News & Views

In an attempt to address concerns of employees and employers alike, in the wake of Malaysia’s Movement Control Order (“MCO”) first announced on 18 March 2020, the Ministry of Human Resources published a series of FAQ that addressed some common concerns. Most of these related to the rights of employees if their employers unilaterally reduced their salaries or forced them to go on unpaid leave during the MCO period. Under the general law  no employee may be forced to accept a unilateral variation of his terms of employment by hi employer. Consequently it is only trite to say that any attempt to reduce the salary of an employee or force him to take leave (of any nature), unless expressly provided or agreed, would be considered unlawful. In this regard, the FAQ was a reflection of the law. However, this is not to say that there cannot be a consensual variation to the terms of employment contracts if agreed by both employee and employer.

It is generally accepted in the legal fraternity that the FAQ are advisory in nature and have no force of law. However, their publication has nonetheless created confusion amongst employers trying to find ways to reduce labour costs by either asking employees to take unpaid leave of absence or accept a consensual reduction in salary. Due to the unqualified nature of some of the statements in the FAQ, many employers assumed that no changes to employment arrangements could be made even if consent was provided by affected employees. The fact that the Ministry published these FAQ together with the gazetted MCO, only served to strengthen the perception that these were part of the legislative intention that could not be altered by mutual agreement of the parties.

To be clear the MCO does have legislative authority as it is issued by the Minister of Health under the Prevention and Control of Infectious Diseases Act 1988 (PCIDA) and can lead to penalties if any of its provisions is breached. The FAQ on the other hand comes under a different ministry and are not gazetted regulations. Conversely, it should be clear to lawyers that the PCIDA under which the MCO is promulgated has no bearing on labour relations and cannot empower the Human Resource Ministry (in the absence of specific legislation) to force employers to remain locked in unfavourable labour relations that they could otherwise have resolved by negotiations or by exercising rights of retrenchment.

To put it plainly, employers continue to have the choice of negotiating and agreeing a fair reduction of salaries with their employees or failing agreement, to exercise their rights of retrenchment where circumstance allow them to do so. This position has not changed.

RLSE