Case Spotlight: Test for Fortuna Injunction where there is an Arbitration Agreement

Case Spotlight: Test for Fortuna Injunction where there is an Arbitration Agreement

Recently the High Court in PRPC Utilities and Facilities Sdn. Bhd. v PBJV Group Sdn. Bhd. & Anor [2022] 2 CLJ 276 held that the existence of an arbitration agreement does not stop a party from presenting a winding-up petition against the other party.

Here, the Defendant presented a winding-up petition against the Plaintiff to recover a debt arising from a construction payment claim. The Plaintiff sought to restrain the presentation of the winding-up petition, arguing it falls within the scope of the arbitration agreement between parties, and therefore arbitration should have been a proper forum to hear the dispute, not the Courts.

Brief Facts

The Plaintiff and Defendant entered into a construction agreement where the value of the contract is at RM84,148,028 (“Contract Price”).
The Defendant commenced a separate suit against the Plaintiff for RM42,696,538.56 (“Suit”). This sum includes the Defendant’s Progress Claim No. 9, amounting to RM6,579,806.74 of the Contract.
The Plaintiff applied to stay the Suit pending reference of the dispute to arbitration where in the arbitration, the Plaintiff is claiming for a sum of RM85,203,274.96 (“Arbitration”).
On 23.9.2020, the Defendant issued a payment claim under Section 5 of the Construction Industry Payment and Adjudication 2012 (“CIPAA”) to claim a sum of RM6,579,806.74 from Progress Claim No. 9, to be paid as Progress Claim No. 10 under the Contract.
The Defendants also issued the Plaintiff a statutory notice of demand under Section 466 of the Companies Act (“Notice”) where the Defendants demanded from the Plaintiff the sum of RM6,579,806.74.
The Plaintiff disputed the demand and applied for a Fortuna Injunction to restrain the presentation of the Defendant’s Winding-up Petition.

Key Issues

The key issues to be determined by the Court were:

whether winding-up proceedings are subject to or caught by the arbitral proceeding or an arbitration agreement/clause;
Whether the arbitral proceeding is the proper forum for the parties’ dispute herein to be determined; and
the impact the arbitral proceeding and parties’ arbitration agreement will have on the tests for a Fortuna injunction and the proper test that should be applied.

Court’s Findings

The Court applied the principles in NFC Labuan Shipleasing I Ltd v. Semua Chemical Shipping Sdn Bhd [2017] 1 LNS 943 and held that winding-up proceedings are not subject to or caught by an arbitration agreement. An arbitration does not prohibit the defendants from presenting and proceeding with a winding-up petition.

However, the Court still allowed a Fortuna Injunction to restrain the presentation of the winding-up petition because where there is an arbitration agreement, the Plaintiff only needs to satisfy a lower threshold prima facie test – i.e., is there a prima facie dispute that the debt fell within the arbitration agreement.

Here, the Court held that the Plaintiff met this lower threshold prima facie test. Not only did the Plaintiff dispute the Defendant’s claim under the statutory demand based on the argument it falls under the arbitration agreement, the Plaintiff provided detailed reasons for their dispute. This went above and beyond what they needed to show. The Plaintiff not only met the lower threshold prima facie test, the Plaintiff also passed the usual standard requirement for a Fortuna Injunction of showing that the debt is bona fide disputed on substantial grounds.

The Court also held that the steps taken by the Defendants (the Suit and the CIPAA payment claim) were in themselves evident that the Defendants had considered there were other processes that could be taken to claim the sum under Progress Claim No. 9. That would affect the suitability of proceeding with a winding-up petition to resolve the Defendant’s claim for the sum.

Key Takeaways

Although an arbitration does not prevent a winding-up petition from being presented, it does not mean a Fortuna injunction will never be granted where there is an arbitration agreement.

To restrain the presentation of a winding-up, the applicant must normally be able to show there is a bona fide dispute of the debt. However, where there is an arbitration agreement between the parties, the applicant need only need to meet a lower threshold of showing there is a “prima facie” dispute that the debt fell within the arbitration agreement.

Based on PRPC Utilities, parties applying for a Fortuna Injunction based on an arbitration agreement are well advised to go beyond the lower threshold test and show how the debt is disputed on bona fide grounds. If they can do that, they are more likely succeed in the Fortuna Injunction rather than just relying on the lower threshold test.

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This article was written by Zi-Han Lim, Senior Associate from Donovan & Ho’s dispute resolution practice.

Donovan & Ho is a law firm in Malaysia. Our dispute resolution provides advice and legal representation in the civil and industrial courts. We also represent clients in both domestic and international arbitration, as well as other forms of alternative dispute resolution. Our experienced lawyers are also able to assist in commercial and civil disputes (such as debt recovery, shareholders’ or directors’ disputes, breach of contract and claims for injunctive relief), constructive disputes (arbitration and/or adjudication proceedings, disputes relating to delays, liquidated damages, defects and rectification work) and employment disputes (unfair dismissal claims, judicial review proceedings, and employment-related civil claims). Have a question? Please contact us.

ESOS: Frequently Asked Questions (FAQs)

ESOS: Frequently Asked Questions (FAQs)

What is an employee share option scheme (ESOS)?

Essentially, ESOS is a type of share incentive plan that rewards its employees or directors with options to buy the company’s shares in the future at a pre-determined price, at the fair market value or at a discounted rate.

How does ESOS work?

Once the company awards the options, the participant will need to remain employed over a vesting period or achieve certain specified milestones (including key performance indicators), in order for the options to become exercisable.

Vesting of the options means the participant has to “earn” the right to subscribe for the actual shares of the company by meeting the conditions set by the company.

How does ESOS benefit the Company?

Generally, ESOS can be used to attract and retain talent, and motivate them to be aligned with the company’s goals.

Especially for start-ups with high growth & rapid expansion plans, ESOS can be awarded in lieu of traditional methods of cash compensation. It is a powerful motivational tool to attract and retain talents, giving them an asymmetrical upside of capital gains in the future, and reducing the company’s much-needed liquidity from high salaries or bonuses.

Are there other types of share incentive programmes?

Yes. The main types of share incentive schemes are categorized as:

those that result in the actual ownership of shares, such as ESOS, Employee Share Purchase Plans (“ESPP”), Share Award Scheme (“SAS”); AND
those that do not result in the ownership of shares, such as Share Appreciation Rights Scheme (“SARS”), or phantom share plans (“PSP”).

