EMPLOYMENT LAW

WHAT IS EMPLOYMENT?
work or service performed by an individual to the task
at hand for another person or entity in exchange for
wages or other remuneration.
WHAT IS EMPLOYMENT LAW?
Employment Law is the law which regulates the
operation of the labour market in general and the
employment relationship between employers and
employees in particular.
Cont…
The obligations and rights of an employment contract
are covered by the Employment law.
The main body of employment is Malaysia is found in
three principal legislation and subsidiary legislation.
They are :-
Employment Act, 1955
Industrial Relations Act, 1967
Trade Unions Act, 1959
Cont…
The employers in Malaysia also need to bear in mind the
relevant legislations :-
Employees Provident Fund Act, 1991
Employees Social Security Act, 1969
Worksmen’s Compensation Act, 1952
Worker’s Minimum Standards of Housing and Amenities Act,
1990
Wages Council Act, 1947
Children and Young Persons (Employment) Act, 1966
Occupational Safety and Health Act, 1994
Human Resources Development Act, 1992
 EMPLOYER AND EMPLOYEE
EMPLOYER: EMPLOYEE:

 Person by whom the employee or  Normally a person who

have been selected by the
workman is employed. employer.
 Obtains the services of another to  Will work full time or
perform work and has direct part-time under the
control of the way in which the degree of supervision for
a wage or salary.
work is to be done.
 Provide the means through which
the services will be performed such
as providing a place where the
work is to be performed and tools
required to get the job done.
CONTRACT OF EMPLOYMENT
CONTRACT OF EMPLOYMENT
CONTRACT OF SERVICE CONTRACT FOR SERVICE
contract of employment Involves when people who
a person places his labour at contract to provide services for
the disposal of another and thus another otherwise than under a
the relationship is constituted of contract of employment are
employer and employee. known as independent
contractors.
contract of service means any
agreement, whether express or
implied and if express whether
oral or writing where the
employer agrees to employ and
the employee agree to be
employed and includes an
apprenticeship contract.
 EMPLOYEES V INDEPENDENT CONTRACTORS
EMPLOYEE INDEPENDENT CONTRACTORS:
Means a person who has entered into A person is “in business on their
or works under a contract of account”.
employment.
Business for himself or he is self-
Eg: factory employees, office clerical employed.
staff, agricultural workers etc
Eg: garage proprietors, house builders
A chauffer is an employee
A taxi driver is an independent
( where the employer have enough contractor
control over him)
(not have necessary control over him)
THE TESTS OF DISTINGUISHING EMPLOYEES AND
INDEPENDENT CONTRACTORS
Over the years the court have evolved several
tests to distinguish employees and independent
contractors.
1) The Control Test
2) The Integration Test
3) The Mixed / Multiple Test
4) Intention of the parties
 The Control Test
The test held that employees could not only be told
what to do but they also be told how to do it.
YEWEN v NOKES
Servant-subject to the command of his master
.
 BATA SHOE COMPANY (MALAYA) LTD v EMPLOYEES
PROVIDENT FUND BOARD
Held: the company did not have sufficient control over the
salesmen and therefore, the salesmen were not employees
of the company. For this reason, the company was not
bound to contribute to the EPF. However, the salesman
were found to be employees of the individual shop
managers
Independent contractors could be told what purposes to
achieve, but it was up to the contractors to use whatever
method they thought fit to achieve these purposes.
HOWEVER : This test did not work particularly well with
some skilled employees and so further tests evolved.
 The Organisation / Integration Test
 In STEVENSON,JORDAN and HARRISON v MACDONALD and
EVANS [1952] Denning LJ put forward an integration test:
 “one feature which seems to run through the cases is that,
under the contract of service [contract of employment], a
man is employed as a part of the business and his work is
done as an integral part of the business; whereas under a
contract for services [ contract made by an independent
contractor] his work, although done for the business, is not
integrated into it but only accessory to it.”
Eg the work of surgeons: their employers do not control the
way surgeons act when operating upon patients, although
they can insist that certain procedures are followed.
However, the work of surgeons is done as an integral part of
the hospitals in which they work.
In other words: employees were ‘part and parcel of the
organization whereas independent contractors were not.
The Mixed / Multiple Test
 In the case of READY MIXED CONCRETE v MPNI [1968]2
QB 497, It was held that: a worker would be an
employee only if three conditions are satisfied:
1. The worker must agree to provide his own work and
skill in return for a wage or other payment
2. The worker must agree, expressly or impliedly that he
will be under the control of the person paying for his
work.
3. The rest of the terms of the contract must be consistent
with a contract of employment.
 Intention of the Parties
Ferguson v John Dawson
Intention in the contract – should be disregard
The important – the entire fact /circumstances of the
contract
 Why the distinction is very
important?
1) Compulsory contribution / payments (eg: EPF, SOCSO,
INSURANCE etc)
2) Existence of vicarious liability: the employer is liable, for
example the damage caused to another by his
employee’s negligence acts while that employee is
acting in the course of his employment.
3) Duty of the employer : to take reasonable care/ safety
4) Definition of “employee” under the act/law : will get
the protections under law.
 DEFINITION OF EMPLOYEE
An employee under the Employment Act 1955 means :
“ any person whose wages does not exceed RM1,500 per month
under a contract of service with an employer, any person who
irrespective of the wages earns in a month has entered into a
contract of service with an employer and disengaged in manual
labour engaged in the operation of mechanically propelled
vehicles one who supervises and oversees employees in manual
labour, any person engaged in any capacity in any vessel
registered in Malaysia with certain exception”
An amendment has been made to the Act on 1st August 1998 to
include employee earning between RM1,500 and RM5,000 per
month. However, these persons are only covered in terms of
wages, allowances or other cash benefits.
 DEFINITION OF WORKMAN
S.2 of the Industrial Relation Act 1967:
“ Workman means 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 retrenched has led to that dispute.”
FORMATION OF THE CONTRACT OF EMPLOYMENT

