Chapter 7:

Employment Law
Application of EA 1955

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 Application of EA 1955
• The Employment Act 1955 is applicable in West
Malaysia only - a different Act covers Sabah and
Sarawak.
• One of the labour laws that governs many aspects
of the relationship between employer and
employee.
• Among others, EA sought to:
– defines the contract of service and the manner of
termination
– sets the minimum terms and conditions of employment
– prescribe the course of action for employer and employee in
times of disputes
– regulates payment of wages and deduction
– provide mechanism for enforcement of the provisions
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 Application of EA 1955
There are different categories and extent of protection as
provided by the EA 1955 i.e.:-
1. Full Protection (First Schedule - Sec 2(1))
• any employee whose wages does not exceed RM2000 per
month (from the previous RM 1500, with effect from 1st April
2012)
• any employee who is engaged in manual labour irrespective
of the amount of wages
• any employee engaged in operating or maintaining any
mechanically propelled vehicle operated for transport of
passenger or goods/ for reward / for commercial purposes
• the direct supervisor of any manual labour, regardless of
amount of wages
• any employee who is employed in any vessel registered in
Malaysia, who is not a duly certified officer, regardless of
amount of wages earned.
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 Application of EA 1955
2. Partial Protection
a) Domestic servant, regardless the amount of wages earned are
NOT covered by
• Sec 12 - entitlement to minimum notice for termination of
service
• Sec 14 - domestic inquiry and disciplinary action
• Sec 16 - entitlement to minimum days of work
• Part IX - entitlement to maternity benefits
• Part XII - entitlement to minimum benefits and payment
• Part XIIA - entitlement to Termination and Layoff benefits

b) Any employee who earns more than RM2000 but up to RM5000 -

not entitled to any benefits provided by the EA but by SEC 69B is
entitled to seek the intervention of the Labour Office to enforce the
terms and conditions of employment of his contract of service.
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Contract of Service

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 Contract of Service (CoS)
• Sec 2 - contract of service means any agreement,
whether oral or in writing and whether express or implied,
whereby one person agrees to employ another as an
employee and that other agree to serve his employer as
his employee and includes an apprenticeship contract.
• A contract of service may be oral or in writing, but under
the following terms must be Rule 5 (b) and 8 Employment
Regulations 1957 given to an employee in writing on or
before the commencement of his employment ;
◦ i) name of employee/NRIC
◦ ii) occupation or appointment
◦ iii) wage rates (excluding allowances)
◦ iv) allowances payable and rates
◦ v) rates for overtime work

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 Contract of Service (CoS)
• Implied Terms in a CoS are terms which the law
assumes to be known by both the employer and
employee - essential to facilitate the smooth running
of the business. e.g:
– to work diligently and honestly
– to be punctual
– to obey all lawful orders, instructions, regulations
etc
– not to be absent without leave
– not to commit fraud or criminal breach of trust
• Express conditions on the other hand are those
expressly stated in the contract, job description,
company handbook or manual, circulars, memos etc.
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 Contract of Service (CoS)
• However by Sec 10 - a contract of service for a specific
period of time exceeding one month or for the
performance of a specified piece of work which is likely
to take more than a month to complete - MUST be in
written form.
• The terms and condition of a CoS which are less
favourable than those stipulated in the EA - will be null
and void but those which are more favourable are
allowed – must not contravene any express prohibition
under the Act.
• A CoS cannot in any way restrain an employee from
joining a Trade Union, join in the activities or organizing
the formation of a TU.

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 Contract of Service (CoS)
• In every written CoS- manner, in which the contract may
be terminated by either party, must be set out.
• The EA allows for the employer and employee to agree
upon the notice period between themselves provided
that:
– the period agreed upon is the same for both parties
– such provision for notice is put in writing
• If either party wants to terminate the CoS - give notice
of his intention to do so in the agreed period as stated in
the CoS.

