Covid-19 and the current situation in Malaysia

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last updated on 18 March 2020 | reading time approx. 6 minutes

 

The Covid-19 outbreak poses for companies active in Malaysia not just an operational challenge, but also raises questions in the legal, regulatory and tax context. This article will provide a high-level overview of the questions companies active in Malaysia may face.

 

 

Restriction of movement

The Malaysian Prime Minister has announced on 16 March 2020 that the country will undergo a two week period of restrictive movement effective from 18 March 2020 to 31 March 2020 under the Prevention and Control of Infectious Diseases Act 1988 and the Police Act 1967. The Prevention and Control of Infectious Diseases (Measures Within the Infected Local Areas) Regulations 2020 gazetted on 18 March 2020 (Order) include the following:

 

  1. Prohibition of the movement of persons and mass gatherings including religious, sports, social and cultural events;
  2. Prohibition of non-essential journeys with interstate travel being subject to a permit issued by police authorities;
  3. All business premises except supermarkets, public markets, sundry and convenience shops have to be closed;
  4. All schools and educational institutions at all levels in the private and government sectors are to be closed. This includes nurseries, elementary schools, secondary schools, pre-university institutions, higher education institutions and skill training centres;
  5. Malaysians are prevented from going overseas, i.e. leaving the country. Those returning to Malaysia must undergo a medical examination and a self-quarantine for 14 days;
  6. All tourist and foreign visitors are barred from entering Malaysia;
  7. All non-essential public and private premises are to be closed. Essential public and private services as defined in the order are allowed to remain open.

  

Please note that currently there is no general exemptions for factories and other manufacturing operations. Manufacturing companies can contact the Ministry for International Trade and Industry in order to seek an exemption from the order.

  

Employment

The Ministry of Human Resource (MHR) has issued a guideline titled “Guidelines on Handling Issues Relating to Contagious Outbreaks Including Novel Coronavirus” (MHR Guidelines). Although the MHR Guideline does not prescribe any statutory obligations, employers are encouraged to adhere to the same.
 

Medical examination

Employees who have returned from countries with COVID-19 cases should be examined immediately by a registered medical practitioner at the expenses of the employer.
 

Paid sick leave

For employees who have been declared unfit to work by a medical practitioner, the employer should provide paid sick or hospitalisation leave to that employee as specified in the respective Employment Contract or the Employment Act 1955.
 

Full pay on quarantined period

Employers to provide full pay to employees who receive quarantine orders from a registered medical practitioner, upon return from countries with COVID-19 cases (if the employee was there due to official duty or instructions from employers).

 
No prohibition from attending work if no quarantine order received

Employers should not prevent employees from attending work if no quarantine order has been issued by any registered medical practitioner. However, an employer may instruct an unwell employee to not attend the workplace by providing paid sick leave to the employee.
 

Annual leave or unpaid leave

Employers should not instruct employees to utilise annual leave entitlement or take unpaid leave during the quarantine period if they have been issued with a quarantine order. From the legal standpoint, an employer ought to bear in mind that they may not unilaterally place employees under unpaid leave on the mere assumption that the employee is suspected to have contracted COVID-19. Leave on such basis should be treated as paid medical leave.
 

Closure of company premises due to the Order

Where possible, employers should permit working from home. No salary deduction should be made. Employees working from home should not have their annual leave entitlement deducted. Certain types of employment does not accommodate for employees to work at home, in such scenario - as per the guidelines issued by the Ministry of Human Resources - employers should not deduct the annual leave if the inability to work is due to a quarantine order or home surveillance order. It is worth noting that the MHR Guidelines are not legally binding and have been issued in connection with the quarantine order and not with a movement control order. It is therefore likely that the same approach will be adopted in respect of closures due to the Order. Employers can opt to put their employees on unpaid leave or reduction of salary if this is done in good faith in order to avoid retrenchment. It is likely however, that employees will challenge measures such as forced leave, unpaid leave or salary deduction. The outcome will depend on the merits of the particular case, the provisions of the employment contract, good faith of the employer and the question whether the employee is subject to the provisions of the Employment Act 11955 or not. Therefore, each measure should be considered carefully. On 16 March 2020, the government also announced that employees who earn below RM 4,000 per month, and who are forced to take unpaid leave from 1st March 2020, will receive cash assistance of RM 600 per month for a maximum period of six months.
  

Health and Safety

Employers should also be cautious in sending employees abroad for work to countries affected by COVID-19. An employer’s duty is to provide a safe system of work and if sending employees to affected countries would expose them to a health risk, employers would potentially be in breach of such a duty. All employers are subject to a duty under Common law and the Occupational Safety and Healthy Act 1994 to provide a safe working environment. This includes the implementation of a Health and Safety Policy and practical measures depending on the industry requirements such as increased hygiene procedures.
 
Employers are required to update their health and safety procedures and to comply with any directives issued by the Ministry of Health. Below guidelines are to be followed:

  • Conduct ongoing risk assessments;
  • Promote Covid-19 awareness and steps to prevent infection;
  • Limit, defer or cancel travel to areas affected by Covid-19;
  • Ensure that employees displaying flu-like symptoms attend a medical professional;
  • Identify employees who visited high-risk areas or got in contact with an infected person in order to facilitate contact tracing by health authorities.  
     

