You are on page 1of 20

Chapter 27

Siva Kumar Kanagasabai, Selvamalar Alagaratnam, Sharmila Ravindran and Foo Siew Li*


The basis of the employment relationship in Malaysia is the contract of employment between the employer and the employee. Hence, the civil courts have jurisdiction to deal with disputes between employer and employee, considering the matter purely from a contractual point of view. i Legislation

in order to provide the employees with additional protection, Parliament has enacted various legislation. The main legislation is as follows. The Employment Act 1955 (the EA) The Ea prescribes minimum terms and conditions of employment for certain categories of employees and provides a process that employees may use to make claims for breach of contract or non-compliance with the provisions of the Ea. an Ea employee refers to any person or class of persons who, irrespective of his occupation, has entered into a contract of service with an employer and whose months wages do not exceed 1500 Malaysian ringgit, or any person who, irrespective of the amount of wages he earns in a month: a i s engaged in manual labour including such labour as an artisan or apprentice; b i s engaged in the operation or maintenance of any mechanically propelled vehicle operated for the transport of passengers or goods or for reward or for commercial purposes; c s upervises or oversees other employees engaged in manual labour employed by the same employer in and throughout the performance of work;

siva Kumar Kanagasabai and selvamalar alagaratnam are partners, sharmila Ravindran is a senior associate and Foo siew li is an associate at skrine.


Malaysia d i s engaged in any capacity on any vessel registered in Malaysia and who is not an officer certified under the Merchant shipping acts of the United Kingdom as amended from time to time, is not the holder of a local certificate as defined in Part Vii of the Merchant shipping Ordinance, 1952, or has not entered into an agreement under Part iii of the Merchant shipping Ordinance, 1952; or i s engaged as a domestic servant.

The Industrial Relations Act 1967 (the IRA) The iRa provides for the protection of rights of workers and employers and their trade unions, the process by which a trade union may claim recognition, the process for collective bargaining, the mechanism for resolution of trade disputes and protects against the unjust dismissal of workmen. a workman refers to any person, including an apprentice, employed by an employer under a contract of employment to work for hire or reward and, for the purposes of any proceedings in relation to a trade dispute, includes any such person who has been dismissed, discharged or retrenched in connection with or as a consequence of that dispute or whose dismissal, discharge or retrenchment has led to that dispute. The Trade Unions Act 1959 (the TUA) The TUa provides for the registration, constitution, rights, liabilities and management of trade unions. The Employees Provident Fund Act 1991 (the EPFA) The EPFa provides for mandatory monthly contributions on the amount of wages to be made by both the employer and the employee to a government-managed retirement fund on a 12:11 percent of income ratio (the employer contributes 12 per cent of the income and the employee contributes 11 per cent). The Employees Social Security Act 1991 (the SOCSO Act) The sOCsO act provides for mandatory contributions to be made by both the employee and the employer to a government-managed programme akin to an insurance scheme, effectively for any employee who has ever earned less than 3,000 Malaysian ringgit a month. The Occupational Safety and Health Act 1994 This act focuses on preventive measures and the imposition of general duties on employers to ensure the safety, health and welfare of persons at work. ii Bodies

The power and jurisdiction to enforce employment laws lies with the various bodies. The Director General of Labour The Director General of labour has the general power to administer and implement the provisions of the Ea made thereunder. This includes, as stated earlier, the inquiry into complaints made by employees for breach of contract or non-compliance with the


Malaysia provisions of the Ea or the regulations made thereunder and has the power to enter and inspect any place of employment to do so. The Director General of labour may also investigate possible offences under the Ea and compound such offences. The Ea vests power and jurisdiction in the Director General of labour to determine any dispute between an employee and his employer in respect of wages or any other payments due to such employee under any term of a contract of service between such employee and his employer in relation to an employee earning up to 5,000 Malaysian ringgit a month. a decision by the Director General of labour may be appealed to the High Court. The Director General for Industrial Relations The Director General for industrial Relations generally has the duty to perform all functions that may be necessary or expedient for the purposes of carrying out or giving effect to the provisions of the iRa, including receiving representations on dismissals and taking such steps as he may consider necessary or expedient so that an expeditious settlement thereof is arrived at; or where the Director General of industrial Relations is satisfied that there is no likelihood of the representations being settled, he shall notify the Minister accordingly. in addition, he shall consider any trade dispute reported to him and take such steps as may be necessary or expedient for promoting an expeditious settlement thereof, which shall include to the industrial Court for conciliation. The Industrial Court The industrial Court was created by the iRa to deal with the following types of claims: a r epresentations for reinstatement brought by a workman when the workman considers himself to have been dismissed without just cause or excuse; b t rade disputes between an employer and his workmen which is connected with the employment, non-employment, terms of employment or conditions of work of any such workmen; c c laims of non-compliance by one party to an award handed down by the industrial Court or a collective agreement; and d applications to interpret collective agreements. The industrial Court derives its powers and functions from the iRa and operates as a quasi-judicial body. it will issue an award in relation to the dispute or issue brought before it, according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal form.1 an award of the industrial Court is binding on the parties to a dispute, the successors, assignees or transferees of any employer or trade union which is party to the dispute and all workmen who were employed in the undertaking to which the dispute relates.2 in relation to trade disputes, the industrial Court shall have regard for the public interest, the financial implications and the effect of the award on the economy of the

1 2

section 30(1) and (5) of the iRa. section 32 of the iRa.


