Employment law: 2021 review and 2022 forecast

I am kicking off 2022 by looking back for a quick recap of the 2021 Malaysian employment law and industrial relations highlights, and a brief outline of what I expect to be the key developments in the coming year.

2021 review

Industrial Relations (Amendment) Act 2020

The major legislative change came via the Industrial Relations (Amendment) Act 2020, which came into force on 1 January 2021. I wrote about this in January 2021 (Changes to the Industrial Relations Act from January 2021: Highlights and practical impact on employee exits), and shared my view that the automatic referral of cases to the Industrial Court without filtering out frivolous claims “arguably tilts the scales too heavily in favour of potentially vexatious litigants, particularly as employees can lodge unfair dismissal claims even after signing a mutual separation agreement and receiving a severance payment.” From personal experience, as well as conversations with in-house counsel and HR professionals, this specific change has had a noticeable impact on termination decisions, as well as in the negotiation of mutual separations and disputes.

Occupational Safety and Health (Amendment) Act 2020

The Occupational Safety and Health (Amendment) Act 2020 was passed by the Dewan Rakyat on 27 October 2021, but has not yet come into force. The amendments impose additional obligations on employers, as well as increased penalties. A key change is that the amended OSHA will apply to “all places of work throughout Malaysia including in the public services and statutory authorities” — prior to the changes OSHA only applied to a specific list of industries.

COVID-19 issues took centre-stage

Unsurprisingly, issues relating to COVID-19 dominated the conversation in 2021. There were some topics from 2020 which were more settled in 2021 and therefore provoked less debate — remote working arrangements, salary cuts, unpaid leave, medical leave, and office closures. But 2021 also brought up newer issues, or issues which evolved from those earlier ones — return to office arrangements, permanently switching to hybrid or remote working arrangements, workplace screening and entry requirements for employees and visitors, on-going compliance with ever-changing SOPs and restrictions, and the very many issues related to employee vaccinations.

One of the biggest talking points for most of 2021 has been vaccinations, particularly as Malaysia impressively ramped up the nationwide vaccination programme and quickly became one of the most-vaccinated countries in the world. I wrote one of the earliest thought-pieces on mandatory workplace vaccinations in August — Is it legal for Malaysian employers to make vaccinations mandatory for employees? — and the debate surrounding this topic picked up and dominated for months after that. The topic attracted even more heated views when government officials started strongly encouraging vaccinations, including saying that action could be taken against unvaccinated employees (HR Minister says employees could face fines or jail for refusing vaccinations. Is this legal?).

Another topic linked to COVID-related downturns, but has also always been a key industrial relations issue, is retrenchments. As employers continue to right-size their workforces, there has been a constant stream of retrenchment-related queries, as well as employee claims. The popularity of this topic can be seen from the fact that two of the five most read articles on The Malaysian Lawyer in 2021 were retrenchment-related: What you need to know about the law on retrenchment of employees and Retrenchments in Malaysia — some recent cases. It’s also notable that, despite being published in 2016 and 2020 respectively, these article still received tens of thousands of views in 2021.

Employment law cases

Despite some inevitable court closures and case postponements due to the various lockdowns, it has been a busy year for employment-related cases. The following are links to some of my writeups about some of the cases that caught my eye this year (and there are many more which are on my to-write-about list):

  1. Case Update: Unfair dismissal due to poor handling of mutual separation agreement
  2. Case Update: Court of Appeal sets out key legal principles for retrenchments
  3. Case Update: Industrial Court finds retrenchment due to effects of COVID-19/MCO was unfair
  4. Case Update: Potential pitfalls where an employee is engaged by a Malaysian service provider for a foreign employer
  5. Employee poor performance: Some recent cases
  6. Case Update: Another company’s retrenchment of employees due to COVID-19/MCO deemed unfair by Industrial Court

Other changes

Changes to the law effective 1 October 2021 meant that self-employed goods and food delivery workers now need to be registered under the Self-Employment Social Security Act 2017 and contribute to the fund under the Self-Employment Social Security Scheme. Read more: New laws require goods/food delivery gig workers to register under Self-Employment Social Security Scheme from 1 October 2021.

