BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal

Environment) Part 1

1. INTRODUCTION

Human resource legislation in Malaysia dated before the Independence of the country. Workmen
Compensation Act, for instance is dated 1952, whereas the country obtained its independence in
1957. Employment (Amendment) Act 2012 is one of the latest legislations on human resource in
Malaysian history.

The country has more than a dozen Acts relating to human resource but this chapter will only
highlight important provisions nine Acts and one code:
 Employment Act 1955 (Act 265)
 Industrial Relations Act 1967 (Act 177)
 Trade Unions Act 1959 (Act 262)
 Factories and Machinery Act 1967 (Act 139)
 Occupational Safety and Health Act 1994 (Act 514)
 Workers Minimum Standards of Housing and Amenities Act 1990 (Act 446)
 Employees Provident Fund Act 1991 (Act 452)
 Employees' Social Security Act 1969 (Act 4)
 Workmen's Compensation Act 1952 (Act 273)
 Code of Practice on the Prevention and Eradication of Sexual Harassment in the Workplace

1.1 Employment contract

The employment contract between an employer and employee is normally contained in the letter
of offer of employment (employment contract) or collective agreement (for employees who are
members of a trade union)

The terms and conditions of the contract of service for an employee must be at least at par with
the provisions of the Employment Act 1955.

Some of the terms and conditions that are included in the letter of offer include:
 Job title and partial job description
 Pay scale
 Place of work
 Hours of work
 Holiday entitlements
 Probationary period
 Notice of termination

The prospective employee is required to sign either the original or the duplicate of the offer letter
and return it to the employer to confirm his acceptance of the offer. The employment contract is
thus duly executed and legally binding.

1.2 Contract of service and Contract for service

There are two possible contracts between employer and employee. Employment status of a
worker is very critical to determine the applicability of the provisions of this and other labour Acts.
Labour legislation in Malaysia protects all categories of employees.

1
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

Contracts OF service Contract FOR Service

Master – Servant relationship exists between No employer and employee relationship.

the organization and the individual. Customer – Independent Contractor
relationship exist where the person
independent contractor usually provide his
services for certain fees.

The organization exerts control over how and The organization cannot exert control over
where of the individual’s work how and where of the individual’s work

The Act require the contract of service to be Organization/Customer entered into

in written form if the employment term is contract with an out-sourced provider of
longer than 1 month or on specified work services.
which consuming more than 1 month [s. 10].

The terms of employment contract are The terms & conditions that mutually
normally contained in the letter of offer, agreed will be stated in the contract.
company handbooks, and collective
agreements. Out-sourced provider does not entitled for
SOCSO and EPF.
Any terms which is less favorable than
provided under the Act is invalid [s.7]

2. EMPLOYMENT ACT 1955 (ACT 265)

The Act governs employment relations between employer and employees in Peninsula Malaysia
and Federal Territory Labuan. The Act shall apply to Peninsula Malaysia only; Sabah and
Sarawak are governed by Labour Ordinance (Sabah Cap. 67) and Sarawak Labour Ordinance.

2.1 Definitions of selected terms of the Act

Employer - An employer is a principal, who enters into a contract of service with an employee.

Employee
The First Schedule of the Act defines employee as:
(a) One who has entered into a contract of service with an employer, and his wages do not
exceed RM2000.00 per month; and
(b) One without regard to his wages, who is engaged:
 as a manual labourer;
 in supervising employees involved in manual labour;
 in the operation or maintenance of any vehicle for the transport of passengers or
goods; and
 as a domestic servant (who is exempted from most of the key provisions of minimum
benefits).

2
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

Contract of service – any agreement, whether oral or in writing and whether express or implied,
whereby one person agrees to employ another as an employee and that other agrees to serve as
an employee and includes an apprenticeship contract

Contractor – any person who contracts with a principal to carry out the whole or any part of any
work undertaken by the principal in the course of or for the purposes of the principal’s trade or
business

Domestic servant – a person employed in connection with the work of a private dwelling-house
includes a cook, house-servant, butler, child’s nurse, valet, footman, gardener, washerman or
washerwoman, watchman, groom and driver or cleaner of any vehicle licensed for private use;
and not in connection with trade, business, or profession carried on by the employer in such
dwelling-house

