After more than a year since it was first tabled in Parliament, the Employment (Amendment) Act 2012 ("Amendment Act") came into force on 1 April 2012. The Amendment Act amends and supplements existing employer obligations prescribed by the Malaysian Employment Act 1955 ("EA") and also introduces new ones.

The more significant changes brought about by the Amendment Act include:

  • increasing the wage threshold with regard to the scope of employees covered by the EA;
  • bolstering maternity-related entitlements;
  • introducing sexual harassment-specific criminal offences in the workplace;
  • introducing the personal liability of directors and other officers for offences committed by a body corporate; and
  • broadening the circumstances under which EA employees may receive advances on wages.

Increase of Wage Threshold

The scope of individuals whose employment is governed by the minimum standards prescribed by the EA regardless of work performed, has been extended to those employees whose monthly wages do not exceed RM2,000. Previously, the wage threshold for coverage was RM1,500. There is no change to the scope of protected employees regardless of wage amount such as manual labourers.

According to the Ministry of Human Resources ("MOHR"), this is expected to increase the percentage of  EA-protected employees from 50% to 70%.

This amendment is complemented by a corresponding change to the eligibility to seek redress before the Director General of Labour ("DGL") with regard to dues under their employment contracts.

Maternity-related Benefits

The EA-prescribed maternity-related benefits are now extended to all female employees regardless of whether they come within the ambit of the EA.  This is in any case reflective of present Malaysian practice for their non-EA employees. 

Employees may now commence their maternity leave from the 22nd week of pregnancy. Previously, the leave could only commence from the 28th week.

The prohibition against termination of an employee during the period she is entitled to maternity leave has been relaxed. Termination during this period as a result of the closure of the employer's business is not an offence. The Amendment Act is silent on the definition of "closure of business", and therefore it remains to be seen whether the closure of only part of the employer's business, would be permitted.

Sexual Harassment

The Amendment Act introduces the criminalisation of workplace sexual harassment. This again applies to all employees regardless of whether they are EA or non-EA.

Sexual harassment complaints is defined broadly to encompass complaints by: (a) an employee against another employee; (b) by an employee against any employer; or (c) by an employer against an employee. As the mechanism is confined to the employer-employee relationship, sexual harassment complaints by or against an independent contractor is likely to be excluded from the EA.

The EA imposes an obligation on the employer to inquire into any sexual harassment complaints in the prescribed manner unless the stipulated grounds of refusal are satisfied.  Any persons dissatisfied with the refusal may refer the matter to the DGL.

If, upon conducting an inquiry, the employer is satisfied that sexual harassment is proven, disciplinary action may be taken against the wrongdoer, including dismissal or downgrading. Alternatively, where the inquiry is undertaken by the DGL and the DGL is satisfied that sexual harassment is proven, the complainant may terminate employment without having to comply with termination notice-related requirements.

The failure of employers to comply with these new requirements is an offence and the penalty is a fine not exceeding RM10,000.

Unlike the earlier version, The Amendment Act does not require employers to have a written workplace sexual harassment policy. The lack of the legal obligation to do so appears somewhat incongruous given the practical need to make all stakeholders aware of the various rights and obligations in order to identify and to reduce incidences of sexual harrassment. Until definitive guidelines are issued by the MOHR, employers should refer to the non-binding Sexual Harassment Code as a first step, and roll out a written policy if this has not been already carried out.

Notwithstanding that the employer may have acted in accordance with the stipulated procedures in handling a sexual harassment complaint, there is also no immunity from an unfair dismissal claim by the wrongdoer where he or she is terminated from employment. Employers must therefore continue to be mindful of the various processes and procedures in terminating for misconduct.

Offences by Body Corporate

Prior to the Amendment Act, only the employer will be subject to the penalties under the EA.  Where the employer is an entity which has a separate legal existence such as an incorporated company, this means that the directors and other management members could sidestep liability for EA non-compliance.  This is likely to be one of the key factors contributing towards the less than satisfactory level of compliance. 

Now, a director or manager, partner or office-bearer shall be deemed to have committed the offence and may be charged jointly or severally in the same proceedings. There is also no express due diligence defence.

Such personal liability is consistent with other related legislation, such as those relating to employee income tax and provident fund contributions. 

Advance on Wages

The Amendment Act has expanded the situations under which employers can provide an advance on wages. Employees are now able to obtain an advance to purchase a computer, to pay for medical expenses, to pay for daily expenses in connection with temporary disablement and to enable the employee to pay for educational expenses.

Conclusion

Other amendments of note include the regulation of supply of labour and additional notification requirements in connection with the employment of non-Malaysians.

To be effective and towards achieving the objective of the EA being one of the key drivers to enhance Malaysia's human capital, the MOHR and the Labour Department must now quickly issue comprehensive guidelines, and the authorities must also expeditiously and consistently respond to clarification requests.

The introduction of the Amendment Act is yet another step in the increasingly regulated Malaysian workspace and employers will need to quickly come up to speed and if necessary and applicable, revise their policies, manuals  and practices for consistency as well as to enhance awareness and compliance.