Summary Of The Federal Court Case Of Crystal Crown Hotel & Resort Sdn Bhd v Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia

Written by Marlysa Razak and Athirah Jaafar

This case had determined the standing of the National Wages Council Consultative Act 2011, Minimum Wages Orders 2012 – 2020, and the Industrial Relations Act 1967.

This case is related to a dispute arising in the Industrial Relations Court which the Appellant in this case applied for a judicial review to the High Court against the decision. The Appellant, Crystal Crown Hotel & Resort Sdn Bhd (“the Hotel”) refused to commence a collective bargaining in 1 October 2011 with the Respondent, Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia (“the Union”) which resulted the dispute being referred to the Industrial Court in February 2012. The primary issue was in regards to the salary structure of the workmen. In the 1st Collective Agreement, the Union proposed to have the service charge system remained and separated from their statutory minimum wage, whereas the Hotel proposed a “clean wage system”. A clean wage system is a concept of compensation and benefit for employees whereby all allowances are amalgamated under one heading. Therefore, the Hotel proposes that the service charge element is to supplement the prevailing rates of the workmen’s salaries, which would result in the workmen to earn less as they are not to receive their remuneration separated but rather as a whole package under the clean wage system.

Before reaching the Federal Court, the Industrial Relations Court, High Court and Court of Appeal held in favour of the Union. A summary of the position of these courts are as follows:

At the Federal Court, there were 2 issues to be determined. Firstly, was the Hotel allowed to use the employee’s service charge in order to meet their statutory obligations in paying the minimum wage. Secondly, can such service charge, with regards to the law, be inserted into a clean wage system or to supplement the minimum wage amount?  

The Court answered both issues negatively and dismissed the appeal. The Court believed the source of this dispute is the matter of determining the standing of the National Wages Consultative Council Act 2011 (“NWCCA 2011”) and the Minimum Wages Order 2011 – 2020 (“MWO 2011”). In this dispute, 2 important provisions under the Industrial Relations Act 1967 (“IRA 1967”) were also disputed, namely Section 26(2) and Section 30(4) in making awards by the Industrial Relations Court. 

The Federal Court proceeded to categorise these legislations, in terms of the manner of interpreting them and the definition of wages they provide, in order to arrive at their decision. 

Interpreting the Legislation

Both IRA 1967 and NWCCA 2011 have a similar objective in meeting the needs of society –  aims to protect and alleviate the plight of workmen and the working poor. This is why the statutory provisions in the IRA 1967 cannot be construed that they effectively abrogate clear and express legislation enacted by the Parliament under the NWCCA 2011 and consequently MWO 2012. This establishes the principle that one Act should not be construed to undermine the purpose or object of another Act. 

The reason for this is that the court believed the object of NWCCA 2011 and MWO 2012 are to serve as a social legislation with a view to achieve higher equality in earnings and enhance the plight of labour, which are not to be disputed. These are the three (3) aims cited:

Referring to the Federal Constitution, the Federal Court opines that equal protection of law is guaranteed to all citizens. However, not many can be guaranteed by this law, particularly the poor and vulnerable members of society. From this, the Court held that special measures are taken by the Parliament to ensure social justice, and this includes the enactment of minimum wage legislation and industrial adjudication legislation. 

From this, the Court emphasised the dictum of social legislations by Bhagwati J in the case of Workmen of Indian Standards Institution v Management of Indian Standards Institution (1976) 1 LLJ 36 the following: 

“We cannot forget that it is a social welfare legislation we are interpreting and we must place such an interpretation as would advance the object and purpose of legislation and give full meaning and effect to it in the achievement to its avowed social objective”

The social legislation in this case refers to NWCCA 2011 and MWO 2012. Hence, for statutory interpretation, the Court summarised the principles to interpret social legislations like the NWCCA 2011 and MWO 2012 along with the IRA 1967, by adopting the literal rule. If the provisions appear to be ambiguous, the courts will determine the meaning through the purposive rule. It must be interpreted in a way which ensures maximum protection of the class in whose favour the social legislation was enacted. Pursuant thereto, it is determined and beyond dispute that both NWCCA 2011 and MWO 2012 were enacted in favour of labour or workmen. Not to disregard the employer’s standings, namely the Hotel, rather it means to say that in collision between the interests of the Hotel and the Union, the Court is bound to consider the purpose of the social legislation enacted to have effect. 

