HR Matters Magazine presents Mastering Industrial Relations

Updates from the 22 Nov 2011 Briefing
Updates from the 23 Aug 2011 Briefing
Updates from the 24 May 2011 Briefing
Updates from the 22 Feb 2011 Briefing

There will be a new series of Briefings for 2012 to be announced shortly. For more info, go to http://www.hr-matters.info/forum.htm.

Key updates from the recent Mastering Industrial Relations in Malaysia Briefing held on 22 Nov 2011

The final in the four part series of quarterly briefings on Mastering Industrial Relations in Malaysia was held recently at the Star Auditorium on 22 November 2011. Dharmen Sivalingam of Meca Employers Consulting spoke about the proposed changes to the Employment Act, specifically on maternity protection, gazetted public holidays, minimum wages and new provisions on sexual harassment.

Cost of business will go up
At present, those on wages between RM1500 – RM2000 do not get protection as they are not within the scope of the Employment Act 1955. As a result of changes to the Employment Act now, this category of people will come within the scope. Consequently, employers will be liable to pay overtime to these people for overtime worked.

The enlargement of the group now covered will have a definite impact on business and cost of business will therefore increase.

Maternity protection
The Employment Act 1955 defines the word "confinement" to mean parturition resulting after at least 28 weeks of pregnancy in the issue of a child or children, whether alive or dead, and shall for the purposes of this Act commence and end on the actual day of birth and where two or more children are born at one confinement shall commence and end on the day of the birth of the last-born of such children. Therefore, based on current legislation, if a female employee should deliver her child after 25 weeks, no maternity protection will be accorded to her.

However, with the proposed changes to the Act being a change from 28 weeks down to 22 weeks of pregnancy, the same employee will now be protected.

The law states that the pregnant female employee :-
( i) must have worked at least 90 days during her pregnancy;
(ii) must have worked at least 1 day in the last 4 months before the confinement period.

If she has worked as above, then she would be entitled to maternity protection ie entitled to not less than 60 days of maternity leave. What this means is that if an employee leaves employment after satisfying both qualifying criteria, she would be entitled to her salary for the 60 days of leave accorded. The condition for this however, is that maternity protection is accorded to female employees with five or less surviving children. The amendments also provide for the same protection to all female employees whether or not they come within the scope of the Act.

Number of public holidays has increased
The number of public holidays has increased, by 1 from 10 days currently, to account for Malaysia Day.
There are five days in particular that are considered compulsory public holidays.

The holidays that must be observed are :-
i) Merdeka
ii) The King’s birthday
iii) Federal Territory Day/ Sultan's Birthday
iv) Labour Day
v) Malaysia Day

The remaining six public holidays to be observed are left to the organisation’s discretion ie an organisation has the choice as to which holidays it wants to observe from the list of gazetted public holidays. For these six days, with the consent of the employee, an employer may be able to substitute a public holiday with another day. However, with holidays that have been declared suddenly, no employee consent is needed for such substitution.

New provisions on sexual harassment
The new provisions will be applicable to all employees and are not restricted to female employees. The obligations of the employer as laid out are that :-
i) If a complaint is made, the employer is duty bound to investigate the matter or may be liable to a fine of up to RM10,000.
ii) The exception is where the matter was previously raised and was investigated and where the employer believes that the matter being raised is frivolous or vexatious. However, if this is the case, the employer must inform the employee of this, in writing, within 30 days.

Provisions on minimum wage
There has been much debate on this issue.
The Wages Council Act decides on the appropriate minimum wage applicable.

The minimum retirement age
It is to be set at 60 years of age and applicable to all employees regardless of the salary earned. The Minimum Retirement Age Act is now being deliberated on. There is a provision which states that the Act will apply even to those on fixed term contracts so long as the period of contract, including renewals, exceed 24 months.

Increased contributions for wage earners RM5000 and below
It has been decided that all employees earning a wage of RM5000 or downwards will warrant employer contributions to the EPF fund of 13%. However, no enforcement date for this has been set as yet. In any event any enforcement will 3be applicable in the future ie not retrospective in effect.

