Amendment to Employment Act - by Raymond Lim, Petaling Jaya. sign now

Amendment to Employment Act

by Raymond Lim
Petaling Jaya

I refer to the recent statement by the Minister for Human Resources, DatoЇ Dr. Chan Fong Onn that the back-dated wages will be limited to 24 months in cases of wrongful dismissal by employers under the proposed amendments to the Employment Act.

The Minister justified the proposed amendment by referring to Practice Note No. 1/1987 which was introduced by the Industrial Court on the said 24 months limitation. Practice Note No.1/1987 on 24 months cap on backdated wages created some confusion. Several Industrial Court decisions applied the 24 months limitation. However, many did not do so on the basis that it is merely a practice note but not legally binding and by doing so, they sought to give more protection to employees from unscrupulous employers.

It is instructive for Members of Parliament to note that the Federal Court, in one of its landmark decisions, had ruled that the right to live under the Federal Constitution included the right to livelihood. For this reason, many decisions in the Industrial Court took judicial notice of this ruling in their decisions and declined to follow Practice Note No. 1/1987 when dealing with wrongful dismissal cases involving breach of natural justice, mala fide, victimization or unfair labour practice. Put in a nutshell, Practice Note No.1/1987 will not achieve the said ruling of the said Federal Court, the highest Court in the land. As a matter of fact, Practice Note No.1/1987 should be withdrawn by the Industrial Court.

In this letter, I will submit that it is extremely unwise for our Government to approve the said amendment to the Employment Act.
By way of introduction, in the case of wrongful dismissal by an employer, the Industrial Court will order a reinstatement of the employee and payment of back-dated wages from the date of wrongful dismissal to the date of judgment. Since the hearing at the Industrial Court may take place 3-5 years later or even longer, the amount of back-dated wages can be a substantial amount. If the employer-employee relationship is such that it is no longer possible to be continued, the Industrial Court will order the employer to pay one monthЇs salary for every year of service in lieu of reinstatement.

As a lawyer for close to 20 years, I have encountered countless cases wherein employers were extremely high handed when handling the dismissal of employees. Such high-handedness borders on total disregard to the livelihood of employees, especially employees who have been loyal to their organizations and had given the best years of their lives to their employers.

Most wronglful dismissals arose because many unconscionable employers simply have no respect for employees as human beings or have scant regard for the due process of natural justice. In many cases, employees were transferred to branches far away merely to make them resign or subjected to other forms of victimization or unfair labour practice. Against this background, it is therefore not surprising that the industrial relations law and the industrial courts are protecting the welfare of employees, much to the chagrin of employers.

For many years, the back-dated wages have been an effective deterrent against wrongful dismissal by unscrupulous employers and the judiciary has been the bulwark in zealously safeguarding the welfare of employees who are victims of wrongful dismissal. Removing this deterrent now by way of legislation is the usurpation of the role of the judiciary by Parliament.

Personally, I see no reason why bona fide employers should take exception to the back-dated issue.Firstly, if employers have conducted due inquiry with objectivity and fairness, and have sufficient evidence to support their case for dismissal based on just cause and excuse, they should not fear the backlash of reinstatement and payment of backdated wages. The law is on the employersЇ side when they have adhered to the principle of natural justice and if they are not guilty of any mala fide or unfair labour practice. Like what Confucius said: If one has examined his heart and found no wrongdoing, why should he be afraid?

Secondly, employersЇ contention is that they should not be the victim of the slow process and delay in the Courts which result in a hearing taking place 3-5 years later or longer. But the pertinent question is this: Is the delay of a trial the fault of the employees? If it is not, then why should the policy consideration be in favour of employers (the rich people) rather than employees (the poor people) on this issue? Who broke the contract of service in the first place? Is it not the employer in the case of a wrongful dismissal?

It will be most unconscionable if the policy consideration is in favour of employers when it is the employers who are at fault. Why is Parliament protecting the employers (the rich people) when it is expected to protect the employees (the poor people).

