On 25 October 2021, the Employment (Amendment) Bill 2021 (“Bill”) was tabled before Parliament for first reading. Proposed amendments to the Employment Act 1955 (“EA”) have been long overdue; the Bill tabled differs substantially from its first iteration uploaded on the Ministry of Human Resources’ website in 2018.
Here are some of the key changes proposed by the Bill:
Pregnancy and maternity protection
The Bill proposes to extend maternity leave from 60 days to 90 days. It is still shorter than the 98 days recommended by the International Labour Organisation, but is still progress.
The Bill also seeks to prohibit dismissal of a pregnant employee or an employee suffering from illness arising out of pregnancy, except on grounds relating to misconduct, wilful breach of the employment contract, or closure of business.
The burden of proving that the termination is not on grounds of pregnancy or illness arising out of pregnancy, shall rest on the employer. This means that a pregnant employee arguably cannot be dismissed on grounds of poor performance (unless it relates to a wilful breach of a condition of the contract of employment), or redundancy that does not involve a closure of business.
The Bill proposes that a married male employee shall be entitled to 3 days paid paternity leave in respect of each confinement, up to a maximum of 5 confinements (regardless of the number of spouses).
The entitlement for paternity leave is subject to the married male employee being employed by the same employer at least 12 months before the commencement of such paternity leave, and subject to him notifying the employer of the pregnancy of his spouse at least 30 days from the expected confinement or as early as possible after the birth.
The Bill does not say when an employee can start their paternity leave; it is presumed that the employee can only start their paternity leave on the confinement date.
Flexible Working Arrangements
The Bill allows an employee to make an application for “flexible working arrangements” (ie: an arrangement to vary the hours of work, days of work or place of work) to the employer. The application must be in writing and the employer is required to either approve or refuse the application within 60 days. The Bill does not oblige the employer to approve all applications; in the event of a refusal, the employer merely has to state the ground of such refusal.
The Bill makes it an offence for an employer to “threaten, deceive or force” an employee to do any work and to prevent an employee from leaving their place of work. Upon conviction, the employer can be liable to a fine not exceeding RM100,000.00 or to imprisonment for a term not exceeding two years, or both.
The Bill requires employers to conspicuously exhibit a notice to raise awareness on sexual harassment. This appears to be a lip service provision since little else is said about what should go into the notice, and the Bill does not require employers to establish any anti-sexual harassment policy.
Section 81G of the EA stating that the sexual harassment provisions apply to all employees regardless of salary has been curiously deleted. This is despite there being no change to the First Schedule (categories of employees under the EA). It is not clear whether other provisions of the Bill were meant to expand the coverage of the EA such that Section 81G is no longer required.
Presumptions of employment
The Bill provides that in any proceeding for an offence under the EA, in the absence of a written contract of service relating to any category of employee under the First Schedule, it shall be presumed that a person is an employee if certain factors are present. This includes:
- Where his work or hours of work is subject to the control and direction of another person;
- Where he is equipped with tools, materials or equipment by another person to execute work;
- Where his work constitutes an integral part of another person’s business;
- Where his work is performed solely for the benefit of another person; or
- Where payment is made to him in return for work done at regular intervals and such payment constitutes the majority of his income
There is potential confusion as to how this section of the Bill may be interpreted. For example, it is not immediately clear what situations are covered by “in the absence of a written contract of service relating to any category of employee under the First Schedule” and how it would operate, given the qualifier that this is only for “proceedings for an offence under the EA”. For example, does this apply to any employee who doesn’t fall within the First Schedule, or does it only apply to an employee under the First Schedule who does not have a written contract of service?
The factors giving rise to a presumption of employment are also wide enough to cover gig work (which is traditionally not an employment) and leaves room for uncertainty as to whether some contracts for service (independent contractors) may be deemed employment through operation of law. This part of the Bill warrants a closer look.
The maximum working hours for EA employees per week is reduced to 45 hours (initially 48 hours).
The Bill does not make discrimination in employment an offence, but provides that the Director General of Labour may inquire into and decide any dispute between employer and employee relating to discrimination in employment. It is only an offence if the employer fails to comply with any order of the Director General of Labour pursuant to that dispute. There is no clarification as to what amounts to “discrimination in employment” and what are the protected traits. It is also not clear what are the powers of the Director General of Labour in making orders relating to a discrimination complaint.
Wider jurisdiction of the “Labour Court” / Director General of Labour
The Bill proposes to lift the salary cap of employees who can bring disputes before the Director General of Labour (currently RM5,000 a month).
The Bill also deletes sections 69B – E of the EA relating to the powers of the Director General of Labour.
Powers of the Court
The Bill proposes to provide additional powers to the court where an employer has been convicted of an offence where payments are due to an employee under the EA. The court may also order the employer to pay any payment due to the employee in relation to that offence. If the employer still fails to do so, the court may issue a warrant to levy the employer’s property for such payments by way of distress and sale of property or by way of a fine provided under the Criminal Procedure Code.
Calculation of wages for incomplete month’s work
The Bill provides a formula for how wages are to be calculated when an employee has not completed a whole month of service:
(Monthly wages / Number of days in the particular wage period) x number of days eligible in the wage period)
This provision clears the air as to whether employers should use the “divide by 26” formula to determine a day’s wage.
The Bill modifies the criteria of which a person can be considered an apprentice. Previously an apprentice contract is one that is at least for a period of 2 years. However, under the Bill this has been changed to a term of at least 6 months and not exceeding 2 years.
Whether someone is an apprentice could still be a hotly debated issue. For example, an apprentice contract refers to a situation where someone is systematically trained for a trade, and during which they are bound to the employer’s service. “Trade” is not defined, and the EA refers to “trade”, “profession” and “business” separately, implying they are all different things. Similarly, apprentices in the First Schedule are referred to in the same category as “manual labour”, which suggest that this is more likely to apply for those learning a craft or trade, rather than those undergoing professional training.
The Bill adopts more politically correct terminology in that “domestic servants” are now referred to as “domestic employees”.
The most glaring confusion stems from a perceived intention to expand the scope of the EA to cover more employees – yet the First Schedule (the part of the EA that states the scope of its applicability) – has remained untouched. This leaves us to imply an expansion through the Explanatory Statement and other sections of the Bill, which is not ideal. Sections appear to have been deleted or modified without a proper consideration of the sum of the EA’s parts. This is a cause for concern given the statutory rights that are available to employees falling under the Bill.
While some initiatives are welcomed, the Bill tabled in Parliament appears to be a shadow of its former self (which was not even that substantial to begin with). Some provisions appear to be included merely as lip service, as they are drafted too generally to be of much practical use. The lack of specificity or foresight as to how the sections would operate in practice hamstrings the Bill.
Employers should continue to monitor developments on the Bill; if passed in its current form, employers will have to face additional obligations and added uncertainties. Employers should stay ahead of the Bill and examine whether their existing policies can comfortably surpass the minimum requirements under the proposed amended EA.
This article was written by Donovan Cheah. Donovan has been named as a Recommended Lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018, 2019, 2020 and 2021, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.
Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory. Have a question? Please contact us.