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Malaysia
 


Source and scope of regulations - 2018    

References
Remarks:
  • - The Employment Act (EA) is in the process of being amended (probably for 2019 or 2020).
    - The EA which previously only applied to the Peninsular Malaysia has been extended to the Federal Territory of Labuan by the Extension and Modification of Employment Act) Order 2000 [P.U. (A) 400/2000] w.e.f. 1 November 2000.
    See also the "Code of Conduct for Industrial Harmony [CCIH], 1975", which is an Agreement between the Ministry of Human Resources and the main social partners. The aim of the Code is "to lay down principles and guidelines to employers and workers on the practice of industrial relations for achieving greater industrial harmony". Although it is not a binding instrument, it is however taken into consideration by the Industrial Court in retrenchment cases.
  • The Employment Act [EA], No. 265 of 1955, as last amended by the Employment (Amendment) Act 2012.
    Date: 30 Apr 2012; view website » (view in NATLEX »)
  • Employment (Amendment) Act 2012, Act A1419, adopted on 30 January 2012 and published on 9 February 2012.
    This Act entered into force on April 1st, 2012.
    Date: 30 Jan 2012; view website » (view in NATLEX »)
  • The Employment (Termination and Lay-off Benefits) Regulations 1980, as last amended by Employment (Termination and Lay-off Benefits) (Amendment) 2011 of January 2011
    Date: 26 Jan 2011; view website » (view in NATLEX »)
  • The Industrial Relation Act [IRA], No. 177 of 1967, as last amended by Act A1488 of May 2015.
    Date: 01 Oct 2015; view website » (view in NATLEX »)
Scope
Size of enterprises excluded (≤): none
Workers' categories excluded: none
Remarks:
  • See the definition of the notion of "employee" under Sec. 2(1) EA and under Subsection 2(1) of the First Schedule EA.
    Sec. 2B EA provides that the Minister may by order exempt or exclude, subject to such conditions as he may deem fit to impose, any person or class of persons from all or any of the provisions of this
    Act.

Types of employment contracts - 2018    

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Maximum probationary (trial) period: no limitation

Remarks:
  • No reference to probationary period in the legislation.
    In practice, employees on probation enjoy the same rights as a permanent employee and they cannot be terminated without just cause.

Fixed term contract (FTC):
  • FTC regulated: Yes
  • Valid reasons for FTC use: no limitation
    Remarks:
    • FTC: sec. 10 (1) EA and 11(1) EA.
      _______________
      - Sec. 10(1) EA: "A contract of service for a specified period of time exceeding one month or for the performance of a specified piece of work, where the time reasonably required for the completion of the work exceeds or may exceed one month, shall be in writing."
      - Sec. 11(1) EA: "A contract of service for a specified period of time or for the performance of a specified piece of work shall, unless otherwise terminated in accordance with this Part, terminate when the period of time for which such contract was made has expired or when the piece of work specified in such contract has been completed."
  • Maximum number of successive FTCs: no limitation
    Remarks:
    • No statutory limitation found in the legislation reviewed.
  • Maximum cumulative duration of successive FTCs: no limitation
    Remarks:
    • No statutory limitation found in the legislation reviewed.

Substantive requirements for dismissals (justified and prohibited grounds) - 2018    

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Obligation to provide reasons to the employee: No
Remarks:
  • No statutory obligation.
    However sec. 10(2) EA states that every written contract of service should include a clause setting out the manner in which the contract concluded may be terminated by either party.
    Sec. 20(1) of the Industrial Relations Act provides that "where a workman, irrespective of whether he is a member of a trade union of workmen or otherwise, considers that he has been dismissed without just cause or excuse by his employer, he may make representations in writing to the Director General to be reinstated in his former employment; (...)"


Valid grounds (justified dismissal): none
Remarks:
  • Sec. 12 (1) EA: termination by either party at any time provided that the notice requirements are observed: no ground for dismissals required in the laws reviewed. This does not result in a total freedom to terminate the contract: it must be understood in light of the existence of prohibited grounds.

    The EA authorizes termination without notice in the following cases:
    Sec. 13 (2) EA: termination by either party without notice in the event of any wilful breach of contract.
    Sec. 14 (1) EA: summary dismissal on the grounds of misconduct.
    Sec. 15 (2) EA: termination of the contract of an employee who has been continuously absent from work without reasonable excuse.
    The 2012 amendments to the EA have introduced a new part on Sexual harassment. According to the new amendments, the employer is required to inquire into a complaint of sexual harassment he/she has received, and to take disciplinary action against the employee concerned if he/she has been found guilty, including dismissing the employee without notice (Sec. 81(c) EA).