Contract Law

Commercial Common Law contracts (including contracts subject to Malaysian Law) frequently contain "force majeure" clauses to define what is to happen to contractual obligations if these cannot be fulfilled due to an “Act of God” or other circumstances not foreseeable by the parties. It depends entirely on the drafting of the specific clause, whether a pandemic such as COVID-19 will be covered or not. It should be noted that contracts related to finance and banking commonly do not contain such clauses, i.e. a company will still be under the duty to fulfil its obligations towards the bank.

 

Additionally, there may be the possibility of a contract being frustrated under Section 57 (2) of the Malaysian Contracts Act 1950. This applies to scenarios in which it became impossible for a party to a contract to fulfil its obligations without this party being able to prevent it, after the contract was signed. The party relying on this provision needs to prove that it is not simply more difficult to fulfil its obligations, but impossible. Whether a pandemic can make an obligation impossible to fulfil will depend on the specific facts of the case. The remedy for frustration is the contract to be considered void, and for each party to return the benefit already received under such contract.
 

Personal data protection

While all employers are obliged to create and maintain a safe working environment for their employees, and therefore to protect the employees from COVID-19 infections in the work place, they also have to consider the rights of employees under the Personal Data Protection Act 2020 (PDPA). Personal data related to health conditions is defined by the PDPA as sensitive personal data. The disclosure of such data is only permitted with the consent of the employee and under some very limited circumstances. Therefore, care should be taken while disclosing COVID-19 infections to employees and/or third parties.

 

Telecommunication Law: Fake News

Spreading of so called “fake news” in connection with the COVID-19 outbreak on social media or through other channels may constitute a criminal offence under the Malaysian Penal Code and/or the Communications and Multimedia Act 1998. Examples of fake news include wrong and/or defamatory statements which lead to public order offences being committed.
 

Immigration: Entry restrictions

As of 18 March 2020, all Malaysian citizens are barred from leaving Malaysia, and all foreign tourists and visitors are barred from entering Malaysia. This includes foreign nationals holding long-term Malaysian visas or employment permits, unless they are employed in an essential service. Everyone entering Malaysia will be subject to a medical examination and will have to self-quarantine for 14 days. The restrictions will apply until 31 March 2020.

 

All foreign nationals (other than permanent residents and certain long-term visa holders) will be denied entry into Malaysia if during 14 days preceding their entry, they visited one of the following locations or countries:

  • Wuhan City, Hubei, Zhejiang or Jiangsu provinces of China;
  • Republic of Korea
  • Italy;
  • Iran;
  • Hokkaido Island, Japan.
     

Further, entry will be denied (all new visa and entry applications) to

  • Chinese nationals whose passport is issued in Hubei, Zhejiang or Jiangsu provinces;
  • Republic of Korea citizens;
  • Italian citizens;
  • Iranian citizens.
     

The restrictions will apply until further notice.

 

Additional restrictions apply to East Malaysia (Sabah and Sarawak). All foreign nationals and Malaysians not resident in the relevant state will be denied entry if they travelled to China or South Korea within 14 days prior to entry. Long-term visa holders are required to self-quarantine at home for 14 days.

 

Tax

All Inland Revenue Board (“IRB”) offices nationwide will be closed throughout the Movement Control Order (“Order”) period, i.e. 18 March to 31 March 2020. However, the following services will continue to be available:

  • Online services through the ezHASiL platform;
  • Hasil Care Line and HASiL Live Chat;
  • Feedback form on the IRB website;
  • Filing and payment of income tax through the ezHASiL platform.

 

In addition, filing of tax returns (both corporate and individual) as well as submission of Form E (Return Form of Employer) falling within the period of March 2020 to June 2020 will be given a grace period of 2 months. This means that companies with accounting periods ending 31 July 2019, 31 August 2019, 30 September 2019, 31 October 2019, and 30 November 2019 will be granted a 2 month extension of time to file their tax returns. 
 

All Kumpulan Wang Simpanan Pekerja (“KWSP” or EPF) branches are closed around Malaysia but online transactions can still be done as usual. Forms to be submitted by employees wishing to retain the 11 percent contribution rate (to avoid automatic reduction to 7 percent, as introduced by the Stimulus Package in February 2020) can be submitted via E-Mail and do not require a signature. PERKESO, the body in charge of SOCSO and EIS, is still operational and will be servicing all related benefits under the essential services list, especially its benefit assistance to people during the period of the Control Order.

 

Companies

The Companies Commission of Malaysia (“SSM”) has temporarily ceased its service operation or submission at all SSM offices in Malaysia from 18 to 31 March 2020 due to the Order. This includes the submission of documents or applications via the SSM counter, online service, e-Complaint service, customer service call center and kiosk. SSM also issued a moratorium period of two (2) weeks from 1st April 2020 for all companies to comply with due dates of submissions. During the moratorium period, late lodgment fees shall be waived. Apart of that, from 1st April 2020 onwards companies are also allowed to apply for an extension of time to hold their Annual General Meeting for more than 6 months from its financial year end.

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