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22 April 2022
Please click HERE to download the full article in PDF.
Introduction
On 25 October 2021, the long-anticipated Employment (Amendment) Bill 2021 (“Bill”) was tabled for its first reading in Parliament[1], and on the 21 March 2022, the Dewan Rakyat approved the Bill when it was tabled for its second reading[2]. The Bill proposes the insertion of, inter alia, Section 101C – Presumption of Employment, which would possibly cover gig workers.
Gig work can be loosely understood as non-standard income-earning activities outside of standard, long-term employer-employee relationships and gig workers enjoy flexibility in schedules and do not possess direct oversight from an employer[3]. Since the COVID-19 pandemic, there has been an increase of remote-working arrangements through digital platforms which in turn encouraged the emergence of more gig workers. This is reflected in the statistics produced by the Department of Statistics of Malaysia, which show that as of 2020, 4 million workers (26%) are full-time gig workers[4]. Moreover, the pandemic resulted in numerous individuals being made redundant and this has led to many of them benefiting instead from being a gig worker.
According to Deputy Human Resource Minister Datuk Awang Hashim:
Current legal position of Gig Workers in Malaysia
There are 2 primary legislations in Malaysia which defines who is an employee: the Employment Act 1955 and the Industrial Relations Act 1967. Under these 2 legislations, it would appear that the definitions of “employees” and “workman” do not extend to gig workers because gig workers often do not have a contract of service.
Section 2 of the Employment Act 1955 (“EA”) defines a contract of service as:
Section 2 of the Industrial Relations Act 1967 (“IRA”) defines a workman as:
Notwithstanding the labels applied to a contract, the Courts would rely on various tests in determining the true status of a worker, i.e. whether they are independent contractors engaged under a contract for services or whether they are actually employees hired on a contract of service/employment contract. The Federal Court case of Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia & Anor [1995] 1 MELR 1 affirmed the “control test”, the degree of control exercised by the employer over the employee’s work, to determine whether the person is an employee or an independent contractor. Other than the “control test”, there are several other factors that the Courts would scrutinize in assessing the employment status of an individual:
Section 2 of the Self-Employment Social Security Act 2017 (“SESSA”), defines a “self-employed person” to mean any citizen or permanent resident of Malaysia who is carrying out a self-employment activity under any of the 20 sectors listed in the First Schedule of SESSA to gain earnings in the industry. Hence, this would effectively cover gig workers as well.
In light of the fact that a workman is defined under the IRA as someone who possesses a contract of employment, the absence of such a contract would mean that gig workers are not considered as an “employee” or “workman” for the purposes of the EA and IRA respectively, but instead, they are defined as a “self-employed person” under the SESSA.
Section 101C of the Bill
Section 101C proposes to create a presumption of employment in the event there is an absence of a written contract of services relating to any category of employee under the First Schedule of the Employment Act. However, the presumption only applies if any of the following 6 elements are satisfied:-
The elements in Section 101C seem to be an amalgamation of the control test and the integration test [please see: Vincent Manickam S/O David (Suing By Himself And As Administrator Of The Estate Of Catherine Jeya Sellamah, Deceased) & Ors v. Dr S Hari Rajah & Anor [2018] 2 MLJ 497].
Impact of S.101C of the Bill
The presumption of employment under Section 101C would bring a gig worker within the meaning of an “employee” under the EA and by extension, within the definition of a “workman” under the IRA. This would give a gig worker all the benefits currently enjoyed by an employee and a workman such as entitlement to annual leave[7], sick leave[8], the mandatory contributions towards the Employees Provident Fund[9] and the right to not be unfairly dismissed[10]. This means that gig workers (who meets the requirements of Section 101C) can now enjoy benefits and protections under the EA and the IRA that they previously lacked.
From a social security standpoint, if a gig worker manages to trigger the presumption of employment under Section 101C of the Bill, then they no longer have to make optional self-contributions under the SESSA, but rather, they would be mandatorily covered under the Employees’ Social Security Act 1969 (“SOCSO Act”), where the contributions are payable by both the employee and employer.
