Q&A on Employment Law in Malaysia

1. What are the laws and regulations governing employment, labour and industrial relations in Malaysia?

The main laws and regulations include:

Employment Act 1955
Industrial Relations Act 1967
Minimum Wages Order 2018
Minimum Retirement Age Act 2012
Occupational Safety and Health Act 1994
Employment (Restriction) Act 1968
Children and Young Persons (Employment) Act 1966
Employment (Part-Time Employees) Regulations 2010
Employees Provident Fund Act 1991
Employees Social Security Act 1969
National Wages Consultative Council Act 2011
Trade Unions Act 1959

2. Which authorities and/or regulatory bodies enforce employment, labour and industrial relations laws and regulations in Malaysia?

The main authorities and regulatory bodies include:

Department of Labour
Department of Industrial Relations
Industrial Court
Department of Occupational Safety and Health
Department of Trade Union Affairs

3. What are the main employment requirements under the employment laws and regulations in Malaysia that employers should be aware of?

Minimum wage of RM1,500 per month
Minimum retirement age of 60 years
98 consecutive days of paid maternity leave for female employees
7 consecutive days of paternity leave for male employees
Duty to enquire on employees’ sexual harassment complaints
Making statutory contributions, including those under the Employees
Provident Fund, Social Security Organisation, Employee Insurance Scheme and Scheduled Tax Deduction
Applicable to all employees pursuant to the Employment Act:
- Payment of wages no later than the 7th day after the last day of the wage period
- Notice of termination of employment (or payment in lieu of notice)
- Paid annual leave and paid sick leave to employees
- Minimum of 11 public holidays per calendar year
- Payment for overtime work
- Termination and lay-off benefits

4. What are some of the employment rights and benefits to which employees in Malaysia are entitled to by law?

Right to security of tenure in employment
Right to file a representation to the Department of Industrial Relations in the event the employee considers that he/she has been dismissed without just cause or excuse by his/her employer to be reinstated (or compensation)
Right to safe and healthy workplace
Right to form, join and participate in trade unions and related activities
(Also see Q&A 3 above for employees’ benefits)

5. What are the procedures and requirements for employers to employ foreign persons and expatriates in Malaysia?

Expatriate passes include Employment Pass (Category I, II & III), Residence Pass-Talent and Professional Visit Pass
Employer shall apply for the employment pass for the foreign employee
Employer shall be registered with the Expatriate Services Division of the Department of Immigration
Compliance with basic minimum salary (depending on type of employment pass)
Compliance with minimum employment period (depending on type of employment pass)
Foreign employee’s spouse and children under 18 years old are eligible for Dependant Pass
Documents required during employment pass application include recent passport photo, passport, highest educational certificates, professional certificate, latest comprehensive resume, employment contract (duly stamped by Inland Revenue Board), supporting document from approving agency/regulatory body (if applicable) and detailed job description printed on employer’s letterhead

(Applicable to West Malaysia only.)

6. What are the common reasons that employers rely on to terminate employment contracts?

The common reasons for employee termination include misconduct, poor performance, redundancy, breach of the employment contract, rules and regulations, policies or employee handbook, expiry or non-renewal of a fixed-term contract.

7. How do employees terminate employment contracts? Are employees strictly required to fulfil the termination notice period (if any)?

Employees may terminate their employees may terminate their employment contracts by giving the employers a notice of termination. The length of the notice period is dependent on the employment contract, and in the absence of such provision in writing, a statutory notice period is provided for in the Employment Act. In any event, the Employment Act provides that the contract may be terminated without notice by the employee in the event that the employer has breached a condition of the contract. Alternatively, the employee may in lieu of notice pay to the employer a sum equal to the amount of wages the employee would have earned during the notice period.

8. What employment dispute resolution forums are there in Malaysia and what are their respective jurisdictions/purpose?

In Malaysia, the available forums for employment disputes are the Industrial Court, Labour Court and the civil courts. The Industrial Court has the jurisdiction to resolve disputes arising from unlawful dismissals and trade disputes. The Industrial Court is also empowered to order reinstatement and backwages, or compensation in lieu of reinstatement, should an order
of reinstatement be infeasible.

The Labour Court is a separate and distinct forum which resolves disputes for the class of persons who are defined as an “employee” under the Employment Act or employees listed under the First Schedule of the Employment Act, which would be employees whose salaries are more than RM2,000 but less than RM5,000.

However, pursuant to the Employment (Amendment of First Schedule) Order 2022 which was gazetted on 15.08.2022 and is scheduled to come into effect on 01.01.2023, the scope would be widened to employees who have entered into a contract of service, regardless of their salary.The Labour Court has the jurisdiction to enquire and hear matters in respect of monetary and benefit disputes under the contract of employment and is only empowered to order monetary compensation.

The civil courts can hear all other forms of employment disputes.

9. What are the laws governing trade unions and collective agreements in Malaysia?

In Malaysia, trade unions and collective agreements are governed by the Trade Unions Act and the Industrial Relations Act.

10. Must a trade union be registered in Malaysia? If yes, what is the procedure for it to be registered?

A trade union must apply to the Director-General of Trade Unions to be registered within one month of the establishment of the trade union.

The procedure for registration of a trade union is provided under Section 10 of the Trade Unions Act, which includes submitting the application signed by at least seven members of the union to the Director-General together with its officers’ details, the rules of the trade union and the prescribed fees.

