The Foreign Worker and the Labour Laws

January 31, 2023

The Foreign Worker and the Labour Laws

Many Malaysian HR professionals are still unsure as to the status of the foreign worker under the Malaysian labour laws. In effect, it is very simple.  The Employment Act 1955 has simply defined the “employee” as anyone   under a contract of service.  This is seen from the wordings of  both  –

  1. Interpretation in sect 2 – “employee” means any person or class of persons included in any category in the First Schedule to the extent specified therein;, and 
  2. The first provision of the First Schedule that says “Any person who has entered into a contract of service”.


Therefore, all foreign workers are employees under the Employment Act 1955.  They have all entered into a contract of service with the employer.  That definition in the First Schedule does not mention position or money; therefore every employee who is not a citizen is covered under the Act. It matters not that they are high-earning expatriates or low skilled general workers.  If their wages are over RM4000 per month, then provision 1A excludes them are from enjoying certain provisions under Part XII which are: 

  1. Subsection 60(3) – payment for working on a rest day
  2. Subsections 60A(3) – payment for OT work
  3. Subsections 60C(2A) – payment of shift allowance (in case it is declared by the Minister)
  4. Subsections 60D(3) – payment for work on a paid public holiday
  5. Subsections 60D(4) – full day’s pay if any paid public holiday falls on a half working day
  6. Subsections 60(J) – payment of termination and lay off benefits


What will surprise a lot of us is that with the way in which the definition of employee has been worded, the Employment Act 1955 is applicable even to the foreign workers who are employed illegally, including those who are undocumented.   This is the decision made by the Court of Appeal in the May 2022 which was widely reported in the news.  It was a case involving the non-payment of wages to an illegal immigrant against the labour office of Klang which had refused to handle his complaint.  The Court of Appeal directed the Klang labour office to take up the case against his employer.


Furthermore, we have the experience of Goodyear Malaysia Berhad in the year 2021 to teach us that foreign workers who are not members of the trade union are fully entitled to the benefits found in the collective agreement.  In that year, faced 5 non-compliances cases at the Industrial Court brought up by 5 different groups of foreign employees who were not allowed to enjoy the benefits of shift allowances, bonus and wage scales according to the collective agreement between the union and the company, namely- 

  1. Buddhi Krishna Rai and 1 Perayu lain  vs Goodyear Malaysia Berhad  Award 946/2020 
  2. Miyan Udin vs Goodyear Malaysia Berhad  Award 944/2020
  3. Aung Naing Win vs Goodyear Malaysia Berhad Award 1156/2021
  4. Aung Aung  vs  Goodyear Malaysia Berhad Award  155/2021
  5. Airi Laxman Singh vs Goodyear Malaysia Berhad Award 1154/2021


Goodyear had employed the foreign workers under a different contract of service, apparently as had been arranged through the employment agencies. In that contract, the salary agreed was different and the contract did not include payment of bonus and shift allowance.   Goodyear lost all the five cases and was ordered to restore to the foreign workers all the payments due to them under the collective agreement.  

What is the reasoning for the above? They are:

  1. In addition to being employees under the Employment Act 1955, they all fall within the definition of “workman” of the Industrial Relations Act 1967
  2. These foreign workers are eligible and qualified to become members of the union.  Since they are qualified, the terms of the collective agreement also apply to them.  It is only that they have chosen not to join the union.  
  3.  Under Sect. 17 of Industrial Relations Act 1967, all workman who are employed in the undertaking are bound by the provision of the collective agreement, even if they are not members of the union.


What does the above teach us?  It teaches us that the contract of service which we sign with the employee is subject to the provisions of the law.  If the employee has agreed to something that is less than what the law says he should be entitled to, then whatever he has agreed to becomes null and void, and the provision of the law applies.  This  is also what Sect. 7 and 7A of the Employment Act 1955 has provided for.


So, foreign workers are not to be treated any differently from the local workers.   If there is any difference which cannot be justified, then it is discrimination.  There is now a new provision for complaints against discrimination too.


Mr. Chan Wang Tak

Mr. Chan Wang Tak

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