Tay Partners

InsiderTAPS (29 January 2021)

Amendments to Malaysia’s Industrial Relations Act 1967 - Are we going backwards?

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The Malaysian Prime Minister has reinstated the Movement Control Order (MCO) in five states and Federal Territories with effect from 13.1.2021. While another MCO, with mandatory cessation of many economic activities is necessary to flatten the Covid-19 curve, it would surely dent an ailing economy. The proclamation of a State of Emergency shortly after the announcement of MCO had further caught many Malaysians off guard. The current unpredictable Covid-19 situation and political atmosphere in Malaysia add to uncertainties for investors which ultimately affect investor participation and market liquidity.

In 2021, Malaysians also welcome the amendments to the Industrial Relations Act 1967 (“IRA 1967”) which came into force effectively on 1 January 2021.

How would these amendments affect us, especially during the recently re-implemented MCO?

Automatic referral of wrongful dismissal cases to the Industrial Court

The new laws allow cases that are not resolved through conciliation at the Industrial Relations Department to be referred directly to the Industrial Court without the previous filtering mechanism of the Minister. The Director General of Industrial Relations shall refer wrongful dismissal representations directly to the Industrial Court if he/she is satisfied that there is no likelihood of the representations being settled through conciliation. The need for the Minister of Human Resources to decide on whether to refer an unresolved representation has been dispensed with.

Imposition of interest to an award and compensation to next-of-kin

The new amendments allow the Industrial Court to impose an interest of up to 8% per annum to an award, from the 31st day of the award. In addition, the Court is also empowered to award backwages or compensation to the next-of-kin of a deceased worker.

In the event where an employee who lodged a wrongful dismissal claim and had passed away (perhaps due to Covid-19), the Court is empowered to continue the proceeding and to award compensation to his or her next-of-kin.

To challenge the Industrial Court award through an appeal

Moving forward, the procedure to challenge an Industrial Court award will be by way of an appeal (instead of a judicial review) to the High Court in accordance with the new Section 33C of IRA 1967. Sitting as the appellate court, the High Court can rehear and reassess the evidence produced in the Industrial Court to reverse an award. There is also no requirement for leave from the High Court to challenge Industrial Court award.

It is notable that an appeal against the Industrial Court award must be made 14 days from the receipt of the Industrial Court award in contrast with the 3-months limitation period for a judicial review.

The current MCO may hinder the process for all parties concerned to file an appeal in the High Court and parties who intend to challenge industrial court awards must be cautious about the new stipulated timeline.

This time around, the MCO has been announced without clear indication of any wage subsidy to be given to employers nor loan repayment moratorium for borrowers. Businesses will need to re-evaluate their employees’ headcount for sustainability. It goes without saying that unemployment rate would remain elevated in 2021.

The new amendments coupled with the current reimplementation of MCO raise the concern of whether there will be an influx of wrongful dismissal claims (including frivolous ones) at the Industrial Court in absence of the filtering mechanism of the Minister. The potential backlog of cases will surely burden the infrastructure of Industrial Court and it may bring us back to the old situation we once desperately tried to resolve.

Employers may be concerned that the amendments will only encourage filing of frivolous complaints during these difficult times and unnecessary costs to defend such claims will burden them further. It may be too soon to make a statement on whether the amendments will lead to a positive development of the employment landscape in Malaysia.

Time will tell.

Leonard Yeoh is a partner and Pua Jun Wen an associate with the law firm, Tay & Partners.

Leonard Yeoh
T: +603 2050 1973
M: 012-321 6893

Pua Jun Wen