Who can award or administer ESOS?

Depending on the By-Laws, the administration of ESOS is typically done by the Board of Directors, which can then authorise a subcommittee, any individual director or member of the management team (e.g. hired CFO/COO/HR/Founders) with delegated powers to administer the ESOS on behalf of the Board.

Who can be awarded?

ESOS are primarily meant for employees and directors with valid employment contracts of service. Publicly listed companies are not allowed to award ESOS under the Bursa Listing Requirements. Private companies that award ESOS to their non-employees such as independent contractors and advisors could face uncertainties under both the securities and tax laws. Professional advice should be obtained.

What are the usual documents needed in an ESOS?

A proper ESOS typically comprises a set of By-Laws, Offer Letter and Exercise Notice. These are highly customizable documents which can affect the overall outcome and legal implications to both the participant and company. Public listed companies must also comply with the Bursa Listing Requirements which may be amended from time to time.

How big should the pool of options be?

A broad rule of thumb is that a company usually reserves around 10% to 15% of a company’s total shares on a fully diluted basis for ESOS. This figure is purely for maximum allocation purposes, the company does not have to award/utilise all the options from the get-go.

Issuing large number of options could mean the company’s equity being diluted in the future when the options are exercised.

What should the exercise price of the options be?

This would be a commercial decision made by the Board or sub-committee administering the ESOS. The setting of the exercise price differs between private unlisted companies (early-stage start-ups / SMEs) and public listed companies which are restricted by the Bursa Listing Requirements. There are also tax implications from the exercise price to be considered.

What are the laws that are applicable to an ESOS?

Introducing any equity incentive plan involves a careful process of designing, planning, drafting of documents, regulatory compliance, ongoing reporting obligations & proper administration of the plan. The planning and administration of an ESOS also involve the consideration of various specific laws including securities, company, tax, EPF and labour laws.

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Link to consultation booking: How D&H can help you with setting up your ESOS?

We can assist our clients with:

Advising on pros and cons of different types of equity incentive plans
Designing and structuring the plan according to your company’s preferences
Drafting customized legal & incidental documents under the plan
Advising on legal regulatory and compliance under Malaysian laws
Attending to initial tax filings upon launch
Providing live training to management or participants

Feel free to contact us by sending us an email or booking an introductory call to explore how we can assist you.

Constructive Dismissal: Do You Need To Say It?

Constructive Dismissal: Do You Need To Say It?

When an employee claims constructive dismissal (ie: where the employee is resigning due to the employer’s breach of contract) what must be said in the resignation letter? Does the employee have to use the words “constructive dismissal” or give detailed reasons? What happens if the resignation letter is silent about the reasons the employee is claiming constructive dismissal?

In this article, we examine two decisions of the Industrial Court that may shed some light.

Masitah bt Mohamad v University College Bestari [2020] ILJU 311

The Claimant was not paid her full salary from December 2018 onwards. When she sought for an explanation from the Company regarding the late payment of her salary, the Company explained that it was undergoing financial difficulties.

The Claimant tendered her notice of resignation in March 2019. In her notice, the Claimant claimed that she had to resign due to her incurring traveling expenses for 3 months, but was only partially paid her December 2018 salary. The notice also stated that she will try to complete her tasks until April 2019, as her classes under the diploma programme were still on-going.

After her resignation, the Claimant filed a complaint at the Industrial Relations Department in May 2019. In her complaint, the Claimant claimed that she was constructively dismissed by the Company in April 2019, due to the Company’s failure to pay her salary from December 2018 onwards.

The Industrial Court dismissed her claim because the Claimant had condoned the Company’s actions. The Industrial Court relied on her notice of resignation, which did not state that the Claimant considered the Company’s actions as constructively dismissing her. The Claimant’s resignation letter thanked the Company for its trust in her, and that she hoped the experiences gained while working there could be used.

Tan Kwee v Mahkamah Perusahaan Malaysia & Anor [2009] MLJU 1701

The Claimant claimed that the Company had asked her to carry out acts and duties which breached the Companies Act. The Claimant tendered her resignation and in her resignation letter, she did not mention she deemed herself to be constructively dismissed, nor did she explain the circumstances surrounding her claim.

The Company argued that the Claimant had voluntarily resigned. It was also highlighted that the Claimant served her one month’s notice period, making no complaint of being constructively dismissed.

The Industrial Court dismissed the Claimant’s claim, and this decision was upheld by the High Court. The High Court noted that the Claimant had produced no document or letter to show that viewed herself as constructively dismissed before the action was initiated against the company.

Key Takeaways

Both cases demonstrate that:

Employees claiming constructive dismissal must prove so;
These employees should clearly state their position and the reasons they are claiming constructive dismissal in their letter of resignation; and
Delay in claiming constructive dismissal and/or post-resignation conduct are factors to be considered by the Court in determining whether the claim for constructive dismissal is an afterthought, or if there is condonation by the employee.

Whilst it is not strictly necessary to use the words “constructively dismissed” in the letter of resignation, there is a minimum requirement for employees to accurately describe the reasons for constructive dismissal. Conversely, employers should also be able to pick up when a resignation may turn contentious, and swiftly deal with any allegations or complaints in resignation letters.

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This article was written by Leow Ho Eng, Associate from Donovan & Ho’s employment law practice.

Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations. Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation. Have a question? Please contact us.

CASE SPOTLIGHT: International Organizations Immune from Unfair Dismissal Claims

CASE SPOTLIGHT: International Organizations Immune from Unfair Dismissal Claims
Despite Dicey’s rule that “no man is above the law”, Section 4 of the International Organizations (Privileges and Immunities) Act 1992 (“Act”) provides that the Government of Malaysia may confer certain international organizations and persons special privileges and immunity.

Does this protect international organizations from unfair dismissal claims?

On 8 March 2022, in Asia-Pacific Institute for Broadcasting Development (AIBD) v Y. B Menteri Sumber Manusia dan 3 lagi (WA-25-270-09/2020), the High Court answered whether the Minister of Human Resources has the authority to refer a representation of unfair dismissal to the Industrial Court, where the employer named in the representation is an international organization.

