What happens when an Industrial Court Award is handed down but one party refuses to comply with it? In such a situation, the party who alleges the non-compliance of the award (“Party A”) has to go through a non-compliance proceeding before the award can be enforced.
Non-Compliance Proceedings
Party A will have to lodge a complaint of non-compliance through Form S under section 56(1) of the Industrial Relations Act 1967 (“IRA”). This will be treated as a new case with its own case number.
The Industrial Court may require parties to file the usual pleadings (Statement of Case, Statement in Reply and Rejoinder) in respect of the alleged non-compliance.
A hearing will be fixed, and the Industrial Court may make any of these orders in a non-compliance proceeding:
- Direct the non-complying party to comply with the award or to cease from doing any act which contravenes the terms of the award;
- Direct the non-complying party to make proper rectification or restitution for contravening the award; or
- If there are special circumstances, vary or set aside the award.
An order made after a non-compliance hearing is known as a “Non-Compliance Order”.
Varying or Setting Aside the Award
Special circumstances must exist before the Industrial Court will vary or set aside the Award.
In National Union of Hotel, Bar & Restaurant Workers v Seasian Hotel Sdn Bhd (Orchard Sun Penang) [1992] 3 CLJ (Rep) 115, the Union alleged that the Company failed to comply with Article 10 of the collective agreement for the grant of annual increment. The Company attempted to argue that their non-compliance of the Award was due to special circumstances (ie: the Company’s severe financial losses). However, the High Court held that there were no special circumstances given that the Company had been making losses even before the collective agreement was entered into, and there was no sudden disaster after the collective agreement which amounted to special circumstances.
In Metal Industry Employees Union v Yodoshi Malleable (M) Sdn Bhd [2013] 3 ILR 621, the Union contended that the Company failed to comply with the collective agreement which required the Company to pay annual contractual bonus to the workmen. One of the arguments raised by the Company was that it was not in a position to pay the bonus because of a fire that broke out in the Company’s premises, which caused the Company to suffer financial loss. The Court considered this argument and held that the fire, which was an uncommon, exceptional and extraordinary event, constituted special circumstances. Article 20(a) of the collective agreement was varied and the company was ordered to pay 50% of the annual contractual bonus for the year 2012 in 2 instalments instead.
After the Non-Compliance Order is obtained
A party who fails to comply with a Non-Compliance Order is guilty of an offence, and on conviction, will be liable to a fine not exceeding RM50,000 or to imprisonment for a term not exceeding one year, or both. The non-complying party can also be imposed with a fine not exceeding RM500 for every day during which such offence continues.
Where the Award in question involves the payment of a sum of money, the Industrial Court shall, upon request, send a certified copy of the Non-Compliance Order expeditiously (and where practicable within 7 days of the date of request) to the High Court or the Sessions Court to be recorded. The Non-Compliance Order shall then be enforceable as a judgment of the High Court or the Sessions Court, as the case may be.
The Non-Compliance Order can then be enforced as a judgment, under the procedures set out in the Rules of Court 2012, e.g. through garnishee proceedings, judgment debtor summons, writ of seizure and sale, writ of possession, charging order etc.
Key Takeaways
Unlike civil court judgments, Industrial Court awards are not “automatically” enforceable. As seen from the above, parties must go through a two-stage process:
- non-compliance proceedings to obtain a Non-Compliance Order; and
- recording of the Non-Compliance Order so that it can be enforceable as a judgment of the civil court.
While this two-stage process ensures procedural fairness and provides an opportunity to address non-compliance issues, it can also result in delays in enforcement. By understanding this process, parties can better manage their expectations and make informed decisions about the next steps.
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This article was written by Sabrina Chang (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. Have a question? Please contact us.