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 Contract of Service (CoS)
• If there is no such provision included in the CoS, then the
notice period SHALL NOT BE LESS THAN i.e. the minimum
of:
– 4 weeks notice if employed less than 2 years
– 6 weeks notice if employed for more than 2 years but
less than 5 years
– 8 weeks notice if has been employed for more than 5
years
• Usually the notice period contained in the CoS comes into
play when the employee wants to resign from his job.
• However in case of termination - the notice period
required may differ according to the ground for
termination.
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 Contract of Service (CoS)
• Where the grounds for termination is related to retrenchment
due to:
– closure of business
– shrinkage of operation, restructuring or reorganization
– change in the business ownership (sale, merger, takeover
etc)
– refusal of the employee to accept a transfer that he is not
contractually bound to
• Then the law requires that a notice to be served to the
employee and the period must NOT BE LESS than those
prescribed by Sec 12 (2) regardless of anything contained in
the CoS.
• If any party fails to provide any notice of termination - must
pay the other indemnity in lieu of notice i.e. one day’s wage
for each day of notice short of the required period.
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 Contract of Service (CoS)
• The requirement of notice may be waived :
– if the party who is supposed to receive it agree to waive
his rights.
– in the case of the dismissal for misconduct of the
employee.
– in situation where the termination is caused by willful
breach. of the CoS by either party e.g.:
➢Employee AWOL for more than 2 consecutive days -
Sec 15 (2).
➢Employer not pay wages according to the law - Sec
15(1).
➢Employee terminate contract due to immediate threat
to the safety of him and his family.

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Breach of Contract

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 Breach of Contract
• A breach of the CoS does not necessarily lead to
termination of the employment - depends on the
circumstances of the breach.
• Sec 13 (2) EA allows either party to terminate the
contract without notice in the event of WILLFUL
breach of the contract by the other party.

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 Breach of Contract
• Breach of Contract also may occur under any one of the
following reasons:
– Sec 14(3) - employee may terminate contract without
notice in case of threat to the safety of himself and his
family (disease or violence) which the employee did
not undertake to run.
– Sec 15(1) - employer breach contract if not pay
wages in accordance with Part III.
– Sec 15(2) - employee breach contract if AWOL for
more than 2 consecutive days.
– Sec 16(2) - employer breach contract if not provide
work.
– Sec 60 F (2) - employee absent on sick leave without
being certified by a registered medical practitioner.
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Probationary Period

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 Probationary Period
• Probationary period is for employer to test / assess the
suitability of the employee for the assigned to him -
aptitude, attitude, ability and adaptability.
• A probationer should be supervised closely during
this period - given guidance, advice and correction
to enable him to meet the needs and expectation of
the company.
• The law is silent on the duration of the probation
period - however the norm in the private sectors - 3
months for non-executive position and 6 months for
executive and managerial positions.

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 Probationary Period
• The period may also be extended to a further 1 - 3
months or depending on the discretion of the
employer - but the probationer must be informed of
this extension BEFORE the end of the initial probation
period.
• The employee also should be informed of the specific
areas where the employer would like him to improve
on his performance - to enable him to defend himself
and strive to meet the expected goals.
• At the end of the probation period - if the employee
turns out to be unsuitable for the job - then the
employer has the right to terminate his service at the
end of the period and NOT before.
i.e. the probationer has no lien on his post.
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 Probationary Period
• The test of suitability to the company’s satisfaction -
subjective but should be reasonable , not arbitrary.
• The termination too should not be mala fide - must be
with just cause
• A probationer so terminated can question the
decision through Sec 20 of the Industrial Relations Act
1967
• If the probationer commits misconduct - may be
dismissed AFTER due inquiry even before the end of
the probation period.

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 Probationary Period
• Where a probationer continues in employment after
expiry of the probation period, the question is
whether, in law, he or she is deemed to have been
confirmed?
• This was settled by the Federal Court in K.C.MATHEWS
v. KUMPULAN GUTHRIE SDN BHD [1981] 2 MLJ 320 and
V.SUBRAMANIAM v. CRAIGIELEA ESTATE [1982] 1 MLJ
317. ; where it was held that if, after the expiry of the
stipulated probation period, no action is taken by the
employer either by way of confirmation or by way of
termination, an employee continues to be in service
as a probationer.