Thirdly, not all employers are penalised by back dated wages as not all unfair dismissal cases end up in the Industrial Court. Many employees just accept what is offered (usually 1-3 monthsЇ salary) by the employers as a settlement because they want to move on with their lives, especially when they found employment elsewhere. They do not have the money to battle it out in Court nor do they wish to endure the agony of attending Court proceedings.
Thus, many employers are getting away without having to pay what the back-dated wages that employees are legally entitled if they had taken the matters to the Industrial Court. Hence, we need to look at the back-dated wages issue in a balanced perspective to be fair to employees as well.

Employers expect loyalty from the employees. But what do employees get in return? Some employees had given the best years of their lives to their companies, only to be thrown out in their late 40s or early 50s without misconduct being proven. At that kind of age, they are not marketable and it is quite impossible to find employment elsewhere. If they still have schooling children, one can imagine the hardships to their families especially when they could not secure a new job immediately.
The untold trauma and stigma that some victimized employees suffered are not known to many of our Members of Parliament. Employers have many ways to make life very difficult. Some employers resort to planting land mines when there is no case for unfair dismissal. They want to get rid of the targeted employees, by hook or by crook. Such employees had to be on full alert daily not to step on any land mine. Materials (e.g. pornography) were planted into the employeesЇ computers and baseless rumours or poison pen letters on alleged misconduct (e.g. financial or sexual misconduct) were spread to tarnish their character. Our Members of Parliament must realize that such mental torture and stigma cannot really be compensated in monetary terms.

As such, employers must not have a warped view that employees are benefiting from the back-dated wages rule. We have the Labour Day as a public holiday to commemorate the significance and contribution of the labour force to this nation. Let us not do so with a mere public holiday, but also with laws and deterrents that will penalize mala fide, unfair labour practice or victimization by employers.

Good corporate citizens should not fear if they are ready to conduct due inquiry with objectivity and fairness free of all forms of any mala fide, unfair labour practice or victimization. The law should encourage employers to be good corporate citizens rather than vice versa.
If the proposed amendment to the Employment Act limiting backdated wages to 24 months is passed, there is real fear that unscrupulous employers may use it as a LICENCE to get rid of their employees. Such employers may offer, say 3 months, and tell the employees to take it now or wait 3-5 years later. After all, their exposure is only 24 months and no longer 3-5 years backdated wages or more. This will not encourage employers in this country to be good corporate citizens. Worse still, it may also result in a higher number of indiscriminate dismissals since the deterrent is no longer in place.
Hitherto, reinstatement and payment of backdated wages without the 24 months limit is an effective deterrent. It should remain so. I hope that Yang Berhormat will drive home the severity of these implications to the other Members of Parliament.

Malaysia is not a developed country wherein the wage level is high. In fact, the wage level is much lower compared to many countries. We donЇt even have the minimum wage for the lower end wage earners. And when you take into account rising inflation and hidden costs due to increasing corruption, many wage earners, especially those below middle class income earners, are indeed struggling to balance their income with expenditure. In the past, most women stayed at home. Now, many women have to work to supplement their husbandsЇ income. Life as wage earners is already very tough as their monthly salary is lagging behind rising inflation and hidden costs due to increasing corruption.

Accordingly, employees need security of tenure of their employment and protection against unscrupulous employers who have scant or no regard for natural justice or are guilty of mala fide, unfair labour practice or victimization.


Employment Law

Q. I have just received a notice of mention from the Industrial Court. What is the Industrial Court?

A. The Industrial Court is a statutory tribunal established under the S.21 of the Industrial Relations Act 1967. It was set up to hear disputes between employees and their employers over rights and obligations that arise from the employment relationship and from the provisions of the Industrial Relations Act 1967. Most of the cases heard by the Industrial Court are claims by individual employees that the employee had been unjustly dismissed by his or her employer. The Industrial Court also hears cases where the grievance of the individual employee is taken up by his or her trade union against the employer and disputes over collective agreements.

