TABLE OF CONTENTS

1.0 INTRODUCTION.............................................................................................................2
1.1 Introduction to the Issue.................................................................................................2
1.2 Sources of Employment Laws in Malaysia....................................................................3

2.0 DISCUSSIONS..................................................................................................................3
2.1 Differences between Contract of Service and Contract for Service...............................3
2.1.1 Contract of service..................................................................................................3
2.1.2 Contract for services................................................................................................4

2.2 Importance of Differentiating Contract of Service & Contract for Services.................5

2.3 Scopes & Protections under EA1955 & Related Statutes..............................................5

2.3.1 Payment of wages....................................................................................................5
2.3.2 Maximum working hours........................................................................................6
2.3.3 Overtime payment...................................................................................................6
2.3.4 Rest days.................................................................................................................6
2.3.5 Annual leave............................................................................................................6
2.3.6 Sick leave................................................................................................................7
2.3.7 Public holidays........................................................................................................7
2.3.8 Maternity protection................................................................................................8
2.3.9 Protection against unfair dismissal..........................................................................8
2.3.10 Protections of employees’ safety and health...........................................................9
2.3.11 Protection of minimum wage..................................................................................9

2.4 Evaluation of Protection Applicable to Grab Drivers....................................................9

2.5 Recommendations for Amending Existing Laws.........................................................10

2.5.1 Introduce a new employee classification known as dependent contractor............10
2.5.2 Create benefit equality for all................................................................................11
2.5.3 A new regulatory system for independent worker................................................11

3.0 LIST OF REFERENCES...............................................................................................12

1.0 INTRODUCTION

1.1 Introduction to the Issue

Over the past couple of years, the rapid advancement in technology has allowed us to witness
a form of ‘new digital economy’ (Smith, 2016) which promises to reshape the way we do
everyday activities such as shop, eat, travel, trade goods and earn a living. This nascent field
is constituted largely by a variety of what have become known as ‘platforms” (Gillespie,
2010). These are online service-providing operators or intermediaries that quickly and
efficiently, usually via the use of smartphone and app-based technology, match consumers
and providers of various different kinds of products and services (Aloisi, 2015). This new
digital economy is known as gig economy.

Among the many sectors forming gig economy, e-hailing services have been growing
rapidly during the past few years. With the proliferation of mobile devices, the mobile
device-based e-hailing applications such as Uber and Grab are experiencing fast growth
worldwide. E-hailing has also transformed transportation in Malaysia, particularly in big
towns and cities across the country. This can be seen from the rapid increase in the number of
trips recorded by e-hailing companies in the country which rises from six million a month in
2016 to 18 million trips in 2018 (Soo, 2018). As e-hailing has become increasingly popular, it
has also become an important source of employment for Malaysians. This therefore gives rise
to the question of whether these drivers working with the various e-hailing companies in
Malaysia are given equal protections and rights under the country’s employment laws.

The common conception of the laws indicates that individual service providers
including that of e-hailing drivers are regarded as self-employed persons under the
employments laws considering that they have the freedom to select the types of temporary
works or projects that they are interested in without being bounded by the standard
restrictions that are often applicable to employees. These standard restrictions include
standard working hours, fixed places of work, and the manner or method of how the work
shall be performed. However, this conception is not always the case when it comes to the
scope of a gig economy. In many sectors, the distinctions between an employee and a self-
employed independent contractor are often blurred, particularly in instances where the
independent service providers offer their services via digital platforms such as Grab. This is
due to the fact that in most cases, the individual service providers such as the Grab drivers are
forced to agree to certain terms and conditions prior registering with the digital platform in

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order to provide their services to the public. It is therefore imperative to determine the actual
positions that the drivers of e-hailing services have within the ambit of the employment laws
to determine their rights to protection under the law.

1.2 Sources of Employment Laws in Malaysia

The employment laws in Malaysia are governed by the legislations, subsidiary legislations as
well as case laws. Under the legislations, employment law in Malaysia is generally governed
by the Employment Act 1955 (EA1955) which is the main statute that deals with the
employment issues in Malaysia. The EA1955 sets out certain minimum benefits and
protections that should be made applicable to the employees working in Malaysia. It is
however important to note that not all employees are protected under the provisions of the
EA1955 since the EA1955 has sets out the categories for employees who are eligible to be
protected under its provisions.