Malaysia country and on the industry concerned, and also to the probable effect in related or similar industries.3 The award of the industrial Court may be challenged by way of a judicial review application to the High Court on the grounds that, in making its award, the industrial Court has committed an error of law. Questions of law arising from the proceedings may also be referred to the High Court under section 33a of the iRa but such applications are uncommon. The Director General of Trade Unions The Director General of Trade Unions is responsible for the general supervision, direction and control of all matters relating to trade unions throughout Malaysia. The Employees Provident Fund Board The Employees Provident Fund Board shall have such powers and shall perform such duties as are given or imposed under the EPFa, and may employ and pay agents, advocates and solicitors, bankers, stockbrokers or any other persons, to transact any business or do any act required to be transacted or done in the exercise of its powers or in the carrying out of its duties or for the better carrying into effect of the purposes of the EPFa. The Social Security Organisation Board The social security Organisation Board has the power of general direction and superintendence of the scheme of social security administered by the social security Organisation under the sOCsO act. II YEAR IN REVIEW

in 2009 and 2010, the government made significant moves to amend the main labour laws in Malaysia namely, the Ea and the iRa. among the proposed amendments to the Ea include provisions in relation to sexual harassment while the proposed amendments to the iRa include a provision that precludes employees earning salaries above 10,000 Malaysian ringgit per month from seeking redress for dismissal without just cause or excuse under section 20 of the iRa. These proposed amendments have been met with resistance from various interest groups and have yet to come to fruition. The Ea amendment Bill which had been tabled for reading before Parliament in 2010 was abruptly withdrawn, because several changes were to be made to the Bill. it is interesting to note that, from 2008 onwards, there has been a drop in the number of cases referred by the Minister to the industrial Courts under section 20 of the iRa for claims of unjust dismissal, i.e. from 2,346 cases being referred in 2007 to 665 cases in 2008, and 647 cases in 2009. This has occurred following the appointment of a new Minister of Human Resources in 2008 who has encouraged settlement and

section 30(4) of the iRa.


Malaysia conciliation before the Director General of industrial Relations and careful scrutiny of the merits of each unresolved representation. among the noteworthy hot topics for employment law in Malaysia in 2010, there is the introduction of the Personal Data Protection act 2010 (PDP act) which was passed by Parliament in June, but has not yet come into force. We anticipate detailed guidelines or regulations to be issued by the Ministry with regard to this PDP act in the near future. at this stage, it is unclear whether the PDP act would apply to employee information. in addition, the Whistle-blower Protection act 2010, which seeks to combat corruption and other wrongdoings by encouraging and facilitating disclosures of improper conduct as well as protecting the persons making those disclosures (including employees) from detrimental action, came into operation on 15 December 2010. However, at this stage, it is still too early to comment on how effective the act is going to be in achieving its aims. III SIGNIFICANT CASES

The Federal Court case of Ranjit Kaur S Gopal Singh v. Hotel Excelsior (M) Sdn Bhd4 concerned an executive in the Food & Beverage Department at a hotel who was suspended pending a domestic inquiry into several charges levelled against her, including her refusal to wear her uniform, her habitual lateness, her failure to submit medical chits promptly on occasions when she took medical leave and her failure to inform her immediate superior promptly that she had taken medical leave. she was found guilty of the four charges and was dismissed. This case is significant because the Federal Court essentially clarified two questions of law that apply in most industrial relations matters. Firstly, the Federal Court held that, where the findings of the industrial Court had been arrived at by taking irrelevant matters into consideration, and failing to take relevant matters into consideration, such findings are always amenable to judicial review. secondly, the Federal Court also held that pleadings in the industrial Court are as important as in the civil courts, to prevent the element of surprise and to provide room for the other party to adduce evidence once the fact or an issue is pleaded. The industrial Courts duty to act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal form under section 30(5) of the iRa does not give the industrial Court the right to ignore the industrial Court Rules 1967 made under the iRa. in Dynamic Plantations Bhd v YB Menteri Sumber Manusia & Anor,5 the Federal Court decided two important points: (1) recognition to a trade union by the employer can be given by conduct; and (2) once an employer is a member of the Trade Union of Employers which has given recognition to a Trade Union of Employees and has conducted collective bargaining with that trade union, it cannot claim that it has not

4 5

Ranjit Kaur S Gopal Singh v. Hotel Excelsior (M) Sdn Bhd [2010] 8 ClJ 629. Dynamic Plantations Bhd v. YB Menteri Sumber Manusia & Anor [2010] 2 ClJ 525.