2022 forecast

There are two significant pieces of legislation currently tabled in Malaysia’s Parliament which will have an impact on Malaysian employment law. The most significant effect will come from the Employment (Amendment) Bill 2021 which introduces wide-ranging changes to the Employment Act. The other proposed legislation is the Anti-Sexual Harassment Bill 2021, which is Malaysia’s first sexual harassment related legislation. Both Bills have only been tabled for their first reading in December 2021, and further readings were then postponed to 2022. It is expected that both Bills should be passed in the first half of 2022.

Major amendments to the Employment Act

The Employment (Amendment) Bill 2021 proposes wide-ranging amendments to the existing Employment Act. This includes increasing maternity leave, introducing paternity leave, allowing employees to apply for flexible working arrangements, and plugging an obvious gap in Malaysian industrial relations law in giving the Director General the power to inquire into and decide on workplace discrimination disputes.

However, the current draft of the Bill contains several glaring weaknesses and inconsistencies, and may need to be significantly revised before being passed by Parliament. The contents of the current draft create confusion on the scope of the revised Employment Act, specifically whether it will continue to only apply to employees falling within the narrow definition of an “employee” in the existing Employment Act, or whether it is intended to apply to all employees irrespective of wages. I expect a revised draft to be tabled to clear up these inconsistencies, but this may mean that there will be a delay in the debate and passing of the amendments, and the amendments may only come into force closer to the end of 2022, or later.

I highlighted the key changes in the current draft Bill, as well as the problems with the draft in an earlier article: Malaysia Employment Act amendments: 7 key changes for employers to note.

Anti-Sexual Harassment Act

Malaysia’s first sexual harassment laws were tabled in Parliament in mid-December 2021 (Malaysia’s Anti-Sexual Harassment Bill tabled in Parliament). This new legislation would be expected to come into force in the first half of 2022, and while it does not directly govern the employment relationship, employers will obviously be expected to be more alert to sexual harassment issues and take more proactive steps, including putting in place robust policies and internal mechanisms to address sexual harassment.

Expected focus points for employers

While COVID has taught us that the only certain prediction is unpredictability, these are some key issues that I expect will draw the focus of employers and HR professionals in 2022 (besides responding to the changes that will be rung in by the Employment Act amendments).

Firstly, there will be the usual quick responses required to potential changes in COVID-related workplace requirements. While I do not expect we will return to the complete lockdowns of 2020 and 2021, any serious spike in cases or hospitalisations will probably see stricter requirement relating to testing, isolation, and possibly industry or location-specific lockdowns. From what I’ve seen, employers have adapted very well in the past two years, and are much more capable of dealing with and adapting to any sudden changes.

Secondly, many employers would have realised from their COVID experiences that their employee documentation is sorely lacking in some areas. While this has already started in 2021, I expect that in 2022 even more employers will comprehensively revise their employee documentation and introduce new terms and conditions or policies which provide them with more flexibility to deal with necessary or preferred changes to employee or workplace arrangements. These changes may also be mandatory, depending on the final version of the Employment (Amendment) Bill 2021 which goes through Parliament.

Thirdly, I fully expect further workforce restructuring and rightsizing as businesses look to a post-COVID future. While many businesses will be looking to increase employee numbers to accelerate production and services, there will be some who choose the leaner path, which would include reducing employee numbers or migrating more employees to hybrid or fully-remote working arrangements.

To keep up-to-date with the latest Malaysian employment law issues, you can join the 1,800+ readers who have subscribed to The Malaysian Lawyer via email (the Subscribe option is in the right sidebar on the website, or at the bottom of the page on a mobile browser) or find more related articles via the employment law tag. You may also find our standalone Guide to Malaysian Employment Law useful.

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