RWC Impact Series: Impact of Covid19 on Employment Laws, Human Resource & Industrial Relation…

Since the beginning of the Movement Control Order(MCO) announced by Our Prime Minister Tan Sri Muhyddin Yassin on 16/3/2020, there have been many queries and complaint raised by employer and employee on wages as the Prime Minister announce that there shouldn’t be any deduction made by the employer. This right was preserved in a crystal clear manner under the Employment Act 1955 that deduction should not be done unilaterally without the consent of the employee. 

At the same time, on the other hand there is a way where deduction can be made, as it depends on the industries where the employee is willing and gives consent for such. The consent will be given by employee for deduction through bilateral agreement between employer and employee as the employee is well aware of the “impact” of MCO towards the organisation he is attached with. There must be a voluntary acceptance by the employee for the deduction.

A suggested guiding principle that can be adopted by employers to achieve a bilateral win-win situation during MCO period is through Business Continuity Plan (BCP) and organising  learning and development training virtually, to enhance the skills and knowledge of the employee. 

Nevertheless, it is important for each and every industry to identify the affected area and how long the company or industry can sustain. For example the cash flow of the company in paying the wages to the employee. The alternative and innovative way an employer can initiate is through a bilateral agreement for 10% pay-cut and reimbursed with interest once the business is back on track. It is very important for an employer to be transparent with their employee pertaining to the business.

It should be noted that under Section 2 of Employment Act 1955, “wages” is defined as basic wages and all other payments in cash payable to an employee for “work done” in respect of his contract of service. This is a grey area where both employer and employee would spike into an argument whether or not to pay, as the service is not able to be rendered by the employee, as the current situation the work is not able to carry out is due to Covid19 Pandemic which is something unforeseen. There is a risk issue which will pop out and have to deal with.

However, the risk faced by the employer could bring a creativity mindset on how an employer can manage or deal with the law such as the Employment Act 1955 which would be beneficial to both parties within the law. One of the ways is through working together with the employee by communicating, being transparent and showing the statistic to make each and every stakeholder to understand the problem involved for long term sustainability. Through this,  it is going to change the way of employment in Malaysia.

On 6 April 2020, our Prime Minister came out with the Wage Subsidy Programme to help out and to reduce the burden faced by many companies. This is a very welcoming Scheme by many out there which would be able to apply by eligible companies beginning from 9 April 2020 till 15 September 2020. This is a 3 months subsidy programmed by the Government according to the eligibility, size of the companies etc. Those who want to get benefitted from the programme can apply through the link attached herein – https://prihatin.perkeso.gov.my/ .

Redundancy is defined as excess of manpower while retrenchment is defined as an exercise to remove the excess manpower(redundancy). Business loss, restructuring, automation and outsourcing will constitute and lead to redundancy of manpower. Thus, it is advisable for each and every employer to be clear on redundancy and retrenchment if the service of excess manpower is no longer required. In other words, the employer should think about the company moving forward strategy and identify who will be affected through this strategy plan.

In applying the “Last In First Out (LIFO)” principle, the company has to take into account and consider the essentiality of this category of Last In. As it does not mean that the last who join are not essential because they could be the key roles that the company needs to keep. Companies also should look into the staggering process as it would lead to cash flow problems.

Force majeure clauses are well known as contractual clauses which enable parties to alter the liabilities and obligations under a contract when an unforeseen or  extraordinary event or circumstance beyond their control takes place. This will prevent the parties from fulfilling those obligations.Evidently,  99% of the employment contract does not have force majeure clauses which deal with pandemic such as Covid19. Thus, it would not be as easy as walking in the park to terminate the employment. 

Thus, as a practical advice, once again the employer has to be transparent to their employee by briefing the situation that is faced by the company through statistics and financial reports. By this, the company can exercise their restructuring plan. In the event, if any unavoidable litigation takes place due to restructuring plans, the company would be able to show and prove that certain initiatives have been taken earlier to avoid the liabilities. The principle of fairness, transparency and justice should always come into place.

For  companies who do not have any choices other than retrenchment, they could go for Mutual Separation Scheme(MSS) or a Voluntary Separation Scheme(VSS).

For those not covered under the Employment Act 1955, the remedy is the same under the Industrial Relations Act 1967, where an employee should not be terminated unlawfully. For any unlawful dismissal, the employee can file a legal suit against the employer. But it should be bear in mind that the legal suit should always be the last resort as it involves many consequences and impacts bilaterally.