A collective agreement is an agreement between an employer and a trade union relating to the terms of employment. Yet, are employers allowed to treat foreign and local employees differently under the collective agreement or exclude them entirely?
In Paper and Paper Products Manufacturing Employees’ Union v Mahkamah Perusahaan Malaysia & Anor [2017] CLJU 546, the High Court took the position that foreign employees should not be excluded from the scope of the collective agreement, as they should be afforded equal treatment to their local counterparts.
Brief Facts
- This was a trade dispute regarding the 2nd collective agreement (“2nd CA”). One of the disputed articles was the scope of the collective agreement, in which the Union sought to include foreign workers.
- Yet, the Company argued that foreign workers who are under three (3) years fixed-term contract and on working visa are strictly subject to the express conditions of the contract as well as the terms of recruitment. Hence, they should be excluded from the CA.
- At the Industrial Court stage, the Industrial Court excluded foreign workers from the scope of the collective agreement, on the basis that the general and basic rights and benefits of the foreign and local workers are similar. The Industrial Court further held that foreign workers were covered by the fixed term contracts signed by the company which are also subject to the terms of recruitment imposed and approved by the relevant authorities (“Decision”).
- Dissatisfied with the Industrial Court’s decision, the Union filed an application for judicial review at the High Court.
High Court’s Decision
The High Court found that the Decision was illegal and beyond its jurisdiction. The High Court held:
- the Industrial Court acted outside its powers in finding that the said terms and conditions of the recruitment of foreign employees have been approved by the authorities, when no such evidence was adduced. The Company had merely adduced a letter from itself to the foreign recruitment agencies, which stated the Company’s own terms for the recruitment of the foreign employees. It was uncertain if the foreign recruitment agencies accepted such terms or not.
- The definition of a “workman” under the Industrial Relations Act 1967 (“IRA 1967”) was wide enough to cover foreign employees. Section 17 of the IRA 1967 explicitly states that a collective agreement was binding on “all workmen”. Therefore, the Industrial Court had failed to understand the spirit and objective of the IRA 1967.
- Section 30(4) of the IRA 1967 was not complied with, as the Industrial Court did not address the issue of public interest, and how the exclusion of foreign employees will impact the industry concerned as well as the probable effect in related or similar industries. The Industrial Court also did not consider the collective agreements in the same industry (which was adduced by the Company) that did not exclude foreign employees from the scope of their collective agreements.
- From a public interest perspective, foreign employees should be treated equally as local employees.
As part of its concluding remarks, the High Court held that the Decision to exclude foreign workers from the scope of the 2nd CA has created an unfair labour practice, which goes against the underlying objectives and purposes of the IRA 1967.
Key Takeaways
Foreign employees and local employees are not equal under the law in all circumstances. The Employment Act 1955 (“EA”) does provide priority protection to local employees over foreign employees – for example, s60M of the EA prohibits the termination of a local employee for the purpose of employing a foreign employee. S60N of the EA also states that where there is a redundancy, the employer shall not terminate the services of a local employee unless he has first terminated the services of all foreign employees in a similar capacity.
However, s69F of the EA now allows the Director General of Labour to inquire into and decide any dispute in respect of “discrimination in employment”, which is wide enough to cover discrimination complaints by a foreign employee.
This decision by the High Court underscores the need for employers to afford equal treatment to both local and foreign employees, in collective agreement situations. It also demonstrates the need for employers to show a cogent justification for excluding certain groups of employees. If employers wish to exclude certain groups of employees beyond the usual accepted categories (ie: managerial, security, confidential or executive capacities), employers must be able and ready to justify their proposal for doing so.
Otherwise, it may risk a trade dispute and/or a complaint of discrimination.
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This article was written by Leow Ho Eng (Associate) from Donovan & Ho’s employment law practice.
Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations. Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation.
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