1. INTRODUCTION
1.1 Definition
‘Industrial relations’ as quoted by Dunston Ayadurai in Industrial Relations in Malaysia : Law and Practice is defined as the relations created by employment between the parties who are involved in employment that are the employers, employees and their trade unions. Industrial relations includes totality of relationships and interactions between employers and employees. It covers all aspect of employment relationship including human resource management, employee relations and union-management relations.
1.2 Origins
The term "industrial relations" came into common usage in the 1910s, particularly in 1912 upon the appointment by President William Taft of an investigative committee titled the Commission on Industrial Relations which was assigned to investigate the causes of widespread, often violent labor conflict and make recommendations regarding methods to promote greater cooperation and harmony among employers and employees. It eventually gained greater saliency in the public mind due to the wave of strikes, labor unrest, and agitation for "industrial democracy" that accompanied the economic and political disturbances associated with World War I.
By beginning of the 1920s universities began to establish industrial relations centers and programs which conduct researches and train their students in employer-employee relations. Meanwhile at the same time, business firms established the first "industrial relations" or "personnel" departments to formalize and professionalize the management of labor and it began to expand until today.
2. EMPLOYMENT LAW IN MALAYSIA
Everyday in our life, we can see rules and regulations around us. When we drive on the road, there are rules to be followed, when we want to cook, there are guidelines to be referred and when we go to work, there are laws stated in the office that we must not ignore. The same case refers to our employment condition, there are laws written for the benefit of the parties involved.
Employment law governs the relationship between an employer and an employee which its main aim is to safeguard the interest of the employer and society in general and an employee/ workman in particular. Labor law contains provisions based on human rights, the rights which are necessary for protecting the dignity of an individual and creating conditions in which human personality can be developed to the fullest extent. In order to ensure that all the workers are ensured at least with basic human rights which are necessary for protecting human dignity, the State has intervened through labor laws. They are enacted with a view of protecting workmen against victimization and exploitation by the employer and also to prevent unrest. It provides for the investigation and settlement of industrial disputes, ignoring all the legal technicalities. It also provides for effective negotiations and conciliation.
In Malaysia, there are number of Acts practiced under employment-related legislation, which are the Employment Act 1955, Industrial Relations Act 1967, Trade Union Act 1959, Employees Provident Fund Act 1991, Employees’ Social Security Act 1969, Workmen’s Compensation Act 1952, Factories and Machinery Act 1967, Occupational Safety and Health Act 1994, Immigration Act 1959/1963 and etc. For the purpose of this assignment, two popular Acts are highlighted, namely the Employment Act 1956 and Industrial Relations Act 1967.
2.1 Employment Act 1955 (EA)
The Employment Act 1955, as well as the Sabah and Sarawak Labour Ordinance has written down the provisions to protect workers from exploitation and provide all workers covered by the respective Acts with minimum benefits, i.e., employees who earn not more than RM1,500 per month (Employment Act) or RM2,500 per month (in Sabah and Sarawak Labour Ordinance); those who carry out manual labour or who supervise such workers or are employed to drive or maintain vehicles.
The Employment Act sees the employee-employer relations as being contractual in nature and it requires a particular contract to exist, that is the ‘contract of service’. Some terms and conditions legislated in the Act are as follows :
(a) Hours of work, including hours of overtime allowed;
(b) Wages (the truck system and not the wage rate);
(c) The right for a weekly rest day;
(d) Public holidays;
(e) Number of annual leave, sick leave and maternity leave given; and
(f) Termination, maternity and layoff benefits..
2.2 Industrial Relations Act 1967 (IRA)
The Industrial Relations Act regulate the relations between the employers and employees and their unions as well as laying down rules to help prevent and settle disputes between the two parties which leads to a peaceful industrial relations as far as possible. The Act embodies 4 important principles, which are as follows:
(a) The principle of trade unionism
(b) The principal of recognition of a union
(c) The principle of collective bargaining leading to a collective agreement
(d) The principle of resolving trade disputes.
The IRA also specifies the legally acceptable ways to resolve an employer-union differences or disputes (such as negotiation, conciliation, arbitration and industrial action).
3. EMPLOYMENT RELATIONSHIP
The nature of employer and employee relationship is connected by a vital link called Employment. If there is no Employment, there shall be no Employer or Employee.
