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Crisis Management Guidance Note

April, 2020

This Guidance Note is issued in light of the imposition of a restriction of movement throughout Malaysia (Perintah Kawalan Pergerakan) with effect from 18th March until 31st March 2020 (“Lockdown Period”) under the Prevention and Control of Infectious Diseases Act 1988 and Police Act 1967.

This means that all schools, government and private premises must be closed EXCEPT for essential services such as water, electricity, energy, telecommunications, post, transportation, irrigation, oil, gas, lubrication, broadcast, finance, banking, health, pharmacy, fire and rescue, prison, ports, airports, security, defence, cleaning, retail and food supplies. Essential Services are further defined under the First Schedule of the Industrial Relations Act 1967.

This Guidance Note is aimed at assisting the Employer’s navigation of the law on the matter.

 

FAQ

Q:     What is the employer’s duty in respect of payment of salary?

A:     All employers have a duty to make payment of wages. Pursuant to Section 19 of the Employment Act 1955 (“Employment Act”), every employer shall pay the wages of his employees not later than the 7th day after the end of each month, less lawful deductions.

 

Q:   Can the employer make deductions from the wages of the employee during the Lockdown Period?

A:   Pursuant to Section 24 of the Employment Act, employers are only allowed to deduct salary of employee in, amongst others, the following circumstances (lawful deductions):

  1.   Overpayment of salary;
  2.   Deductions for payment in lieu of notice;
  3.   Deductions for advances given to employees;
  4.   Statutory deductions such as EPF and SOCSO;
  5.   Deductions pursuant to written request by an employee.

Any other deductions made by the employer, which do not fall under lawful deductions, may be regarded as unlawful and thus, allow the employee to file a complaint with the Labour Department.

 

Q:    Does the Employment Act apply to all employees?

A:  The Employment Act does not apply to all employees. It only applies to the following categories of employees:

  1.   Monthly salary not exceeding RM2,000.00; and
  2.   Engaged in manual labour, on a vessel, and domestic servants.

 

Q:    Can the employer make deduction of salary for employees who do not fall under the Employment Act?

A:    The employees who do not fall under the Employment Act are governed by the terms of their employment contracts. Any deductions must be based on mutual agreement between the employee and the employer.

 

Q:    Can the employer persuade the employee to take annual leave or unpaid leave during the Lockdown Period?

A:  The employer cannot force an employee to take annual leave during this period. This is because the Malaysian Human Resources Ministry (“MOHR”) has urged employers and workers to apply Section 60E (1B) and Section 60F of the employment Act.

In respect of annual leave, Section 60E (1B) provides:

“Where an employee who is on paid annual leave becomes entitled to sick leave or maternity leave while on such annual leave, the employee shall be granted the sick leave or the maternity leave, as the case may be, and the annual leave shall be deemed to have not been taken in respect of the days for which sick leave or maternity leave is so granted.”

In essence, we imply that the MOHR cited Section 60E (1B) provides that employees cannot be compelled to utilize annual leave where Quarantine Order has been given by a government hospital or where a Restricted Movement Order has been declared by the government.

Whereas for unpaid leave, as mentioned hereinabove, any other deductions other than the lawful deductions provided by the law leaves the employer open to risk of RM10,000.00 fine.

 

SOLUTIONS TO MANAGE THE IMPACT OF THE LOCKDOWN

1.  If the Lockdown impacts the job functions of the employee:

  1. Our view is that, if possible, the company should assign tasks to be completed by the employee remotely from their homes.
  2. Further, all meetings, either internal staff meetings, or client meetings, can be conducted by way of conference calls.

 

2.  If the job functions of the employee cannot be changed:

  1. We are of the view that each employment contract be reviewed to assess the risks, reliefs and remedies agreed upon.
  2. Events such as a pandemic and/or government-imposed lockdown may constitute as a force majeure event in some employment contracts or contracts for service. It will be important for the employer to consider if the language of the clause allows for the employee’s obligation to perform work to be suspended.
  3. In the event the force majeure clause allows for the obligations of both Parties to be suspended during the force majeure event, the employer should comply with the notice policy contained in the contract.
  4. Take note that typically, force majeure provisions require notice to be given without delay. This is to ensure that the rights to relief to be barred where timely notice is not given.
  5. If there is no provision in the contract that addresses a force majeure event, the employer may explore the option of entering into a ‘standstill’ arrangement with the employee which suspends the obligation of the employee to work during the Lockdown Period and the obligation of the employer to pay salary during such period.

 

3.  If the company can prove that the magnitude of the impact of the Lockdown is extremely detrimental to the company’s financial stability, the company may take the following steps:

  1. The company should consider cost-minimizing alternatives such as reduction of shifts, working hours, working days and freezing recruitment.
  2. Issue a notice to the employee, at the earliest possible opportunity, informing about the company’s financial predicament and that the company is considering options to retrench a number of employees;
  3. The company should then take the appropriate steps, in compliance with the Code of Conduct for Industrial Harmony 1975 (“Code”) issued by MOHR to ensure proper procedure for retrenchment is followed;
  4. Formulate and introduce schemes for voluntary retrenchment; and
  5. Report the retrenchment or voluntary separation to the Labour Office within the stipulated timeline in the Employment Act, failure of which carries a punishment of a fine of RM10,000.00.

For any enquiries on the restriction, the government has set up a hotline at 03-88882010. The line will be open starting at 12.00 p.m. on 17th March 2020.

We expressly disclaim our views as forming any form of legal opinion on the content herein. Our views shall not bind us and we disclaim any liability thereto.