Besides EA1955, there are several other statutes that deal with the employment issues
in Malaysia namely the Industrial Relations Act 1967 (IRA), Trade Unions Act 1959,
Employee Provident Fund Act 1991, Employee’s Social Security Act 1969, Employment
Insurance System Act 2017, Occupational Safety and Health Act 1994, Minimum Wages
Order 2016, as well as Minimum Retirement Age Act 2012. All these statutes formed the
sources of employment law in Malaysia. In circumstances where local law does not address
any issue relating to the case, case law from commonwealth countries, especially the United
Kingdom, is persuasive.

2.0 DISCUSSIONS

2.1 Differences between Contract of Service and Contract for Service

2.1.1 Contract of service

A contract of service is an agreement whereby a person agrees to employ another as an
employee and the employee agrees to service his employer as an employee. From this
perspective, contract of service illustrates an agreement that is established between an
employer and an employee for a service offered by the employee in return for substantial
benefits and social benefits. The agreement can be in writing, verbal, expressed or implied. It
can be in the form of a letter of appointment or employment, or an apprenticeship agreement.
However, to minimize disputes on the agreed terms and conditions, the contract should be in
writing.

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 Contract of service gives rise to the employer-employee relationship between the
parties to the contract. By definition, if a worker has a contract of service with an
organization, they are an employee under the ambit of the EA1955. A contract of service
often engages the service of another person for a considerable amount of time therefore
establishing a continuous relationship between the employer and the employee. The contract
of service will enable both employer and employee to deliberately discuss and agree upon
employment terms and conditions for a long-term period. As the employer in a contract of
service, a duty of care is owed to employees whereby the employer has a legal obligation to
ensure the safety and well-being of his employee. This is mainly due to the fact that an
employee’s minimum rights are protected under the provisions of employment laws in
Malaysia. In accordance with the provision of Section 7 of the EA1955, any term or
condition sets out in a contract of service which is less favourable to an employee as
compared to the term or condition provided under the Act or any other legislation shall be
void and has no effect and the favourable term or condition provided under the Act or any
other legislation shall prevailed.

2.1.2 Contract for services

A contract for services is a formal, legally binding agreement before a business and a self-
employment individual. It differs than a contract of service which is between an employer
and an individual who then becomes employed by the company. In a contract for service,
there is no employer and employee relationship. The person is usually self-employed or may
provide his services on a freelance basis at a fee. He is not an employee within the definition
in the EA1955 therefore making him not eligible for the minimum rights and protections
outlined under the Act.

The relationship that exists between a business and a self-employed contractor under
the contract for services is organized around the completion of a once-off piece of work. That
being said, successful completion of a mutually agreed objective between the business and
the self-employed independent contractor will entitle either party to the contract for services
to terminate the contract without jeopardizing the future relations with other party.
Considering that an independent contractor under a contract for service is not an employee
within the definition of EA1955, he is therefore not covered for protection under the Act and
statutory benefits outlined in the Act are not applicable to him.

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2.2 Importance of Differentiating Contract of Service & Contract for Services
Even though there seem to be well-define definition differentiating a contract of service from
a contract for services, however, in the event where a dispute occurs between the parties to
the contract, the status of the employed must first be determined before legal resolution of
dispute can be commence. This is because, both the contract of service and contract for
service are subjected to different set of laws and regulations and therefore, differentiating
between the two contracts effectively determine the statutory protection that applies to the
parties to the contract. The minimum rights and protections outlined under the EA1955 for
example are only applicable to employees employed under a contract of service. This can be
seen from the legal definition of employee and employer under the provisions of Section 2 of
the EA1955 which outlines the requirements for the existence of a contract of service in
defining both employee and employer. That beings said, the employment status of an
individual will help to define what rights and responsibilities that he has at work under the
statutes. It also help to outlines the rights and responsibilities of an employer in the event of a
dispute occurring.

An example of the importance of differentiating a contract of service from a contract

for services can be seen in the case of Dutt v Assunta Hospital (1981). In one of the point
raised by the council for the hospital, the hospital argued that Dr. A. Dutt was actually an
independent contractor (by implying that the employment contract is a contract for service).
The Industrial Court however ruled that the applicant was actually an employee because the
contract that exists between the hospital and the applicant is that of a contract of service.
Thus, the applicant was entitled to the compensation due to his wrongful dismissal by the
hospital.

2.3 Scopes & Protections under EA1955 & Related Statutes

2.3.1 Payment of wages

Employers must pay all their employees their monthly salary no later than the seventh day
after the last day of any wage. This right of an employee is ensured under the provision of
Section 19 of the EA1955.

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2.3.2 Maximum working hours
According to the provision of Section 60A, an employee is not required to work under his
contract of service:

a) For more than five consecutive hours without a period of leisure of not less than 30
minutes;
b) For more than eight hours in one day;
c) For more than 48 hours in one week; or
d) In excess of a spread over a period of 10 hours in one day.