Malaysia recognised that trade union merely by ceasing to be a member of the Trade Union of Employers. in the case before the court, the employer, Dynamic Plantations was a member of a Trade Union of Employers known as the Malayan agricultural Producers association (MaPa). MaPa had recognised and conducted collective bargaining with the National Union of Plantation Workers (NUPW) and had entered into five collective agreements which were binding on its members including Dynamic Plantations. Dynamic Plantations subsequently ceased to be a member of MaPa. When NUPW invited them to conduct collective bargaining, Dynamic Plantations declined and said that they had not directly recognised NUPW. Their dispute with the NUPW over the collective bargaining was referred by the Minister of Human Resources to the industrial Court for adjudication as a trade dispute. Dynamic Plantations challenged the Ministers decision on grounds that in the first place, it had not even directly recognised NUPW and therefore, the issue of conducting collective bargaining does not arise. The Federal Court held that Dynamic Plantations had by conduct recognised NUPW as a trade union of its employees. This is because Dynamic Plantations was expressly named as a consenting member of MaPa in the collective agreements and there was not just one collective agreement but a series of five in succession. IV i BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP Employment relationship

an employment contract can be made orally or in writing. in the case of Ea employees, section 10 of the Ea requires a contract of service exceeding one month to be in writing. as for employees who fall outside the scope of the Ea, a written employment contract is recommended as it would better define the relationship between the parties. it is possible to have fixed-term employment contracts. There is no legislation mandating a maximum period for fixed-term contracts but, in practice, they rarely exceed three years. However, for the purposes of a claim for dismissal without just cause or excuse, the industrial Court will enquire into whether the fixed-term contract is genuine or a permanent contract disguised as a fixed-term contract. in that regard, the purpose of the fixed-term contract, the nature of the work carried out by the employee, the status of the employee and the number of renewals will, among other things, be factors that will influence the industrial Court. save that the Ea requires that every written employment contract must contain a clause setting out the manner in which the contract may be terminated by either party6, parties are free to set out such terms as they may agree in the written employment contract. in that regard, it is recommended that the employment contract should stipulate in writing the essential terms, including job title, probationary period (if any),

section 10(2) of the Ea 1955.


Malaysia remuneration, manner of termination, transfer clause, hours of work, and benefits such as leave entitlements and retirement age (if any). also, any term or condition of a contract of service which provides a term or condition of service which is less favourable to an Ea employee than a term or condition of service prescribed by the Ea shall be void and of no effect, and the more favourable provision shall replace it. The employment contract should be executed by the parties prior to the commencement of the employment. However, the execution of the contract postcommencement of employment will not be deemed invalid by that reason alone. The terms of employment may be varied by the mutual agreement of the employer and the employee. However, as the agreement to amend or change the employment contract or terms of employment constitutes a separate contract in itself, there has to be consideration flowing between the parties. The employer may not unilaterally impose changes that are detrimental to the employee, even if it reserves the right to do so. ii Probationary periods

Probationary periods are permitted under Malaysian law. The law does not prescribe a maximum probation period. in practice, a period of between three to six months is common. The agreement may also have provisions for an extension of the probationary period where the employer may extend the initial probationary period for a further period or periods. an employee on probation enjoys the same protection from dismissal as a permanent or confirmed employee in that he or she may make a claim for reinstatement due to dismissal without just cause or excuse under section 20 of the iRa. The notice period for termination of an employee under probation would be as stipulated in the contract of employment and often ranges from 24 hours to two weeks. iii Establishing a presence

a foreign employer may hire employees to carry on business in Malaysia without being locally incorporated or registering a branch office. However, they should ensure that the activities of the employee do not result in the foreign employer carrying on business in Malaysia. Foreign companies may recruit employees through an agency or other third party. a foreign employer that is not officially registered in Malaysia may engage an independent contractor to act on its behalf in Malaysia. an independent contractor will not normally create a permanent establishment of the foreign employer. This is particularly the case where the independent contractor carries on business in its own name and charges a fee at arms length for the use of its services by the foreign employer. if the foreign employer is found to be carrying on business in Malaysia, then it must either locally incorporate or register a foreign branch, otherwise it will be committing an offence under the Companies act 1965.