Part-time employee – a person included in the First Schedule whose average hours of work
does not exceed 70% of the normal hours of work of a full-time employee employed in a similar
capacity in the same enterprise

Principal – any person who in the course of ... his trade or business contracts with a contractor
for the execution ... of the whole or any part of any work undertaken by the principal

2.2 Wages

“Wages” means basic wages and all other payments in cash ... for work done in respect of his
contract of service but do not include:
(a) house accommodation, supply of any food, fuel, light or water or medical attendance, or any
approved amenity or approved service;
(b) pension fund, provident fund, superannuation scheme, retrenchment, termination, lay-off or
retirement scheme, thrift scheme or any other fund or scheme established for the benefit or
welfare of the employee;
(c) travelling allowance
(d) special expenses due to the nature of his employment;
(e) gratuity payable on discharge or retirement;
(f) annual bonus or any part of any annual bonus [S2]

2.2.1 Rate of pay

Ordinary rate of pay calculated by the month, the week, the day, the hour, or by piece rate, or
otherwise, but does not include incentive payment scheme or any payment for work done on a
rest day or on any gazetted public holiday [s. 60I(1)(a)].

Hourly rate of pay means the ordinary rate of pay divided by the normal hours of work.
[s.60I(1)(b)].

The rate of pay is calculated as follows [s. 60I (1A) and s. 60I(1B)]:
Monthly rated Weekly rated
Monthly rate of pay ÷ 26 Week rate of pay ÷ 6

3
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

2.2.2 Wage Period and Time of Payment

s. 18: wage period

 contract of service shall specify a wage period not exceeding 1 month
 If does not specify, it shall be deemed to be 1 month.

s.19: time of payment of wages

 employer require to pay wages not later than 7th day after the last day of wage period

2.2.3 Deductions from wages

s. 24
The employer is entitled to make the following deductions:
a) to recover overpayment of wages in the past three months,
b) pay the Employees Provident Fund, Employees Social Security Organization, and Inland
Revenue Board,
c) recover advance payments made without charging interest
d) any other deductions authorized by law

s.29 – any other deductions require permission from the employee and the DG of labour.

2.2.4 Mode of payment, Conditions Restricting and Priority of the Wages

s. 25(1) and s. 25A(1) : mode of payment

 Wages earned shall be paid directly into an employee’s bank account unless the employee
makes a written request that he be paid in cash or by cheque.

s.26: condition restricting the wages

It is illegal for an employer to specify the conditions restricting the place at which, or the manner
in which, or the person with whom, any wages paid to the employee is to be spent.

s.31: priority of wages over other debts

If the employer’s business is wound up, the employees’ wages must be paid before paying other
debts, in the amount not exceeding four months’ wages.

2.3 Termination of employment

2.3.1 Termination of service with notice

s.12
 Either the employer or employee may give the other party notice of termination of service as
per stated in contract of service.
 When the contract does not state the information, the length of notice of termination shall be
as follows:
Length of service Length of notice of termination
Less than 2 years 4 weeks
2 years or more but less than 5 years 6 weeks
5 years or more 8 weeks

4
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

s.57: domestic servant

 The contract of service of a domestic servant may be terminated by the person or the employer
by giving the other party 14 days’ notice, or by paying an indemnity equivalent to the wages
the domestic servant would have earned in 14 days

2.3.2 Termination of contract without notice

Either the employer or the employee can terminate a contract of service without giving the
required notice by paying indemnity equivalent to the amount of wages which would have been
earned [s. 13].

2.3.3 Termination of contract for misconduct

An employer may dismiss, downgrade, or impose a suitable punishment on an employee who,

after a due (domestic) inquiry is found guilty of misconduct. An employee’s wages may be withheld
for up to a maximum of two weeks only [s. 14].

It is mandatory for the employer to conduct due/domestic inquiry (internal trial) to decide if there
is a misconduct. Domestic inquiry also allow the employees’ voice to be heard (right to defend
himself).

2.3.4 Termination due to breach of contract

s.15: breach of contract by employer or employee

 An employer who fails to pay wages has breached the contract and made constructive
dismissal of his employee.
 An employee has breached the contract if he is absent without permission for more than two
consecutive working days, unless he has a reasonable excuse.

s.16: minimum days of work for estate workers

 An employer is required to provide his estate employees at least 24 minimum numbers of
days of work in each month.
 A contract of service shall be deemed to be broken by an employer if he fails to provide work
or pay wages accordingly.