Brief Facts

Under section 4 of the Act, the Asia-Pacific Institute for Broadcasting Development (“AIBD”) was granted immunity from any suit of legal process by the Government of Malaysia.
AIBD’s ex-Finance Manager (“Employee”) tendered her resignation, which was accepted by AIBD.
A few days after the acceptance of resignation, the Employee attempted to withdraw her resignation. AIBD did not agree to her withdrawal of her resignation.
The Employee lodged a representation of unfair dismissal under Section 20(3) of the Industrial Relations Act 1967.
As there was no settlement, the Minister of Human Resources (“Minister”) referred the matter to the Industrial Court for adjudication.
AIBD applied to the High Court for judicial review to quash the Minister’s referral because the Minister failed to appreciate that AIBD was immune from any suit or legal process.

Court’s Findings

The High Court quashed the Minister’s referral and found that the Minister had acted in error of law and fact. The Minister’s referral contravened Parliament’s intention for enacting the Act, which provided international organizations with immunity from legal process.

At the hearing, the Minister claimed that he was not aware of the Act or AIDB’s status as an international organization. However, the affidavit evidence showed that AIDB had informed the Industrial Relations Department of its status and immunity during the conciliation meeting. The High Court held that the Minister cannot be ignorant about an Act of Parliament, and therefore the Minister’s own admission is that he failed to consider the facts about AIBD’s immunity before arriving at his decision to refer the matter to the Industrial Court. Therefore, the Minister’s decision was tainted with illegality, irrationality and/or was outside or without jurisdiction.

A side issue also arose as to whether the Employee should have been named as a party to the judicial review application. Here, as the Employee knew of the judicial review proceedings but chose not to intervene or challenge the judicial review application, the High Court held that her not being named as a party was not fatal to the judicial review application.

Key Takeaways

Under the Industrial Relations Act 1967 (“IRA”), some entities such as the government or statutory bodies are protected from unfair dismissal claims, provided certain conditions are met. Immunity can also be afforded through the Act, which means international organizations are shielded from unfair dismissal claims.

Under Section 8A(1) of the Act, an international organization must cooperate with the appropriate authorities in Malaysia to facilitate the proper administration of justice, secure the compliance of all domestic legislation, and prevent abuse of the privileges and immunities conferred under the Act. Even with this requirement, an employee who feels that the international organization has not complied with local labour law would have no recourse for unfair dismissal under the IRA. The presumption is therefore that international organizations through Section 8A(1) would comply with local law and would not intentionally do anything that may jeopardize their privileges and immunities as an international organization.

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This article was written by Donovan Cheah (Partner) and Tan Jing Huei (Intern). Donovan has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific for 2017-2022, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.

Minimum Wages Order 2022 Gazetted

MINIMUM WAGES ORDER 2022 GAZETTED

The Minimum Wages Order 2022 was gazetted on 27 April 2022. These are the key provisions:

The monthly minimum wage is RM1,500 effective 1 May 2022.
Employers with less than 5 employees are exempted until 1 January 2023. Until then, the minimum wage for these employers is maintained at RM1,200 a month (City Council or Municipal Council area) or RM1,100 a month (other than City Council or Municipal Council area).
Employers carrying out professional activities are not exempted, even if they have less than 5 employees. The definition of professional activities is as per the Malaysia Standard Classification of Occupations (MASCO) as published by the Ministry of Human Resources. This includes, for example, engineers, lawyers, surveyors, and medical practitioners.

Commentary

Affected employers should take steps to comply with the Minimum Wages Order 2022. This should include communicating with employees, recording any increase in wages in writing, and notifying payroll providers. Employers with exemptions have at least 8 months to make these adjustments, since their compliance is only required on 1 January 2023.

Contrary to earlier announcements by the Ministry of Human Resources that certain businesses that have been “facing huge losses” will enjoy some flexibility or exemptions from minimum wage, there are no such exemptions in the Minimum Wages Order 2022. On the contrary, professional sectors are subject to more stringent requirements since they receive no exemption regardless of their number of employees. This means, for example, a sole proprietor of a law firm with only 2 employees will have to pay a monthly minimum wage of RM1,500 effective 1 May 2022.

The Minimum Wages Order 2022 as gazetted demonstrates the importance of distinguishing between “announcements” and the law. Government announcements and press statements are not the law. What is legally in effect is only what is gazetted.

The inconsistency between government announcements and the law will likely reoccur when we deal with the amended Employment Act 1955 and the proposed expansion of employee coverage. Previously, there were announcements that the amended Employment Act 1955 will apply to “all employees” but the Ministerial Order on this has not been gazetted. There is a strong possibility that the Ministerial Order, when gazetted, may reflect something different. Until this order is gazetted, employers will remain uncertain as to which part of their workforce will be covered by statute.

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This article was written by Donovan Cheah (Partner). Donovan has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific for 2017-2022, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.

What happens to Employee Share Options in an exit event?

What happens to Employee Share Options in an exit event?
In our previous articles, we have discussed the basic regulatory framework, EPF and tax implications of ESOS. In this article, we aim to explore the less encountered effect of ESOS issued by private unlisted companies during an “exit event”.

What is an exit event?

An exit event, also known as “liquidity event”, generally includes the company going through a listing on a stock exchange (IPO), an asset sale, or a share sale to a third party.

What could happen to vested options in an exit event?

The participating employees can benefit from an “exit event” taking the form of a third-party acquisition by selling their vested options (but not yet exercised) for cash or substituting them with new options, potentially getting them cash and/or new options in their pockets.

This positive outcome will only occur if the options are “in the money” i.e., when the value of the underlying share exceeds the exercise price of the vested option.

However, this largely hinges on how the deal terms are negotiated and structured with the buyer, as well as the terms of the current ESOS by-laws. There are also other potentially complicated factors like deal structuring, valuation of the options, distribution of sales proceeds and tax considerations to navigate carefully, depending on whether the exit event is a share sale or asset sale.

What could happen to unvested options in an exit event?

Typically, the Shareholders and Board of Directors of the company will have the broad discretion to decide what happens to any unvested options in such events, unless the by-laws already provide otherwise. Broadly speaking, this may include any of the 3 actions, explained as follows:

Cancellation

The unvested options could potentially be cancelled in an exit event without compensation. This is because the unvested options are not yet earned. Cancellation outright may be perceived by the participant employees as an unfriendly move and it may risk complicating the relationship of the acquirer and the employees or precipitate a flight of talent after the exit event is done.