Malaysia among the statutory benefits that arise when an employer hires employees, there is the mandatory monthly contributions on the amount of wages to be made by both the employer and the employee to a government-managed retirement fund on a 12:11 per cent of income ratio pursuant to the EPFa. in addition, the sOCsO provides for mandatory contributions to be made by both the employee and the employer to a government-managed programme akin to an insurance scheme, effectively for employees who have ever earned less than 3,000 Malaysian ringgit a month. Taxes are deducted at source in accordance with the schedule of Monthly Tax Deductions or other methods approved by the Director General pursuant to Rule 3 income Tax (Deduction from Remuneration) Rules 1994. V RESTRICTIVE COVENANTS

Under the Contracts act 1950, every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Therefore, it follows that non-compete clauses in an employment contract during the post-contractual period are void in law, but these clauses are enforceable while the employment contract subsists. Restrictive covenant clauses that state that an employee is not to solicit clients and employees of his or her employer are likely to be enforceable if they are reasonable. VI i WAGES Working time

The Ea provides that an Ea employee shall not be required to work more than eight hours a day or more than 48 hours a week or more than five consecutive hours without a break of at least 30 minutes. an Ea employee who works less than eight hours in one or more days in a week may be required to work in excess of eight hours (but not more than nine hours) on the remaining days of the week provided his total working hours in the week do not exceed 48 hours. shift workers may be required to work more than eight hours in a day or more than 48 hours in a week provided that the average number of hours worked over any period of three weeks does not exceed 48 hours per week. Nonetheless, no Ea employee should be required to work more than 12 hours a day. Every Ea employee shall be entitled to one whole rest day in each week. in the case of shift workers, a continuous period of not less than 30 hours shall constitute a rest day. Ea employees may not contract out of these restrictions on working hours that are prescribed by the Ea. For non-Ea employees, the working hours are subject to contract between the parties. There are no limits on the amount of night work that may be performed. However, there is a provision in the Ea that generally prohibits women from working in any


Malaysia industrial or agricultural undertaking between 10 p.m. and 5 a.m. or commencing work for the day without having had a period of 11 consecutive hours free from such work.7 ii Overtime

Ea employees are by law entitled to overtime pay. For any overtime work carried out in excess of the normal hours of work, the Ea employee shall be paid not less than one and a half times his hourly rate of pay irrespective of the basis on which his rate is fixed. Normal hours of work means the number of hours of work as agreed between an employer and the Ea employee in the contract of service to be the usual hours of work per day. such hours of work shall not exceed the limits of hours prescribed in the Ea. if an Ea employee paid on a monthly basis works on his or her rest day, the employee shall be paid as follows in addition to his or her normal remuneration: a for any period of work which does not exceed half his normal hours of work, wages equivalent to half the ordinary daily rate of pay for work done on that day; b for any period of work which is more than half but which does not exceed his normal hours of work, one days wages at the ordinary rate of pay for work done on that day; and c for ny work carried out in excess of the normal hours of work on a rest day at a a rate which is not less than two times his hourly rate of pay. if an Ea employee paid on a monthly basis works on a public holiday, the employee shall be paid two days wages at the ordinary rate of pay, regardless of whether the period of work done on that day is less than the normal hours of work. For any overtime work carried out by a monthly-paid employee in excess of the normal hours of work on a public holiday, the employee shall be paid at a rate which is not less than three times his hourly rate of pay. The hourly rate of pay is calculated on the basis of an Ea employees ordinary rate of pay (ORP) divided by his normal hours of work. For employees paid on a monthly basis, the ORP is calculated by dividing the monthly rate of pay by 26 days. The computation differs for employees engaged on a daily, hourly or other rate of pay. The maximum limit on overtime work is 104 hours in any month. Payment for overtime work and the calculation of the same for non-Ea employees is not mandatory and is subject to the contract of employment. VII FOREIGN WORKERS

Pursuant to the Ea, an employer must prepare and keep one or more registers containing information regarding each employee. These records have to be available for inspection for not less than six years after their recording.

section 34 Ea.


