Workshop Review and FAQs

Last week, the first part of Mr. Loo Kia Shong’s workshop on the Malaysia Industrial Relations System regarding Dismissal, Pay Cuts, and Retrenchment. We would like to thank all participants for their attendance, and share answers to some of the frequently asked questions we have received.

FAQs on MCO, Covid-19

Note: Please note that the answers to the questions does not constitute legal advice as they represent general discussions. Kindly seek independent legal advice concerning the matters in this FAQ should you require it.

1. What should employer do before proceeding with pay cuts, retrenchment or downsizing?

The Malaysian Code of Conduct for Industrial Harmony 1975 (the Code) which was endorsed in February 1975 provides a guideline on the measures that employer could take before considering retrenchment which should be the last option to take. Some of the appropriate measures that could be taken and are listed as follows:

  • limitation on recruitment:
  • restriction of overtime work;
  • restriction of work on weekly day of rest;
  • reduction in number of shifts or days worked a week;
  • reduction in the number of hours of work;
  • re-training and/or transfer to other department/work.

2. What are the Dos and Don’ts during MCO?

With respect to Human Resource matters, the Ministry of Human Resource (MOHR) has issued 4 FAQs as a guidance. Participants should read the 4 FAQs to familiarize themselves on the dos and don’ts during MCO. Besides the MOHR, other ministries and regulatory authorities like SSM, LHDN, KWSP etc have also issued guidance.

We must understand that this MCO and Covid-19 is something new. How the FAQs would be applicable is still being debated as to the legality on some of the matters as stated in these FAQs.

3. Does the employer need to report to JTK prior to any pay cuts, downsizing or retrenchment?  What if the employer did not submit or submits after the  retrenchment?

Yes there is a need to inform the MOHR. Employers are also required to submit a written notification (PK Form) to the nearest Department of Labour at least 30 days before conducting a retrenchment exercise.

4. If company has a clause of Force Majeure, how can this be applied during the pandemic?

In order for any party seeking to rely on a force majeure clause it must be shown that:

  • the force majeure event was the cause of the inability to perform or delayed performance.
  • the non-performance was due to circumstances beyond their control; and
  • there were no reasonable steps that they could have taken to avoid or mitigate the event or its consequences.

It would be disputed whether the MCO is a force majeure and whether it is an act of God but in some force majeure clauses, infectious disease may be listed as a force majeure event.

5. A summary of the Four MOHR FAQs are as follows:

4 FAQs By Ministry of Human Resource (MOHR)

  • 1st  issued on 19.3.2020
  • 2nd FAQ on 23.3.2020
  • 3rd FAQ on 31.3.2020
  • 4th FAQ on 7.4.2020

Summary of FAQ 1 – 18th March to 31st March

  • Allowed workers in essential services to work but under strict SOPs
  • 50% of employees, Minimum movement, Hand sanitizer, temperature, social distancing, sanitization
  • Employers need to pay full wages
  • Take note of Minimum Wage
  • For essential services, if employees requested to work from home but refused, then need not pay
  • Cannot deduct annual leave or force employees to take unpaid leave
  • If request employees to work at home, must pay full pay and allowances

Summary of FAQ 2 – Dated 23.3.2020

  • Besides Essential service – critical work, need to apply for approval.
  • Wages and allowance from 18.3.2020 to 31.3.2020 need to be paid (except allowance like travelling or attendance allowance)
  • Inform that salary cut, forcing employees to take annual leave – constructive dismissal
  • Does not allow employers to force employees to take annual leave.
  • Unions may take up such matters under Section 18 of IRA 1967
  • All salary deductions must be discuss with Employees/Unions and obtain their agreement. Does not say whether this is ok?
  • Not frustration of contract
  • Lay-off, retrenchment, pay cuts mentioned in this FAQs.
  • Section 20 of IRA – 60 days. MCO period not counted.
  • Cannot force staff on quarantine to work

Summary of FAQ 3 – Dated 31.3.2020

  • Wages required to be paid from 1.4.2020 to 14.4.2020 except allowances like attendance/travelling
  • Force annual leave not allowed from 1.4.2020 to 14.4.2020
  • It stated that employer can offer leave with full pay, half pay or no pay but subject to agreement. It did not say whether this is permitted? It requires employers to inform Labour Department via Borang PK.
  • It listed 3 conditions for employers before retrenchment
    1. Genuine reason because of COVID-19
    2. Take measures to reduce costs
    3. Follow Principles like LIFO
  • Duration of MCO not taken into account for Section 20 IRA calculation of 60 days

Summary of FAQ 4 – Dated 7.4.2020

  • Wage subsidy – workers RM4k and below, 3 categories below 75 workers, 76 – 200 workers and above 200 workers.
  • Wage subsidy for 3 months
  • To retain staff for at least 6 months

6. Can employer retrench or downsize during or after MCO?

It depends. The employer bears the burden to prove that there are good reasons to go on a retrenchment. It depends on the financial position of the company and also whether there would be a surplus of labour resulting from Covid-19.

7. Can employer retrench employee but not paying for termination notice nor retrenchment benefits?

For those who are under the ambit of Schedule 1 of the Employment Act 1955 eg. Earning RM2000.00 and below the employer must pay retrenchment benefits. For those not under the ambit of Employment Act 1955 technically the employer need not pay although in practice, some employers do pay.

8. Can employer not pay retrenchment benefit to employees who are not under Employment Act?  If their pay is above RM5,000, can they log a report to IR Court?

As long as a person is an employee even though he earns more than RM5000.00 he can make a claim for unfair dismissal with the Industrial Relations Department and they may refer the matter to the Industrial Court for Adjudication.

9. I sent a letter to all my employees on 31/3 on decision to cease operation. It’s valid during MCO?

If you are ceasing operation, it depends on the type of organization i.e. private limited company or a sole proprietorship. The manner of ceasing operations differs and the respective law applies eg on winding-up of companies.

10. Can employers terminate under-performer who is under extended probation period? Can employers terminate new hire under probation period due to under-performance due to MCO, attitude issues and capability issues?

Probationers can have their probation extended or dismiss but employers must make sure that any dismissal is with just cause and excuse. There must be warning given and if necessary training given. However with respect to poor performance, even confirmed staff can be dismissed with bona fide reasons.

11. Can employer cut allowances?  E.g. phone allowance, travel allowance, meal allowance, petrol card, et-cetera.  Does the employer need to get consent from employees to do so?

You can cut travelling or meal allowance or attendance allowance during the MCO, provided the staff is not working or not travelling. With respect to petrol allowance, now that the price of petrol has drop tremendously, you may consider reducing the mileage allowance.

Thanks again to all participants, and we’ll see you on Saturday for part 2!

For those who were unable to join us, be sure to follow us on Facebook, LinkedIn or Instagram so that you don’t miss any updates. We have many more enriching workshops lined up for you, and we hope to see you soon!