Malaysia - League of Lawyers

Capital: Kuala Lumpur
Largest city: Kuala Lumpur
Official Language: Bahasa Malaysia
Government: Federal representative democratic constitutional monarchy
Area: 330,803 km2
Population: 32.7 million
Currency: Malaysian Ringgit (RM/MYR)
GDP total: RM3.712 trillion (USD900 billion)
GDP per capita: RM11,1388.50 (USD27,000)
Time zone: UTC+8
Calling code: +60
Internet TLD: .my
[Source: Wikipedia/ dosm.gov.my]

The number/participation rate of people in the workforce: 69.7% (August 2022)
The general unemployment rates: 3.7% (August 2022)
[Source: https://www.dosm.gov.m]

Q&A on Employment Law

What are the laws and regulations governing employment, labour and industrial relations in Malaysia?
The main laws and regulations include:
- Employment Act 1955
- Industrial Relations Act 1967
- Minimum Wages Order 2018
- Minimum Retirement Age Act 2012
- Occupational Safety and Health Act 1994
- Employment (Restriction) Act 1968
- Children and Young Persons (Employment) Act 1966
- Employment (Part-Time Employees) Regulations 2010
- Employees Provident Fund Act 1991
- Employees Social Security Act 1969
- National Wages Consultative Council Act 2011
- Trade Unions Act 1959
Which authorities and/or regulatory bodies enforce employment, labour and industrial relations laws and regulations in Malaysia?
The main authorities and regulatory bodies include:
- Department of Labour
- Department of Industrial Relations
- Industrial Court
- Department of Occupational Safety and Health
- Department of Trade Union Affairs
What are the main employment requirements under the employment laws and regulations in Malaysia that employers should be aware of?
- Minimum wage of RM1,500 per month
- Minimum retirement age of 60 years
- 98 consecutive days of paid maternity leave for female employees
- 7 consecutive days of paternity leave for male employees
- Duty to enquire on employees’ sexual harassment complaints
- Making statutory contributions, including those under the Employees Provident Fund, Social Security Organisation, Employee Insurance Scheme and Scheduled Tax Deduction
- Applicable to all employees pursuant to the Employment Act:
  - Payment of wages no later than the 7th day after the last day of the wage period
  - Notice of termination of employment (or payment in lieu of notice)
  - Paid annual leave and paid sick leave to employees
  - Minimum of 11 public holidays per calendar year
  - Payment for overtime work
  - Termination and lay-off benefits
What are some of the employment rights and benefits to which employees in Malaysia are entitled to by law?
- Right to security of tenure in employment
- Right to file a representation to the Department of Industrial Relations in the event the employee considers that he/she has been dismissed without just cause or excuse by his/her employer to be reinstated (or compensation)
- Right to safe and healthy workplace
- Right to form, join and participate in trade unions and related activities
- (Also see Q&A 3 above for employees’ benefits)
What are the procedures and requirements for employers to employ foreign persons and expatriates in Malaysia?
- Expatriate passes include Employment Pass (Category I, II & III), Residence Pass-Talent and Professional Visit Pass
- Employer shall apply for the employment pass for the foreign employee
- Employer shall be registered with the Expatriate Services Division of the Department of Immigration
- Compliance with basic minimum salary (depending on type of employment pass)
- Compliance with minimum employment period (depending on type of employment pass)
- Foreign employee’s spouse and children under 18 years old are eligible for Dependant Pass
- Documents required during employment pass application include recent passport photo, passport, highest educational certificates, professional certificate, latest comprehensive resume, employment contract (duly stamped by Inland Revenue Board), supporting document from approving agency/regulatory body (if applicable) and detailed job description printed on employer’s letterhead
(Applicable to West Malaysia only.)
What are the common reasons that employers rely on to terminate employment contracts?
The common reasons for employee termination include misconduct, poor performance, redundancy, breach of the employment contract, rules and regulations, policies or employee handbook, expiry or non-renewal of a fixed-term contract.
How do employees terminate employment contracts? Are employees strictly required to fulfil the termination notice period (if any)?
Employees may terminate their employment contracts by giving the employers a notice of termination. The length of the notice period is dependent on the employment contract, and in the absence of such provision in writing, a statutory notice period is provided for in the Employment Act. In any event, the Employment Act provides that the contract may be terminated without notice by the employee in the event that the employer has breached a condition of the contract. Alternatively, the employee may in lieu of notice pay to the employer a sum equal to the amount of wages the employee would have earned during the notice period.
What employment dispute resolution forums are there in Malaysia and what are their respective jurisdictions/purpose?
In Malaysia, the available forums for employment disputes are the Industrial Court, Labour Court and the civil courts. The Industrial Court has the jurisdiction to resolve disputes arising from unlawful dismissals and trade disputes. The Industrial Court is also empowered to order reinstatement and backwages, or compensation in lieu of reinstatement, should an order of reinstatement be infeasible.The Labour Court is a separate and distinct forum which resolves disputes for the class of persons who are defined as an “employee” under the Employment Act or employees listed under the First Schedule of the Employment Act, which would be employees whose salaries are more than RM2,000 but less than RM5,000.

