Key Amendments to the Employment Act 1955

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We previously wrote about the Employment (Amendment) Bill 2021 (“BILL”) when it was tabled for its first reading, and now the Bill has been passed by the Senate. The amendments under the Bill have not yet come into force, and there is no indication as of when it will be effective. Upon the Bill coming into force, there will be implications on employers and employees in Malaysia.
  
Below are some of the key amendments that will impact employers:
  

Scope of employees covered under the Bill

With a few exceptions, the Employment Act 1955 (“ACT”), only applies to employees mentioned in the First Schedule of the Act (in a nutshell, these are employees whose wages do not exceed RM2,000 a month and/or employees involved in manual labor.) Provisions such as maternity protection and protection against sexual harassment under the Act do apply regardless whether the employee falls under the First Schedule or not. 
  
The passing of the Bill has led to some confusion as the Bill deletes sections under the Act which provide maternity protection to all female employees regardless of salary, and sexual harassment provisions which apply to all employees regardless of salary - but does not make any amendments to the First Schedule. This would result in employees earning above RM2,000 a month not being entitled to maternity leave, or to protection under the sexual harass-ment provisions. 
  
The Ministry of Human Resources has assured that subject to certain conditions, all employees, regardless of wages will be protected under the Act, and this will be reflected by way of a Minister’s Order. At the time of writing, no details as to the Minister’s Order are available, hence it remains unclear.
  

Presumption of employment

The Bill provides that in the absence of a written contract and unless proven otherwise, there will be presumption of an employment relationship if the following factors are given:
  • his/her work or hours of work are subject to control by another person;
  • he/she is equipped with tools, material or equipment by another person to execute his work;
  • his/her work constitutes an integral part of another person's business;
  • his/her work is performed solely for the benefit of another person; or
  • payment is made to him/her for work done at regular intervals and it constitutes the majority of his/her income.
  

Calculation of wages for an incomplete month

The Bill provides a new section in the Act that introduces the below formula for calculating wages where an employee has not worked a full month:

Extension of maternity leave

Previously, the Act provided a 60 days maternity leave for all female employees, subject to the conditions of the Act. Now, when the Bill comes into force, eligible female employees will be entitled to 98 days of maternity leave.
  

Restriction on termination of pregnant employees

The Bill introduces a new section in the EA which prohibits an employer from terminating an employee who is pregnant or is suffering from an illness arising out of her pregnancy, except under specific circumstances such as willful breach of contract, misconduct or closure of the employer’s business. It is vital on employers to prove that the termination was not due to pregnancy.
  

Paternity leave

Married male employees will now be entitled to 7 consecutive days of paternity leave up to 5 confinements.

Sexual harassment

The Bill introduces a new section which requires employers to conspicuously exhibit a notice to raise awareness of sexual harassment in the workplace. The sexual harassment provisions are still viewed as weak and limited. The Anti Sexual Harassment Bill 2021 would provide more guidelines upon being passed. It is currently in its first reading in Parliament.
  

Employment of foreign employees

Approval must be obtained from the Director-General of Labor to employ a foreign employee. Upon the employer satisfying the conditions listed in the Act, approvals are granted. Failure to obtain an approval is an offense, and on conviction, the employer shall be liable to a fine not exceeding RM 100,000 and/or to imprisonment for a term not exceeding five years.
  

Reduction on working hours 

Previously, the Act provided 48 hours as regular working hours. With the Bill coming into force, the regular working hours will be reduced to 45 hours a week. 
  

Flexible working arrangements

Employees can apply for flexible working arrangement, depending on the suitability of the working hours or work place. However, there is no legal obligation on the employer to grant this request. If the employer is to reject the request, they are required to provide grounds of refusal within 60 days of the application.
  

Discrimination 

The Director General has the authority to investigate and decide disputes on discrimination in employment between employer and employee. Furthermore, the Director General has the power to make an order where necessary. However, this provision is vague and it does not define discrimination. Job seekers will not be able to rely on this provision as there is no employment relationship between an employer and job seekers, and as such this provision will not apply to protect job seekers from discrimination. 
  

Conclusion

The timing of the passing of the Bill can be said to be dreadful and a challenge for employers, as businesses are still recovering from the impact of the pandemic and the increase of the minimum wage being effective as of 1 May 2022.
  
However, the amendment of the Act is something long overdue and is necessary to be in line with international labor standards and prac-tices under the Trans-Pacific Partnership Agreement, the Malaysia-United States Labor Consistency Plan and the International Labor Organisation.

Employers may feel the pinch with these amendments and are encouraged to revisit their business model to incorporate the new employment benefits.

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