11. What are the key elements to be incorporated in a trade union agreement/collective agreement?

The key elements to be incorporated in a collective agreement are, among others, as follows:

The name of the parties
Effective date and duration of the collective agreement
Settlement of disputes
Recognition by the employer
Recognition of the trade union
Trade union duties
Annual increment
Transfer and promotion
Termination of employment
Rates of pay and annual variable bonus
Medical benefits
Maternity benefits
Rest day / additional rest day / public holidays
Hours of work
Annual leave, sick leave and special leave
Retirement benefits
Employment injury
Existing benefits
Implementation

12. What trade union dispute resolution forums are there in Malaysia?

The Industrial Court is the only trade union dispute resolution forum in Malaysia.

13. When an employee’s wages are unpaid by the employer, what legal options are available to the employee?

The employee may:

Send a letter of demand to the employer;
File a complaint to the Labour Department; or
File a representation to the Industrial Relations Department against the employer claiming constructive dismissal pursuant to Section 20 of the Industrial Relations Act.

14. What are the types of dismissal cases in Malaysia?

In Malaysia, dismissal cases are commonly divided into two broad categories, namely, direct dismissals and constructive dismissals. Direct dismissals involve a situation whereby the employer issues a dismissal letter to the employee with immediate effect or with notice. Constructive dismissal includes a situation where there is a fundamental breach of the employment contract and the employee puts the employer on notice that he deems himself as constructively dismissed.

15. What factors are taken into account when determining the types of dismissal cases in Malaysia?

The factors for determining the types of dismissal cases include evaluating the conduct of the employers and employees during the period leading to the employee’s dismissal. The Industrial Court will evaluate whether the employer has adhered to due process prior to dismissing the employee on the grounds of misconduct, poor performance, redundancy or non-confirmation of probationers.

In constructive dismissal cases, the Industrial Court will evaluate as to whether there is any breach of fundamental terms in the employment contract which forces the employee to resign as a result of the employer’s breach. Common circumstances which may amount to constructive dismissal include non-payment of salary, victimisation, discrimination, harassment, demotion and change or reduction in job responsibilities.

16. When an employee has been unfairly dismissed, what legal options are available to the employee?

The employee has the right to file a representation for unfair dismissal to the Director General for Industrial Relations pursuant to section 20 (1) of the Industrial Relations Act. Upon receiving a representation, the Director General will take the necessary steps to achieve an expeditious settlement. If there is no likelihood of the representation being settled, the representation will be referred to the Industrial Court for determination.

17. What is the limitation period imposed on employees to commence a legal action against the employer?

The Industrial Relations Act provides that the claimant may file the representation for unfair dismissal within 60 days from the date of dismissal, or where the dismissal is made with notice, no later than 60 days from the expiry of the notice period. Once the limitation period of 60 days has passed, the Industrial Court will cease to have jurisdiction to hear any claims against the employer.

In the event the claimant wishes to commence a civil suit against the employer for a breach of contract, the Limitation Act 1952 provides the claimant with 6 years to file the suit in court.

18. When an employee decides to take legal action against the employer, what are the steps to observe and comply with?

An employee who feels that he has been dismissed without just cause or excuse may submit the representation for unfair dismissal by way of a form called the Annexure P1 together with copies of his identification document within 60 days of the dismissal or if he has been dismissed with notice, 60 days from the expiry of the notice period. Thereafter, the employee is required to submit his particulars (as the claimant) and the grounds for dismissal in Annexure P2, and a copy of the relevant documents in support of his claim, namely, the appointment letter, termination letter, show cause letter or notice of domestic inquiry, if any, in Annexure P3.

19. When taking legal action against the employer, can an employee represent himself?

An employee may represent himself or where he is a member of a trade union of workmen, be represented by an officer or employee of the trade union. However, given the complexity of employment law, it is advisable for both the employee and employer to be represented at the Labour Court and the Industrial Court.

20. What happens if an employee’s death takes place before the completion of the legal action filed by the employee?

The Industrial Relations Act empowers the Industrial Court to continue an unfair dismissal proceeding notwithstanding the death of the employee. The Industrial Court is also empowered to award backwages or compensation in lieu of reinstatement, or both, to the next-of kin of a deceased employee.

21. Does the aggrieved party have a right to appeal against the decision? If yes, is there a limitation period to file for an appeal?

For cases that were referred to the Industrial Court prior to 1.1.2021, the aggrieved party may file an Application for Judicial Review against the award made by the Learned Chairman within three (3) months from the date the award was communicated to the party.

However, for cases that were referred to the Industrial Court after 1.1.2021, the aggrieved party may appeal against the award made by the Industrial Court to the High Court within 14 days from the date of receipt of the award.

22. Is there any alternative dispute resolution available? If yes, what are the key differences between the alternative dispute resolution and a suit filed in court?

Upon receipt of a complaint for unfair dismissal, the Industrial Relations Department will call parties to attend a conciliation meeting at the Industrial Relations Department to explore an amicable settlement between the disputing parties. This process is a statutory requirement under the Industrial Relations Department. If parties fail to reach a settlement, the dispute will be referred to the Industrial Court.

In most cases, the Chairman of the Industrial Court will encourage parties to undergo mediation with the Chairman acting as the mediator, even after a dispute is referred to the Industrial Court. In the event of an agreement being reached during the mediation, parties may record a consent award detailing the terms of the settlement.

This article is reproduced from the Malaysian Chapter in the League of Lawyers’ Country Guide on Employment Law. If you’re interested in exploring chapters from other jurisdictions, click here.

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Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.