Q. What is the difference between the Industrial Court and the Labour Court?

A. While the Industrial Court deals with individual disputes arising from the employer-employee relationship (such as dismissals) and trade disputes between trade unions and employers (such as transfers, collective agreements) and breaches of rights and obligations imposed under the Industrial Relations Act 1967, the Labour Court deals mainly with recovery of wages and other monies and employment benefits provided to employees under the Employment Act 1955 such as overtime pay, maternity allowance, salary in lieu of notice of termination and termination benefits. The Labour Court is not a statutory tribunal like the Industrial Court but refers to the hearing conducted by a Labour Officer of the Labour Department into complaints by employees. Employees whose monthly wages are RM1, 500 and below and other categories of employees who are entitled to the benefits in the Employment Act 1955 can file their claims in the Labour Court. Employees who fall outside the scope of the Employment Act 1955 but whose monthly salary does not exceed RM5, 000 may also seek the assistance of the Labour Court for recovery of salary or other monies due and payable by their employers under their individual contracts of service.

Q. I have been dismissed. How do I make a claim against my employer in the Industrial Court?

A. An employee does not lodge a claim directly with the Industrial Court. If the employee believes that he or she had been dismissed unlawfully or without just cause or excuse he or she has to personally go to the office of the Industrial Relations Department (which is under the Ministry of Human Resources) nearest his workplace where the employee would be asked to make his or her representations. At the Industrial Relations Office, the employee would be asked to fill up a form, Borang S.20 giving all particulars of the dismissal. The Industrial Relations Office would arrange for a conciliation meeting at the Industrial Relations Office to be attended by the employee and employer to explore an amicable settlement. If there is no settlement, the dispute would be escalated to the Minister of Human Resources for his decision on whether the case should or should not be referred to the Industrial Court for a hearing.

Q. Is there a time limit for making an unjust dismissal representation to the Industrial Relations Department?

A. The time limit for making an unjust dismissal representation to the Industrial Relations Department is 60 days from the date of dismissal. In a case where notice of termination is served, the 60 days period begins to run from the date of expiry of the notice period. For example, Mr. X is given one month's notice of termination on 1.1.2008. The notice would expire on 1.2.2008 and the 60 days period begins to run from 1.2..2008.

Q. How long do I have to wait before I am called for the conciliation meeting?

A. This depends very much on the Industrial Relations Department but normally parties will be called to attend a conciliation meeting within 1 to 3 months from the date the representation is lodged.

Q. Can I be represented by a lawyer at the conciliation meeting?

A. Lawyers are not allowed at conciliation meetings. A Company may be represented by its employee or by an officer or employee of a trade union of employers or by a registered organization of employers. The employee may represent himself or, if he is a member of a trade union, by an officer or employee of the trade union or an official of any other registered organization of workmen.

Q. If a matter is not settled, how long does it take for the matter to reach the Industrial Court?

A. Reference to the Industrial Court is dependent upon the Minister being satisfied that there is a fit and proper case for reference. The Industrial Relations Department will notify the parties of the outcome of the Minister's decision, generally, within 6 to 12 months of the representation being made.

Q. How will I know if my matter is referred to the Industrial Court or not?

A. You will receive a letter from the Industrial Relations Department informing you of the outcome. If the letter states that your case is wajar untuk dirujuk then it means that your case has been referred to the Industrial Court and you may expect to receive a notice of mention from the Industrial Court soon after that requiring your attendance for mention.

Q. What can I do if my case is not referred to the Industrial Court?

A. If you receive a letter stating that your case is tidak wajar untuk dirujuk this means that the Minister has decided not to refer your case to the Industrial Court. The decision of the Minister may be challenged in the High Court by judicial review. An application for judicial review must be filed within 40 days from the date the applicant employer or applicant employee, as the case may be, is informed of the decision.