Migration

It is also possible for an acquirer to cancel the existing ESOS and migrate/replace the company’s vested and unvested options to acquirer’s own ESOS plan, assuming it has one. This may be especially beneficial for the employee if the acquirer is a listed company, as they can trade and sell their shares in the market easily once the options vest in accordance with the vesting schedule. For the employer, although a migration or replacement may secure the ongoing of target company’s talent, it may dilute the acquirer’s existing equity.

Acceleration

Some by-laws may provide for the acceleration of unvested options in an exit event. The idea being that an underlying acceleration is an additional reward for the ESOS participants upon reaching the significant milestone of an exit, even though the original vesting conditions (typically time-based) are not yet fully played out.

In practice, an acquirer would first review the target company’s ESOS by-laws as part of its due diligence before purchasing the company and the presence of acceleration rights could be a factor for a re-negotiation or adjustment of the purchase price. Such acceleration rights come in two main forms: single-trigger or a double trigger acceleration.

Single Trigger

A single trigger acceleration simply means all unvested options automatically vest on an exit event.

Employees are immediately rewarded with full vesting for their contribution towards the company irrespective of the vesting schedule remaining. This could mean that even a new joiner with unvested options could enjoy the full vesting of its freshly granted options.

Whilst single trigger acceleration may be favourable for and popular with the employees, it might not be so welcomed by the existing investors of the company or the potential acquirer, as acceleration of the options results in immediate additional dilution or a higher cost of acquisition respectively

Double Trigger

Conversely, a double trigger acceleration typically needs 2 events to happen for the employee to enjoy full acceleration. Firstly, the occurrence of an exit event must happen. Secondly, the company must terminate the employee without cause or if the employee resigns with “good reason” (e.g., caused by the company’s action of cutting pay, mandated relocation or significant downgrade of duties rather than due to the employee’s fault) within a specified time period after the exit event has occurred.

Most start-ups prefer this as it is a multi-dimensional approach that aims to strike a delicate balancing the interests among the employees, current shareholders and potential acquirer.

For existing investors and potential acquirers, a double trigger may sit better as it prevents the company from committing to large cash pay-outs just because of an exit event happening (which is a clear drawback of single trigger acceleration) and yet preserving the ongoing workforce needed for the business. In other words, the acquirer or the company is able to keep its cash to pay any retention bonuses or provide attractive incentives to employees who stay on after the acquisition.

On the other hand, a double trigger acceleration protects the interests of participating employees, since they will be assured of acceleration if, post-acquisition, they are unfairly terminated or treated by the acquirer. The ‘second trigger’ then essentially acts as a deterrent to the acquirer from taking such actions on the option holders, especially if the value of the unvested options is greater than the cost of hiring a new employee.

Conclusion

It is possible for start-ups to adopt a mixture of any of the above approaches surrounding the exit event. It must be noted that, there is no one-size-fits-all solution and companies should seek professional advice and customise their ESOS by-laws to suit the company’s needs and goals, especially when an exit event is in the horizon.

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This article was written by Shawn Ho (Partner) & Sylvia Lock (Associate) with assistance from Low Rui Thong (Intern). Shawn leads the corporate practice group of Donovan & Ho, and has been recognised as a Notable Practitioner, whilst the firm has been recognised as a Notable Firm for Corporate and M&A by Asialaw Profiles 2020 and 2021. We are also ranked as a Recommended Firm by IFLR1000 2020 and 2021. Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.

Endemic Stage: Employers’ Duties

Endemic Stage: Employers’ Duties

NB: This article is based on information available as of the date of publication stated above. As the government’s response to the outbreak is continuously developing, this article may not necessarily include updates or developments after this date. In situations of doubt, you are advised to check for updates directly with the government authorities.

As we transition to the endemic phase of COVID-19, the general Standard Operating Procedure (SOP) has been streamlined, with additional guidelines issued for different sectors and activities (#ReopeningSafely Guidelines).

In this article, we will be setting out employers’ general obligations and what the SOPs mean for employers in Malaysia.

There are two guidelines issued which relate to activities at the workplace, i.e. Indoor Work Spaces and Outdoor Work Spaces (“Guidelines”).

The new employment-related SOPs require employers to ensure that:

Employees scan the QR Code using their MySejahtera application upon entering the premises;
Only employees with a “Low Risk” status on their Mysejahtera may enter the premises;
Employees are always wearing a face mask while on the premises or carrying out their duties, unless in exempted situations, e.g. while eating or drinking, while carrying out a performance, or if the individual has special needs or breathing difficulties (certified medical report required for exemption);
Employees are always practicing physical distancing of at least one meter from each other while on the premises or carrying out their duties;
Employers comply and enforce COVID-19 test requirements on employees;
Employers bear the isolation costs for COVID-19 positive employees and also the quarantine costs for close contact employees;
Employers fund the COVID-19 screening tests (if the employee is symptomatic while on the premises), the cleaning costs and also the premise-disinfection costs;
Employers accept Home Surveillance Orders for suspected, or confirmed COVID-19 positive employees as evidence of the employee undergoing isolation or quarantine and;
Employers review the digital vaccination certificate on the MySejahtera application for each employee who requires complete vaccination status as a condition for certain activities.

Commentary

Although the Guidelines are presented as a simplified document with flowcharts, there is still confusion given there are numerous other documents co-existing with the Guidelines, such as 52 annexures of guidelines by the Ministry of Health. It is unclear how inconsistency between the documents will be resolved.

However, what do the Guidelines mean for employers and employees? Our comments below are based on our interpretation of the Guidelines and information available as at the date of this article.

Costs & Employee Management

Employers are to bear the costs of testing if an employee is identified as symptomatic while on the work premises or at locations where activities are held. Employers are also to bear the costs of treatment and isolation.

Previously, employers were only required to bear the costs of testing and it was not clear if employers had to bear the costs of quarantine and isolation (employers were only encouraged to do so by authorities). Now, the SOPs are clear in that the costs of testing, treatment, isolation (for positive employees) and quarantine (for close contacts) must be borne by the employer if the employee is identified as symptomatic while on the premises.

If periodic testing has to be carried out due to a high-risk workplace, employers should cover the costs of testing for fully vaccinated individuals and those exempted due to medical reasons. Employers also have to bear the costs of cleaning and disinfecting the premises.

