The Code of Conduct for Industrial Harmony ("Code") in a non binding set of guidelines agreed upon by the Ministry of Human Resources and the Malaysian Council of Employers' Organisations. Although non binding, Courts will take account of whether the parties have complied with the Code when determining disputes. Is your Company compliant? What the Code covers?

What the Code covers? 

The Code covers 50 specific practices which can be broadly categorised into four areas responsibilities, employment policies, collective bargaining and communication. A key area to be mindful of is retrenchments; the code provides that when an employee is retrenched, the employers should make a retrenchment payment.

How is the Code Implemented?

Although non binding, the Code gains effect by virtue of the Industrial Relations Act 1967 ("IRA"). The IRA provides that when a court is making an award, it "...may take into consideration any agreement or code relating to employment practices ...". The courts have been enthusiastically interpreting this as meaning that the Code should be followed by employers, and that failure to do so amounts to an unfair labour practice.

Why does it matter?

Employers often fall foul of the Code when it comes to handling retrenchments. Assuming that because an employee is not covered by the Employment Act they have no entitlement to a retrenchment payment, employers often forget that those employees are still covered by the IRA. The courts have consistently found that where an employer fails to comply with the Code, the retrenchment amounts to an unfair dismissal.

What should employers do?

Employers should ensure that understand their obligations under the Code and that any policies relating to employees, including retrenchments, should be implemented in a way that is compliant.