2.4 Employment of women

2.4.1 Prohibition of night work and underground work

Women are not allowed to work between 10.00 p.m. and 5.00 a.m. in industrial and agricultural
undertaking. The Director General of Labour has the authority to give exemptions with certain
conditions [s.34 – s.36].

2.4.2 Maternity protection

s.37
 Every female employee is entitled to 60 days’ maternity leave for each birth of her child
5
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

 She may eceives a maternity benefit or allowance equivalent to her wages, if she has no more
than 5 surviving children.
 She may take up to a maximum of 30 days of this leave before she gives birth.
 She must serve the employer for at least 90 days during the 9 months or employed anytime
during 4 months immediately before her confinement.

2.5 Rest days, hours of work, holidays and other conditions of service

2.5.1 Rest Day

All employees are given 1 rest day per week [s. 59]. No requirement that rest day has to be
fixed. E.g: Sunday – official rest day, Saturday – off day.

2.5.2 Working on rest day

For employees who work on rest days, the following table can be used as a guide to calculate
their wage entitlement:

Employee category Period of work Payment

A daily, hourly or other similarly rated employee

s. 60(3)(a)(i) Does not exceed half his normal
hours of work.
s. 60(3)(a)(ii) More than half but does not exceed
his normal hours of work.
s. 60(3)(c) Work in excess of the normal hours
of work.
A monthly rated employee
One day’s wages at the ordinary
rate of pay.
Two days wages at
the ordinary rate of pay.
Not less than two
times his hourly rate of pay.

s. 60(3)(b)(i) Does not exceed half his normal

hours of work.
s. 60(3)(b)(ii) More than half but does not exceed
his normal hours of work.
s. 60(3)(b)(ii) More than half but does not exceed
his normal hours of work.
s. 60(3)(c) Work in excess of the
normal hours of work.
A piece rated Employee
Half the ordinary rate of pay.
One day’s wages at the ordinary
rate of pay.
One day’s wages at the ordinary
rate of pay.
Not less than two
times his hourly rate of pay.

s. 60(3)(d) (Not applicable – piece rated.) Two times his ordinary rate per
piece.

2.5.3 Hours of work

An employee should not be required to work in excess of the limit of hours prescribed in the Act
[s. 60A(1)(a),(b),(c) and (d)]

6
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

No more than 5 consecutive hours without rest of Break of at least 30 minutes is considered part of
at least 30 minutes [s. 60A(1)(a)]. 5 consecutive hours of work [s. 60A(1)(i)].

No more than 8 hours daily. [s. 60A (1)(b)].
an employee who is engaged in work which must
be carried on continuously and which requires his
continual attendance may be required to work for
eight consecutive hours inclusive of a period or
periods of not less than 45 minutes in the
aggregate [s. 60A(1)(ii)].

45 minutes’ break is counted as part of the 8

hours of work.

No more than a spread over 10 hours daily Fluctuating work of less than 8 a day may be
[s. 60A(1)(c)]. offset on the remaining days, but the total should
not exceed 9 hours daily or 48 hours weekly
[s. 60A(1)(iii)].

No more than 48 hours weekly [s. 60A(1)(d)].

2.5.4 Shift work

An employee may be required by his employer to work more than 8 hours in any one day or more
than 48 hours in any one week but the average number of hours worked over any period of three
weeks, or over any period exceeding three weeks as may be approved by the Director General,
shall not exceed 48 per week [s. 60C(1)].

2.5.5 Overtime

Overtime work done after the normal hours of work entitles the employee to the minimum of one
and a half times his hourly rate of pay [s. 60A(3)(a)].

2.5.6 Public holidays

s. 60D(1)(a)
 Employees are entitled to 11 gazetted public holidays per year
 5 compulsory public holidays; National Day, Birthday of the Yang Dipertuan Agong, Birthday
of Ruler/Federal Territory Day, Labour Day and Malaysia day

s. 60D(3)(a)
 Employee who works on the public holiday must be paid two days’ extra wages over at the
ordinary rate of pay

2.5.7 Annual leave

s. 60(E) paid annual leave is determined based on the employee’s length of service:

7
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

Length of service Entitlement of paid annual leave

Less than 2 years 8 days
2 years or more but less than 5 years 12 days
5 years or more 16 days

For an uncompleted 12 months of continuous service, his entitlement to paid annual leave shall
be proportioned (i.e. prorated) to the number of completed months of service.

