearin, su)Hect to a ma!imum of @C
months +=ractice 6ote 6o% 1 of 19G3 issued )y the =resident of the 1ndustrial 9ourt,%
7iscounts, such as contractual increments that an employee is entitled to
11