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Key updates from the recent Mastering Industrial Relations in Malaysia Briefing held on 23 Aug 2011

The third in the four part series of quarterly briefings on Mastering Industrial Relations in Malaysia was held recently at the Star Auditorium on 23 August 2011. Dharmen Sivalingam of Meca Employers Consulting spoke about key issues pertaining to misconduct and highlighted some caselaw developments. Some of these are outlined below in more detail.

Due inquiry and the principles of natural justice
One of the issues pertaining to misconduct relates to what meaning is ascribed to certain words used in the legislation. For example, in Section 14 of the Employment Act 1955 (EA), the word ‘due inquiry’ is used. Under Section 14 of the EA, it is stated that an employer may, after due inquiry, dismiss an employee or take other disciplinary action including downgrading and suspension of the employee on grounds of misconduct inconsistent with the fulfilment of the express or implied conditions of service.

The issue here is that the Act does not define what due inquiry means in this instance and therefore, we are to look to caselaw to assist us. However, it is important to note that when conducting domestic inquiries, a fundamental tenet is that the rules of natural justice apply. Justice must not only be done, it must be seen to be done. Natural justice may be summed up as 'no man shall be condemned unheard'.

Dharmen went on to explain that while this is simple enough, employers cannot take a simplistic stand on the matter. There is a need for certain processes to be put in place to ensure consistency in how this rule is applied. The advice Dharmen gives is that when managing a misconduct situation, the best thing to do is to work on a worst case scenario – assume that the case goes to court and therefore all the relevant information and documentation to prove whatever it is that you seek to assert must be maintained.

Due process
In managing misconduct, due process should be complied with. When due process is followed, the rights of employees are protected and this ensures that the company's chances of success, in the event the matter goes to court, are enhanced.

When an inquiry is held, who decides on the punishment to be meted out? It is not appropriate for the inquiry panel members themselves to make that call. These members need to be impartial and neutral. Ideally, this also means that panel members should not have sight of past records of the accused employee. Without knowledge of the accused employee's past records, a decision on punishment may not be effectively made.

Reliance on information presented and misconduct – a case update
Dharmen drew reference to a particular case that was decided recently. It concerned an employee who was hired, among other things, on the strength presented by an MBA, from the University of Hull, that he held. Four to five months after his employment had begun, the employer and employee had a falling out which resulted in the employee being dismissed. The employee thereafter sought to claim for unfair dismissal. While this case was awaiting decision, the employers had in the meantime, discovered that the MBA the employee possessed was false and they took up a civil suit for wages for the period of his employment. The Sessions Court held that the employee was wrong in this instance and awarded the case to the plaintiff employer. The Court ordered the employee to pay the employer back for the wages he had taken. The decision was upheld by the High Court on appeal. One of the arguments made was that the decision to hire was heavily influenced by the employee’s possession of the MBA.

For more Industrial Relations updates and developments, come to the final Briefing on 22 November. For more info on the Briefing, programme updates and speaker profile, go to www.hr-matters.info/forum.htm.

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Key updates from the recent Mastering Industrial Relations in Malaysia Briefing held on 24 May 2011

The second in the four part series of quarterly briefings on Mastering Industrial Relations was held recently at the Star Auditorium on 24 May. Dharmen Sivalingam of Meca Employers Consulting gave a presentation touching on key legislative updates as well as caselaw highlights and implications thereof. Some of these are outlined below in more detail.

Legislative updates
1. The Employment Act is coming up for amendment. There have been many discussions since 2009 but these have yet to be finalised. Amendments are now at Parliament and coming up for debate at the June 2011 sitting. A major issue is the coverage of the Employment Act (EA). It currently applies to those with wages not exceeding RM1,500.00. There is a plan for this to be extended to all employees with wages not exceeding RM2,000.00 instead.

2. Second key area is the topic of sexual harrassment. Plans are afoot for a provision on this area to be worded to apply to all employees regardless of salary structure. This is far more inclusive and bodes well.

3. There is a move to increase the number of public holidays a year from ten to eleven to account for Malaysia Day which falls on September 16. Currently, this is not the law as yet. Hence, employers may not be duty bound to provide this holiday.

4. There are also changes afoot in the area of wage advances to employees. Currently, this area is regulated under the Employment Act 1955. These changes are due to the antiquated nature of the Employment Act. For example, there are references to wage advances being allowed for employees who wish to buy livestock or bicycles, for example. Changes are being proposed to the Employment Act to be more reflective of current practices and developments.