From a business and financial standpoint, the implementation of Section 101C may pose many challenges for companies. Certain companies may decide to terminate their operations in sectors where they are unable to absorb the gig workers (who may be presumed as employees under the new Section 101C) into their current financial scheme, due to the statutory obligations placed on an employer-employee relationship, although such a relationship was never intended[11]. In terms of liability, companies will also be vicariously liable for any tort/wrongdoing committed by the gig worker during his course of employment.
Comparison with other jurisdictions
In the recent case of Uber BV and Others v Aslam and Others [2021] UKSC 5 (“Uber case”), the UK Supreme Court handed down a landmark ruling that drivers for technology applications are recognized as workers. The case recognized a new category of employees known as “Dependant Contractors” amongst independent contractors. These Dependant Contractors are recognized as “workers” for limited employment benefits given under certain laws only, such as entitlement to minimum wage and paid holidays. It is however important to note that the case did not determine that the Uber drivers were “employees”.
In another case involving a food delivery service, Deliveroo, in The Independent Workers Union of Great Britain v The Central Arbitration Committee [2021] EWCA Civ 952 (24 June 2021) (Deliveroo case), the Union attempted to bring their riders within the meaning of “worker” within the Trade Union and Labour Relations (Consolidation) Act 1992 so that they can be accorded with collective bargaining powers. The Court of Appeal held that due to the nature of ‘personal’ work being undertaken and that riders could send substitutes to undertake work even after they had accepted a delivery through the Application, this meant that they could not fall within the meaning of a “worker”.
Aside from the UK, the protection of gig workers seem to be expanding in other jurisdictions as well. Laws in Australia and New Zealand have adopted broader statutory language and extended occupational safety and health coverage to all workers, including platform workers. [12]
What can employers do moving forward?
Where employers and gig workers do not intend to enter into an employment relationship and prefer to maintain flexibility in their engagement, employers would need to ensure that the presumption of employment provisions in Section 101C(a) to Section 101C(f) of the Bill are not triggered. For example, some of the steps that companies can take would include, inter alia, avoid setting a regular pattern of daily or weekly hours; allow gig workers to supply their own tools, supplies, and equipment; allow contractors to hire their own assistants; compensate gig workers/independent contractors on a per-job basis rather than by hour or by week; ensure the contract for service requires proof of work done (eg: invoice) before paying for any work that has been performed by the gig worker/independent contractor; avoid directly reimbursing gig workers/contractors for any expenses they might have; if possible, make payment for services rendered by gig workers/independent contractors to a company rather than to an individual; or allow workers to set up their own “gig worker social security fund” as a way to exercise more control over these payments[13].
In the event gig workers fall within Section 101C and are presumed to be employees, some of the steps that employers can take to mitigate the risk of litigation for unfair dismissal include, inter alia, providing gig workers with clear explanation as to the process behind any investigation into any misconduct and this includes the right to answer any charges of misconduct. Further, for gig workers who operate through platforms that monitor their quality of work by using digital algorithms[14], these employers would need to include some form of human element in determining whether these gig workers should be subject to any disciplinary action or performance review. This is because the algorithm in digital platforms would assess a gig worker’s performance mainly based on customer ratings and feedback, hence, steps ought to be put in place to identify the feedbacks which may be baseless, biased or discriminatory.
Conclusion
In our view, the Bill should recognize a new category of workers as “Dependant Contractors”, i.e. a category of workers who are accorded limited benefits and protection such as occupational safety and health coverage or social security benefits, but still being regarded as “self-employed” or ”independent contractors”, much like in the Uber case discussed above. To accord all gig workers the status as ’employee” based on the 6 elements for presumption of employment under the EA, will no doubt place an onerous burden on employers as it will open the floodgates for all gig workers to claim for benefits under the EA and the right to claim unfair dismissal under the IRA. This is an onerous burden as both parties may never have intended to enter into an employer-employee relationship. Companies may now also be vicariously liable for the wrongdoing or tort committed by gig workers who are presumed as employees. As such, the current system that applies to employees under an employment relationship is not a one-size-fit-all system and may be impossible to apply to gig workers. Hence, a more tailored version of employment needs to be implemented. Rather than laterally applying the same rights for all workers, it would be more beneficial to both employers and gig workers to have a system that caters to their specific requirements and flexible pattern of work.