3.1 Who is an employee?
The definition of employee is clearly stated in the First Schedule (Section 2(1)) of the Employment Act 1955
FIRST SCHEDULE
(Section 2(1)) (Sub. Act A 497)
Employee Provision of the Act not applicable
(1) Any person, irrespective of his occupation, who has entered into a contract of service with an employer under which such person’s wages do not exceed RM One Thousand and Five Hundred per month.
(Am. Act 716)
(2) Any person who, irrespective of the amount of wages he earns in a month, has entered into a contract of service with an employer in pursuance of which –
(a) He is engaged in manual labour including such labour as an artisan or apprentice : Provided that where a person is employed by one employer partly in manual labour and partly in some other capacity such person shall not be deemed to be performing manual labour unless the time during which he is required to perform manual labour in any one wage period exceeds one-half of the total time during which he is required to work in such wage period;
(b) He is engaged in the operation or maintenance of any mechanically propelled vehicle operated for the transport of passengers or goods or for reward or for commercial purposes;
(c) He supervises or oversees other employees engaged in manual labour employed by the same employer in and throughout the performance of their work;
(d) He is engaged in any capacity in any vessel registered in Malaysia and who –
(i) is not an officer certified under the Merchant Shipping Acts of the United Kingdom as amended from time to time;
(ii) is not the holder of a local certificate as defined in Part VII of the Merchant Shipping Ordinance, 1952; or
(iii) has not entered into an agreement under Part III of the Merchant Shipping Ordinance, 1952; or
(e) he is engaged as a domestic servant
Part XII
Sections 12,14,16,22,61 and 64 and Parts IX, XII and XIIA.
(3) For the purpose of this Schedule “wages” is the one that is defined in Section 2, but shall not include any payment by way of commission, subsistence allowance and overtime payment.
In this Act ‘employee’ means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment
(1) In this Act ‘contract of employment’ means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether it is oral or in writing.
Comment :
(1) Note that statutory purposes a contract of apprenticeship is to be treated as a contract of employment. This means, for example, that an apprentice who is not kept on at the end of his training period has the right to claim redundancy or unfair dismissal (though see North East Coast Shiprepairs Ltd v Secretary of State (1978). In Flett v Matheson (2006) the Court of Appeal extended the traditional concept of apprenticeship to cover a typical tripartite modern apprenticeship programme where the training was mainly provided at college and the employer was essentially providing work experience. The test was how far the arrangement displayed the features classically associated with an apprenticeship contract: that the main aim was to learn a skill; a lengthy period of training was involved, and the employer’s power to dismiss was restricted.
Apart from clarifying the status of apprentices, the statutory definitions of ‘employee’ and ‘contract of employment’ are not very helpful, as they give no indication of how a contract of service is to be identified. The answer must be found at common law, and various factors to be taken into account can be identified from the extracts which follow.
4. CONTRACT OF SERVICE AND CONTRACT FOR SERVICE
The employment law which deals with the contract of service touches almost everyone than any other branch of law. A contract of service is an agreement whereby one person agrees to employ another as an employee and the other agrees to serve his employer as an employee (and includes an apprenticeship contract). The Employment Act 1955 deals with the contract of employment. But it is not applicable to every employee or to every employer. It is applicable to those employers or employees whi fall within the definitions of the Employment Act 1955. Under this Act, an employer is any person whi enters into a contract of service to employ any other person as an employee (includes the agent, manager or factor of such person). An employee is any person who enters into contract of service with an employer and whose wages ‘do not exceed RM1500 a month’. However, there are some exceptions where a person falls within the definition of an employee, even though his wages exceed the above limit. For example annual labor, persons engaged in the operation or maintenance of any mechanically propelled vehicle and the persons specified in the 1st schedule of the Act :
1. Any person, irrespective of his occupation, who has entered into a contract of service, with an employer under which such person’s wages do not exceed RM1500 a month’.
2. Any person who, irrespective of the amount of wages he earns in a month, has entered into a contract of service with an employer in pursuance of which :
He is engaged in manual labour including such as an artisan or apprentice etc....
Contract of service and contract for service
Section 2 of EA 1955 defines ‘contract of service’ as ‘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 person agrees to serve his employer as an employee and includes an apprenticeship. This is distinguished from a contract where the employer gets the work done by an independent, or self employed, contractor. For example, an electrician called to mend a faulty circuit in a private house would most likely be an independent contractor, while an electrician hired and stationed in a factory to look after its electrical components is an employee of the factory.