2.5.8 Sick leave

s. 60(F)(1)(aa) sick leave entitlement is determined by the duration of service:

Length of service Entitlement of paid sick leave

Less than 2 years 14 days
2 years or more but less than 5 years 18 days
5 years or more 22 days

s. 60(F)(1)(bb), if hospitalization is necessary he is entitled to 60 days of paid sick leave at ordinary

rate of pay.

An employee is deemed to absent himself from work if his sick leave is not certified by a registered
medical practitioner, or if certified, but without attempting to inform his employer within 48 hours
of the commencement thereof [s. 60(F)(2)].

2.5.9 Termination, lay-off and retirement benefits

Employee entitled to termination benefits, lay-off benefits, and retirement benefits [s. 60J(1)].

Regulation 3 & 4(1) of Employment (Termination And Lay-Off Benefits) Regulations 1980:
 An employee who has been employed under contract of service for at least 12 months shall
be entitled to termination benefits if his contract of service is terminated for any reason, except
retirement, misconduct resigning voluntarily.
 The termination or lay-off benefits are calculated as follows:
Length of service Termination benefits (number of days wages)
Less than 2 years 10 days
2 years or more but less than 5 years 15 days
5 years or more 20 days

2.5.10 Employment of foreign employees

The employer shall not terminate a local employee for the purpose of employing a foreign
employee [s. 60M].

Where an employer is required to reduce his workforce by reason of redundancy, he shall first
terminate all foreign employees in a similar job before terminating the local employees [s. 60N].

8
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

3. INDUSTRIAL RELATIONS ACT 1967 (ACT 177)

The Act is to promote and maintain industrial harmony relations between employers and workmen
and their trade unions. The Act also provide the regulation for prevention and settlement of any
differences or disputes arising from their relationship.

3.1 Definitions of Selected Terms in IRA

contract of employment - any agreement, whether oral or in writing and whether express or
implied, whereby one person agrees to employ another as a workman and that other agrees to
serve his employer as a workman

employer – any person or body of persons, whether corporate or unincorporated, who employs
a workman under a contract of employment, and includes the Government and any statutory
authority, unless otherwise expressly stated in this Act

trade dispute – any dispute between an employer and his workmen which is connected with the
employment or non-employment or the terms of employment or the conditions of work or any such
workmen

workman – any person, including an apprentice, employed by an employer under a contract of

employment to work for hire or reward and for the purposes of any proceedings in relation to a
trade dispute includes person who has been dismissed, discharged or retrenched in connection
with or as a consequence of that dispute or whose dismissal, discharge or retrenchment has led
to that dispute.

3.2 Rights of workmen and employers

There should be no interference in the exercise of the rights of a workman or an employer in the
formation and joining of a trade union, and participation in its activities [s.4(1)].

Both trade unions of workmen and that of employers are not allowed to interfere with each other
[s.4(2)], including showing support by financial or other means with the objective of control or
influence [s.4(3)].

3.2.1 Prohibition on employers and their trade unions in respect of certain acts

An employer, his representative, or his trade union is not allowed to treat a person based on his
affiliation with trade union related matters, i.e.:
(a) imposing it as a condition in a contract of employment,
(b) refusing to employ,
(c) discriminating in employment, promotion, terms and conditions of employment,
(d) subjecting a person to dismissal, injury, alteration of his position, and
(e) inducing him to refrain from engaging in a trade union by giving him an advantage [s.5].

9
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

3.2.2 Leave on trade union business

A workman is required to apply in writing to his employer for leave of absence due to trade union
business for a reasonable period [s. 6].

3.2.3 Prohibition of workmen and their trade unions in respect of certain acts

A workman, his trade union, or his representative shall not carry out membership recruitment at
the employer’s place of business during working hours without the employer’s consent [s. 7].

A person may lodge a complaint in writing to the DG of Industrial Relations [s. 8(1)] pertaining to
Sections 4, 5, or 7, who in turn may refer the matter to the Minister [s. 8(2)], in turn to the Industrial
Court [s. 8(2A)].