Prohibited grounds: pregnancy; maternity leave; trade union membership and activities
Remarks:
  • * Trade union activities: sec 5 (1) (d) and 59 (1) IRA.

    *Maternity leave and pregnancy: Section 37 (4) has been inserted in the EA and it states that dismissing an employee during maternity leave constitutes an offence. Unlike the previous Section 40 (3) EA (which now has been deleted), sec. 37 (4) of the amended EA provides that the prohibition of dismissal during maternity leave does not apply to termination on the grounds of the closure of the employer's business.
    Constitutes also an offence the dismissal of a female employee who remains absent from work after the expiration of the protection period as a result of illness arising out of her pregnancy or confinement (sec. 42 (1) EA).
    - Prior to the 2012 amendments the provisions on maternity leave were applicable to female employees depending on their wages. As of April 2012, a new Section 44A has been introduced in the EA, and it states that maternity leave entitlements are now extended to all female employees, irrespective of their wage.


Workers enjoying special protection: pregnant women and/or women on maternity leave; national employees
Remarks:
  • *Maternity leave and pregnancy: Section 37 (4) has been inserted in the EA in 2012 and it states that dismissing an employee during maternity leave constitutes an offence (former section 40 (3) EA). Unlike the previous Section 40 (3) EA (which now has been deleted), sec. 37 (4) of the amended EA provides that the prohibition of dismissal during maternity leave does not apply to termination on the grounds of the closure of the employer's business.
    Prior to the 2012 amendments the provisions on maternity leave were applicable to female employees depending on their wages. As of April 2012, a new Section 44A has been introduced in the EA, and it states that maternity leave entitlements are now extended to all female employees, irrespective of their wage.
    Constitutes also an offence the dismissal of a female employee who remains absent from work after the expiration of the protection period as a result of illness arising out of her pregnancy or confinement (sec. 42 (1) EA).

    Special protection for local/national employees:
    Sec. 60M EA provides that "no employer shall terminate the contract of service of a local employee for the purpose of employing a foreign employee."
    Sec. 60N EA provides that "where an employer is required to reduce his workforce by reason of redundancy necessitating the retrenchment of any number of employees, the employer shall not terminate the services of a local employee unless he has first terminated the services of all foreign employees employed by him in a capacity similar to that of the local employee."


Procedural requirements for individual dismissals - 2018    

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Notification to the worker to be dismissed: written

Remarks:
  • Sec. 12 (4) EA.

Notice period:
Remarks:
  • Sec. 12 (2) EA lays down statutory minimum notice periods applicable to all dismissals, including those for operational reasons, but except dismissals for misconduct, as follows:
    - 4 weeks for employees with less than 2 years of service;
    - 6 weeks for employees with 2 to 5 years of service;
    - 8 weeks for employees with more than 5 years of service.
    • tenure ≥ 6 months
      • 4 week(s).
    • tenure ≥ 9 months
      • 4 week(s).
    • tenure ≥ 2 years
      • 6 week(s).
    • tenure ≥ 4 years
      • 6 week(s).
    • tenure ≥ 5 years
      • 8 week(s).
    • tenure ≥ 10 years
      • 8 week(s).
    • tenure ≥ 20 years
      • 8 week(s).

    Pay in lieu of notice: Yes

    Remarks:
    • Sec. 13 (1) EA.

    Notification to the public administration: No

    Notification to workers' representatives: No

    Approval by public administration or judicial bodies: No

    Approval by workers' representatives: No

    Procedural requirements for collective dismissals for economic reasons (redundancy, retrenchment) - 2018    

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    Definition of collective dismissal (number of employees concerned):
    No provision on the number of employees concerned.

    Prior consultations with trade unions (workers' representatives): No

    Remarks:
    • No statutory provisions.

      However, see the "Code of Conduct for Industrial Harmony [CCIH], 1975", § 20 to 24 on Redundancy and retrenchment.
      The CCIH is an Agreement between the Ministry of Human Resources and the main social partners. The aim of the Code is "to lay down principles and guidelines to employers and workers on the practice of industrial relations for achieving greater industrial harmony".
      Although it is not a binding instrument, it is however taken into consideration by the Industrial Court in retrenchment cases.

      § 20-21 reads as follows:
      "(20) In circumstances where redundancy is likely an employer should, in consultation with his employees' representatives or their trade union, as appropriate, and in consultation with the Ministry of Labour and Manpower, take positive steps to avert or minimise reductions of workforce by the adoption of appropriate measures such as:
      (a) Limitation on recruitment
      (b) Restriction of overtime work
      (c) Restriction of work on weekly day of rest
      (d) Reduction in number of shifts or days worked a week
      (e) Reduction in the number of hours of work
      (f) Re-training and/or transfer to other department/work.
      (21) The ultimate responsibility for deciding on the size of the workforce must rest with the employer, but before any decision on reduction is taken, there should be consultation with the workers or their trade union representatives on the reduction.".