5. THE IMPORTANCE TO DIFFERENTIATE BETWEEN CONTRACT OF SERVICE AND CONTRACT FOR SERVICE
Reasons for stressing the importance of the distinction between a contract of service and contract for service :
1. Compulsory statutory contributions and payments like the provident fund, social security, workmen’s compensation and pension schemes are payable by employers if the workers are employed.
2. In tort, an employer will not normally be vicariously liable for the tortuous acts committed by independent contractors, whereas the employer would be liable for torts committed by his employees in the course of their employment which resulted in injuries or damages to third parties.
3. Employer owes a duty at common law to his employees to take reasonable care for their safety, whereas these duties do not normally apply with respect to independent contractors.
4. In case of a judgement made against an employee, an attachment of earnings can be ordered, where the Court can compel the employer to deduct the employee’s salary and wages for certain purpose.
5. Most important of all, the employee who falls within the definition of an ‘employee’ under the employment or industrial statutes would be entitled to protections under those statutes which as minimum standard of employment protections, minimum requirement of dismissal and termination notices and protections against unfair dismissal and the right to redundancy payments. These protections do not apply to a person who is working under a contract for service.
6. TEST FOR DETERMINING CONTRACT OF SERVICE AND CONTRACT FOR SERVICE
The Court have applied several test for determining whether an employee is working under a contract of service or as an independent contractor. The tests are the control test, organizational or integration test, multiple, mixed or economic reality test and other elements such as intention and objective of the contractual relationship.
Control test case :
The essence of the control test is that an employee works under the control of another, not only as to what he must do but also how and when he must do it. The test relies on the ability of the employer to exercise control over the employee in relation to the work done.
As a whole, the control test is inconclusive as far as professionals are concerned. It is difficult to see how employers can control the work of lawyers, engineers, architects, doctors and computer analysts as they have, to an extent, some independence in the course of their employment.
Mat Jusoh bin Daud v. Syarikat Jaya Seberang Takir Sdn. Bhd., that :
The notion of control as a test to determine the existence of relationship of master and servant has lost a good deal of its importance because under modern conditions no control as to how work is to be done can be directed to such professionally trained employees as engineers, architects, lawyers, managers, doctors and many others…This notion is also becoming unrealistic because the majority of employers today are corporate entities who have to act through human agencies. Thus the absence of control is no longer conclusive as to the existence or otherwise of the relationship of master and servant.
In the case of Bata Shoe Company (Malaya) Ltd. V. Employee Provident Fund Board, the question was whether salesmen employed by shop managers were employees of Bata Shoe Company. Applying the control test, the Court concluded that the Company did not have sufficient control over the salesmen, and for that reason they were not employees of the Company.
Organizational or integration test :
This test takes into account the degree of integration into the organization, whether it be a hospital, a factory,a university or a shop. The test would work if the extent to which a workman is integrated is not ambiguous. Nonetheless, it Is a superficial approach because the status of a workman is viewed from an outset and the detailed terms and conditions of the relationship is not properly assessed.
In Employee Provident Fund Board v. M S Ally & Co. Ltd., the organizational test was applied apart from the control test. The case was about the status of working assistants employed by the defendants under the EPF Ordinance. The Federal Court decided that they were employees and Wan Sulaiman FJ observed that :
…the correct conclusion to be drawn is that there is a sufficiency of control or if one is to apply the test employed by Denning LJ in Bank Voor Handel En Scheepvaart NV v. Slatford & Anor. and Stevenson Jordan & Harrison Ltd. v. MacDonald. Working assistants are ‘part and parcel’ of the organizations; that they are employed as part of the business and their work is done as integral part of and not as an accessory to the business.
Mixed or multiple test
7. CONCLUSION
8. REFERENCES
Cases and Materials on Employment Law : Gwyneth Pitt, Pearson Longman Education, 3rd Edition 2008
Employment Law For Human Resource Practice : David J. Walsh, Thomson South-Western West 2004
Employment Law in Malaysia , Prof. Altaf Ahmad Mir & Dr. Nik Ahmad Kamal, International Law Book Services 2006
A Handbook of Malaysian Labour Laws , M.N. D’Cruz, Leeds Publication, 7th Edition, 2008
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