Movement Control Order vs Wages

On 16th March 2020, the Government of Malaysia issued a nationwide Movement Control Order (MCO) until 31 March 2020, and thereafter extended the said order until 14th April 2020 pursuant to the Prevention and Control of Infectious Diseases Act 1988.

Amongst others, during the MCO period, only companies providing essential services and/or supporting essential services may continue its business operations and/or operate their business premises. Consequently, employees of such companies are required to work and their wages shall continue as per their contract of employment. Any refusal to work by the said employee may amount to a misconduct.

A company, which is not providing essential service is required to temporarily close its premises during the MCO period, unless prior written approval of the DG of Health is obtained. The MCO is only in respect of closure of office/ business premises and not the operation of the company. Therefore, the employees are required to work from home, if applicable, in order to ensure continued service. For example, management staffs, accountants, lawyers, designers etc. Such employees who refuses to carry out their duties can be subjected to disciplinary action.

However, it is inevitable, due to the MCO, majority of the employees such as factory workers will not be required to perform any work.

The question now arises, is whether an employer is obliged to pay the employee’s wages during the MCO period considering there is no actual work is done?

Whilst there is no provision under the Prevention and Control of Infectious Diseases Act 1988 for ordering the employer to pay wages/salary to its employees during the MCO period, on 19th March 2020, the Ministry of Human Resource (MOR) had issued a FAQ and Guidelines (FAQ) pertaining to Covid-19 and the MCO, amongst others, directing the employers to pay full wages/salary during the MCO period. We cannot but overemphasize the MOR directive serves as a mere guideline.

As the said FAQ is not a regulation and was never gazzeted by the Ministry, we are of the considered opinion that the said FAQ has no force of law and it merely stands as a good practice/ guideline at its best. It must be further stated that the Employment Act 1955 explicitly states that “wages are to be paid for work done”.

Whilst the legality of the FAQ may be challenged in Court, we anticipate that the Industrial Court, being a court of equity (where disputes are normally referred to other than Labour Department/ Court) may hold in favor of the employee with regards to their entitlement to wages/ salary during the MCO period.

What are the options available to an Employer?

Options for Employers

No Payment

• Wages not paid during the MCO period

• Employee may file complaints to the Labour Department or cite Constructive Dismissal as it may amounts to fundamental breach of the contractual terms and file representation under Section 20 of the IRA 1967.

• The Company may be exposed to legal consequences unless the employment contract provides for a force majeure clause and covers Covid-19 and/or MCO situation.

NB: It is not common for an employment contract to provide for such clause. However, for our retainer clients, if you are in doubt, kindly extend us a copy of the employment agreement for us to review.

Full Payment

• Wages are paid in full during the MCO period.

• However, the Company may choose not to pay discretionary allowances i.e discretionary bonus, performance bonus, sales commission etc.

• No legal implication.

• Under the Wage Subsidy Program, an Employer may apply through Socso’s Employment Insurance System (EIS) for wage subsidy up to RM600/month for a period of 3 months starting from 1st April with the following T&C:-

– Employees whose wages are below RM4000/month;

-Employers suffered revenue losses of at least 50% from January 2020; and

-Employersmustensurethesaid employee is not terminated or directed to be on unpaid leave 3 months after the implementation of the program i.e 3 + 3 months

Variation

• Employer negotiates with the employee to vary the terms of the employment contract i.e wages, allowances

• Eg: Partial reduction of salary or utilisation of AL during the MCO period i.e collective burden

• Eg: Reduction of fixed allowances such as traveling, productivity and/or meal allowance since it was not incurred during MCO period

• Eg: The employer may also discuss with the employee if he is willing to factor in the allowances as announced by the Government under the ‘Bantuan Prihatin Nasional’ scheme.

• No legal implication provided both parties agrees to the variation in writing.

NB: For our retainer clients, we will be able to vet the variation letter if required.

Other Relevant Matters & Disclaimer

Employees’ Provident Fund & HRDF Fund

• Starting 15th April 2020, vide EPF’s Employer Advisory Services (EAS) programme, employer may opt for deferral of payments, restructuring and rescheduling of employer contributions of EPF, if required.
• Also, employers are exempted from payment of Human Resources Development Fund (HRDF) levy, if applicable, for a period of six months beginning April 2020.

Useful links:
Perkeso’s Wage Subsidy Program
– https://www.perkeso.gov.my/index.php/ms/program-subsidi-upah

Perkeso’s Employment Retention Program
– https://www.perkeso.gov.my/index.php/ms/kenyataan-media
– https://www.perkeso.gov.my/images/erp/BORANG_ERPC19_Edited_22_Mac_V4.pdf

Disclaimer: Please note that the contents above do not constitute legal advice. Should you require legal advice, please contact any of our lawyers as listed below:

If you have any queries, please contact our via e-mail, we are available for a scheduled conference call.