3.2.4 Claim for recognition

Only workmen who are not employed in managerial, executive, confidential, or security, may
apply for recognition of their proposed trade unions [s. 9(1)] or engage in collective bargaining
[s.13].

When the issue of recognition of a trade union is pending, no workman or employer may resort to
strike, lock-out, picket, and terminate services as applicable [s. 10].

3.3 Collective bargaining

A recognized trade union of workmen or the employer or his trade union may invite one another
in writing to commence collective bargaining [s. 13(1)].

But the trade union of workmen should not include matters classified as “managerial prerogatives”
[s. 13(3)] in its proposal, i.e.
(a) promotion of any workman,
(b) the transfer of a workman,
(c) the employment of any person to fill in a vacancy,
(d) the termination of a workman by reason of redundancy or reorganization,
(e) the dismissal and reinstatement of a workman, and
(f) the assignment or allocation of duties or specific tasks.

However, the trade union of workmen may request the employer or the latter’s trade union to give
clarification of a general character pertaining to managerial prerogatives
[s. 13(3)].

Where a trade union of workmen considers the employer or his trade union has refused to
entertain questions pertaining to Section 13(3), the trade union of workmen may within 1 month
of such refusal, write to the Minister of Human Resource. The Minister may give an opportunity
to both parties to explain, and issue a directive which is final and conclusive [s. 13(8)].

10
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

3.3.1 Procedure of collective bargaining

Either party, i.e. the trade union of workmen or the employer, may invite the other to commence
collective bargaining [s. 13(4)-(8)]:

(i) The party that receives the invitation must reply in writing to the proposer within 14 days of
acceptance or otherwise of the invitation.
(ii) If the invitation is accepted, the parties shall commence collective bargaining within 30 days
from the date of the reply notifying acceptance of the invitation.
(iii) If an invitation to commence collective bargaining has been refused, not been accepted within
14 days or not commenced within 30 days, the party making the invitation may notify the DGIR
in writing. The DG will take the necessary steps to cause the parties to commence collective
bargaining as soon as possible.
(iv) If the two parties still refuse to commence collective bargaining, a trade dispute exists.

3.4 Collective agreements

Collective agreements should be in writing and signed by the parties concerned or their
representatives [s. 14(1)].

Some of the mandatory items to be stated in the collective agreement are as follows:
(a) Name of the parties
(b) The period of the agreement, and shall not be less than three years
(c) Procedure for its modification and termination
(d) Procedure for the adjustment of any question that may arise [s. 14(2)(a)(b)(c)(d)]

In addition to the above, the collective agreement contains matters related to terms and conditions
of service, and practice. The collective agreement also contains the provisions of the Employment
Act 1955, the Industrial Relations Act 1967, and accepted practices.

3.4.1 Deposit of collective agreements

The signed copy of the collective agreement shall be jointly submitted with the Registrar within 1
month from the date of the agreement, who in turn shall bring it the Industrial Court for its
cognizance [s. 16(1)].

The Court may refuse cognizance if it contravenes Section 14, or require amendments before
cognizance [s. 16(2)].

3.4.2 Effect of collective agreement

s.17
(1) A collective agreement which has been cognizance by the Court shall be deemed to be an
award and shall be binding on:
(a) the parties to the agreement including in any case where a party is a trade union of
employers, all members of the trade union to whom the agreement relates and their
successors, assignees or transferees; and
(b) all workmen who are employed or subsequently employed in the undertaking or part of
the undertaking to which the agreement relates.
11
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

(2) As from such date and for such period as specified in the collective agreement
 it shall be an implied term of the contract between the workmen and employers bound by
the agreement….
 that the rates of wages to be paid and the conditions of employment to be observed under
the contract….
 shall be in accordance with the agreement unless varied by a subsequent agreement or
a decision of the Court.

3.5 Conciliation of trade dispute

3.5.1 Conciliation of trade dispute by the DG

Either an employer or his trade union or a trade union of workmen may report to the DG where a
trade dispute exists or is apprehended (except for the dismissal of a workman under s. 20), the
latter will attempt to solve the dispute as soon as possible[s. 18(1) & s. 18(2)].

If the DG thinks the 2 disputing parties cannot settle the dispute, he shall refer it to appropriate
machinery as specified in the collective agreement [s. 18(3) & s. 18(4)].

