Amendment to Employment Act

by Raymond Lim
Petaling Jaya

I refer to the recent statement by the Minister for Human Resources, Dato’ Dr. Chan Fong Onn that the back-dated wages will be limited to 24 months in cases of wrongful dismissal by employers under the proposed
amendments to the Employment Act.

The Minister justified the proposed amendment by referring to Practice Note No. 1/1987 which was introduced by the Industrial Court on the said 24 months limitation. Practice Note No.1/1987 on 24 months cap on backdated wages created some confusion. Several Industrial Court decisions applied the 24 months limitation. However, many did not do so on the basis that it is merely a practice note but not legally binding and by doing so, they sought to give more protection to employees from unscrupulous employers.

It is instructive for Members of Parliament to note that the Federal Court, in one of its landmark decisions, had ruled that the “right to live” under the Federal Constitution included the “right to livelihood”. For this reason, many decisions in the Industrial Court took judicial notice of this ruling in their decisions and declined to follow Practice Note No. 1/1987 when dealing with wrongful dismissal cases involving breach of natural justice, mala fide, victimization or unfair labour practice. Put in a nutshell, Practice Note No.1/1987 will not achieve the said ruling of the said Federal Court, the highest Court in the land. As a matter of fact, Practice Note No.1/1987 should be withdrawn by the Industrial Court.

In this letter, I will submit that it is extremely unwise for our Government to approve the said amendment to the Employment Act.

By way of introduction, in the case of wrongful dismissal by an employer, the Industrial Court will order a reinstatement of the employee and payment of back-dated wages from the date of wrongful dismissal to the date of judgment. Since the hearing at the Industrial Court may take place 3-5 years later or even longer, the amount of back-dated wages can be a substantial amount. If the employer-employee relationship is such that it is no longer possible to be continued, the Industrial Court will order the employer to pay one month’s salary for every year of service in lieu of reinstatement.

As a lawyer for close to 20 years, I have encountered countless cases wherein employers were extremely high handed when handling the dismissal of employees. Such high-handedness borders on total disregard to the livelihood of employees, especially employees who have been loyal to their organizations and had given the best years of their lives to their employers. Most wronglful dismissals arose because many unconscionable employers simply have no respect for employees as human beings or have scant regard for the due process of natural justice. In many cases, employees were transferred to branches far away merely to make them resign or subjected to other forms of victimization or unfair labour practice. Against this background, it is therefore not surprising that the industrial relations law and the industrial courts are protecting the welfare of employees, much to the chagrin of employers.

For many years, the back-dated wages have been an effective deterrent against wrongful dismissal by unscrupulous employers and the judiciary has been the bulwark in zealously safeguarding the welfare of employees who are victims of wrongful dismissal. Removing this deterrent now by way of legislation is the usurpation of the role of the judiciary by Parliament.

Personally, I see no reason why bona fide employers should take exception to the back-dated issue.

Firstly, if employers have conducted due inquiry with objectivity and fairness, and have sufficient evidence to support their case for dismissal based on just cause and excuse, they should not fear the backlash of reinstatement and payment of backdated wages. The law is on the employers’ side when they have adhered to the principle of natural justice and if they are not guilty of any mala fide or unfair labour practice. Like what Confucius said: “If one has examined his heart and found no wrongdoing, why should he be afraid?”

Secondly, employers’ contention is that they should not be the victim of the slow process and delay in the Courts which result in a hearing taking place 3-5 years later or longer. But the pertinent question is this: “Is the delay of a trial the fault of the employees? If it is not, then why should the policy consideration be in favour of employers (the “rich” people) rather than employees (the “poor” people) on this issue? Who broke the contract of service in the first place? Is it not the employer in the case of a wrongful dismissal? It will be most unconscionable if the policy consideration is in favour of employers when it is the employers who are at fault. Why is Parliament protecting the employers (the “rich” people) when it is expected to protect the employees (the “poor” people).

Thirdly, not all employers are penalised by back dated wages as not all unfair dismissal cases end up in the Industrial Court. Many employees just accept what is offered (usually 1-3 months’ salary) by the employers as a settlement because they want to move on with their lives, especially when they found employment elsewhere. They do not have the money to battle it out in Court nor do they wish to endure the agony of attending Court proceedings. Thus, many employers are getting away without having to pay what the back-dated wages that employees are legally entitled if they had taken the matters to the Industrial Court. Hence, we need to look at the back-dated wages issue in a balanced perspective to be fair to employees as well.

Employers expect loyalty from the employees. But what do employees get in return? Some employees had given the best years of their lives to their companies, only to be thrown out in their late 40s or early 50s without misconduct being proven. At that kind of age, they are not “marketable” and it is quite impossible to find employment elsewhere. If they still have schooling children, one can imagine the hardships to their families especially when they could not secure a new job immediately. The untold
trauma and stigma that some victimized employees suffered are not known to many of our Members of Parliament. Employers have many ways to make life very difficult. Some employers resort to planting “land mines” when there is no case for unfair dismissal. They want to get rid of the targeted employees, by hook or by crook. Such employees had to be on full alert daily not to step on any land mine. Materials (e.g. pornography) were planted into the employees’ computers and baseless rumours or poison pen letters on alleged misconduct (e.g. financial or sexual misconduct) were spread to tarnish their character. Our Members of Parliament must realize that such mental torture and stigma cannot really be compensated in monetary terms. As such, employers must not have a warped view that employees are benefiting from the back-dated wages rule.

We have the Labour Day as a public holiday to commemorate the significance and contribution of the labour force to this nation. Let us not do so with a mere public holiday, but also with laws and deterrents that will penalize mala fide, unfair labour practice or victimization by employers.

Good corporate citizens should not fear if they are ready to conduct due inquiry with objectivity and fairness free of all forms of any mala fide, unfair labour practice or victimization. The law should encourage employers to be good corporate citizens rather than vice versa.

If the proposed amendment to the Employment Act limiting backdated wages to 24 months is passed, there is real fear that unscrupulous employers may use it as a “LICENCE” to get rid of their employees. Such employers may offer, say 3 months, and tell the employees to take it now or wait 3-5 years later. After all, their exposure is only 24 months and no longer 3-5 years backdated wages or more. This will not encourage employers in this country to be good corporate citizens. Worse still, it may also result in a higher number of indiscriminate dismissals since the deterrent is no longer in place. Hitherto, reinstatement and payment of backdated wages without the 24 months limit is an effective deterrent. It should remain so. I hope that Yang Berhormat will drive home the severity of these implications to the other Members of Parliament.

Malaysia is not a developed country wherein the wage level is high. In fact, the wage level is much lower compared to many countries. We don’t even have the minimum wage for the lower end wage earners. And when you take into account rising inflation and hidden costs due to increasing corruption, many wage earners, especially those below middle class income earners, are indeed struggling to balance their income with expenditure. In the past, most women stayed at home. Now, many women have to work to supplement their husbands’ income. Life as wage earners is already very tough as their monthly salary is lagging behind rising inflation and hidden costs due to increasing corruption. Accordingly, employees need security of tenure of their employment and protection against unscrupulous employers who have scant or no regard for natural justice or are guilty of mala fide, unfair labour practice or victimization.