However, an employee may be required by his employer and/or nature of work to exceed the
limit of hours above and to work on a rest day if:

a) The work is essential to the life of the community

b) The work is essential for the defence or security of Malaysia
c) There's urgent work to be done to a machinery or plant
d) There are unforeseen circumstances which requires the employee to work
e) Accident, actual or threatened, in or with respect to his place of work
f) There's work that is essential to the economy of Malaysia or any important service.

2.3.3 Overtime payment

Should the contract of service mention the practice of overtime rates, employees are entitled
to be paid a rate of no less than 1.5 of their hourly salary if they work on normal working
days in accordance with Section 60A(3)(a). If an employee is required to work on his rest
day, he must be paid two times the hourly rate of pay in accordance with Section 60(3). As
for working on public holidays, an employee is entitled to be paid three times the hourly rate
of his pay as provided under Section 60D.

2.3.4 Rest days

Each employee is entitled to at least one whole rest day in a week as provided under Section
59 of the EA1955. The Act also required the employer to prepare a roster before the
commencement of the month in which the rest days fall to inform employees of such
information.

2.3.5 Annual leave

The provision of the EA1955 that deals with the scope of annual leave is Section 60E. Under
the Act, an employee is entitled to a paid annual leave of:

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 a) Eight days for every 12 months of continuous service with the same employer if he
has been employed for a period of less than two years;
b) 12 days for every 12 months of continuous service with the same employer if he has
been employed for a period of more than two years, but less than five years, or
c) 16 days for every 12 months of continuous service with the same employer if he has
been employed for a period of five years or more.

If the individual has not completed 12 months of continuous service with the same employer
during the year his contract of service terminates, his paid annual leave must be directly
proportionate to the number of completed months of service. Any fraction of the annual leave
that is less than one-half of a day will be disregarded, and if it is one-half or more, it shall be
counted as one day.

2.3.6 Sick leave

An employee is entitled for sick leave as provided under Section 60F which states that after
an employee has undergone an examination at the expense of the employer either by a
registered medical practitioner appointed by the employer or any other registered medical
practitioners or officers in the event where no designated clinics are available, is entitled to
sick leave days as below provided that no hospitalization is required:

a) 14 days every year if the employee has been employed for less than two years.
b) 18 days every year if the employee has been employed for two years or more but less
than five years.
c) 22 days every year if the employee has been employed for five years or more.

However, if the illness requires hospitalisation, a total number of 60 days will be provided for
each employee. This is inclusive of the paid sick leave entitled as stated above.

2.3.7 Public holidays

Every employee is entitled to paid holidays on the following days as provided under Section
60D:

a) Eleven of the gazetted public holidays, five of which are:

i. National Day
ii. The birthday of the Yang di-Pertuan Agong
iii. The Birthday of the Ruler or the Yang di-Pertua Negeri (based on the state the
employee works in)

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 iv. Workers' Day
v. Malaysia Day
b) On any day appointed as a public holiday under Section 8 of the Holidays Act 1951
which refers to any other day that can be observed as a public holiday as the leader of
the state sees fit after consultation with the State Authority.

2.3.8 Maternity protection

According to Section 37(1) of the EA1955, all female employees are entitled to maternity
leave for a period of not less than sixty consecutive days if:

a) She has been employed for a period of not less than or amounting to 90 days during
the nine months immediately before her confinement; and
b) She has been employed at any time in the four months immediately before her
confinement.

In addition to maternity leave, female employees are also eligible to receive maternity
allowance under the provision of Section 37(2) of the Act which value equals to the
employee’s ordinary monthly salary.

2.3.9 Protection against unfair dismissal

Under the laws of the country, all employees are protected in terms of their employment. The
services of an employee cannot be terminated unless there is just cause, or in simple words,
good reasons when viewed objectively and not only from the employer’s point of view
(Singh, 2018). Section 20 of the Industrial Relations Act 1967 (IRA1967) provides that an
employee who feels that he has been unfairly dismissed without just cause or excuse by his
employer, may lodge a representation to the Director General of Industrial Relations within
60 days from the date of his termination. By lodging this representation, the employee is
seeking for reinstatement to his former employment with the employer.

This recourse includes the situation where an employee believes that he was
constructively dismissed by the employer. Briefly, “constructive dismissal” means a situation
where the employee was left with no choice but to tender his resignation due to the actions,
decisions or policies imposed by the employer on the employee resulting in a breach of
contract by the employer although there is no direct termination by the employer.

