Recently, the Employment Act 1955 (‘EA 1955’ or ‘the Act’) was amended to improve the rights conferred on employees in Malaysia in line with international standards and practices. This article will highlight the changes effected by the Employment (Amendment) Act 2022 (‘the Amendment Act 2022’) on the EA 1955, which are pertinent in the syllabus for Corporate and Business Law (Malaysia). The Amendment Act 2022 came into force on 1 January 2023, and is examinable from the June 2024 exam session.
The EA 1955 is an Act relating to employment in the Federal Territories and the states in Peninsular Malaysia. There are provisions imposing duties on employers and giving rights to employees. Section 2(1) provides that for the purpose of the Act, the term ‘employee’ means any person or class of persons:
(a) included in any category in the First Schedule to the extent specified therein, or
(b) in respect of whom the Minister of Human Resources makes an order under s.2(3) or s.2A.
In 2022, the Minister made the Employment (Amendment of First Schedule) Order 2022 to expand the scope of employees by amending the First Schedule of the EA 1955. Now the Act covers any employee who has entered into a contract of service irrespective of their wages. However, certain provisions in the Act do not apply to employees whose wages exceed RM4,000 a month unless the nature of their job falls within the scope in paragraph 2 of the First Schedule. The provisions are on the calculation of the pay rate for work on rest day (s.60(3)), overtime work (s.60A(3)), and work on holiday (s.60D(3)); shift work allowance (s.60C(2A)); and termination, lay-off and retirement benefits (s.60J).
Definition
‘Contract of service’ is defined in s.2(1) to mean ‘any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee and includes an apprenticeship contract’. Prior to 2023, the apprenticeship contract should be for at least two years duration. The Amendment Act 2022 has shortened its duration to between 6 months to 24 months.
Presumption
Where the contract of service is not in writing, reference may be made to the new s.101C which lays down the presumption as to who is an employee or employer in any proceeding for an offence under the EA 1955. Section 101C provides that it shall be presumed until the contrary is proved that (X) is the employee and (Y) is the employer:
(a) where (X)’s manner or hours of work is subject to the control or direction of (Y)
(b) where (X) is provided with tools, materials or equipment by (Y) to execute work
(c) where (X)’s work constitutes an integral part of (Y)’s business or is performed solely for the benefit of (Y), or
(d) where payment is made to (X) in return for work done by (X) at regular intervals and such payment constitutes the majority of (X)’s income.
The term ‘wages’ is defined in s.2(1) EA 1955.
Wages to be paid through financial institution
Section 25 requires the employee’s wages to be paid into an account opened by a financial institution in the name of the employee or in the name of the employee jointly with another person as stipulated by the employee. The phrase ‘financial institution’ has now been re-defined in sub-sections (3) and (4) to include an approved issuer of designated payment instrument under the Financial Services Act 2013 which has been recognised by the Minister of Human Resources for the purpose of payment of wages.
Nevertheless, s.25A allows the employer to pay the wages in legal tender or by cheque made payable to or to the order of the employee at the employee’s written request and upon approval from the Director General of Labour. This applies to all employees.
Calculation of wages for incomplete month’s work
There are occasions when an employee fails to complete a whole month of service. A new s.18A provides the formula to calculate the employee’s wages for that month where they commenced work after the first day of the month, or their employment was terminated before the end of the month, or where they took leave without pay for one or more days in that month, or they took leave of absence to comply with any written law relating to national service.
Advances to employees
Section 22(1) EA 1955 states that an employer cannot give their employee an advance of wages which exceeds the wages the employee earned in the previous month. There are exceptions and two of which are to enable them to pay for the medical or educational expenses for themself and their immediate family members. Prior to the Amendment Act 2022, the definition of immediate family members did not include a spouse. It has since been amended to include a spouse. Thus, for the purpose of s.22, the term ‘immediate family members’ now means the employee’s parents, spouse, children, siblings and any other person under the employee’s guardianship.
Restriction on termination of pregnant female employee
A new s.41A provides that it is an offence to terminate the employment of a female employee on the ground that she is pregnant or suffering from an illness arising out of her pregnancy. Nevertheless, her employment may be terminated on the grounds of:
(a) wilful breach of a condition of the contract of service
(b) misconduct inconsistent with the fulfilment of the express or implied conditions of her service, or
(c) closure of the employer’s business.
The burden to prove that her termination is not on the ground of pregnancy or illness arising out of the pregnancy rests on the employer.
Prior to the Amendment Act 2022, female employees were given maternity leave of 60 days in respect of each confinement. However, the father of the newborn was not entitled to paternity leave. The Amendment Act 2022 increased the number of days of maternity leave and also conferred paid paternity leave on married male employees.
Maternity leave
Section 37(1) EA 1955 was amended to give every female employee maternity leave of 98 days in respect of each confinement, unless she has five or more surviving children at the time of her confinement. She may commence work at any time during the maternity leave provided she has obtained the consent of her employer and has also been certified fit to resume work by a registered medical practitioner.
Paternity leave
A new s.60FA prescribes that a married male employee shall be entitled to a paid paternity leave of seven consecutive days in respect of each confinement subject to the following conditions:
(a) the paternity leave is restricted to five confinements irrespective of the number of spouses
(b) he has been employed by the same employer at least 12 months immediately before the commencement of the paternity leave, and
(c) he has notified his employer of his wife’s pregnancy at least 30 days from the expected confinement or as early as possible after the birth.
Section 60A was amended to reduce the maximum number of work hours in one week from 48 hours to 45 hours. This reduction also applies to shift work (s.60C).
There is a new Part XIIC in the EA 1955 on flexible working arrangements. Subject to the contract of service, an employee may apply to their employer for a flexible working arrangement to vary the hours of work, days of work or place of work in relation to their employment (s.60P). Section 60Q provides that the application must be in writing, and that the employer informs the employee in writing of their decision within 60 days from the date of the receipt of the application. In case of a rejection, the employer must state the grounds for the rejection.
The Amendment Act 2022 included provisions on the employment of foreign employees. The employer has to obtain the prior approval of the Director General of Labour before they employ a foreign employee. They are also required to furnish the Director General with the particulars of the foreign employee and to notify the Director General of the termination of employment of the foreign employee by the employer.
Part XVA of the EA 1955 lays down the procedure to inquire into complaints of sexual harassments. New s.81H requires the employer to exhibit conspicuously at the place of employment, a notice to raise awareness on sexual harassment.
A new s.90B provides that it is an offence for an employer to threaten, deceive or force an employee to do any activity, service or work and prevent that employee from proceeding beyond the place or area where such activity, service or work is done.
The EA 1955 was amended to enhance the protection of employees in Malaysia. The amendment to the First Schedule of the EA 1955 expanded the coverage of the Act to any employee who has entered into a contract of service irrespective of their wages. In the absence of a written contract of service, reference may be made to the presumptions as to who is an employee and employer prescribed in the new s.101C. The Act was amended to bring it in line with international practices, such as the increase in the number of days of maternity leave, introduction of paternity leave, and reduction in the maximum number of working hours per week. There are also amendments to make the Act more current. For example, there is now a procedure on the application for flexible working arrangements. All these changes are beneficial to the general workforce in Malaysia.
Written by a member of the LW-MYS examining team