[Note: When this article was first published on 18 August 2022, the amendments to the Employment Act were scheduled to come into force on 1 September 2022. In late August 2022, the government announced that the implementation date would be deferred to 1 January 2023. This article has been edited to reflect the new implementation date, with any new text in red.]
The practical effect of this change is that employees with monthly wages in the RM2,001-RM4,000 range who previously may have been used to occasionally working beyond their normal working hours to complete urgent tasks, or to attending to work matters on weekends or public holidays, will be entitled to overtime payments for doing so. However, overtime does not simply mean any work done outside of the 9-5 window. There are various, sometimes fairly technical, definitions and legal provisions that have to be considered in order to understand the legal definition of “overtime”.
[Note: When this article was first published on 16 August 2022, the amendments to the Employment Act were scheduled to come into force on 1 September 2022. In late August 2022, the government announced that the implementation date would be deferred to 1 January 2023. This article has been edited to reflect the new implementation date, with any new text in red.]
EA salary threshold increased from RM2,000 to RM4,000
Prior to the new amendments, the vast majority of the EA only applied to employees earning up to RM2,000/month, or to specified groups of employees irrespective of wages (e.g. those engaged in or supervising manual labour, and several other groups). The existing EA set out specific provisions to enable non-EA employees to also be included in the sections of the EA regarding maternity protection (Part IX) and sexual harassment (Part XVA).
Following the First Schedule Amendment Order which will come into force on 1 September 20221 January 2023, the way the EA scope is defined has been reversed. While it previously only applied to employees earning up to RM2,000/month with some specific sections applying to all employees, it will now apply to all employees irrespective of wages, with some specific sections not applying to employees earning more than RM4,000/month. Here are the details:
The EA will now apply to “any person who has entered into a contract of service”.
However, the sections of the EA in relation to overtime payments and termination benefits will not apply to employees whose wages exceed RM4,000/month (the full list of excluded EA provisions is listed below).
The list of EA provisions which do not apply to domestic employees (previously known as domestic servants) has also been expanded.
This is the full list of EA provisions which will not apply to employees earning more than RM4,000/month:
Subsection 60(3): Overtime for work on rest days.
Subsection 60A(3): Overtime for work outside of normal working hours.
Subsection 60C(2A): Shift work allowance.
Subsection 60D(3): Overtime and allowance for work on public holidays.
Subsection 60D(4): Overtime for work on holidays on half working days.
Subsection 60J: Termination, lay-off, and retirement benefits.
What employers need to do
All employers will need to review their existing employment contracts and policies to ensure that they comply with the EA. It should be noted that Section 7 of the EA states that any terms or conditions which are less favourable to an employee than those provided under the EA will be void and of no effect. This includes contracts which were entered into before 1 September 20221 January 2023.
The introduction of FWAs under the Amendment Act is the first time that FWAs have been formally recognised in Malaysia, and may be the first of many such changes — the government has also shared that it is conducting studies on the feasibility of a four-day working week. Malaysian employers can expect FWAs to become more commonplace in the near future, and must start preparing now. Several of my clients are already putting in place the necessary flexible working policies and other related documents to not only ensure that they are not caught unprepared come the 1st of September, but also to lay the foundations for the anticipated changes in the next couple of years.
This article sets out the essential points that need to be covered in a Flexible Working Policy, and also other recommended administrative/HR documents that employers should strongly consider putting into place to smoothly accommodate FWAs.
In this Case Update series, I share summaries of recent Malaysian court decisions to explore the current approach taken by the courts when deciding on employment-related issues. You can find all the posts in the series by clicking here, including case updates on other legal areas by TheMalaysianLawyer co-founder Lee Shih.
It is not uncommon, in instances where an employee has been dismissed, for new facts or circumstances to be discovered post-termination which are then treated as “justifying” the dismissal in the eyes of the employer.
For example, where an employee has been dismissed for poor performance, the employee or employees who then take on the dismissed employee’s responsibilities may discover a trail of errors or negligence that ran deeper than was known at the point of termination. In other cases, the employee may have been dismissed for one reason, but the employer later uncovers evidence of other misbehaviour or misconduct which the employer then takes as further proof that the dismissal was “the right decision”.
While these post-dismissal discoveries may make an employer rest more easily, convinced that dismissal was the correct option, what would happen if the employee brings an unfair dismissal claim? Would an employer who dismissed an employee because of Reason A be then able to justify the dismissal by later saying that, after the termination, they also discovered Reason X, Y, and Z, and that therefore even if Reason A was weak and insufficient to justify termination, the court should also consider Reasons X, Y, and Z?
This was the issue that went all the way to the Federal Court recently, in Maritime Intelligence Sdn Bhd v Tan Ah Gek  4 ILR 417.
[Update: The Bill was tabled for its second reading and passed on 21 March 2022. There were only two minor amendments from the first draft which was the subject of this article, in relation to maternity and paternity leave. These have been updated in the text below.]
Wide-ranging amendments to Malaysia’s Employment Act 1955 (“the EA”) are now going through Parliament. The Employment (Amendment Bill) 2021 (“the Bill”) was tabled for its first reading on 25 October 2021.
The Explanatory Statement to the Bill states that it seeks to amend the EA “to comply with the international standards and practices as required by the Trans-Pacific Partnership Agreement, the Malaysia-United States Labour Consistency Plan and the International Labour Organization”. It further states that the purpose of the amendments, among others, is “to provide for the protection against discrimination and forced labour, and to provide for maternity benefits”.
As the Bill is only in its first reading, I expect some changes before it is finalised and passed. The current draft of the Bill does appear quite disjointed in parts, and there are some inconsistencies that will need to be cleaned up. It is worth noting that many of the amendments contained in the Bill have been mooted as far back as 2017, so while the fact that the Bill has been tabled is promising, there is no guarantee that it will be passed — though for political reasons it does appear very likely that it will happen this time.
The current draft of the Bill contains comprehensive amendments — there are 46 sections in total — but at this stage I will briefly set out the key changes that employers should take note of, along with some commentary.