A contract of employment does not have to be in writing.

A contract of service shall contain particulars of :
1. the names of employer and employee
2. the date when the employment began
3. the place of work and the address of the employer
4. the title of the job
5. the commencement salary and where applicable other
allowances and bonus
6. any terms and conditions relating to :
a) probation period
b) hours of work
c) entitlement to holidays, including public holidays
d) overtime pay and leave in lieu
e) incapacity for work due to sickness or injury, including any
provision for sick pay and medical bills
f) EPF and SOCSO schemes
g) the length of notice which the employee is obliged to give
and entitled to receive to terminate the contract of service
or a clause on the manner in which the contract of service
may be terminated.
 HOLIDAY AND LEAVE ENTITLEMENTS –
EMPLOYMENT ACT 1955
PUBLIC HOLIDAYS – S.60D
All employees are permitted to paid holiday on at least 10
gazetted public holidays in any one calendar year.

ANNUAL LEAVE – S.60E

Length of Service Annual Paid Leave (Days)

Less than 2 years of service 8 days
2 years or more but less than 5 years 12 days
of service
5 years of service or more 16 days
An employee is not permitted to annual leave due to the
following :
if absent from work without the permission of the employer
without reasonable excuse for more than 10 per centum of the
working days during the 12 months of continuous service in
respect of which such employee entitlement to such leave
accrues.
if dismissed after due inquiry
SICK LEAVE – S.60F
Length of Service Paid Sick Leave (Days)
Less than 2 years of service 14 days
2 years or more but less than 5 years of service 18 days
5 years of service or more 22 days
-hospitalization ( it can be up to
60 days)

MATERNITY LEAVE
Female employees are entitled to 60 days paid maternity leave for
up to five surviving children.
New implementation: 90 days – up to three surviving children.
WORKING HOURS
The normal work hours of an employee shall not exceed 8 hours in
one day or 48 hours in one week.
Unless prior written approval of the Director General of the
Department of Labour is obtained, female employees are not permitted
to work in any industrial or agricultural undertakings between the hours
of 10 o'clock in the evening and 5 o'clock in the morning.