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 Probationary Period
• A probationer under any other circumstances is
considered an employee and if comes under the
purview of the EA - should be entitled to all the
minimum benefits stipulated by the Act.
• Pakir Abdul Jalil v. Sykt Shell Refinery Co. Bhd
• Khaliah Abas v Pesaka Capital

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Wages and Benefits

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 Wages and Benefits
• Sec 2 EA - Wages means basic wages and all other
payments in cash payable to an employee for
work done in respect of his CoS, but does not
include :-
▪ value of accommodation, food, fuel, light and
water
▪ employer’s contribution to EPF, pension, any
funds or schemes
▪ travel allowances
▪ expenses and claims
▪ gratuity and annual bonus

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 Payment of Wages
• Payment of wages - paid into an employee’s bank
account or financial institution under the BAFIA Act
within 7 days after the last day of any wage
period.
• Employee must be given a written statement of the
wages paid to them.
• Sec 18 - a CoS should state a specific wage period
which should not exceed one month - if the CoS
not mention the period - law deems it to be one
month.
• i.e. wages may be paid daily, weekly or fortnightly.

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 Payment of Wages
• Sec 19 - latest time for wages to be paid - not later
than the 7th day after the end of the specified
wage period.
• Employers are not encouraged to give advance to
their workers - such payment however is still
allowed but strictly regulated.

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 Payment of Wages
• Payment of wages on normal termination of contract
- i.e.:-
– due to contractual expiry of the contract of a
specific period
– due to the completion of work of a specific nature
– retrenchment
– dismissal due to misconduct
– termination due to breach of contract
– resignation with proper notice
– resignation without notice or sufficient notice by
paying indemnity in lieu of notice.

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 Payment of Wages
• MUST be paid on the last day of his service with the
company.
• If the resignation is without notice and without
paying indemnity in lieu of notice - not later then 3
days after the last day.
• Also applicable to termination by willful breach
and due to fear of safety of his own self and family.

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Deduction of Wages
• Overpayment of wages
ALLOWED • Indemnity in lieu of notice
DEDUCTION • Recovery of advance
• Lawful deductions – EPF, SOCSO, EIS etc

◦ Payment of subscription or entrance fees, loan

DEDUCTION WITH installments, interest or other dues payable to
EMPLOYEE’S registered union, co-op or loan society
CONSENT • Recovery of advance made for the purpose of
buying shares in the employer’s company

DEDUCTION BY
• Deduction in respect of payments
WRITTEN REQUEST
to 3rd party on behalf of the
WITH DG
PERMISSION employee
 Deduction of Wages
• Sec 24 (8) - the total amount that an employer can
deduct in a month from the employee’s wages must
not exceed 50% of that month’s pay.
• However the 50% limit can be exceeded in case of :-
– payment of indemnity in lieu of notice under Sec
13 (1).
– recovery of any monies due to the employer from
the final payment of wages upon the termination
of the CoS.
– up to 75% for the repayment of housing loan with
the written approval from the DG.
 Deduction of Wages
• Priority of Wages
– If an employer is forced by a court to sell of
property and assets to pay of debts, employees
who have not been paid their wages will receive
priority over other secured creditor (e.g.
mortgagor, charger, lien holder).
– However the maximum that may be claimed is
only the sum of 4 month’s wages.
Working Hours

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 Working Hours

• 8 hours per day, max of 10 hours in spread over period

DURATION • 48 hours per week

• not more than 5 consecutive hours in a day - with a rest / break

of not less than 30 minutes - if less than 30 min - not counted as
DURATION break

• An employee can be asked to work an hour longer than the 8

hrs. without getting OT payment - but given time -off to replace
DURATION the time worked.

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 Working Hours
• However - there are exceptions to the time limit
above in case of :
– accident, actual or threatened, in or with
respect of his workplace
– performance of work that is essential to the life of
the community
– interruption of work that is not foreseeable
– urgent work to be done to a machinery or plant
– performance of work essential to the defense or
security of Malaysia
– work in any industrial undertaking essential to the
economy of Malaysia or other essential service
defined by IRA 1967.

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 Overtime
• Overtime - means work done in excess of the
normal hours of work
• For work carried out in excess of the normal hours -
the employee shall be paid overtime rates
• Overtime hours is limited to max 4 hours daily and
not exceed an aggregate of 104 hours in a month.
• Calculation of ORP (wages) for one day for the
following purpose:-
– maternity leave, public holiday , annual or sick
leave
➢for monthly rated employee - Monthly wages
/26
➢for weekly rated employee - Weekly wages/6

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Overtime > RATES FOR DIFFERENT DAYS
NORMAL WORKING DAY