Malaysia an employer who employs a foreign employee must, within 14 days of the employment, furnish the Director General of labour with the particulars of the foreign employee.8 Whenever required to so do by the Director General, an employer must also furnish returns of particulars relating to the employment of its foreign employees.9 There are currently no numerical limitations and the number of foreign workers that can be recruited would depend on various factors such as the capitalisation of the employer and the availability of local workers. a foreign worker is allowed to work in Malaysia, in the first instance, for three years. a subsequent extension of two years may be permitted upon application by the employer. Thereafter, the employer has to send the foreign worker back to his or her country of origin at the expense of the employer. The permit of the foreign worker should be renewed annually with the payment of a levy. section 55B of the immigration act 1959 provides that any employer who employs one or more persons, other than a citizen, who is not in possession of a valid pass shall be guilty of an offence and shall, on conviction, be liable to a fine of not less than 5,000 Malaysian ringgit or to imprisonment for a term not exceeding 12 months or to both, for each such employee. if the employer has employed more than five such employees, the employer shall, on conviction, be liable to imprisonment for a term not less than six months but not more than five years and shall also be liable to whipping of not more than six strokes. Where the offence is committed by a body corporate, any person who at the time of the commission of the offence was a member of the board of directors, a manager, a secretary, or a person holding a similar office or position shall be liable to the same punishment. Pursuant to the Workmens Compensation act 1952, employers must ensure that foreign workers are insured with a designated insurer with respect of employment injury and permanent disablement. Generally, employers do not have to contribute to the Employees Provident Fund for foreign workers. However, if the foreign workers elect to contribute, the employers share of their contribution is 5 Malaysian ringgit per month. Foreign workers who leave Malaysia permanently are allowed to completely withdraw their contributions when leaving. For tax purposes, an individual is treated as a resident if he is physically present in Malaysia in a particular calendar year for 182 days or more. However if his period of stay is less he may still be resident if certain conditions are satisfied. The entire Ea is equally applicable to foreign workers and local employees. However, there are certain provisions that are specifically in respect of employers with foreign workers, for example, the issuance of the Certificate of Registration of Foreign Workers pursuant to section 60K Ea and the prohibition of discrimination against foreign workers or local employees pursuant to section 60l Ea.

8 9

section 60K(1) Ea. section 60K(2) Ea.


Malaysia VIII GLOBAL POLICIES internal discipline rules are not required by law. if such rules are issued, employees do not have to approve or agree to them and there is no requirement for the rules to be filed with or approved by government authorities. There are no mandatory rules regarding discrimination, sexual harassment, or corruption. However, there are codes such as the Code of Conduct for industrial Harmony and the Code of Practice on the Prevention and Eradication of sexual Harassment in the Workplace which, although not legally-binding, provide useful guidelines that employers would be prudent to follow. There is no requirement for these internal discipline rules to be written in the local language (i.e., in Malay). However, it is recommended that they be written in Malay and English when the employees do not have a good command of English. Notification of the rules to the employee is sufficient but it is recommended that the rules be signed by the employee to indicate that they have received or been notified of them. The internal discipline rules are often set out in a handbook distributed to all employees. Where there is a recognised union, the rules are sometimes also provided for in the collective agreement. The rules may also be set out on the employers intranet but it is important that there is evidence that the employee has been notified of these rules. The disciplinary rules may be incorporated into the employment contract. alternatively, they may be contained in a separate document. IX EMPLOYEE REPRESENTATION

Employees are permitted to form trade unions which must be registered with the Director General of Trade Unions. a member of a registered trade union must be above the age of 16. The Director General of Trade Unions may refuse to register a trade union if he is satisfied that there is in existence a trade union representing the workmen in that particular establishment, trade, occupation or industry and if it is not in the interests of the workmen concerned that there be another trade union in respect thereof. in addition, the Director General of Trade Unions will refuse to register a trade union if he is of the opinion that: a t he trade union is likely to be used for unlawful purposes or for purposes contrary to or inconsistent with its objects and rules; b a ny of the objects of the trade union are unlawful; c t he objects, rules and constitution of the trade union conflict with any of the provisions of the TUa or its regulations; d t he name under which the trade union is to be registered is identical to that of any other existing trade union, or so nearly resembles the name of such other trade union as, in the opinion of the Director General, is likely to deceive the public or the members of either trade union or is, in the opinion of the Director General, undesirable, unless the trade union alters its name to one acceptable to the Director General.


Malaysia The trade union needs to be recognised by the employer. The purpose of a claim for recognition is to enable the trade union of workmen to commence collective bargaining with the employer or trade union of employers.10 any claim for recognition by a trade union of workmen shall be substantially in a prescribed form and shall be signed by a responsible officer of such trade union.11 No trade union of workmen whose membership consists of a majority who are not employed in a managerial, executive, confidential or security capacity may seek recognition or serve an invitation for collective bargaining in respect of workmen employed in any of the roles mentioned supra.12 There is no ratio of representatives to employees required. The election procedures for representatives essentially follow the union constitution. The length of a representatives term is also in accordance with the union constitution. section 5(1)(c) of the iRa prohibits any discrimination in regard to employment, promotion, any condition of employment or working conditions on the ground that an employee is or is not a member or officer of a trade union. Hence the representatives of a trade union do not have any additional rights. However, to protect trade union representatives and members in the course of carrying out their duties, sections 21 and 22 of the TUa provide that no legal proceeding shall be actionable in any civil court against any officer or member of a trade union in respect of any act done in contemplation or in furtherance of a trade dispute or in respect of any tortious act alleged to have been committed by or on behalf of the trade union. Once the trade union is recognised, collective bargaining must be done with the trade union and the employer must comply with the terms of the Collective agreement. an employer shall grant leave of absence to a workman intending to carry out his duties or to exercise his rights as an officer of a trade union if the duration of the leave applied for is reasonable. The frequency that representatives must meet also depends on the union constitution. X i DATA PROTECTION Requirements for registration