If the DG thinks the machinery is not able to settle the dispute, he has to inform the Minister
accordingly [s. 18(5)].

3.5.2 Conciliation of trade dispute by the Minister

The Minister may conciliate in any trade dispute at any time, if he considers it necessary or
expedient [s. 19A].

An employer who is a party to the trade dispute may represent himself or be represented by his
duly authorized employee, or, where he is a member of a trade union of employers be represented
by an officer or employee of such trade union of employers, or by any official of an organization
of employers [s. 19B].

3.6 Representation on dismissals

A workman, whether or not a member of a trade union, who considers that he has been dismissed
without just cause may write to the DG to be reinstated in his former employment [s. 20(1)].

The workman must file the representation within 60 days of the dismissal [s. 20(1A)].

The DG shall expedite settlement; where he thinks there is no likelihood of settlement, he shall
notify the Minister accordingly [s. 20(2)], who in turn may refer the representations to the Industrial
Court for an award [s. 20(3] which shall operate as a bar to any action for damages by the
workman in any court in respect of wrongful dismissal [s. 20(4)].

Section 20 shall not apply to the dismissal of a workman under Section 59 [s. 20(5].

12
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

3.7 Trade disputes, intimidation and picketing

In furtherance of a trade dispute, a person should abstain from intimidation, e.g. persistently
follows such other person about from place to place [s. 39].

While picketing is allowed, it should be carried out peacefully for communicating information or
persuading any workman to work or abstain from working [s. 40].

3.7.1 Restrictions on strikes and lockouts in essential services

A workman or an employer in any essential service may not strike or lock-out, respectively
(a) without giving the notice within 42 days before taking the action
(b) within 21 days of such notice; or
(c) before the expiry of the date of strike/lock-out specified in any such notice as aforesaid. [s.
43(1)(a),(b),(c); s. 43(2)(a),(b),(c)]

The receiver of the notice must report the matter to the Director General of Industrial Relations
[s. 43(4)].

Essential Services include banking, electricity, fire, postal, prison, public health, public water,
radio communication and broadcasting, telephone and telecommunication, transport, water, and
defense related businesses.

3.7.2 Illegal strikes and lock-outs

A strike or a lock-out shall be deemed to be illegal if:

(a) it is declared or commenced or continued in contravention of section 43 or 44 or of any
provision of any other written law; or
(b) it has any other object than the furtherance of a trade dispute
(i) between the workmen on strike and their employer; or
(ii) between the employer who declared the lock-out and his workmen [s. 45(1)].

3.8 Code of Conduct for Industrial Harmony

It is a guideline for good industrial relations jointly drawn up in 1975 by the Ministry of Human
Resource. Its aim is “to lay down principles and guidelines to employers and workers on the
practice of industrial relations for achieving greater industrial harmony.”

It includes sections on employment policy, training, redundancy and retrenchment, collective

bargaining and collective agreements, procedure for settling disputes, procedures for disciplinary
action, communication and consultation.”

The sanction of the Code is moral, not legal, and hence it is not a legally enforceable document.
However, the Act gives it a semi-legal status when approved by the Minister of Human Resource
[s. 30(5A)]

13
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

4. TRADE UNIONS ACT 1959 (ACT262)

4.1 Definition

Trade Union – s. 2
A trade union is defined as any association or combination of workmen or employers whose place
of work is in Peninsula Malaysia, Sabah or Sarawak.
(a) within any particular establishment, trade, occupation or industry or within any similar trades,
occupations or industries; and
(b) whether temporary or permanent; and
(c) having among its objects one or more of the following objects:
(i) the regulation of relations between workmen and employers, for the purposes of promoting
good industrial relations between workmen and employers, improving the working
conditions of workmen or enhancing their economic and social status, or increasing
productivity;
(ii) the regulation of relations between workmen and workmen, or between employers and
employers;
(iii) the representation of either workmen or employers in trade disputes;
(iv) the conducting of, or dealing with trade disputes and matters related thereto; or
(v) the promotion or organization or financing of strikes or lock-outs in any trade or industry
or the provision of pay or other benefits for its members during a strike or lock-out [s. 2].