However, if an employee has to isolate outside his or her place of residence, these costs must be self-borne. Employees are to cover their own costs of testing if they are symptomatic while at home. Those who are unvaccinated, partially vaccinated or who are eligible but choose not to be vaccinated (with no certified exemption due to medical reasons) will also have to cover their own costs for testing.

From an employment law perspective, employers should be free to set their own policies, with requirements higher than those stated in the SOP or any guideline. The SOPs do permit parties responsible for premises, including employers, to put in place additional requirements to protect employees, customers and visitors in their premises. Hence, employers can set requirements which are in their opinion necessary to comply with their duty as an employer to ensure the safety, health and welfare of the individuals in their workplace.

Besides setting proper policies, good management of leave applications by ensuring there are proper procedures in place to grant, reject and monitor sick leave applications will help organisations manage their workforce and to come up with workarounds in advance to address any temporary shortages.

Home Surveillance Orders

Employers must accept a Home Surveillance Order (HSO) as proof that the employee is undergoing isolation or quarantine. If employees are asymptomatic or test negative but must quarantine for a specific period before being released from the HSO, employers can request that the employee continue working from home.

Vaccination Status

General SOPs treats individuals who have not received their booster shot as not fully vaccinated, i.e. they will lose their “Fully Vaccinated Status” on the MySejahtera application, but remain allowed to perform activities permitted for individuals who have completed their primary dose.

However, the Guidelines treat individuals without a booster dose differently, as they permit these individuals to perform activities permitted for those who are fully vaccinated.

This inconsistency may cause confusion as to the public’s understanding of what level of vaccination constitutes fully vaccinated status.

Nevertheless, the Guidelines differentiate between those who have a booster dose and those without, in setting out the testing and quarantine requirements for case management. All individuals who have not received a booster dose will have to comply with the same testing and quarantine requirements as not fully vaccinated and unvaccinated individuals.

We have yet to understand the effect of this inconsistency and what the clear position is on this matter. Until the government provides clarity on the labels and treatment of partially vaccinated individuals, it may be best for individuals who have not received their booster dose to only participate in activities permitted for individuals with a complete primary dose of vaccination, and not those which strictly require fully vaccinated status, to prevent risk of liability.

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This article was written by Donovan Cheah (Partner) and Adelyn Fang (Associate). Donovan has been named as a recommended lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018, 2019, 2020, 2021 and 2022, 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.

What is Collective Bargaining?

What is Collective Bargaining?

The employment relationship between employers and employees who are members of a trade union is generally governed by collective agreements. Collective agreements result from a process known as “collective bargaining”. Collective bargaining is the process of negotiation of terms of employment with a trade union, on behalf of the employees represented by the trade union. Unlike employment contracts between individual employees and employers which can be negotiated as parties deem appropriate, collective bargaining is regulated under the Industrial Relations Act 1967 (“IRA”).

This is an overview of the collective bargaining process under the IRA:

One
Collective bargaining can be done only with a union that has received recognition by the employer. It is initiated by inviting the other party to commence the negotiation – the invitation may be made by either the trade union or the employer and must be in writing and set out the proposals for a collective agreement. Where there is an existing collective agreement between the same parties still in force, an invitation to commence collective bargaining shall be made only 90 days or less before the expiry of such collective agreement.

Two
Upon receipt of the invitation, the invitee must respond in writing and inform the other whether it accepts the invitation. The reply must be made within 14 days from receiving the invitation.

In the event:

The invitation is accepted: Parties shall commence collective bargaining within 30 days from receipt of the reply notifying acceptance of the invitation.

The invitation is refused, not accepted within the prescribed period (14 days from receiving the invitation), or where no collective bargaining has commenced within 30 days from receipt of the acceptance of the invitation : The invitee may notify the Director General (for industrial relations) in writing. Upon receipt of the notice, the Director General may take such steps as may be necessary or expedient to bring the parties to commence collective bargaining without undue delay.

Parties still refuse to commence collective bargaining after intervention by the Director General or where there is a deadlock in negotiation : A trade dispute is deemed to exist and will be resolved under the IRA.

Three
Upon conclusion of a collective bargaining, parties must prepare the collective agreement in writing, sign it and deposit it with the Registrar of the Industrial Court. The collective agreement has to be deposited with the Industrial Court within 1 month from the date on which the agreement has been entered. Once deposited, the Industrial Court will decide whether to give cognizance to the agreement. The Industrial Court can refuse to give cognizance if it views the collective agreement did not comply with the statutory requirements of the IRA.

Four
When cognizance is received, the collective agreement shall be deemed to be an Award of the Industrial Court and it shall be binding on all parties to the agreement.

The provisions under the IRA relating to collective bargaining are mainly facilitative – it provides timeframes for different steps in the process so it is carried out without undue delay. The IRA also ensures that no party can act in bad faith and refuse to enter into negotiations – the Industrial Court is empowered to intervene and hear the matter to determine the trade dispute (which is deemed to occur when parties refuse to commence collective bargaining).

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This article was written by Donovan Cheah (Partner) and Adryenne Lim (Pupil). Donovan has been named as a recommended lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018, 2019, 2020, 2021 and 2022, 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.

Residential Tenancy Act: A Curse or A Blessing?

Residential Tenancy Act: A Curse or A Blessing?
In recent years, many have pushed for a piece of legislation that would govern conflicts arising out of residential tenancy agreements. The demand for this became even more prominent when the COVID-19 pandemic hit Malaysia, leaving both landlords and tenants high and dry – landlords raising rents arbitrarily, and tenants refusing to pay rent. After much deliberation, the Residential Tenancy Act (‘RTA’) is proposed to address these concerns. The Australian Residential Tenancy Act 1997 will be a point of reference. It will however be adapted to fit the local context.

(1) The RTA will provide a template tenancy agreement
The current practice is that the rights, obligations and remedies of the parties will be purely contractual and stipulated in the tenancy agreement, which is problematic if one party takes advantage of his stronger bargaining power or knowledge, to compel the other into accepting certain terms he may not have agreed to. In the best interests of both parties, the template tenancy agreement aims to lessen such unjust incidents, by establishing a set of standard terms that balance the landlord’s and tenant’s rights, duties, and remedies. If the Australian Act is strictly adhered to, every landlord and tenant will agree to a set of rights and obligations, whether or not they are in the signed agreement, including rent increases, reimbursement for urgent repairs and the landlord’s access to premises. Any terms unfairly biased towards one party will also be void and possibly penalised.