5. There are changes being discussed pertaining to the minimum wage. Although this was supposed to be tabled in June 2011, it may be that the relevant parties are not in a state of readiness just yet however.

6. Lastly, a critical change pertaining to the Industrial Relations Act 1967 is that if you should earn more than RM10,000/- per month, then you cannot go to the Industrial Court. This is still at proposal stage and the outcome is as yet, still unclear and this is strongly being opposed to by some stakeholders.

All of the above are still up for debate and the final changes are, as yet, unclear.

Caselaw highlights
Clear exit strategy
There was a recent case pertaining to a telecommunications company. A senior employee, prior to joining the organisation, had entered into negotiations with his prospective employer. Terms were drawn up for his employment which stated that should he be terminated at any defined time, a specific package would be paid out. For example, if he was terminated in his first year, he would be paid X. If terminated in his second year, he would be paid Y and so on. Consequently, upon joining the organisation, there was some disagreement which led to discussion about termination of contract of employment. Subsequently, the employee was terminated and the payout was made as specified in the contract drawn up. The employee received more than RM2 million after which he proceeded to file a complaint at the Industrial Court.

Decision : The organisation won the case on the grounds that there was a clear exit strategy specified. The employee appealed against the decision and the Court held that, especially when dealing with senior level employees and where the termination payout was large and the compensation adequate, it would be unfair on the organisation to have to reinstate the employee.

Poor performance
A second case pertains to poor performance. In 2010, some 8000+ cases were filed at the Industrial Relations Department. Of these, mainly cases are due to poor performanceand misconduct. The success rate for misconduct was such that up to 65% of employers won the case. It seemed that things are more clear with misconduct. On the contrary, the success rate for employees when it came to poor performance, was higher at about 70%. Poor performance brings in the element of subjectivity.

This case involved an employee whose employment contract stated that either party could terminate by giving notice. An employee can simply resign just by providing 24 hours' notice. The question was why employers could not do this as easily. The reason for this is due to the fact that the specific clause on termination in contracts, is in conflict with Section 20 Industrial Relations Act 1967 wherein an employee can file a complaint if he feels that the termination constituted unfair dismissal. In a situation where individual contracts conflict with existing legislation, legislation will prevail.

The clause however, remains in a great majority of these contracts still simply because it presents limited use. If you were to file a complaint after a period of 60 days after the incident, then the complaint would not be accepted at the Industrial Relations Department. There are time limits imposed for action. However, while you may be prevented from actioning this off in the Industrial Court, it can still be adjudicated at the Civil Court where the clause allowing termination with notice is accepted.

The reason that the rate of failure is so high for employers, at least in terms of poor performance, is frequently due to the fact that employers need to give employees sufficient opportunity to improve. Any time frame imposed for such action should be reasonable. While there is no magic formula, the most critical aspect is that all actions pertaining to this needs to be documented. In many situations, employers lose out in court, not because they were wrong but because they failed to document the trail. Verbal statements by supervisors or other managers in such situations are often seen as too subjective. Timelines are not recorded and memories fade. Assertions are not sufficient. If an employee wins at the Industrial Court, it is more likely due to the fact that there may be insufficent qualitative and/or quantitave data to back up their assertion of poor performance.

That is why proactive action in managing employee relations is a more balanced and successful approach to managing employees. The contrast between a well managed situation is stark against a poorly managed situation which leads to industrial action. The road begins with KPIs and thinking about how you can measure an employee's performance. You have got to be able to show with empirical evidence where an employee, in terms of performance, is and where he should be. The focus on industrial relations therefore, is purely reactionary. A clear plan that encompasses a robust recruitment process, clear job description, a well-crafted onboarding process, amongst others, goes a long way. This enables the employee, when he joins, to begin work, equipped with the necessary tools and understanding what is required of him.

Fair treatment of probationers
There is a tendency amongst some organisations to extend probation terms and to this extent, it is abused. If you need to assess someone two or three times during this period, you are already in a position to make a decision on them. An extension should only rightly be granted when the probationer is not good enough to confirm yet not such that he needs to be let go. Section 30 of the Industrial Relations Act draws reference to the court being a court of good conscience and equity. This simply means that you need to act in good faith to come to this Court asking for justice. If you extend a probationary term unnecessarily, this action will be viewed as being in bad faith and will therefore, be read against you.

