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Asia employment law bulletin 2021

Malaysia

Developments in the light of COVID-19

Increased number of court cases is expected due to dismissals during the COVID-19 pandemic

2020 has been quite a year globally and Malaysia is no different. In order to curb the spread of the COVID-19 pandemic, Malaysia went into a lockdown for a number of months and it appeared to have successfully curbed the transmission of the COVID-19 virus. However, since December 2020 and ushering the new year, there was a spike in the number of cases, which resulted in another lockdown with slightly less stringent measures.

Most employers responded to the lockdown by placing their employees under some form of work from home arrangements. Others, who were heavily impacted by the lockdown e.g. the tourism, non-essential manufacturing and retail sectors, tried various ways to ensure business continuity, including encouraging employees to take annual leave, reduced working hours, pay-cuts and ultimately, when there no other options, dismissal of employees. We are beginning to see employers put in place contractual rights to terminate employment and/or impose cost cutting exercises upon the occurrence of certain events. These have yet to be tested in the courts, but employers are understandably exploring ways that allows them flexibility to respond quickly according to their needs.

According to the Industrial Court (the body that hears cases of unjust dismissal), a rise in cases is expected throughout 2021 due to job losses during the pandemic. Employers should therefore prepare themselves by keeping abreast of the changes to the Industrial Relations Act.

Amendments to the Industrial Relations Act, in force as of 1 January 2021

The Industrial Relations Act 1967 (IRA), which regulates disputes between employers and their workforce and/or trade unions, was amended several times by the Malaysian Parliament in 2020. These amendments have been effective since 1 January 2021 and they include the following changes.

New cases to be automatically referred to the Industrial Court

The previous requirement of a ministerial discretion before a case could be referred to the Industrial Court has been removed. Following this change in the law, it is the Director General of Industrial Relations (DGIR) who must automatically refer to the Industrial Court any cases that are not settled in reconciliation proceedings.

Wider powers for the Industrial Court

The expansion of the powers of the Industrial Court that now include the power to award compensation and back pay to the next-of-kin of deceased claimants (when previously, a claim would abate in the event of the demise of the claimant) and the granting of interest of up to 8 per cent per annum on monetary awards that remain unsatisfied after 30 days.

Enhancement of penalties

Previously, non-compliance with Industrial Court awards or orders could result in a fine of up to RM2,000 (approximately USD  495). The maximum fine payable has been increased to RM 50,000 (approximately USD12,370). This fine may be imposed in addition to the offender being compelled to pay any monetary award that may have been ordered. The general penalty for any contravention of the IRA has similarly been revised from RM 2,000 to RM 50,000 (approximately USD 1236).

These long awaited amendments are a welcome for employees. The implication however for employers is that this may prompt a rise in the number of claims taken out by employees, especially, unjust dismissal claims that would be referred to the Industrial Court on an expedited basis and employers would need to be better prepared to deal with such claims that may be progressed by the Industrial Courts much faster than before.

Hon Cheong Yong, Zaid Ibrahim & Co. (a member of ZICO Law)