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2.3.10 Protections of employees’ safety and health
The protections of employees’ safety and health is govern under the Occupational safety and
Health Act 1994 (OSHA1994) which provides the legislative framework to secure the safety,
health and welfare among all Malaysian workforce and to protect others against risks to
safety or health in connection with the activities of persons at work. Section 15 of the Act
outlines the duties of the employer includes maintenance of plant and systems that are safe
and without risk to health, provides information, instruction, training and supervision to
ensure the safety and the health at work. Section 16 on the other hand requires the employer
to formulate safety and health policy at the workplace and regularly revise the policies to
align the policies with changes and best practices in the business world.

2.3.11 Protection of minimum wage

The right of employees to receive minimum wage of RM1,100 per month is protected under
the Minimum Wages Order 2018 which was first implemented on 1 January 2013 and the
latest revision was on 28 November 2018.

2.4 Evaluation of Protection Applicable to Grab Drivers

In the Malaysia’s legal perspective, independent service providers or self-employed persons
do not fall within the definition of “employees” under the EA1955 who are entitled for rights
and protections. The drivers who registered themselves with e-hailing services such as Grab
in Malaysia are considered as self-employed and are not considered as employees of these
companies (Steward & Stanford, 2017). These are in line with the arguments made by e-
hailing companies such as Uber when dealing with the issue of the employment status of their
drivers which states that the company has no direct control over its drivers. Drivers are free to
work or not to work, whenever and wherever they want, for as many or as little days or hours,
and take any number of breaks. They are paid not by the company but by customers whereby
Uber’s sole role is only to collect and distribute these payments (minus its own cut). These
drivers are free to work elsewhere including with the company’s competitors. Whereas
employers typically provide workers with tools, e-hailing drivers use their own cars and pay
for gas (Ben-Shahar, 2017).

Since the e-hailing drivers are not employees within the definition provided under the
EA1955, they are therefore not entitled to the benefits accorded under the EA1955 including
all the protections that are available to employees. In this sense, e-hailing drivers can only
pursue a civil action under the Contract Act 1965 in the case of a dispute between the

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company and the drivers. However, to ensure that some sort of protection is offered to the e-
hailing drivers, the government has enacted the Self-Employment Social Security Act 2017
(Act 789) which came into effect on June 1, 2017 (Ahmad, 2019). The Act specifically
governed the Self-Employed Employment Injury Scheme, a Social Security Organization
(Socso) protection to self-employed drivers including that of e-hailing drivers. This Scheme
provides protection to self-employed insured persons from employment injuries including
occupational diseases and accidents during work-related activities. “Self-employment injury”
means personal injury to self-employed insured person caused by an accident or an
occupational disease arising out of and in the course of his or her self-employment activity
including while travelling for the purpose of his or her self-employment activity. The scheme
covers temporary disablement, permanent disablement, constant-attendance allowance,
dependents’ benefit, funeral benefit, education benefit, as well as facilities for physical and
vocational rehabilitation and return-to-work programs (Ahmad, 2019).

2.5 Recommendations for Amending Existing Laws

2.5.1 Introduce a new employee classification known as dependent contractor

The boundaries of the existing employee classification tests under the employment laws in
Malaysia should be carefully examined to better encompass e-hailing drivers as well as other
gig workers. A middle-ground classification, creatively labeled as the “dependent contractor”
classification (Tucciarello, 2017) would operate to encompass the legal gray area between
employee and independent contractor where gig workers seem to fit best. This classification
could be defined by building off of, and differentiating from, the existing classifications.
Whereas employees have little independence and employers have significant control, and
independent contractors have significant independence and companies have little control over
them, dependent contractors fall somewhere in the middle of the spectrum. They are
characterized by increased worker independence and decreased company control from
traditional employees, while not quite reaching the level of independent contractors
(Tucciarello, 2017).

As to the effect of this third classification, the benefits and rights could be crafted
around the implied breakdown between legal benefits versus fundamental rights in the
existing tests. Under existing tests, employees receive both benefits and rights, and
independent contractors receive neither. Thus the third classification, situated between these
two ends of the spectrum, would receive fundamental rights, but not benefits. This would

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mean that the middle classification would receive many of the protections afforded to
employees under the economic realities test, including minimum and fair pay, health and
family leave, and other protections offered under the employment laws. However, unlike
employees, this new classification would not be owed the benefits applied under the control
test, including retirement, health, and welfare benefit plans, unionization and tax withholding.
This allocation will provide e-hailing drivers with the fundamental rights that they are owed,
but, in exchange for the flexibility and independence offered by the e-hailing work, not the
greater economic benefits of full employment. This creates a fair balance between e-hailing
drivers and e-hailing companies and seamlessly fills the gap between the existing
classifications.