(2) The RTA will act as a comprehensive legislation regarding residential tenancies
Despite there being existing legislations like Contracts Act 1950, Specific Relief Act 1960 and National Land Code 1965, these provisions are each separate legislations that deal with a variety of issues. The RTA aims to provide a comprehensive and all-encompassing legislation that will put all these issues under a single umbrella, ultimately ensuring there are provisions to protect and preserve the landlords’ and tenants’ rights from loopholes in the existing laws. This all-in-one legislation will also include the existing rights and remedies, such as the right to evict a tenant via a court order provided under Section 7(2) of the Specific Relief Act 1950. A legal framework coupled with introducing a template tenancy agreement could undoubtedly provide safeguard/better protection to the party who is relatively inexperienced or in a weaker financial position.

(3) Establishment of a Tribunal
Even with the template agreement, no agreement is perfect, and there are bound to be disputes arising between the parties. Therefore, following the introduction of the RTA, the parties no longer have to bring the claim to a small claims court as the process is often costly and lengthy, often making it a ‘zero sum game’ to pursue the claim. Instead, a special Tribunal will handle such disputes with a maximum sum of not more than RM250,000 and as seen with the Strata Management Tribunal, a Tribunal of such kind saves time and money, while eliminating the need for legal representation. This Tribunal can also handle disputes arising out of the tenancy agreement, such as rent control and rental duration, as there are no avenues to resolve those issues.

(4) Rental control
Landlords can freely increase the rental rate upon the expiration of the tenancy term, unless a fixed rental increase was negotiated by the tenant initially. However, the RTA proposes to restrict the number of rent increases to once a year and its quantum. This is to prevent exorbitant rental increases, particularly in high-demand areas where the landlord would receive a better offer while the lease is still active. If the landlord wishes to raise the rental, he can only do so after the renewal of the rental period. He also has to provide written notice of at least 60 days before the expiry of the tenancy agreement, allowing the tenant time to assess whether the new rental amount is acceptable to them. As this move directly interferes with basic economics and market forces, is it justifiable in the interest of protecting the financially weaker party?

(5) Determination of rental rate
One of the most controversial proposals is that the RTA will impose rental caps depending on the property. Properties must be marketed with a fixed price, and landlords may not accept a higher price. This undeniably protects the interests of individuals in a more vulnerable financial position, but at the expense of the country’s economic growth, and may not be practicable given the many properties and accommodation styles found in Malaysia, and its enforcement may also be an issue. The government’s interference in such private rental agreements between a willing tenant and willing landlord may deter property investors, and might drive the local and foreign investors away. Perhaps this certain part of the legislation should have selective application – only to protect certain segments of the public based on specific earning capability or needs. This way, it can balance the interests of those who are more vulnerable while not bringing a detrimental impact on the economy’s growth.

(6) Anti-discrimination clause
As of today, landlords have the ability and freedom to refuse a potential tenant or remove an existing tenant based on their preferences. Through the proposed RTA, the tenants will all have an equal chance to rent an accommodation and not be prejudiced due to certain characteristics like one’s race, employment status, and gender orientation. However, there are concerns by property owners that the right to rent immoveable property to anybody they want is an inalienable right and should not be taken away. It is also difficult to conclusively determine whether the rejection was purely due to biased perceptions, as many landlords want to select responsible and trustworthy tenants who can best support their financial goals. Perhaps a database or credit rating system could be a more objective way to identify problematic parties. This would enhance the decision-making procedure for landlords while also ensuring that potential tenants are not prejudged based on their characteristics.

In conclusion, having an “all-in-one legislation” specially for residential tenancies and the establishment of a special Tribunal under the RTA would be a welcome step.

However, instead of prescribing rigid statutory terms that limit a landlord’s legal and economic rights to manage or rent his property as he sees fit, the RTA should perhaps focus on striking down just highly unfair terms of contracts, setting minimum statutory standards, increasing knowledge of parties’ rights and remedies, and resolving disputes equitably, to ensure both sides receive proper and adequate protection.

Should there be any seriousness in implementing the RTA, it is hoped that the lawmakers will take note and act on the possible concerns and issues to produce a win-win situation for all parties.

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This article was written by Shawn Ho (Partner) with assistance from Tan Jing Huei (Intern) from the property & tax practice group of Donovan & Ho. Shawn leads the corporate practice group of Donovan & Ho, and has been recognised as a Notable Practitioner, whilst the firm has been recognised as a Notable Firm for Corporate and M&A by Asialaw Profiles 2020 and 2021. We are also ranked as a Recommended Firm by IFLR1000 2020 and 2021.

Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. We also advise on property transactions and real-estate related tax planning. Feel free to contact us if you have any queries.

Case Spotlight: Forced to Resign?

When an employee signs a mutual separation agreement (“MSA”), the understanding is that the employee has agreed to resign or “mutually separate” from the company, in exchange for the benefits under the MSA. Such benefits typically include ex-gratia payments or payments in recognition of the employee’s length of service.

Sometimes, an employee may resign without a MSA. This could be for other reasons such as to avoid disciplinary proceedings or to avoid being put on a performance improvement plan.

Yet, some of these cases still end up at the Industrial Court. The usual complaint will be that the employee was forced to sign the MSA, or otherwise pressured or coerced into resigning.

We look at two recent decisions of the Industrial Court dealing with this issue.

Tan Shun Sheng v V Capital Sdn Bhd (Award No. 374 of 2022, 3 March 2022)

The Claimant resigned after being informed of his poor performance. The Company offered the Claimant a “Separation and Release Agreement”, to which the Claimant made some counter-proposals. Before this agreement could be finalised, the Company uncovered gross misconduct committed by the Claimant and therefore dismissed him.

The Claimant lodged a complaint of unfair dismissal, alleging that as he already resigned, he was no longer an employee of the Company and therefore did not need to respond to the allegations of gross misconduct. He claimed however, that his resignation was forced.

The Court held that the Claimant willingly participated in discussions about his resignation, going so far as to even counter-propose his own terms. He therefore had no qualms in discussing and preparing his exit from the Company. There was also no evidence or independent witness to prove that the Claimant was forced to resign. The Court held there was no dismissal, given the Claimant had voluntarily resigned.

