In Wong Mei Yoke v Tien Wah Press Malaya Sdn Bhd [2018] 1 ILR 20] (which was upheld by the High Court on judicial review), the Industrial Court dealt with the issue of an employee who was placed on a fixed term contract after being retired. The Industrial Court held that as the employee was retired before the Minimum Retirement Age Act 2012 (“MRAA”) came into force, and subsequently placed on a fixed term contract within the purview of the MRAA, she therefore had the right to work until she attained the age of 60 – this is notwithstanding that her contract of employment was on a fixed term basis that would have expired at the end of the agreed term.

As the decision of this case has wider implications on fixed term contracts generally, it warrants a careful study of the court’s findings and reasoning, which will be discussed in this article.

Background facts

  • The employee was previously hired on a permanent contract;
  • The employee had retired at the age of 50 (before the MRAA came into force);
  • After her retirement, she was thereafter employed on a fixed term basis;
  • The employee’s contract was renewed 3 times, each duration was between 1-2 years;
  • The employee’s contract was not renewed, allegedly due to the company’s restructuring exercise which rendered the employee’s role redundant.
  • At the time of the non-renewal, the MRAA was in force which provided a minimum retirement age of 60 for certain categories of employees.

Issues

One of the issues adjudicated before the court was whether the employee was dismissed, or whether her contract had come to a natural end when the contract expired.

The decision on this issue centred on the interpretation of the MRAA as the argument that was mounted by the employee was that she cannot be dismissed until she attains 60 years of age, as she is an employee that comes within the purview of the MRAA.

Industrial Court’s decision

For context, the MRAA does not apply to everyone. The Schedule in the MRAA excludes certain categories of workers, such as:

  • a person who is employed on a fixed term contract of service, inclusive of any extension, of not more than 24 months;
  • a person who is employed on a fixed term contract of service, inclusive of any extension, of more than 24 months but not more than 60 months with basic wages of RM20,000 per month and above; or
  • a person who, before the date of coming into operation of this Act, has retired at the age of 55 years or above and subsequently is re-employed after he has retired

The court said that the employee came within the purview of MRAA because:

  • The employee had retired before she was 55, before the MRAA came into force;
  • The employee’s contract, inclusive renewals was more than 24 months.

As a result of this finding, the court said that the employee was therefore entitled to work until she attains the age of 60, notwithstanding that she was on a fixed term contract, on the following grounds:

  • An employee, including an employee on a fixed term of 24 months or more, would have the right to work until that age
  • Any contract of employment which exceeds 24 months would by operation of law bring the employee within the scope of MRAA (if the employee does not earn RM20,000 per month or above)
  • An employee has security of tenure if his/her fixed term contract is for 24 months or more
  • Employers can no longer claim that a contract has “come to an end” by way of effluxion of time. The MRAA has removed this cause for termination of contracts for employees who qualify under the MRAA

Commentary

The possible implication of the decision is that all fixed term contracts with duration which exceeds 24 months are permanent contracts, unless the exceptions apply (e.g. the contract is less than 60 months with monthly wages of more than RM20,000; the employee was rehired after retiring at 55, etc.).

With respect, the Wong Mei Yoke case may have misinterpreted Parliament’s intention when it enacted the MRAA. The objective of the MRAA as set out in its preamble is to “provide for the minimum retirement age”. Under Section 5 of the MRAA, an employer shall not prematurely retire an employee before the employee attains the minimum retirement age (currently set at 60). This is substantially different from saying that an employee on a fixed term contract of 24 months or more will have security of tenure until the age of 60.

The objective of the MRAA is not to interfere or regulate an employer’s prerogative to enter into fixed term contracts where the operational requirements demand for such short-term engagements. However, the Industrial Court’s findings in Wong Mei Yoke may unintentionally set a precedent where fixed term contracts exceeding 24 months or more (inclusive renewals) are rewritten by operation of law to have their terms automatically extended until the employee reaches the age of 60.

The Industrial Court’s approach in Zulkefli Hashim v Uda Holdings Berhad [2018] 2 LNS 3169 (“Zulkefli’s case”) provides a more nuanced interpretation of the MRAA, stating that the MRAA only provides for the minimum retirement age and nothing else. In Zulkefli’s case, the Court held:

  • the MRAA does not in any manner provide that an employee who is employed on a fixed-term contract will be treated or deemed as a permanent employee in that company
  • the MRAA in setting out the minimum retirement age of 60 years for employees, was never intended to inhibit the right of employers to offer fixed-term contracts to their employees. This cannot be the intention of Parliament. In the MRAA there is no expressed nexus between the minimum retirement age and the supposed imposition of permanent employment in all circumstances. To agree otherwise would impinge on the prerogative of employers to carry out their governance and management in the manner they deem fit
  • Wong Mei Yoke’s case was distinguished on the basis that the employee was earlier appointed as a permanent employee in the company. In pursuance of the MRAA, the employee’s retirement age in the company under her contract of employment was held to be extended from 50 years to 60 years. In other words, because the employee was prematurely retired and placed on a fixed term contract as a result, she was in substance still a permanent employee and had a right to work until she attains the age of 60

The author is of the view that Zulkerfli’s case is the correct proposition of the law regarding the interpretation of the MRAA. The MRAA should not be interpreted to unwind what is a genuine, fixed term contract.

However, as the High Court did not quash the Industrial Court’s decision in Wong Mei Yoke’s case, the interpretation of the MRAA there may be treated as a precedent for future cases. This is unless the High Court had reached its decision using different reasonings and interpretation of the MRAA. As at the time of writing of this article, the High Court has not prepared any written grounds of judgment.

The end result is that conservative employers who are aware of the Court’s decision in Wong Mei Yoke’s case will likely avoid having fixed term contracts longer than 24 months. Such employers may even refuse to renew fixed term contracts to avoid extending it beyond a 24 month term, to mitigate their risk.

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This article was written by Donovan Cheah (Partner) and Adryenne Lim (Senior Legal Executive). Donovan has been named as a recommended lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018, 2019 and 2020, 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.

 

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