The New Employment Law Amendments: Empowering Employees

*Note: Barring any further amendments to the law, this article should be read in the context of the Bill being passed in the current form as at 21 March 2022. 

The Employment (Amendment) Bill 2021 (“Bill”) was tabled before the Malaysian Parliament (House of Representatives) on 25 October 2021 and approved by the House of Representatives on 21 March 2022. The Bill will now proceed to be tabled before the Senate and thereafter, it will be presented for Royal Assent by His Majesty The Yang di-Pertuan Agong. Therefore, it will still take a while before the Bill will legally come into force.

That being said, as the Bill will bring significant impacts on the employment scene in Malaysia, employers are urged to pay serious attention to the new changes put forward by the Bill.

The Bill seeks to amend the Employment Act 1995 (“EA”) that has been in force since 1 June 1957. It is one of the oldest legislation passed prior to our Independence Day and has remained as the main legislation governing the employment practices in Malaysia. Throughout the years, the EA has been amended several times to take into account changes in modern employment practices as well as to ensure our country’s labour law meets the international labour standards outlined by the International Labor Organisation (“ILO”) and other international conventions and practices.

This article aims to share with you the main amendments in the Bill. To get a better understanding and overview of the amendments, this article also makes reference to the Parliament’s Hansard dated 21 March 2022 (“Hansard”).

According to the Hansard, the Deputy Minister of Human Resources, Datuk Haji Awang bin Hashim mentioned that the main objectives of the EA is to provide protection and welfare to workers through the setting of minimum terms and conditions of employment whereas the main objective of the Bill is to increase and improve the protection and welfare of the working class in the country by way of strengthening the labour market, employees’ welfare and prohibiting discriminatory practices by employers.

In other words, this Bill aims to empower workers’ and employees’ rights and protection in Malaysia.

1. Workplace

(a) Flexible working arrangement

The Bill allows a flexible working arrangement to be entered into between employees and employers such that they can vary the hours of work, the days of work or the place of work. This arrangement has to be initiated by a written application by the employee, in the manner and form as determined by the Director General of Labour (“DG”).

Once the employer receives the application, he must decide whether to accept or reject the application within 60 days from the date of application. The final decision will be made by the employer but if he rejects such application, he must provide the reason in writing. This flexible working arrangement is to incorporate the hybrid work culture that has been put in place at many workplaces since the outbreak of the COVID-19 pandemic and therefore, the Government believes that this should not come as a surprise to many employers.

Nevertheless, the arrangement is still subject to other provisions of the EA and any agreed arrangement should not contravene the existing provisions such as the number of working hours, adequate rest time etc.

(b) Reduction of work hours

The maximum working hours per week for EA employees has been reduced from 48 hours to 45 hours in the Bill. If the employee is required to work beyond 45 hours per week, the employer may be required to give overtime payment to the employee as overtime payment is one of the mandatory benefits under the EA. This amendment is in line with the two main ILO conventions regarding working hours and the Bill also allows the Minister of Human Resources to make regulations relating to night work and shift allowances.

(c) No forced labours

The Bill prohibits any form of forced labour. Force labour is defined in the Bill as (i) threatening, deceiving, or forcing employees to do any activity, service or work and (ii) preventing the employees from leaving before the activity, service or work is done. Employer who contravenes this section may face a monetary fine up to RM100,000 or imprisonment up to two years or both.

(d) Increase awareness of sexual harassment

The Bill introduces a new requirement for the employer to display a notice that raises employees’ awareness towards sexual harassment. This notice shall be placed at a conspicuous place in the workplace.

The Bill however deleted section 81G in the EA which allow sexual harassment complaints to be made by any employees irrespective of their wages, including employees that falls outside the realm of the EA (i.e., non-EA employees whose monthly salary is more than RM 2000). However, the sexual harassment provisions in the EA are still there and EA employees can still lodge a sexual harassment complaint to their employers. As for non-EA employee, they can still lodge a sexual harassment complaint to the Industrial Court or to institute a tort claim against the harasser if such event arises.

Do take note that the Government through the Ministry of Women, Family and Community Development, has also tabled a stand-alone Anti-Sexual Harassment Bill 2021 on 15 December 2021 and it is expected to be debated and hopefully passed by the Parliament later this year.

2. Maternity, paternity leave and pregnant employee’s protection

(a) Maternity and paternity leave

Under the EA, a female employee is entitled to 60 days of maternity leave while a male employee is not entitled to any paternity leave. The Bill raises the 60 days maternity leave to 98 days to follow the Maternity Protection Convention. However, the Bill removed section 44A of the EA which allow non-EA employees to be entitled to the same benefits.