The PDP act recently passed by Parliament is not yet in force. at this point, employee information has very limited data protection. it is unclear whether the PDP act applies to employee information and the following write-up is on the assumption that it applies. section 2 of the PDP act provides that the act applies to any person who processes and any person who has control over or authorises the processing of, any personal data in respect of commercial transactions. as the data must be in respect of commercial transactions, there has been some debate as to whether the employeremployee relationship will be covered by the PDP act. This will only become clear once

10 11 12

Ibid, section 3(2). industrial Relations Regulations 2009, section 3(1). section 9(1) industrial Relations act 1967.


Malaysia the government provides further legislation or guidelines on this act. For now, it would be prudent to assume that the new data protection provisions apply to employment contracts and it is on that basis that the information infra is provided. as long as the employer processes any personal information of its employees within the scope of the PDP, they are bound by the PDP. The employer is required to register with the PDP Commission if they fall within the class of data users required to be registered as data users under the PDP act. The employer is required to inform the data subject, in this case the employee, of the particular information that is being processed, for example his name, address and identification number. Employee consent is necessary for the processing of his or her personal data save in the following situations: a the performance of a contract to which the data subject is a party; b the taking of steps, at the data subjects request, with the view of entering into a contract; c compliance ith any legal obligation to which the data user is the subject, other w than a contractual obligation; d protecting he vital interests, namely matters relating to the life, death or security t of the data subject; e the administration of justice; or f the exercise of any functions conferred on any person under any law. The PDP act also sets out certain parameters for the processing of personal data. it provides that such data may not be processed unless: a it is for a lawful purpose directly related to the activity of the data user; b it is necessary for or directly related to that purpose; and c the data is not excessive for that purpose. additional and more stringent conditions are imposed for the processing of sensitive personal data, an employer has to give the right of access to the employee in the event the employee wants to view, update or correct his or her own information. The employer shall take practical steps to protect the employees personal data from any loss, misuse, modification, unauthorised or accidental access or disclosure, alteration or destruction by ensuring that there are adequate technical security measures incorporated into the system where the personal data is stored. ii Cross-border data transfers

The PDP act does not permit a data user to transfer any personal data to a place outside Malaysia unless it is to such a place specified by the Minister and published in the Gazette. There are certain circumstances specified in the PDP act where personal data can be transferred out of Malaysia, i.e., where the data subject has given consent to the transfer, if the transfer is necessary for the performance of a contract between the data subject and data user, or the transfer is for the purposes of legal proceedings or obtaining legal advice.


Malaysia Employee consent is also needed for cross-border data transfers by the employer unless an exception applies. safe harbour principles do not exist in the PDP act. as such, there is no need for employers to register or get recognition from the relevant authority to show that their data protection policy is in compliance with safe harbour principles. Employers do not need to have any joint-user agreements in place. The onus is on the employers to obtain consent from the employees for such transfer of personal data. However, it is always advisable for the employers to ensure that the receiving party provides a warranty that they will comply with any data protection undertaking which the employers have given to their employees (including not to further transfer the personal data to other third parties without obtaining consent from the employees) and to require the receiving party to also provide an indemnity for such warranty. Generally, personal data cannot be transferred out of Malaysia except in certain circumstances. For instance, to a country which has been specified as permitted by the Minister, where consent of the employee or data subject has been obtained, or where the transfer is pursuant to a contract, etc. should there be continuous onward transfer after that, for instance from Malaysia to the United states of america, and onwards to the United Kingdom, this has to be spelt out in the notice and consent. This means that the employee has to be notified that his or her data will be transferred out of Malaysia and then to the United states of america and then to the United Kingdom, and the employee would have to consent to that. iii Sensitive data

sensitive data would include data on the physical, mental health or condition, political opinions, religious beliefs or other similar beliefs of a data subject, the commission or alleged commission of an offence by a data subject, and any other data declared by the Minister to be sensitive personal data. The General Principle prohibits a data user from processing a data subjects personal data except with the data subjects explicit consent. additional and more stringent conditions are imposed for the processing of sensitive personal data, iv Background checks

There are no restrictions or prohibitions against background checks on prospective employees. an employer or prospective employer may either conduct its own checks or hire a third party to do so. Generally, the employer may be able to do credit checks on an employee with licensed Credit Reporting agencies in Malaysia. On the other hand, criminal records checks are more difficult to do because they require the cooperation and assistance of the police. Pursuant to the Banking and Financial institutions act 1989, no employer would be able to obtain or access any information in relation to its employees financial affairs.