1.5 x normal hourly rate

REST DAY

2 x normal hourly rate

PUBLIC HOLIDAY

3 x normal hourly rate

 Rest Day and Leave
• Sec 59 - an employer must allow a worker to have one
whole day of rest every week - if not - commit an
offence.
• The rest day may be any day of the week - not
necessarily on Sunday and may be on a different day
each week.
• If the rest day is not fixed on the same day each week
, the employer needs to inform the worker beforehand
at the beginning of the month through a roster (which
should be maintained for up to 6 years for inspection
by LO)
• The rest day of all the employee may be the same or
different e.g: by rotation.
 Rest Day and Leave
• If more than one day is given as rest day - the last of
such days will be the de facto rest day.
• Rest day cannot be counted into annual leave but for
workers on maternity leave, sick leave or disablement
leave - not entitled to any additional days as rest day
leave.
• For a shift worker - the rest day should be a minimum
30 hours
• If a public holiday falls on a rest day, then the next
working day shall be considered as a public holiday.
• With the 1998 amendment - an employer may now let
the worker accumulate his rest days for the month and
enjoy it in a stretch.
 Rest Day and Leave
• Once a rest day has been fixed - cannot be changed
by the employer or the employee.
• A shift worker can be compelled to work on rest day
but not a non-shift worker except for cases under Sec
60 (1).
• If the employee is required to work on a rest day, the
amount of wages to be paid shall be:-
– for daily rated workers
➢1-day wages if work 1/2 day or less
➢2 times daily wages if exceed 1/2 day
– for monthly rated workers
➢1/2 ORP if work not exceed 1/2 normal hours
➢1-day ORP if work not exceed normal hours
 Public Holidays
• Sec 60D - an employee should enjoy at least ELEVEN
(11) paid public holidays out of which FIVE (5) will be
compulsory i.e. :
– Merdeka Day
– Agong’s Birthday
– The State Sultan’s Birthday or Hari Wilayah for FT
– Labour day
– Malaysia Day
 Public Holidays
• The other 6 days - up to discretion of the employer to
choose from the list of gazetted public holidays or may
choose any other day as a paid public holiday.
• If employee asked to work on public holiday, the
wages to be paid:
– for daily rated workers
➢2 days wages even if work less than normal hour
+ public holiday pay
– for monthly rated workers
➢ 2 days wages at ORP even if work less than
normal hours
 Annual Leaves
• Sec 60E - an employee entitlement to paid annual
leave AFTER every 12 months of continuos service is :-
– 8 days if has served the same employer <2 years
– 12 days if has served the same employer >2 but < 5
years
– 16 days if has served the same employer >5 years
• However - if the employee AWOL and without
reasonable excuse for more than 10% of the working
days within the 12 months - not entitled to AL
• The paid annual leave to which the employee is
entitled is in addition to his rest days and public
holidays.
 Annual Leaves
• The leaves must be taken within the preceding 12
months of service - if not may be forfeited.
• The unconsumed leaves however may be carried
forward provided does not violate the minimum
number of days (follow established policy or by mutual
consent)
• The employer too may make payment in lieu of leave
with the written consent of the employee.
• If employee gets sick leave / maternity leave on
annual leave - the latter is cancelled.
 Annual Leaves
• If the contract of service is terminated by either party.
• (except under Sec 14.1.a for misconduct) and there is
a balance from the annual leave - the employee will
get his ORP for every day of the unutilized leaves.
• An employee may use the balance of his annual
leave to offset the whole or part of the required notice
period of his resignation.
• An employee’s entitlement to annual leaves is not as
of right. Have to obtain permission from the employer -
failure to obtain such consent is a fundamental
breach of contract.
 Sick Leaves
• Sec 60 F - an employee after examination by a panel
doctor (or other registered GP under special
circumstances) is entitled to paid sick leave of:-

a) Without hospitalization
– 14 days - service < 2 years
– 18 days - service >2 but < 5 years
– 22 days - service > 5 years

b) With hospitalization - 60 days inclusive of the days

mentioned above.
 Sick Leaves
• Unlike annual leaves - sick leave does not require
qualifying period of 12 continuous months of service to
be entitled for it.
• Sick leaves - includes leave granted by dentist.
• Sick leaves cannot be brought forward, or pro rated
for the year if an employee joins the company in the
middle of the year.
• An employee is not entitled to paid sick leave when :-
– under maternity leave AND receiving maternity
allowances.
– on leave while receiving compensation for
disablement benefit under WCA.
– on leave while receiving payment from SOCSO for
temporary disablement.
 Sick Leaves
• An employee who absents himself on sick leave which
is not certified by a registered medical practitioner or
a medical officer or a dental surgeon OR which is
certified by such registered medical practitioner or
medical officer or dental surgeon, but without
informing or attempting to inform his employer of such
sick leave within forty-eight hours of the
commencement thereof, shall be deemed to absent
himself from work without the permission of his
employer and without reasonable excuse for the days
on which he is so absent from work.
Employment of Women

