With the 11Malaysian Plan, you may not have to worry about this so much

With the 11Malaysian Plan, you may not have to worry about this so much

The 11th Malaysia Plan (“11MP“) has been defined by the Malaysian government as the “next critical step in our journey to become an advanced nation that is inclusive and sustainable”.

Chapter 5 of 11MP (“Accelerating human capital development for an advance nation“) refers to a proposal to improve legislation and institution to transform the labour market:

“The Ministry of Human Resources will amend labour-related legislation such as the Employment Act 1955, Trade Unions Act 1959 and the Industrial Relations Act 1967. These amendments will address the rigidity of existing dismissal processes, resolve overlapping and contradicting provisions, as well as increase flexibility in working hours and registration of trade union membership.”

No further particulars have been mentioned so it is unclear for now what sort of impact the 11MP will have on existing labour laws in Malaysia. That being said, the reference to the “rigidity of existing dismissal processes”  implies that the reforms would make it easier for an employee to be terminated.

In line with this, the Malaysia Employers Federation (“MEF“) have announced that part of their wishlist for the proposed reforms was for unfair dismissal claims to be limited to cases involving employee misconduct only.  The MEF have specifically suggested that retrenchments should not be the subject of unfair dismissal suits since “workers who are retrenched should accept the termination benefits and move on”.  MEF executive director Datuk Shamsuddin Bardan was quoted as saying: “If a company ceases operations, where is the misconduct in that?

The MEF’s proposal may be misguided. The existing industrial regime does not punish employers for terminating employees due to closure of business. In fact, the Industrial Court has on multiple occasions, dismissed unfair dismissal claims filed by retrenched employees, after review of the evidence submitted by the employer. That being said, the legal requirement is that the termination (howsoever caused), must be conducted in accordance to natural justice, and the basis for termination must be supported by evidence.  Limiting the scope of unfair dismissal cases to misconduct alone is prone to abuse. Retrenchment exercises, even in genuine cases, must be subject to checks and balances. A blanket exclusion of retrenchment exercises or voluntary separation schemes (VSS) from the ambit of unfair dismissal may result in “savvy” employers “restructuring” their termination as a retrenchment or VSS just to escape liability.

Further, there have been cases where a VSS, despite its name, is anything but voluntary. Employees may be pressured to accept a VSS without being given enough time to evaluate their options or seek legal advice.  In the right circumstances, the courts should have the power to review the enforceability of the VSS.

MEF’s proposal is based on the assumption that limiting the number of unfair dismissal cases would improve investor confidence in the country. This is curing the symptom and not the problem. Rather than limiting the avenues in which employees can seek redress, it might be more appropriate to educate employers about the legal requirements of maintaining and reducing their workforce, so that grievances can be prevented in the first place.

Until there are more details on the 11MP, the rest of us will just have to wait and see.

A Package You Can't Refuse: Do You Know Your Consumer Rights?
Case Study: When is a retrenchment fair? [Segaran Venoo v PPG Coatings (Malaysia) Sdn Bhd [2012] 3 MELR 617]
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