OVERTIME
The minimum payment for overtime work is:
 1 1/2 times the hourly rate of pay on normal working days
2 times the hourly rate on rest days
3 times the hourly rate on public holidays.
REST DAY
 An employee shall be entitled to at least 1 whole day of rest
day in a week.
 Under the following circumstances, an employer may also
require an employee to work on a rest day :
1) Accident
2) actual or threatened in the workplace
3) work which is essential to the life of the community
4) work which is essential to the defence or security of the country
5) urgent work need to be done to the machinery or plant
6) an interruption of work which was impossible to foresee
7) work to be performed by employees in any industrial undertaking essential
to the economy of Malaysia or any essential service as defined in the
Industrial Relations Act 1967.
WAGES
Wages less any lawful deductions are payable not later than the 7th day after
the end of wage period.
Where a wage period is not specified in the contract of service, the wage
period shall deemed to be 1 month. A wage period shall not exceed 1 month.
Where an employer wishes to extent the payment of wages time, permit
must be obtained from Director General of Department of Labour.
Where an employee terminates the contract of service under normal
termination, wages to such employee shall be paid not later than the day
when the contract of service is terminated.
An employer has the right to deduct the following items from
an employee's wages without the employee's permission :
Overpayments made by mistake during the immediate
preceding three months from the month in which deductions
are to be made
 Indemnity due to the employer under Section 13(1)
Recovery of advances of wages provided not interest is
charged on the advances EPF, SOCSO contributions, income
tax and other items as authorized by law.
1) Work in a skilful and competent manner.
2) Obey the employer’s lawful, reasonable and safe
commands. OTTOMAN BANK LTD v CHAKARIAN (1930)
3) Hand over inventions made during the course of
employment. He cannot claim it to be his, as per terms of
the employment contract.
4) Account for all money or property received in the course
of employment.
5) Disclose information relevant to the employer.
6) Duty of fidelity, loyalty and confidence.
1) To pay the agreed remuneration
2) To provide work
3) To ensure the safety of their employees – this includes
the provision of competent staff, safe equipment, plant
and machinery and safe system of work. It is the
employer’s duty of care to take reasonable care to avoid
exposing his employee to unnecessary risk of injury. It is
his duty to provide him safe and proper system of work.
MANLIO VASTA v INTER OCEAN SALVAGE & TOWAGE LTD
ANG TOH WAH v GOH LOH & ANOR
• Dismissal is an act of an employer to terminate the contract of
service unilaterally.
• By such act, the employee ceases to be in the services of the
employer.
TYPES OF DISMISSAL:
1) Constructive dismissal - where your employer's actions (for example,
extreme bullying) force you to resign.
2) Unfair / Unlawful Dismissal - the term used to describe an employer's
action when terminating an employee's contract unfairly.
3) Wrongful Dismissal - A situation in which an employee's contract of
employment has been terminated by the employer in circumstances where
the termination breaches one or more terms of the contract of
employment, or a statute provision in employment law.
 TERMINATION BY NOTICE
An employee may resign by giving notice of resignation or
termination to the employer to terminate the contract of
service.
An employer may also dismiss an employee by giving notice of
termination to such employee. In both situation, the length of
notice shall be the same pursuant to the contract of service.
Where the period of notice of termination is not specified in
the contract of service, the notice period shall be as follows :
S.12(2) EA 1955
Length of Service Notice Period (Weeks)
Less than 2 years of service 4 weeks
2 years or more but less than 5 years of service 6 weeks
5 years of service or more 8 weeks

S.12(3) EA 1955
 TERMINATION WITHOUT NOTICE
S.13(1) : paying an indemnity of a sum equal to the expiry of
that notice
S.13(3) : any wilful breach by the other party.