    Notification to the public administration: Yes

    Remarks:
    • No provision in the EA. However, pursuant to Employment (Retrenchment) Notification 2004 [PU(B) 430], the employer must inform the Labour Department via the PK Forms one month before the retrenchment.

      However, see the "Code of Conduct for Industrial Harmony [CCIH], 1975", § 20-21 (not binding):
      "(20) In circumstances where redundancy is likely an employer should, in consultation with his employees' representatives or their trade union, as appropriate, and in consultation with the Ministry of Labour and Manpower, take positive steps to avert or minimise reductions of workforce by the adoption of appropriate measures such as:
      (a) Limitation on recruitment
      (b) Restriction of overtime work
      (c) Restriction of work on weekly day of rest
      (d) Reduction in number of shifts or days worked a week
      (e) Reduction in the number of hours of work
      (f) Re-training and/or transfer to other department/work.
      (21) The ultimate responsibility for deciding on the size of the workforce must rest with the employer, but before any decision on reduction is taken, there should be consultation with the
      workers or their trade union representatives on the reduction."

    Notification to workers' representatives: No

    Remarks:
    • No statutory provisions.

      However, see the "Code of Conduct for Industrial Harmony [CCIH], 1975", § 20-21 (not binding):
      "(20)In circumstances where redundancy is likely an employer should, in consultation with his employees' representatives or their trade union, as appropriate, and in consultation with the Ministry of Labour and Manpower, take positive steps to avert or minimise reductions of workforce by the adoption of appropriate measures such as:
      (a) Limitation on recruitment
      (b) Restriction of overtime work
      (c) Restriction of work on weekly day of rest
      (d) Reduction in number of shifts or days worked a week
      (e) Reduction in the number of hours of work
      (f) Re-training and/or transfer to other department/work.
      (21) The ultimate responsibility for deciding on the size of the workforce must rest with the employer, but before any decision on reduction is taken, there should be consultation with the
      workers or their trade union representatives on the reduction."

    Approval by public administration or judicial bodies: No

    Approval by workers' representatives: No

    Priority rules for collective dismissals (social considerations, age, job tenure): Yes

    Remarks:
    • The courts have required employers to operate the "last on, first off" principle when retrenching employees, unless there are sound and valid reasons for departing from this principle (see i.e: East Asiatic v. Ong Wai Beng, Award 24/87).

      In addition the Code of Conduct for Industrial Harmony [CCIH], 1975, provides in § 22 b) that:
      "(b) The employer should select employees to be retrenched in accordance with objective criteria.
      Such criteria, which should have been worked out in advance with the employees' representatives or trade union may include:
      (i) The need for the efficient operation of the establishment or undertaking
      (ii) Ability, experience, skill and occupational qualifications of individual workers required by the establishment or undertaking under part (i)
      (iii) Consideration for length of service and status (non-citizens, casual, temporary, permanent)
      (iv) Age
      (v) Family situation
      (vi) Such other criteria as may be formulated in the context of national policies"

      See also art. 60N of the Employment Act: "Where an employer is required to reduce his workforce by reason of redundancy necessitating the retrenchment of any number of employees, the employer shall not terminate the services of a local employee unless he has first terminated the services of all foreign employees employed by him in a capacity similar to that of the local employee".

    Employer's obligation to consider alternatives to dismissal (transfers, retraining...): No

    Remarks:
    • No statutory provisions.

      However, see the "Code of Conduct for Industrial Harmony [CCIH], 1975", § 20-21 (not binding):
      "(20) In circumstances where redundancy is likely an employer should, in consultation with his employees' representatives or their trade union, as appropriate, and in consultation with the Ministry of Labour and Manpower, take positive steps to avert or minimise reductions of workforce by the adoption of appropriate measures such as:
      (a) Limitation on recruitment
      (b) Restriction of overtime work
      (c) Restriction of work on weekly day of rest
      (d) Reduction in number of shifts or days worked a week
      (e) Reduction in the number of hours of work
      (f) Re-training and/or transfer to other department/work.
      (21) The ultimate responsibility for deciding on the size of the workforce must rest with the employer, but before any decision on reduction is taken, there should be consultation with the
      workers or their trade union representatives on the reduction.
      (22) (a) If retrenchment becomes necessary, despite having taken appropriate measures, the employer should take the following measures:
      (i) Giving as early a warning, as practicable, to the workers concerned
      (ii) Introducing schemes for voluntary retrenchment and retirement and for payment of redundancy and retirement benefits
      (iii) Retiring workers who are beyond their normal retiring age
      (iv) Assisting, in co-operation with the Ministry of Human Resources, the workers to find work outside the undertaking
      (v) Spreading termination of employment over a longer period
      (vi) Ensuring that no such announcement is made before the workers and their representatives or trade union has been informed"