However, pursuant to the Employment (Amendment of First Schedule) Order 2022 which was gazetted on 15.08.2022 and is scheduled to come into effect on 01.01.2023, the scope would be widened to employees who have entered into a contract of service, regardless of their salary.The Labour Court has the jurisdiction to enquire and hear matters in respect of monetary and benefit disputes under the contract of employment and is only empowered to order monetary compensation.

The civil courts can hear all other forms of employment disputes.
What are the laws governing trade unions and collective agreements in Malaysia?
In Malaysia, trade unions and collective agreements are governed by the Trade Unions Act and the Industrial Relations Act.
Must a trade union be registered in Malaysia? If yes, what is the procedure for it to be registered?
A trade union must apply to the Director-General of Trade Unions to be registered within one month of the establishment of the trade union.The procedure for registration of a trade union is provided under Section 10 of the Trade Unions Act, which includes submitting the application signed by at least seven members of the union to the Director-General together with its officers’ details, the rules of the trade union and the prescribed fees.
What are the key elements to be incorporated in a trade union agreement/collective agreement?
The key elements to be incorporated in a collective agreement are, among others, as follows:
- The name of the parties
- Effective date and duration of the collective agreement
- Settlement of disputes
- Recognition by the employer
- Recognition of the trade union
- Trade union duties
- Annual increment
- Transfer and promotion
- Termination of employment
- Rates of pay and annual variable bonus
- Medical benefits
- Maternity benefits
- Rest day / additional rest day / public holidays
- Hours of work
- Annual leave, sick leave and special leave
- Retirement benefits
- Employment injury
- Existing benefits
- Implementation
What trade union dispute resolution forums are there in Malaysia?
The Industrial Court is the only trade union dispute resolution forum in Malaysia.
When an employee’s wages are unpaid by the employer, what legal options are available to the employee?
The employee may:
- Send a letter of demand to the employer;
- File a complaint to the Labour Department; or
- File a representation to the Industrial Relations Department against the employer claiming constructive dismissal pursuant to Section 20 of the Industrial Relations Act.
What are the types of dismissal cases in Malaysia?
In Malaysia, dismissal cases are commonly divided into two broad categories, namely, direct dismissals and constructive dismissals. Direct dismissals involve a situation whereby the employer issues a dismissal letter to the employee with immediate effect or with notice. Constructive dismissal includes a situation where there is a fundamental breach of the employment contract and the employee puts the employer on notice that he deems himself as constructively dismissed.
What factors are taken into account when determining the types of dismissal cases in Malaysia?
The factors for determining the types of dismissal cases include evaluating the conduct of the employers and employees during the period leading to the employee’s dismissal. The Industrial Court will evaluate whether the employer has adhered to due process prior to dismissing the employee on the grounds of misconduct, poor performance, redundancy or non-confirmation of probationers.In constructive dismissal cases, the Industrial Court will evaluate as to whether there is any breach of fundamental terms in the employment contract which forces the employee to resign as a result of the employer’s breach. Common circumstances which may amount to constructive dismissal include non-payment of salary, victimisation, discrimination, harassment, demotion and change or reduction in job responsibilities.
When an employee has been unfairly dismissed, what legal options are available to the employee?
The employee has the right to file a representation for unfair dismissal to the Director General for Industrial Relations pursuant to section 20 (1) of the Industrial Relations Act. Upon receiving a representation, the Director General will take the necessary steps to achieve an expeditious settlement. If there is no likelihood of the representation being settled, the representation will be referred to the Industrial Court for determination.
What is the limitation period imposed on employees to commence a legal action against the employer?
The Industrial Relations Act provides that the claimant may file the representation for unfair dismissal within 60 days from the date of dismissal, or where the dismissal is made with notice, no later than 60 days from the expiry of the notice period. Once the limitation period of 60 days has passed, the Industrial Court will cease to have jurisdiction to hear any claims against the employer.In the event the claimant wishes to commence a civil suit against the employer for a breach of contract, the Limitation Act 1952 provides the claimant with 6 years to file the suit in court.
When an employee decides to take legal action against the employer, what are the steps to observe and comply with?
An employee who feels that he has been dismissed without just cause or excuse may submit the representation for unfair dismissal by way of a form called the Annexure P1 together with copies of his identification document within 60 days of the dismissal or if he has been dismissed with notice, 60 days from the expiry of the notice period. Thereafter, the employee is required to submit his particulars (as the claimant) and the grounds for dismissal in Annexure P2, and a copy of the relevant documents in support of his claim, namely, the appointment letter, termination letter, show cause letter or notice of domestic inquiry, if any, in Annexure P3.
When taking legal action against the employer, can an employee represent himself?
An employee may represent himself or where he is a member of a trade union of workmen, be represented by an officer or employee of the trade union. However, given the complexity of employment law, it is advisable for both the employee and employer to be represented at the Labour Court and the Industrial Court.
What happens if an employee’s death takes place before the completion of the legal action filed by the employee?
The Industrial Relations Act empowers the Industrial Court to continue an unfair dismissal proceeding notwithstanding the death of the employee. The Industrial Court is also empowered to award backwages or compensation in lieu of reinstatement, or both, to the next-of kin of a deceased employee.
Does the aggrieved party have a right to appeal against the decision? If yes, is there a limitation period to file for an appeal?
For cases that were referred to the Industrial Court prior to 1.1.2021, the aggrieved party may file an Application for Judicial Review against the award made by the Learned Chairman within three (3) months from the date the award was communicated to the party.However, for cases that were referred to the Industrial Court after 1.1.2021, the aggrieved party may appeal against the award made by the Industrial Court to the High Court within 14 days from the date of receipt of the award.
Is there any alternative dispute resolution available? If yes, what are the key differences between the alternative dispute resolution and a suit filed in court?
Upon receipt of a complaint for unfair dismissal, the Industrial Relations Department will call parties to attend a conciliation meeting at the Industrial Relations Department to explore an amicable settlement between the disputing parties. This process is a statutory requirement under the Industrial Relations Department. If parties fail to reach a settlement, the dispute will be referred to the Industrial Court.In most cases, the Chairman of the Industrial Court will encourage parties to undergo mediation with the Chairman acting as the mediator, even after a dispute is referred to the Industrial Court. In the event of an agreement being reached during the mediation, parties may record a consent award detailing the terms of the settlement

