Employees, employers and wages during the MCO

The movement control order (MCO) issued on March 16 was made under the Prevention and Control of Infectious Diseases Act 1988. The MCO was issued together with the Declaration of Infected Local Areas. Both orders are effective March 18 to 31.

Employers have been confused by the different opinions expressed by the human resources ministry, various other HR consultants and even certain solicitors over the question of whether employees who are not able to report for work during this period are entitled to full wages.

The ministry seems to be of the opinion that employees are entitled to full wages during this period and that they cannot be compelled to utilise annual leave. However, this opinion is without any legal basis.

The current situation is one of force majeure, i.e. an event that is beyond the control of employers and employees. Therefore, it would appear that contractual rights and obligations are suspended during this period.

The ministry has referred to Sections 60E and 60F of the Employment Act 1955 (EA 1955). Section 60E states that employers shall grant annual leave and that employees shall take such leave. Section 60F provides for paid sick leave in the event that employees are certified unfit for work by a medical practitioner. Both these sections are irrelevant to the current situation.

The only section of the EA 1955 that may be relevant is Section 23 which states that employees are not entitled to wages nor can they recover wages for any period during which they are in prison or in custody. To be in custody is a situation where a person is under care and protection. In the current situation, the people’s movements are restricted.

The result of enforcing the MCO is that both employers and employees suffer adverse consequences. The prime minister is aware that both employers and employees will undergo difficulties. In a press conference on March 23, he said employees would not be earning wages and in light of that, he had instructed the Employees Provident Fund to allow them to withdraw up to RM500 a month for 12 months. Socso has also been instructed to entertain claims up to RM600 a month for six months under the Employment Insurance System.

The Labour Department, in opining that employees must be provided with full wages during this period of partial lockdown, has made a statement without legal basis.

The common law position was explained in the case of Viking Askim Sdn Bhd v National Union of Employees in Companies Manufacturing Rubber Products (1991) 2 MLJ 115 where the learned judge of the High Court stated as follows:

Under common law, if an employee is ready to perform his services during the period covered by his contract of employment, which provides for payment of wage at certain times, he is entitled to the wages although the employer has no work for him.

In the current situation where companies have to shut down due to the MCO, no employee can be deemed to be ready to perform his services. Therefore, the basic fact is that the employee would not be entitled to wages.

However, it would be totally unfair to require the employee to bear the full brunt of the shutdown. Similarly, it would be unfair to require the employer to bear the full brunt. In view of this, it is recommended that companies make some arrangements to compensate employees during this period. The choices open to the employer would be as follows:

  1. That those who have sufficient annual leave be required to utilise such leave; or
  2. if the annual leave is not sufficient, such employees could be placed on unpaid leave for the days in excess of annual leave eligibility.
  3. On compassionate grounds, to consider the entire period of the shutdown as paid unrecorded leave.
  4. To consider 50% of the shutdown period as paid leave and the other 50% as unpaid.
  5. To consider some other form of compensation for employees who are placed on unpaid leave. This could include an additional incentive in April 2020 or an additional bonus at the end of the year.

Other government agencies have provided relief for employers to make life easy for them. However, the human resources ministry seems bent on making things difficult for employers without considering that businesses have to survive to sustain employees in the long term.

We hope the ministry will look at the situation and refrain from making statements that have no legal basis.

David Kanagaraj served in the Labour and Industrial Relations Department of the human resources ministry for almost 30 years.

The views expressed are those of the author and do not necessarily reflect those of FMT.

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