section 20 of the iRa provides a procedure which effectively requires an employer to only dismiss an employee when there is just cause or excuse. The failure to have just cause and excuse for dismissal can result in the employer being ordered to reinstate the employee with back wages or to pay the employee compensation in lieu of reinstatement. The iRa does not define just cause or excuse but misconduct, breach of contract, redundancy, retirement (pursuant to the terms of the contract) and closure can constitute just cause or excuse for dismissal, if substantiated. The employer is only required to notify a government authority if the termination is due to redundancy, voluntary separation scheme (Vss), temporary lay-off or closure of business. The employer must notify the trade union if it is required to do so under the collective agreement. There is no social plan required. When the termination is due to redundancy, the law requires that it be done as a last resort and where there is suitable alternative employment, the employee ought not to be terminated. in the event that the employee is retrenched, then the Code of Conduct for industrial Harmony requires that employees who are retrenched be given priority of engagement or re-engagement as far as possible by the employer when he engages workers. There is no prescribed time limit on this requirement, bur ordinarily one year is considered reasonable. For Ea employees, in the absence of a specific provision on length of notice or where the employee is terminated due to redundancy, the minimum length of notice is as follows: a four weeks notice if the employee has been employed for less than two years; b six weeks notice if the employee has been employed for more than two years but less than five years; c eight weeks notice if the employee has been employed for five years or more. For non-Ea employees, the notice period and payment in lieu of notice depends on the terms of the employment contract. as stated earlier, the iRa has created a procedure which effectively protects an employee or workman from being dismissed save with just cause or excuse. additionally, the following sets out some additional protection given to certain categories of employees. a female Ea employee may not be dismissed from employment on the grounds that she has remained absent from work after the expiry of maternity leave (which shall not be less than 60 days from the date of child birth) if her absence is due to an illness certified by a medical practitioner arising from her pregnancy and confinement. This protection extends for 90 days after the expiry of her maternity leave period. section 5(1)(d) of the iRa provides that no employer may dismiss a workman by reason that the workman is or proposes to become, or seeks to persuade any other person to become, a member or officer of a trade union or participates in the promotion, formation or activities of a trade union.


Malaysia section 10(2) of the iRa also provides that no employer may dismiss a workman once a trade union of workmen has served a claim for recognition on the employer except in limited circumstances such as dismissal on disciplinary grounds, medically boarding out, or retirement. Pursuant to section 59(1) of the iRa, it is also an offence to dismiss a workman by reason that the workman is, or proposes to become, a member of a trade union or of an association that has applied to be registered as a trade union; is entitled to the benefit of a collective agreement or an award; or has appeared or proposes to appear as a witness. For Ea employees, the Employment (Termination and lay-Off Benefits) Regulations 1980 provides for payment of termination benefits upon termination for any reason other than in limited situations, such as by way of retirement, on grounds of misconduct and resignation. These regulations only apply to Ea employees. The quantum payable is as follows: a 10 ays wages for each year of service where the employee has worked less than d two years; or b 15 ays wages for each year of service where the employee has worked for more d than two years but less than five years; or c 20 ays wages for each year of service where the employee has been employed for d five years or more; and d pro-rated for any incomplete year of service. as for non-Ea employees, under the Code of Conduct for industrial Harmony, the employer should pay reasonable redundancy benefits when retrenching an employee. in Malaysia, the trend is generally to pay at least one months salary for each year of service as a term benefit. Parties can enter into a settlement agreement. However, the employee may still claim that he had been forced into the agreement and make a claim for dismissal without just cause or excuse under section 20 of the iRa. an employee is not estopped from bringing a claim under section 20 of the iRa on grounds that he has entered into an agreement in full and final settlement of all his claims with his employer. ii Redundancies

To terminate an employee contract for redundancy, an employee must be shown to be redundant, the selection must be in accordance with generally accepted procedure and there must be compliance with the Code of Conduct for industrial Harmony and any collective agreement or term of contract. it does not make a difference if there are multiple redundancies (see sub-section (i), supra). The notification obligations, rights to rehire, notice requirements, severance requirements and other aspects of dismissal are the same as for all dismissals, as set forth supra.



