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Asia employment law bulletin 2020


The labour laws in Malaysia have been fairly stable, without any major changes over the past decade. Whilst laws such as the Personal Data Protection Act, Minimum Retirement Age Act and the Minimum Wages Order have been introduced over the past 10 years, the main laws relating to employment, namely the Industrial Relations Act 1967 (IRA) and the Employment Act 1955 (EA) have not been materially amended.

This changed in 2019. With a new government installed in 2018, the Ministry of Human Resources promptly embarked on a review of the IRA and EA.

Since then, amendments to the IRA have been tabled and as of December 2019, approval from both the upper and lower houses of Parliament had been obtained.

Along with the amendments to the IRA, the amendment to the Malaysian Anti-Corruption Commission Act (MACC Act) will also have an impact on employers in 2020.

Amendments to the Industrial Relations Act 1967

The amendments to the IRA include the following:

  1. The existing discretion of the Minister of Human Resources as to whether or not to refer cases to the Industrial Court for adjudication has been removed, with that discretion not sitting with the Director General of Industrial Relations.
  3. Cases that are not resolved through conciliation at the Industrial Relations Department shall be referred to the Industrial Court without further filtering i.e. they will be automatically referred.
  5. Currently, an unjust dismissal claim ends on the death of the claimant worker. However, under the amendments, the Industrial Court is vested with new powers to continue with proceedings in an unjust dismissal claim notwithstanding the death of the claimant and, where appropriate, award back wages or compensation to the next of kin of the deceased employee.
  7. Whilst no interest was applicable previously to any Industrial Court awards, interest of up to 8% per annum may now be imposed on any award sum from the date the award is made till the date the payment is fully satisfied.
  9. The penalty for non-compliance of an Industrial Court award or a collective agreement has been increased from RM 2,000 (c. USD 490) to RM 50,000 (c.USD 12,260).
  11. If a dismissal is demonstrated to be one that is related to union busting, the Industrial Court will have wider powers to determine what remedies appropriate. In all likelihood, this will include awarding some form of punitive compensation against the employer.

Amendments to the MACC Act

With effect from 1 June 2020, the new Section 17A of the MACC Act will become effective. This new provision creates corporate liability for corruption. A commercial organisation may be guilty of an offence if any person associated with the organisation commits a corrupt act in order to obtain or retain business for the organisation. However, liability does not stop with the organisation. A person who is a director, controller, officer, partner or a person concerned with the management of the organisation’s affairs can be deemed to have personally committed the offence as well.

Potential consequences under this provision are a maximum fine of 10 times the sum of gratification involved or RM1 million (c. USD 245,000) whichever is higher or a maximum jail term of 20 years or both. This amendment accordingly seeks to strengthen accountability and place potential liability not only on the corporation but also on senior management.  The new provision essentially requires organisations to commit ‘top down’, to promote a culture of integrity and maintain a comprehensive anti-corruption compliance program. The time has now come for organisations to wake up and realise that it must not only have policies and procedures in place, but it must be seen to be effectively implementing these policies with effective risk management and due diligence.

The gig-economy

It is apparent that the new government is serious about seeking reforms in labour laws. However, whilst the above amendments address existing mechanisms and attempt to improve processes within those existing laws, there is a whole other area of law that still requires attention.

In 2019, the Prime Minister identified that the gig economy would be a new source of economic growth and will be made part of the 12th Malaysia Plan (i.e. an economic development plan for the years 2021-2025). However, whilst acknowledging the gig economy has benefited many, the government has voiced concerns over the protection of “workers” rights in such an economy and has said that new laws will be developed to regulate the economy and protect workers.

It remains to be seen when these laws will be read in Parliament but certainly, these are laws that need to be carefully considered balancing the rights of organisations and individuals in a gig economy. The debate continues globally as to whether providers in a gig economy are employees or independent contractors and so any new laws enacted by the government in this area will need to provide clarity as to the right classification.

Certainly exciting times for employment law in Malaysia.

Yong Hon Cheong, Zaid Ibrahim & Co