TERMINATION FOR SPECIAL REASON

S.14 (1) : on the ground of MISCONDUCT
Failure to afford the requisite skill which has been expressly or
impliedly promised.
EXAMPLE:- disobedience to lawful order, theft, fraud, taking
bribe, assault
 CONSTRUCTIVE DISMISSAL

It refers to a situation where an employee being dissatisfied with

the manner in which he is being treated by the employer such as
where there is an unilateral change in the terms and conditions of
service, the employee tender a letter of resignation and pleads
that he has been constructively dismissed.
Part X, section 59 of the Industrial Act 1967 makes it an offense to
dismiss a workman or employee or injure or threaten to injure a
workman or employee during employment or alter or threaten to
alter the position of the workman or employee to prejudice under
certain circumstances.
An employer contravening to the above section is liable on
conviction to imprisonment for a term not exceeding 1 year or a
fine not exceeding RM2,000 or to both.
 UNLAWFUL DISMISSAL
 When an employee has been dismissed without just cause or excuse by an
employer.

 The employee can file in a written representation within 60 days of the

dismissal to the Director General of Industrial Relations Department to be
reinstated pursuant to section 20 of the Industrial Relations Act, 1967.

 The letter must have the following information :

1) The remedy (reinstatement)
2) The name, identity card number and address and telephone contact if any
3) The name, address and telephone number of the employee’s former
company
4) Occupation
5) Date of appointment
6) Date of dismissal
7) reasons for dismissal
8) Whether the employee is a member of a union or otherwise
9) Attach copies of other supporting documents such as letter of
appointment and termination letter.

The Director General Industrial Relations will try to resolve the case
through conciliation by inviting both the employer and the employee
for a meeting.
The conciliation officer will explain the principles and practices law
that are applicable including judgment of the courts, both the
Industrial Court and civil courts, so that both parties are aware of
their rights and liabilities.
If there is a failure to resolve the case through conciliation, the
Director General Industrial Relations will then refer the case to the
Minister of Human Resources, who will refer the matter to the
Industrial Court for adjudication and for an award if he thinks fit.
The Industrial Court upon the matter being referred to by the Minister
of Human Resources, then goes to consider whether the termination of
employment is unlawful or whether it is justified.

Where the Industrial Court rules that the termination is unlawful, the
Court then makes an "Award" to reinstate the employee to his former
position or in lieu awards proper compensation.

The normal remedies in a cases of dismissal is the reinstatement into

the employee’s former employment and award of back waged from
dismissal date to the final date of hearing subject to maximum period of
24 months.

The Industrial Court may also order compensation in lieu of

reinstatement base on the formula on 1 month salary for every year of
service.
 Investigation
 Domestic Inquiry/ Due inquiry ( internal trial) - A domestic
inquiry is a formal hearing held for an employer to an
employee is dismissed, or before any major penalty is
imposed.
 It must be according to the PRINCIPLES OF NATURAL JUSTICE
which consists of two components:
1) The rule requiring a fair hearing ( audi alteram partem)
Means: No man should be condemned unheard
2) The rule against bias (Nemo judex in causa sua)
Means: No man should be a judge in his own cause
 Requirements:
1) The worker has the right to know of what he is accused.
2) No one should be condemned unheard.
3) The worker must be given time to reply to accusations.
4) An unbiased party must conduct the inquiry.

 Penalties
 The punishment must be appropriate to the seriousness of the misconduct
and take into account any mitigating factors:
1) The length of service of the employee
2) The prior record of the employee and
3) Whether there was any provocation leading the employee to commit the
misconduct.
 Examples of Penalties:

1) Oral warning combined with counseling (minor misconduct

2) Written Warning (Repeated minor misconduct / serious
misconduct)
3) Downgrading / Demotion (gross misconduct)
4) Suspension without pay for not more than two weeks (gross
misconduct)
5) Dismissal (gross misconduct)
 EXAMPLES OF MISCONDUCT

MAJOR MINOR
Being drunk at work Lateness
On drugs at work Using rude language
Fighting Inappropriate clothes
Refusing to work
Theft
Fraud