in a transfer of business situation, Regulation 8 of the Employment (Termination & lay-Off Benefits) Regulations 1980 applies to Ea employees. Regulation 8 of the said Regulations provides as follows: (1) here a change occurs (whether by virtue of a sale or disposition or by operation W of law) in the ownership of a business for the purposes of which an employee is employed or of part of such business, the employee shall not be entitled to any termination benefits payable under the said Regulations if, within seven days of the change of ownership, the purchaser of the business offers to continue to employ the employee on terms and conditions not less favourable than those under which the employee was employed by the vendor and the employee unreasonably refuses the offer. (2) f the purchaser does not offer to continue to employ the employee in accordance i with paragraph (1), the contract of service will be deemed to have been terminated, and consequently, the vendor shall be liable for the payment of all termination benefits under the said Regulations. (3) here an offer by the purchaser to continue to employ the employee is accepted by W such employee the period of employment of the employee under the vendor shall for the purposes of the said Regulations be deemed to be a period of employment under the purchaser and the change of employer shall not constitute a break in the continuity of the period of his employment. in the event that there is non-compliance with Regulation 8, the Ea employees will be entitled to the following minimum amount of termination benefits payable under Regulation 6 of the Regulations (to those who have been in employment for 12 months or more): a 1 0 days wages for every year of employment under a continuous contract of service if he has been employed by that employer for less than 2 years; b 1 5 days wages for every year of employment under a continuous contract of service if he has been employed by that employer for 2 years or more but less than 5 years; and c 2 0 days wages for every year of employment under a continuous contract of service if he has been employed by that employer for 5 years or more. Generally for administrative ease and to avoid any allegations of discrimination, nonEa employees are often dealt with in the same manner as Ea employees under this method. XIII OUTLOOK With the introduction of the PDP act, it would be prudent for organisations to begin looking into compliance with the said act as the effect of the act is far-reaching and would impact organisations and individuals alike.


Malaysia i Minimum Wage Bill

The Minister of Human Resources has indicated that the Minimum Wage Bill is set to be tabled in Parliament in 2011. The introduction of a minimum wage appears to be intended to raise the employees standard of living as well as support the economic transformation plans which the government is currently undertaking. ii Retabling of the amendments to the EA and the IRA

The proposed amendments to the Ea and iRa, including amendments on sexual harassment and the protection of the rights of pregnant women and domestic servants, are likely to be looked at again as pending Bills or fresh Bills are likely to be re-tabled in the near future. iii Talent Corporation to Fight Brain Drain

a Talent Corporation has been established under the Prime Ministers Office as part of the governments initiative to increase and retain talented and highly qualified and skilled Malaysians within our countrys workforce. .


Malaysia SKRINE Unit No. 50-8-1, 8th Floor, Wisma UOa Damansara, 50, Jalan Dungun Damansara Heights 50490 Kuala lumpur Malaysia Tel: +60 3 2081 3999 Fax: +60 3 2094 3211 SIVA KUMAR KANAGASABAI Skrine siva Kumar Kanagasabai is a Partner of skrine. He was admitted to practise as an advocate & solicitor of the High Court of Malaya in March 1995. He is the Head of skrines Employment practice group which has been ranked in tier 1 by the legal 500. He has wide experience in employment law, administrative law, maritime law and he also handles civil cases. He has acted for clients in a number of important cases including before Malaysias highest court. Kumar is listed in Chambers asia 2008-2010 as a leading lawyer for Employment law. Kumar has presented numerous papers at conferences and seminars. He is the author of Halsburys law of Malaysia industrial law & labour law (published by lexis Nexis), the Employment law Practice in Malaysia Chapter for Employment law Client strategies in the asia-Pacific (published by aspatore), the Malaysian Chapter of Restrictive Covenants and Trade secrets in Employment law (published by the american Bar association) and is a co-author of the law of Dismissal (published by CCH). SELVAMALAR ALAGARATNAM Skrine selvamalar alagaratnam is a partner in the Dispute Resolution Division at skrine, Malaysia and possesses extensive experience in the areas of administrative, employment and industrial relations and employment-related immigration. selvamalar was admitted to practice as an advocate and solicitor of the High Court of Malaya in November 1994. selvamalar is listed in Chambers asia 2009 and 2010 as a leading individual for Employment law. she is a Member of the Malaysian Bar Councils industrial law Committee, lawasias labour law Committee and the international society for labour and social security law Malaysian Chapters Protem Committee. Her publication activities include having presented several papers at various local and international conferences. selvamalar was also a co-author of the law of Dismissal, published by Commerce Clearing House (CCH), Malaysia Court Forms Employment law section, labour law Handbook, and the legal Guide to Employee Dispute Malaysia.


Malaysia SHARMILA RAVINDRAN Skrine sharmila Ravindran was admitted to the Malaysian Bar in January 2004 and is currently a senior associate in the Dispute Resolution Division at skrine. sharmila Ravindran has gained experience in various areas of civil and commercial litigation with a particular focus on minority share holder disputes, land disputes, banking, tort and defamation. FOO SIEW LI Skrine siew li is an associate in the Dispute Resolution Division of skrine. she graduated with an llB (Hon) degree from Cardiff University in 2008 and was called to the Malaysian Bar as an advocate and solicitor of the High Court of Malaya in september 2010. siew li focuses on all aspects of labour and employment related matters including employment litigation and providing advice on employment contracts, voluntary separation schemes, dismissals, employee investigations and industrial relations.