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 Employment of Women
• Employers must abide by several rules regarding the
employment of female employee.
• Sec 34 -
– no female worker allowed to work in any industrial /
agricultural venture between 10.00pm and 5.00am.
– No female employee can start work without having
a rest period of 11 consecutive hours.
• However the DG may exempt any female employee
from the restriction on working hours , but not the rest
period
• Sec 35 - female workers cannot work underground i.e.
mining activities
 Maternity Leave
• All female employee are entitled to 60 days of
maternity leave for each birth.
• Up to 30 days of this leave may be taken before giving
birth.
• During this period of leave, the employee is entitled to
receive maternity allowances provided several
conditions are fulfilled.

• ** You need to understand the difference between

maternity leave and maternity allowances
 Maternity Leave
During this period, the employee is entitled to
receive maternity allowances provided :

There is birth of child/children after 22 weeks of pregnancy

The female employee have no more than FIVE (5) surviving

children at that time

Have been employed by the employer in the 4 months

immediately before the confinement

Employed for at least 90 days in the 9 months immediately

before the confinement
 Maternity Leave
• If maternity leave taken earlier than 30 days before
giving birth - the leave will be considered as medical
leave, annual leave or sick leave.

• If after 60 days, the employee is still absent because

she is medically certified to be unfit for work - her
service cannot be terminated until after 90 days from
the end of the maternity leave.

• A female worker too cannot be dismissed without just

cause during her maternity period.
Termination and Lay-off Benefits

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 Termination and Lay-off Benefits
• Provided for under the ‘Employment (Termination
and Layoff Benefits) Regulations 1980.

• An employer becomes liable to pay these benefits

when he terminates the services / lay-off any
employee who has served him continuously for 12
months.

• Lay-Off generally means any period where work is

not provided when the employer is obliged to do so
and the employee is not paid during such idle
period.
 Termination and Lay-off Benefits
• For the purpose of determining eligibility to receive
benefit means:
✓ A total of 12 normal working days without work, in
any consecutive period of 4 weeks and during
which the employee is not paid
• A company may lay-off or retrench some or all of its
employee for any reasons e.g :
✓ management or financial problems, shortage of
raw material, breakdown of machinery or
prolonged power failure, reorganization,
amalgamation, shutdown ordered by local
council etc.
 Termination and Lay-off Benefits
• Regulation 4 excludes the following employee from
getting the benefits:
➢ those terminated on grounds of retirement upon
reaching the age -where such age is provided for in
the CoS
➢ those terminated due to misconduct
➢ those who resigned voluntarily
➢ those who is terminated but the contract is renewed
immediately / engaged in new contract not less
favorable than the previous one - 4(2)
➢ those who refuses offer to re-employ /renew contract
made more than 7 days before the existing CoS ends -
4(3)
➢ those who leaves the job before the expiry of the
notice period without prior consent from employer and
not paying indemnity in lieu of notice.
 Termination and Lay-off Benefits
• Regulation 6 - Amount of termination / lay-off benefits
due:
➢ < 2 years -10 days wages for each year of service for
➢ >2 but < 5 years - 15 days wages for each year of
service
➢ > 5 years - 20 days wages for each year of service

• The amount above is to be pro-rated for any incomplete

year and includes any indemnity, annual leave balance
etc which is due to the employee.
 Termination and Lay-off Benefits
• Payment of the benefits must be made within 7 days from
the termination date.

• CASES:
➢ See Fatt v. Harper Gilfillan (1980)
❖ the average daily wages in a particular month
should be arrived at by dividing the amount of
wages by the total number of days in the month.

➢ Abdul Azizi Atan v. Ladang Rengo Malay States

❖ acquisition of share holding of a company does
not constitute a change in the ownership of the
company.
End of Slides