For this case, Section 26(2) and Section 30 of the IRA 1967 should then be implemented in a way to ensure the minimum wage prescribed is achieved without derogation from other entitlements or benefits enjoyed by the workmen. The rationale is to avoid entrenchment of benefit and deprivation of monies by the workmen. It is not open for the Hotel to claim the increment of costs and to use contractual benefits formerly agreed by the two, in meeting mandatory payment obligations. It is also provided by the Court that placing the IRA 1967, to say the Industrial Court must take into account the financial status of the Hotel, in order to abrogate NWCCA 2011 and MWO 2012 is inconceivable. Interpreting the IRA 1967 should be made in a way that the mischief is suppressed and the remedy advanced. 

Minimum Wages

It was essential for the court to then discuss the matter of wages of the workmen. There are two “basic wages” provided each under the NWCCA 2011 and the Employment Act 1955. 

Section 2 of the NWCCA 2011 defined “wages” and minimum wages as follows;

“wages” – to have the same meaning assigned to it in section 2 of Employment Act 1955
“minimum wages” – means the basic wages to be or as determined under Section 3 of NWCCA 2011

Section 2 of the Employment Act 1955 provides “wages” as;

“basic wages and all other payments in cash payable to an employee for work done in respect of his contract of service …”

Section 23 of NWCCA 2011 provides that upon agreement of the Government with the recommendation of the Council, the Minister shall make a minimum wage order as agreed to or determined by the Government. The Minister upon direction of the Government may also amend or revoke the minimum wages order. 

To that effect, Section 24 of NWCCA 2011 further states;

Effect of the minimum wages order

  1. (1) For the purpose of this section, “contract of service” includes the collective agreement made under Section 14 of the Industrial Relations Act 1967 [Act 177]. 

(2) Where the rates of the basic wages agreed in a contract of service is lower than the minimum wages rates as specified in the minimum wages order, the rates shall be substituted with any rates not lower that the minimum wages rates as specified in the minimum wages order. 

On determining basic wages of the workmen, the Court established that “basic wages” under Section 23 of NWCCA 2011 is the bare minimum sum payable for work done under a contract of service, regardless of what their individual contracts of service or collective agreement provide. It means to say that all contractual agreements must provide this amount of basic minimum wage, provided legislatively. Other than that, “basic wages” in the Employment Act 1955 refers to the contractual sum negotiated between the employer and employee under a contract of service or collective agreement. 

Therefore, it goes to say that if the basic wages under a contract of service or collective agreement is less than the minimum wage in the MWO 2012, the NWCCA 2011 requires employers to increase that basic wage to the minimum wage stipulated under the MWO 2012. The court also held that basic wages are separated from all other cash, which includes the service charge element. It could not be included in the basic wages to meet the statutory requirement of minimum wages. This can then be related to the clean wage structure proposed by the Hotel. The Hotel had no entitlement by law to take away the service charge as a means of relabelling it in the clean wage system. It amounts to the removal of an entrenched term of service.

Conclusion

It was held in favour of the workmen to have their basic wage and service charge element separate from each other. The Hotel is under no entitlement to claim that the IRA 1967 undermines NWCCA 2011 and MWO 2012-2020, and therefore are not entitled to implement a clean wage system which utilises the service charge element by employers to pay off their employee’s salary. This puts in a new position and view of minimum wages of the working class in the hospitality industry. Also to note, matters involving minimum wages in Industrial Relations Court should not be prolonged. From what we can see in this case, the Court acknowledged how the workmen had been waiting for a decision for more than half a decade, which proceeds to defeat the IRA 1967 supposedly to deal with these matters expeditiously.

 

Published on 21 April 2021

Photo by Marten Bjork on Unsplash

visit Us @ RWC:

NINE COURTNo 9, Jalan 22/3846300 Petaling Jaya, Selangor, Malaysia

Write To Us @ RWC:

justright@richardweechambers.com

Give us a call @ RWC :

+603-7890 4118

Whatsapp Us:

+6016-275 0025
Subscribe to our Newsletter @ RWC
Always Get Our Latest News & Events Newsletter!