When there is a deadlock in the collective bargaining process, the dispute may be referred to the Industrial Court for determination. Recently, in Kesatuan Pekerja-Pekerja Plusliner Sdn Bhd v Plusliner Sdn Bhd [Award No 1216 of 2021, 21 August 2021], the Industrial Court sided with the employer in the transport industry regarding whether employees should be given additional benefits such as contractual bonus and increased allowance.
Brief Facts
- During collective bargaining, the Company and the Union could not agree on 4 clauses:
- Scope of Membership
- Safe Driving Allowance
- Trip Allowance
- Payment of Bonus
- Scope of Membership – the Union wanted the Collective Agreement to cover all employees in the Company. The Company said that all employees were already entitled to benefits stipulated under the Collective Agreement, so the status quo should remain.
- Safe Driving Allowance – the Union proposed an increase of RM160.00 a month to RM200.00 a month. The Company said this was unsustainable, but put forward other proposals for the improvement of this benefit which were not agreed by the Union.
- Trip Allowance – trip allowance is paid to drivers per kilometre. The Union proposed increases of between 10 cents to 17 cents per kilometre depending on the category of driver. The Company refused as this would severely affect the Company’s operational cost.
- Annual Bonus – the Union proposed that the Company should provide contractual bonus of 3 months to employees, every year. The Company refused this proposal as this was excessive.
Court’s Findings
- Scope of Membership – there was no justification to extend the collective agreement to include all employees of the Company. The Company imposed no restrictions on employees from benefits of the collective agreement. The Court agreed with the Company that the status quo should remain.
- Annual contractual bonus – the Union’s demand for a fixed contractual bonus of 3 months is untenable and defeats the whole purpose of awarding gratuitous payments to deserving employees subject to the Company’s performance. As much as the Court sympathises with employees who do not receive annual bonus, the nature of bonus is discretionary to reflect the Company’s appreciation to deserving employees. Bonus is not accorded as of right, as quantum and payment should be linked to profits and productivity.
- Safe Driving Allowance and Trip Allowance – the proposed increase of trip allowance would cause an increase in the allowance ranging from 200% to 361%. The Court took cognisance that the public transport industry was one of the most severely affected industries during the pandemic, as the Movement Control Order caused restrictions in inter-state travels. During this period of uncertainty aggravated by the pandemic and time of crisis, it was not appropriate to have an increase in allowances that would have a financial impact on the transport industry.
Key Takeaways
In determining wage structure and wage increases, the Industrial Court will consider three factors:
- Wage and salaries prevailing in comparable establishments in the same region;
- Any rise in the cost of living since the existing wages or salaries were last revised; and
- The financial capacity of the company to pay the higher wages or increases
Of the three factors above, the Company’s financial capacity to pay is “really the limiting factor in dealing with wage increases and with other employees’ benefits, because when other factors may provide prima facie justification, increased wages will normally only be awarded within the limits of the Company’s financial capacity”. The Industrial Court acknowledges that if wage increases are granted when the Company is facing a shaky financial position, the unintended consequence is that the Company would have to close its business which results in loss of jobs.
This recent case illustrates that the Industrial Court will take a balanced approach when dealing with wage disputes, and the allegation that the courts are “always pro-employee” may not be justified (See also our previous case spotlight where the Industrial Court rejected the Union’s claim for increased benefits, due to the pandemic). Here, the Industrial Court took judicial notice that the employer’s industry (public transport) was badly affected by the pandemic and therefore a disproportionate increase in operational costs for the employer would not be in anyone’s best interests.
While trade disputes are determined on their individual facts, the Industrial Court would likely take into account similar factors for employers in industries undisputedly affected by the pandemic (eg: tourism and hospitality, retail, aviation, etc).
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This article was written by Donovan Cheah. Donovan has been named as a Recommended Lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018, 2019, 2020, 2021 and 2022, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.
Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory. Have a question? Please contact us.