For more Industrial Relations updates and developments, come to the next Briefing on 23 August. For more info, go to www.hr-matters.info/forum.htm.

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Key updates from the recent Mastering Industrial Relations in Malaysia Briefing held on 22 February 2011

At the recent briefing above, Dharmen Sivalingam highlighted some of changes being discussed at the legislative level and provided some insight. Dharmen also referred to some key caselaw and its implications. The issues discussed include the following :-

1. Potential legislative amendments
The Industrial Relations Act 1967 and the Employment Act 1955 may be subject to significant amendments shortly. The primary drivers for these amendments are said to be the slip in Malaysia's ranking in terms of global competitiveness. According to the Global Competitiveness Report 2009-2010, Malaysia ranked 24th, down three positions, essentially as a result of a much poorer assessment of its institutional framework.* It is also believed that this is a consequence of our country's archaic and prescriptive laws. The amendments are not finalised and are being driven by PEMANDU although some amendments to the Employment Act 1955 are due to be considered by Parliament in the next sitting and if it is gazetted, it would take effect from 1 May this year. So, this is something to keep an eye for in the coming months.

Many changes through the years have been passed via a series of amendments ie they have been reactionary to some extent. What is needed now is a more holistic look at the legislation, which is dated. Thailand, for example, has legislation with stringent timelines in dealing with employee complaints. This would be great to emulate.

* World Economic Forum Global Competitiveness Report 2009-2010: Country Profile Highlights

2. Speed of case resolution
One of the issues being looked at is the timeliness in which a case is processed. In Thailand for example, the timeline for a case from dismissal to decision is very likely to take not more than a year. As a result of the push for greater speed in our legal system now, the Bar Council has said that legal fees are likely to increase by as much as three times the current fee levels. From an industrial relations point of view, defending a case in the Industrial Court which might cost anywhere from RM15,000 and upwards at present, may go up threefold. This therefore has a bottom line impact on employers as a whole.

One of the ways in which these cases may be sped through the legal system is the current use of pre-trial assessments. A pre-trial assessment is a situation whereby a judge would look a the merits of the case and proceed to give his views on the issues at hand. This usually happens without the need to call witnesses etc. Any flaws may be picked up and highlighted to the parties concerned. This is done with the aim of early closure or settlement where possible. However, if the parties decide to proceed anyway, they would continue but with a different judge. All this is being undertaken with the primary aim of cutting down the timeframe in processing these cases and moving towards closure as quickly as possible.

While the number of cases that have been settled at present may appear to be small, it does represent a good step in the right direction and the process is far more robust.

3. The position on probationers
There are a few things that employers need to realise about probationers ie those who are still regarded to be on probationary terms at the company. One of these is understanding what position the employee on probation holds, if the company does not do anything after the probation term. Generally, there are three options available. A company can choose to confirm the probationer, extend the probation term or decide not to confirm the probationer. At present, our legal position closely mirrors the precedent established in India, namely that the probationer is deemed to still be in probation if no action is taken by the company.

A High Court decision sought to change this. In this case, the court decided that the employee should not have been left in a state of uncertainty and that he should be deemed confirmed. The decision reversed a previous Supreme Court decision. This however, was not allowed primarily because in the legal arena, a lower court, the High Court, cannot overturn a decision made by a higher court, the Supreme Court. Consequently, on appeal, the existing law applied in the case above, ie the probationer remained a probationer.

Another case on the issue of when a probation term was deemed to end was also recently decided. In this case, the person was on probation for 10 months and in December, was given a bonus. In January thereafter, he was terminated on grounds of non-confirmation. The question was whether the termination was with just cause. One of the issues considered dealt with the issue of how much back wages was payable. Maximum back wages payable to a probationer is 12 months, whereas a confirmed employee would be entitled to a maximum of 24 months. The argument put forward was that as the person was only on probation and not confirmed, he was therefore only entitled to 12 months back wages. The argument put across in defence however was that the Company Handbook clearly stated that bonuses would only be given to confirmed employees. Consequently, the Court held that the act of paying him the bonus amounted to implied confirmation and thereafter, the person was entitled to 24 months in back wages.

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