2.5.2 Create benefit equality for all

As a long-term solution, the government should proposed an amendment to the existing
employment laws which effectively separate social benefits from employment, creating equal
benefit opportunity for all individuals in the employment sector (Ali Mohamed, 2019). This
would help to strengthen the social safety net for all individuals by guaranteeing equal access
to certain traditional employee-only benefits (Brown, 2015). This would ensure that
nontraditional work forms are not disadvantaged simply because they do not fit the traditional
notion of employment. Universalized benefits would help alleviate the consequences of a
reduced workforce due to further technological advances. This action would also neutralize
many of the key advantages and disadvantages between existing worker classifications,
which would increase legal flexibility and reduce financial incentives (Harris & Krueger,
2015).

2.5.3 A new regulatory system for independent worker

According to Harris and Krueger (2015), an entirely new regulatory approach is required to
tackle the issue of on-demand works considering that they are so structurally different from
traditional employer-employee forms of employment. De Stefano (2015) urged for the gig
workers to be defined and basic standards of fair treatment are described and enforced under
the new regulatory approach. These protections would presumably focus on the contractual
arrangements between platform workers and their respective intermediaries but might also
apply to their relationships with end-users.

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3.0 LIST OF REFERENCES

Ahmad, A. (2019). Protecting the self-employed. The Star Online. Retrieved October 29,
2019 from https://www.thestar.com.my/metro/metro-news/2019/07/20/protecting-the-
selfemployed

Ali Mohamed, A. A. (2019). Move to promote equal protection for all workers. The Star
Online. Retrieved October 30, 2019 from
https://www.thestar.com.my/opinion/letters/2019/03/30/move-to-promote-equal-
protection-for-all-workers/

Aloisi, A. (2015). Commoditized Workers The Rising of On-Demand Work: A Case Study
Research on a Set of Online Platforms and Apps. Retrieved October 30, 2019 from
SSRN: http://ssrn.com/abstract=2637485

Ben-Shahar, O. (2017). Are Uber drivers employees? The answer will shape the sharing
economy. Forbes. Retrieved October 30, 2019 from
https://www.forbes.com/sites/omribenshahar/2017/11/15/are-uber-drivers-employees-
the-answer-will-shape-the-sharing-economy/#6221bbd75e55

Brown, K. (2015). How much would it cost Uber to make drivers employees? Splinter.
Retrieved October 29, 2019 from https://splinternews.com/how-much-would-it-cost-
uber-to-make-drivers-employees-1793848516

Tucciarello, C. (2017). The Square Peg Between two Round Holes: Why California's
Traditional Right to Control Test is not Relevant for On-Demand Workers. Seton Hall
Circuit Review, 13(2), 7. Retrieved October 30, 2019 from
https://scholarship.shu.edu/circuit_review/vol13/iss2/7

De Stefano, V. (2015). The rise of the ‘just-in-time workforce’: on-demand work, crowd
work and labour protection in the ‘gig-economy. Conditions of Work and Employment

Gillespie, T. (2010). The politics of “platforms”. New Media & Society, 12(3), 347–364.

Harris, S., & Krueger, A. (2015). A Proposal for Modernizing Labor Laws for Twenty-First
Century Work: The ‘Independent Worker. The Hamilton Project. Policy Brief 2015-10,
December. Washington DC: Brookings Institute.

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Singh, B. (2018). What to do next when you’re fired. The Star Online. Retrieved October 29,
2019 from https://www.thestar.com.my/opinion/columnists/law-for-
everyone/2018/08/09/what-to-do-next-when-youre-fired-employment-is-well-
protected-under-malaysian-law-if-there-is-no-jus

Smith, A. (2016, 19th May). Shared, Collaborative and On Demand: The New Digital
Economy. Pew Research Center. Retrieved October 29, 2019 from:
http://www.pewinternet.org/2016/05/19/the-‐new-‐digital-‐economy/

Soo, S. Y. (2018). E-hailing: The part-time industry. The Malaysian Reserve. Retrieved
October 28, 2019 from https://themalaysianreserve.com/2018/09/26/e-hailing-the-part-
time-industry/

Steward, A., & Stanford, J. (2017). Regulating work in the gig economy: what are the
options? Economic and Labour Relations Review, 28(3), 382-401. Retrieved 12
October 2019 from http://journals.sagepub.com/toc/elra/28/3

Case Law

Dutt v Assunta Hospital (1981) [1981] 1 LNS 5

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