ABOUT THE AUTHORS

John Chan
Partner in MahWengKwai & Associates (Malaysia)
john.chan@mahwengkwai.com

John is a partner in MahWengKwai & Associates and practises primarily in the areas of employment, industrial relations and strata management laws and disputes. His experience includes a variety of other areas such as contractual and commercial disputes, director and shareholder disputes, trespass and nuisance, constitutional law, citizenship for adopted children, debt recovery and criminal law. He has had the opportunity of advising and representing multinational corporations originating from Japan, Australia, Germany, France, Sweden, China, Benin, New Zealand and Singapore. John graduated from the National University of Malaysia with a Bachelor of Laws (Hons) in 2013 and was admitted as an Advocate and Solicitor of the High Court of Malaya in 2014.

Naveen Joshua Solomon
Senior Associate in MahWengKwai & Associates (Malaysia)
naveenn.solomon@mahwengkwai.com

Naveen is a senior associate in MahWengKwai & Associates. His practice focused on the areas of employment, industrial relations and contractual disputes. His employment law experience includes employment disputes, unfair dismissal cases, performance-related dismissals, misconduct-related dismissal and also retrenchment-related dismissals. Naveen also handles trade union disputes, collective agreement related matters and even collective bargaining. Naveen graduated with a Second Class Honours (Division 1) in Bachelor of Laws (Hons) from Northumbria University, Newcastle, United Kingdom in 2014. He completed his Certificate in Legal Practice in 2015 and was admitted as an Advocate and Solicitor of the High Court of Malaya in April 2017.

ABOUT THE FIRM

Name: MahWengKwai & Associates
Address: Level 10-1, Tower B, Menara Prima, Jalan PJU 1/39, Dataran Prima, Petaling Jaya, Selangor, 47301 Malaysia
Telephone: + 603 7887 2702
Email: lawyers@mahwengkwai.com
Website address: www.mahwengkwai.com
Key contact: Raymond Mah, Managing Partner, raymond.mah@mahwengkwai.com
Established: 1985 by Dato’ Mah Weng Kwai
Number of lawyers: 26
Languages: English, Chinese, Malay

Brief description:
MahWengKwai & Associates (MWKA) is a leading full-service law firm focused on serving small-medium enterprises (SMEs), family businesses and high-net-worth individuals (HNWIs). MWKA’s corporate team of specialised lawyers is committed to providing the best solutions for different types of companies ranging from enterprises, private limited companies to public listed companies and large international corporations. Much of the firm’s corporate matters in which we have represented clients, whether individual or company, include negotiating, drafting agreements and advising on merger and acquisition transactions, project based transactions, oil & gas commercial transactions, regulatory compliance and corporate governance, corporate restructuring exercises, foreign investment and general corporate contracts. MWKA’s dispute resolution team comprises experienced and energetic lawyers with a passion for their respective practice areas. They handle run of the mill matters in the lower Courts as well as complex and precedent-setting cases in the appellate and apex Courts of Malaysia. The firm represents clients in various disputes including administration of estates, citizenship, company, commercial, construction, debt recovery, defamation, employment, family, injunctions, insolvency, judicial review, land acquisition, medical negligence, real estate, strata management, and white-collar crime.

Key practice areas:
Administrative and regulatory, Capital markets, Civil litigation, Commercial and Corporate transactions, Commercial arbitration, Corporate governance, Criminal, Financial services regulatory, Healthcare, Insolvency, Intellectual property, International arbitration, Labour and employment, Litigation, Mergers & Acquisitions, Personal injury, Privacy and data protection, Tax, Technology, Trusts and estates, White-collar crime, Employment and Industrial Relations, Strata management, Land acquisition and Adoption/Citizenship/Family matters.