    Priority rules for re-employment: No

    Remarks:
    • No statutory provisions.
      However, see the Code of Conduct for Industrial Harmony [CCIH], 1975, § 23 (not binding):
      "(23) Employees, who are retrenched, should be given priority of engagement/re-engagement, as far as is possible, by the employer when he engages workers".

    Severance pay and redundancy payment - 2018    

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    Severance pay:
    Remarks:
    • The Employment (Termination and Lay-off Benefits) Regulations 1980 provides for statutory severance pay in the event of termination, on the following scale (sec. 6 (1)):
      - ten days' wages for each completed year of service of less than two years;
      - 15 days' wages for each year of two to five years' service;
      - 20 days' wages for each year of service exceeding five years.

      These Regulations apply to employees with more than one year's service (sec. 3(1)) and do not apply to dismissals for misconduct, after due inquiry (sec. 4).
    • tenure ≥ 6 months: 0 day(s)
    • tenure ≥ 9 months: 0 day(s)
    • tenure ≥ 1 year: 10 day(s)
    • tenure ≥ 2 years: 30 day(s)
    • tenure ≥ 4 years: 60 day(s)
    • tenure ≥ 5 years: 100 day(s)
    • tenure ≥ 10 years: 200 day(s)
    • tenure ≥ 20 years: 400 day(s)
    Redundancy payment:
    Remarks:
    • Same as severance pay: see sec. 6(1) of the Employment (Termination and Lay-off Benefits) Regulations 1980.
    • tenure ≥ 6 months: 0 day(s)
    • tenure ≥ 9 months: 0 day(s)
    • tenure ≥ 1 year: 10 day(s)
    • tenure ≥ 2 years: 30 day(s)
    • tenure ≥ 4 years: 60 day(s)
    • tenure ≥ 5 years: 100 day(s)
    • tenure ≥ 10 years: 200 day(s)
    • tenure ≥ 20 years: 400 day(s)

    Avenues for redress (penalties, remedies) and litigation procedure for individual complaints - 2018    

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    Compensation for unfair dismissal - free determination by court: Yes

    Remarks:
    • The IRA does not expressly refer to legal limits (see provisions on the court's award: sec. 20 (2) and (3) and 30 IRA).

    Reinstatement available: Yes

    Remarks:
    • See sec. 20 1) and 33 b) IRA.

    Preliminary mandatory conciliation: Yes

    Remarks:
    • The employee who considers to have been dismissed without "just cause or excuse" first has to make representations to the Industrial Relations Department for reinstatement. If no settlement, including by conciliation, is possible, the Department will report the matter to the Minister, who may refer the matter to the Industrial Court (sec. 20 IRA)

    Competent court(s) / tribunal(s): labour court

    Remarks:
    • The judicial body competent to hear cases of unfair dismissal is the industrial court (sec. 20 (3) and 30 IRA)
      The employee who considers to have been dismissed without "just cause or excuse" first has to make representations to the Industrial Relations Department for reinstatement. If no settlement, including by conciliation, is possible, the Department will report the matter to the Minister, who may refer the matter to the Industrial Court (sec. 20 IRA)

      Alternatively, an employee can bring a civil action for damages in respect of wrongful dismissal before the civil courts. However, a decision issued by the Industrial Court on unfair dismissal shall operate as a bar to any action for damages by the employee in any court in respect of wrongful dismissal.(sec. 20 (4) IRA).

    Existing arbitration: No

    Length of procedure: 30 day(s) (statutory)

    Remarks:
    • Sec. 30 (3) IRA: with respect to unfair dismissal, the court shall make its award without delay and where practicable within 30 days from the day the case was referred to it.

    Source of additional information - 2018    

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    Links

    Code of Conduct for Industrial Harmony, 1975 »
    "Agreement between the Ministry of Human Resources (then known as the Ministry of Labour and Manpower) and the Malaysian Council of Employers' Organisations (the predecessor to the Malaysian Employers Federation and the Malaysian Trades Union Congress. The aim of the Code is "to lay down principles and guidelines to employers and workers on the practice of industrial relations for achieving greater industrial harmony".
    Although it is not a binding instrument, it is however taken into consideration by the Industrial Court in retrenchment cases.