Employee – any person who is engaged for hire or reward on a full-time or part-time basis

Workman – any person, including an apprentice, employed by an employer under a contract of

employment to work for hire or reward and for the purposes of any proceedings in relation to a
trade dispute includes any such person who has been dismissed in connection with that dispute

Employer – any person or body of persons, whether corporate or unincorporated, who employs
a workman, and includes the Government and any statutory authority

Executive - body, by whatever name called, which the management of the affairs of a trade union
or of any branch thereof is entrusted

Officer – [with reference to a trade union] any member of the executive thereof, but does not
include an auditor

Director General of Trade Unions - supervises, directs and controls all matters relating to trade
unions throughout Malaysia [s.3].

The rationale of the definition can be understood as follows:

 A trade union of workmen or employers need not carry the word “union” in its name; it may
use any suitable words such as “association.”
 Union membership is limited geographically, i.e. West Malaysia, Sabah, or Sarawak.
 Membership is specific to a particular establishment, trade, occupation or industry. Members
of a union must share common interests.
 Workmen and employers cannot form a joint union because the nature of their association or
combination is different.

14
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

 The trade union, whether of workmen or employer(s), has as one of its objectives “the
regulation of relations between workmen and employers,” “trade disputes,” “strikes,” and
“lock-outs.”
 A trade union is not subject to the legislation relating to societies and companies [s. 67].

4.2 Worker’s right to form and join union

Workers in Malaysia have the right to form and join trade unions. This is known as freedom of
association and this right is protected in s. 5 of the Industrial Relations Act 1967.

4.3 Strikes and lock-outs

A trade union may not declare strikes or lock-outs [s. 25A]:

(a) without first obtaining at least two-thirds consent by secret ballot of its total number of
members entitled to vote
(b) before the end of the seventh day after submitting to the DG the results of such secret ballot
(c) if the secret ballot has become invalid or of no effect by virtue of s.40(2), (3), (6) or (9)
(i) in contravention of the rules of the trade union
(ii) in respect of any matter covered by a direction of the Minister
(iii) in contravention of this Act or any other written law

4.4 Membership

s.26
 A person under aged 21 but above 16 [called a minor] can be a member but cannot be an
elected executive or a trustee of the trade union.
 However, a member who is under aged 18 is not entitled to vote on some matters.
 A student who is a bona fide workman and above aged 18 is allowed to be a member of the
trade union.

s.27(3)(aa)(i)
 Employees in the managerial and professional group in the public sector need to obtain
approval from the Chief Secretary to the Government to join a trade union.

s.28
 A person will be disqualified from being a member of the executive of a trade union if he is not
a citizen, not employed for at least one year, an executive of any cancelled or withdrawn trade
union, office bearer or employee of a political party, convicted of criminal breach of trust, or a
bankrupt.

4.5 Rules

s.38
 The rules of a trade union should include all matters specified in the First Schedule.
 Any alternation of the rules must be voted by more than one-half of the members entitled to
vote

15
BBBD3063 Corporate Administration – Chapter 7: Human Resource (Legal
Environment) Part 1

4.6 Secret ballot

A trade union should take a secret ballot on any of the following matters [s. 40(1)]:
(a) the election of delegates to a general meeting,
(b) the election of officers (other than trustees),
(c) all matters relating to strikes or lock-outs,
(d) the imposition of a levy,
(e) dissolution of the trade union,
(f) amendment of the rules causing increase in liability or decrease in the benefits, and
(g) amalgamation with or transference of engagements to another trade union.

4.7 Property

A trade union should have at least three trustees, who could be a corporation appointed by the
Director General [s. 43(1)].

The trustees manage and control all movable or immovable property of a trade union for the use
and benefit of the trade union [s. 47].

A trade union may invest in land or building, securities, deposits, cooperative society, any
commercial, industrial or agricultural undertaking, banking enterprises operating in Malaysia
[s.49]

4.8 Funds and accounts

The funds of a trade union can be expended for the payment of salaries of officers and employees,
administration expenses, legal proceedings, trade disputes, fees of affiliation membership, and
related expenses [s. 50]; but they cannot be used for political objects [s. 52].

It is a requirement for a trade union to submit annual returns of 12 months ending 31st March in
each year before 1st October to the Director General [s. 56(1)].

4.9 Membership of consultative bodies

A trade union must obtain prior permission of the Director General if it wants to be a member of
any consultative or similar body established outside Malaysia [s. 76A].

16