Q. What happens at the mention of the case in the Industrial Court?

A. You are required to be present in the Industrial Court for the mention of the case. At the mention, the Industrial Court normally directs the Statement of Case to be filed by the Claimant (the individual making the claim) by a certain date to be followed by the Statement in Reply to be filed by the employer. Subsequent mention dates may be fixed by the Court for management of the case before trial.

Q. Do I have to pay any fees for the filing of documents in the Industrial Court?

A. No. There are no filing fees in the Industrial Court.

Q. Can I be represented at the Industrial Court?

A. Yes. The employer and the employees may seek representation at the Industrial Court. They may represent themselves or be represented by officers of a trade union of employees or employers. They may also be represented by Advocates & Solicitors. However, representation by an Advocate & Solicitor is only with the permission of the President of the Industrial Court. Parties desiring representation by Advocates & Solicitors are required to fill up Forms A and B to apply for permission from the President. Normally permission is not refused unless there are valid objections from the opposing party.

Q. Do I need to be represented?

A. Although the Industrial Court is not a court of law, there are practices and procedures similar to a court of law and rules of evidence that have to be followed and these can be overwhelming for the lay person who has no comprehensive knowledge or training in conducting a trial.

Q. Where is the Industrial Court?

A. The Industrial Court is centralized in Kuala Lumpur at Jalan Mahkamah Persekutuan (opposite Dataran Merdeka). The courtrooms are in the Industrial Court building and the adjacent Straits Trading Building. The Industrial Court also has courts in Johor Bahru, Penang, Ipoh, Kota Kinabalu, Kuching and Kuala Terengganu. For the court numbers and the presiding President/Chairpersons please refer to the Industrial Court's website at

Q. How do I know which Court will hear my case?

A. The case registration number contains information on the case and the first digit indicates the courtroom. For example the Case number 3/4-2468/2008 shows as follows:--
3 - Court 3
4 - Nature of Case.
2468 - Case Number
2008 - Year Case is registered

Q. What will I get if I win my case of unjust dismissal against my employer in the Industrial Court?

A. If the employee wins the case, the Court has the power to order that the claimant be given the job he had at the time he was dismissed or a similar job on the terms and conditions he enjoyed before the dismissal otherwise known as reinstatement. The employer will also be ordered to pay to the employee is entitled to be paid his wages from the date of his dismissal until the date of reinstatement. This is known as backwages. Recent amendments to the Industrial Relations Act 1967 has introduced a cap of 24 months on the backwages. In some cases, the Industrial Court may decide not to order reinstatement and in place of reinstatement, it would, together with the backwages, order compensation, generally at the rate of 1 month's salary for each year of past service.

The Industrial Court has power to make orders for costs and expenses of witnesses appearing at the trial but generally does not make such orders. The Court has no power to award interest on the compensation.
Q. What happens if I lose my case against my employer in the Industrial Court?

A. The Court will dismiss the claimant's claim The claimant will not be ordered to pay costs to the employer and will also not be awarded any payments of any kind for the loss of the job.

Q. If I win the case, will my employer be ordered to pay costs in the Industrial Court?

A. In the Industrial Court, the losing party is not liable to pay the winning party's costs.

Q. If I lose the case in the Industrial Court, can I appeal?

A. An award of the Industrial Court is not appealable. However, as the Industrial Court is an administrative tribunal and a public decision-maker, you may apply to the High Court for Judicial Review of the award.

Q. Is there a time limit for applying for Judicial Review?

A. Yes. The time limit is 40 days from the date the decision of the Industrial Court is communicated to you. It is important to note that the Industrial Court does not normally pronounce judgment in open court. The decision of the Industrial Court is in writing and the award is handed down after the parties have made their submissions. The award is normally sent by post and the 40 days will start to run from the day the award is received.


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Amendment to Employment Act


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