Rukumany Devi a/p S. Raghavan v Ralph Lauren (Malaysia) Sdn Bhd (Award No. 395 of 2022, 9 March 2022)

The Claimant and the Company entered into a MSA and as a result the Claimant received the sum of more than RM108,000 from the Company.

However, the Claimant’s allegations as to how she ended up signing the MSA was this: She was suddenly called to attend a meeting where she was given two MSA documents with differing compensation figures, and given an ultimatum to accept either option. She alleged that she was only given 1 hour to decide. She therefore alleged that the Company had decided to terminate her as the MSA documents were pre-prepared and she was given an ultimatum.

The Court held that the Claimant could not prove that she was forced to sign the MSA. During cross-examination, the Claimant admitted that she was given the right to seek legal advice on the MSA but instead consulted her husband. She also admitted that the “1 hour ultimatum” was an assumption on her part simply because they were in the meeting room for 1 hour.

Further, there was no indication on the MSA or in any subsequent letter or e-mails from the Claimant she was protesting against the MSA. On the contrary, the exchanges in communication between the Claimant and the Company after that were rather cordial. The Claimant also received the compensation under the MSA. There was no evidence before the Court, other than the Claimant’s own words, that she was put under compulsion to sign the MSA.

The Court concluded that the Claimant signed the MSA on her own free will and volition, and her claim for unfair dismissal was dismissed.

Key Takeaways

Both cases demonstrate that: (1) an employee claiming forced resignation must prove so; and (2) the conduct of the employee during and after the resignation are relevant in determining whether the resignation was forced.

In both cases, the Claimants were unsuccessful in proving forced resignation because their conduct was not consistent with that of someone forced to resign. Counter-proposing a separation suggests parties were on equivalent if not similar bargaining positions, and cordial communications after the resignation with no inkling of a protest, would suggest there was no coercion, threat or duress surrounding the resignation.

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This article was written by Donovan Cheah. Donovan has been named as a Recommended Lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018, 2019, 2020, 2021 and 2022, 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.

Case Spotlight: Fired for Gossiping

A toxic employee exhibits undesirable behaviour and contributes to an unhealthy working environment. For example, an employee that spreads negativity, or gossip mongers maliciously. However, as such toxic behaviour is hard to define and often subjective, this leads to a question of whether an employer can dismiss an employee on these grounds.

In Afnizahanim Mohammad Saad v Kemaman Bitumen Company Sdn Bhd [2019] 4 ILR 503, the Industrial Court considered whether it was fair for a company to dismiss its employee for spreading rumours and “character assassination”.

Brief Facts

The Claimant was the Company’s Human Resources Manager.

The Company charged the Claimant with these allegations of misconduct:
- Charge 1 : Harassing subordinates by spreading unsubstantiated rumours of a malicious nature and character assassination of a male subordinate and a female employee.
  - The allegation here was that the Claimant had on several occasions, made slanderous remarks about two employees, insinuating that they were having an affair. The rumours spread throughout the Company and resulted in a complaint being lodged by one employee.
- Charge 2: Conduct unbecoming of a senior employee of the Company by interacting with people outside the company in an undesirable manner and causing potential loss of reputation for the Company and its shareholders
  - The Claimant was alleged to have slandered and badmouthed former employees to their new employers.
- Charge 3 : Withholding information or making untrue statements and lying to the CEO
  - During a meeting with the CEO, the CEO informed the Claimant about complaints made against her. The CEO asked the Claimant if she had spoken to anyone else about the two employees’ alleged relationship, and the Claimant denied doing so. It was later discovered that the Claimant had spoken to multiple other employees about this issue.

A domestic inquiry was conducted. The Claimant was found guilty of Charges 1 and 3, and dismissed.

The Claimant lodged a complaint of unfair dismissal.

Court’s Findings

As the DI held that Charge 2 was not proven, the Court focused its decision on Charge 1 and 3 only.

The Court found that the Company had proved Charge 1 on a balance of probabilities. The Court observed that the Claimant’s conduct in handling the “alleged affair” between two employees “left much to be desired”. The Court noted the CEO’s testimony on why the Claimant’s behaviour warranted dismissal:

“It is important to note that the Claimant was the Head of HR at the material time. In that role, she was expected to follow the best ethical working practices as well as uphold all the policies and procedures of the Company to set an example for other employees. Instead, she conducted herself in a manner completely unbecoming of a senior management employee…

One of the key responsibilities of the HR Manager is, as the name suggests, to nurture and manage the human resources and to ensure there is a conducive, harmonious and friendly environment for the employees to work in. On the contrary, the Claimant created an environment of distrust and disharmony and tried to misuse her position to intimidate subordinates…”

The Court also found that the Company had proved Charge 3 on a balance of probabilities. The Court agreed that where an employee’s conduct is incompatible with his duties, the employer may dismiss him.

The Claimant had acted irresponsibly and unprofessionally and also lied to the CEO. This dissolved the trust held in her, and is a misconduct in breach of the Company’s core values of integrity, and the Company’s Code of Ethics. The Court believed the Company when it said they could no longer repose the trust and confidence they had in the Claimant.

During trial, the Claimant alleged that she had exemplary service with the Company before these charges were levelled against her. The Court’s view was this is not enough to be considered a mitigating factor; on the contrary, past exemplary service should have been a deterrent for the Claimant to act in such a manner.

Overall, the Court concluded that no reasonable employer would have retained the Claimant in its employment, after being found guilty on Charge 1 and 3. It was not a suitable case for letting the Claimant off lightly with just a warning or demotion. The decision to dismiss her was reasonable and fair.

Key Takeaways

It is possible to dismiss an employee for misconduct if they behave unprofessionally or inappropriately – for example: malicious rumour mongering that damages the industrial harmony of the workplace. It will, however, boil down to proof and proportionality. Factors considered include the employee’s position in the company. Here, the charges were serious because the Claimant was holding a senior management position, and was the Head of HR, no less.

The Claimant’s version of events was that she did not want the Company’s good name to be tarnished, given that the two employees were working in Kemaman, which had a conservative local community. The Claimant’s view was that she was acting in the Company’s interests, by trying to mitigate against the alleged affair.