On a plain reading, it might seem that the Government has taken away such maternity benefits from non-EA employees and that any maternity benefits will be left entirely in the employment contract between the employer and employee. However, the Deputy Minister of Human Resources had mentioned in his speech that the Government’s intention is to broaden the application of certain parts of the EA to cover non-EA employees as well and that would include maternity benefits, subject to certain conditions which will be further stipulated in a Ministerial Order that his Ministry is currently drafting.

Under the Bill, male employees in the private sector are now entitled to 7 days paternity leave for each child, up to maximum of five children. This introduction is to allow male employee to celebrate the birth of the newborn baby, to take care of his wife (especially the physical body recovery and psychological support) as well as complete the tasks on hands such as birth registration and settling down on confinement procedure etc. The entitlement to paternity leave is subject to two conditions. Firstly, the male employee must be employed for at least 12 months by the same employer whom he applies for the paternity leave. Secondly, the male employee must give at least 30 days prior notice to the employer of the expected birth delivery date. Whether non-EA male employees are also entitled to such benefit remains to be seen, when the Ministerial Order is published later on.

(b) Non-dismissal of pregnant employees

Section 41A is a newly inserted provision into the Bill to protect pregnant employees from being dismissed by the employers because of pregnancy or due to illness arising out of pregnancy. This amendment is in line with the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW). It shall be an offence if the employers terminate the pregnant employees during their pregnancy period unless such termination is on the grounds of a wilful breach of the employment contract, misconduct or closure of business.

3. Heavier penalty and increase in the power of authority

(a) Increase in penalty

The general penalty under the EA has been increased from RM10,000 to RM50,000 to give a heavier and stern warning to employers not to breach the provisions of the EA.

(b) Increase in Court’s power

The court has the power to issue a warrant to levy the employer’s property for any payments due when the employer, who has been convicted for offences relating to wages, fail to make any payment due to the employee.

(c) The employment of foreign employees is subject to DG’s approval

The EA requires employers who employ foreign employees to furnish the particulars of foreign employees to the DG. This requirement has been tightened in the Bill. Employers will now need to apply in writing and furnish the required particulars in order to get DG’s approval. Employers who did not obtain DG’s approval may face a monetary fine up to RM 100,000 or imprisonment up to five years or both. According to the Hansard, this will allow an effective monitoring of the employment of foreign workers by the Government to prevent human-trafficking cases and hiring of illegal foreign workers. This will have an impact on employers hiring foreign workers and expatriates as not only they have to get permit from the Immigration Department, they now also have to get an additional approval from the DG of Labour, which means additional administrative work and cost will be involved.

(d) Inquire into dispute relating to workplace discrimination

The DG has the power to inquire and make any order regarding dispute that involves workplace discrimination. Employers who fail to comply with the order will face a monetary fine not exceeding RM 50,000 and a daily monetary fine not exceeding RM1,000. However, the Bill does not define what amounts to discrimination, and such may lead to various forms of interpretation. 

The “discrimination” here only covers discrimination in employment disputes between an employer and an employee. As there is no employment relationship between job seekers and employers, this provision will not protect job seekers from discrimination (for e.g. if the job advertisement places racial discrimination language).

Besides the amendments stated above, the Bill further amends or modifies the definition and wording of several provisions. For instance, the Bill proposes to change the archaic word “servant” in the EA to “employee”, the definition of an apprentice contract has been modified to be at least 6 months and not exceeding 2 years etc.

4. Presumption of employment

It has always been a debate as to what constitutes “employment” as that will have implications on the employment benefits and protection. For e.g. an employee will receive SOCSO and EIS protection whereas an independent contractor will not get to enjoy such benefit.

The Bill lists out that if certain factors are present, these will be the presumption of an employment relationship (in the absence of a written contract):

• 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

The above section could be interpreted in many ways and question still remains as to whether “gig workers” (such as e-hailing drivers, food delivery riders) would be considered as “employees” or “self-employed”. SOCSO took the position that gig workers are self-employed and are covered by their own contribution fund whereas the Government has expressed intention to regulate them under a new legislation which they will propose to the Parliament.

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About the author:

This article was written by Edwin Lee Yong Cieh, Partner and Wong Shen Ming, Trainee Lawyer – law firm in Kuala Lumpur, Malaysia.

The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.