The Company proved its charges against the Claimant because they had witnesses to testify about the rumours spread by the Claimant. For example, one employee who was the subject of the gossip testified in Court about the rumours, her confrontation with the Claimant, the mental distress suffered and possible damage to her marriage. Another witness testified that he heard the Claimant making those slanderous remarks during a lunch outing with the Claimant and another witness.

Malicious and slanderous gossip should also be distinguished from petty “tea room” gossip, which can be annoying but is mostly harmless. An employer who wishes to take disciplinary action against an employee who behaves unprofessionally by spreading rumours, should ensure there is sufficient evidence to reasonably conclude that the rumours originated from the accused employee. Direct evidence is best (an employee confirming that they heard the rumour directly from the accused employee), instead of second/third hand information (an employee saying they heard it from someone else, who heard it from the accused employee). The employer should also be able to articulate why this is a misconduct, how it has damaged industrial harmony, and why it is severe enough to warrant dismissal.

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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.

How do the new Employment Act amendments affect you?

Note: This article is current as of the date of publication and may not take into account changes or developments that occur after this date.

On 21 March 2022, the Employment (Amendment) Bill 2021 (“Bill”) was passed by Dewan Rakyat after second reading. The amendments under the Bill are not in force yet (it still has to go through Senate approval and obtain royal assent). However, if the Bill comes into force in its current form, it will have some material implications on employers and employees in Malaysia.

We previously wrote about the Bill when it was tabled for first reading in December 2021 (you can read our commentary here). The Bill that was passed by Dewan Rakyat is substantially similar to the Bill that was presented in December 2021, save that maternity leave was increased to 98 days (14 weeks) and paternity leave was increased to 7 days.

Which employees are affected by the amendments?

The Employment Act 1955 (“EA”), with some exceptions, only applies to employees mentioned in the First Schedule of the EA – typically employees whose wages do not exceed RM2,000 a month and/or employees involved in manual labour. Maternity protection and sexual harassment provisions under the EA apply regardless of the employee’s salary range.

When the Bill was passed, confusion arose as to whether employees who are earning above RM2,000 a month will still receive their maternity protection under the EA, or if the EA will be expanded to cover all employees.

The confusion is because the Bill deletes some sections under the EA:

Section 44A: that provides that maternity protection provisions apply to all female employees regardless of salary; and
Section 81G: that provides that the sexual harassment provisions apply to all employees regardless of salary,

but does not make any amendments to the First Schedule.

This means, on a plain reading of the Bill, employees who are earning above RM2,000 a month will not be entitled to maternity leave, or be covered under the sexual harassment provisions.

However, when the Bill was presented for second reading, the Ministry of Human Resources assured that all employees, regardless of wages, will be afforded protection under the EA subject to certain conditions. The amendments to the First Schedule will instead be done by way of a Minister’s Order.

At the time of writing, no details have been given about this Minister’s Order, what it contains, and what are the conditions that will be imposed.

So, are employees earning above RM2,000 a month entitled to maternity leave?

For now, all female employees are entitled to 60 days maternity leave (subject to the conditions in the EA), until the Bill comes into force.

When the Bill comes into force, eligible female employees will be entitled to 98 days maternity leave. However, the scope of eligibility will depend on the Minister’s Order.

If the Minister’s Order is not in force by the time the Bill comes into effect, on a strict reading of the Bill, women who are earning above RM2,000 a month will not be entitled to any paid maternity leave, until such time the Minister’s Order is in force or until the EA is further amended to say so.

Why is the First Schedule being amended through a Minister’s Order?

The approach of amending the First Schedule through a Minister’s Order has caused a lot of uncertainty. By not amending the First Schedule through the Bill itself, it also means that the expansion of the EA was not debated before the Dewan Rakyat before the Bill was passed. Without having sight of the Minister’s Order, it will be difficult to assess which employees will be impacted and how.

Previously, when the salary cap for EA employees was raised or proposed to be raised, it was usually reflected in the amendment bill (eg: from RM750 a month to RM1,000 a month in 1985; RM1,000 a month to RM1,250 a month in 1989, or the 2018 proposal to increase the range from RM2,000 to RM4,000 which did not end up being tabled before Parliament). Since an amendment bill with other changes to the EA was already being tabled, it is puzzling why the widening of the EA is not being dealt with simultaneously in the bill itself.

If the Ministry of Human Resources is saying that the EA will apply to all employees, does this apply to all rights and protection under the EA?

As the proposal to widen the scope of EA was not reflected in the Bill, again, this will depend on the content of the Minister’s Order.

If the Minister’s Order extends the coverage of the EA to all employees without limitation, this could result in some wide-ranging consequences. For example, highly paid C-Suite officers and managers could be statutorily entitled to overtime, which is unlikely to be Parliament’s intention.

Therefore, it’s highly possible that the Minister’s Order will include some limitations. Again, without details on the Minister’s Order, it will remain to be a “wait and see” approach.

As an employee, can I ask that my employer give me 98 days of maternity leave now? Or as a company, should I give my employees 98 days of maternity leave?

Currently, there is no legal obligation to offer 98 days of maternity leave. This only needs to be done when the Bill comes into force. However, employers can start relooking at their maternity leave benefits and prepare for the necessary changes, in anticipation.

There are employment discrimination provisions in the Bill. Can an employer get in trouble for placing racist job advertisements?

Unfortunately, the employment discrimination provisions only cover “discrimination in employment” disputes between an employer and employee. As there is no employment relationship between job seekers and employers, these provisions will not apply to protect job seekers from discrimination.

Can I demand that my employer grant me flexible working arrangements?

Under the Bill, an employee can make an application for “flexible working arrangements”. However, there is no legal obligation on the employer to grant this request. The only obligation on the employer is to approve or refuse the application within 60 days, and if the application is refused, the employer has to provide grounds for refusal.

How do the presumptions of employment under the Bill protect me? Are they applicable to gig workers?

The Bill states 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 drafting of this provision leaves much to be desired since this section could be interpreted in a variety of ways. It is quite possible that gig workers could end up being presumed as employees, even though it would not have been the intention of both parties at the time the arrangement is made.

This also goes against the position of authorities like SOCSO (who claim that gig workers are “self-employed” and are covered under their own contribution fund) and the government themselves who have been saying that gig workers would be regulated under a different, new legislation.

This provision may therefore create complications for companies who rely heavily on gig work as an alternative workforce.

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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.