Moreover, from a business perspective, extending employment benefits to gig workers would result in an unsustainable financial impact which would in turn cause a severe reduction in job opportunities for gig workers[15]. It is also unclear whether gig workers actually want to be recognised as employees given the flexibility they currently enjoy[16]. The recognition of a separate category to cover those in the gig economy would not only accord more appropriate protections to gig workers while taking into account the methodology behind their work but also a more stable and financially sound approach for employers.
Authors
Wong Keat Ching
Reyna Lim Khang Yen (Pupil-in-Chambers)
Sandeep Singh Sidhu (Pupil-in-Chambers)
Disclaimer: The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.
Zul Rafique & Partners
22 April 2022
Please click HERE to download the full article in PDF.
Introduction
On 25 October 2021, the long-anticipated Employment (Amendment) Bill 2021 (“Bill”) was tabled for its first reading in Parliament[1], and on the 21 March 2022, the Dewan Rakyat approved the Bill when it was tabled for its second reading[2]. The Bill proposes the insertion of, inter alia, Section 101C – Presumption of Employment, which would possibly cover gig workers.
Gig work can be loosely understood as non-standard income-earning activities outside of standard, long-term employer-employee relationships and gig workers enjoy flexibility in schedules and do not possess direct oversight from an employer[3]. Since the COVID-19 pandemic, there has been an increase of remote-working arrangements through digital platforms which in turn encouraged the emergence of more gig workers. This is reflected in the statistics produced by the Department of Statistics of Malaysia, which show that as of 2020, 4 million workers (26%) are full-time gig workers[4]. Moreover, the pandemic resulted in numerous individuals being made redundant and this has led to many of them benefiting instead from being a gig worker.
According to Deputy Human Resource Minister Datuk Awang Hashim:
“Under the gig employment system and contract for service as agreed, gig economy workers are not subject to the National Wages Consultative Council Act 2011 (Act 732) and the Minimum Wages Order (PGM) 2020.”[5]
Current legal position of Gig Workers in Malaysia
There are 2 primary legislations in Malaysia which defines who is an employee: the Employment Act 1955 and the Industrial Relations Act 1967. Under these 2 legislations, it would appear that the definitions of “employees” and “workman” do not extend to gig workers because gig workers often do not have a contract of service.
Section 2 of the Employment Act 1955 (“EA”) defines a contract of service as:
“any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee and includes an apprenticeship contract.”
Section 2 of the Industrial Relations Act 1967 (“IRA”) defines a workman as:
"...any person, including an apprentice, employed by an employer under a contract of employment to work for hire or reward and for the purposes of any proceedings in relation to a trade dispute includes any such person who has been dismissed, discharged or retrenched in connection with or as a consequence of that dispute or whose dismissal, discharge or retrenchment has led to that dispute”[6].
Notwithstanding the labels applied to a contract, the Courts would rely on various tests in determining the true status of a worker, i.e. whether they are independent contractors engaged under a contract for services or whether they are actually employees hired on a contract of service/employment contract. The Federal Court case of Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia & Anor [1995] 1 MELR 1 affirmed the “control test”, the degree of control exercised by the employer over the employee’s work, to determine whether the person is an employee or an independent contractor. Other than the “control test”, there are several other factors that the Courts would scrutinize in assessing the employment status of an individual:
(i) Whether the worker’s interest in the relationship involved any prospect of profit or risk of loss;
(ii) Whether the worker was properly regarded as part of the employer’s organization;
(iii) Whether the worker was carrying on business of his own account or carrying on the business of the employer;
(iv) The provision of equipment;
(v) Tax and insurance;
(vi) The parties’ own view of their relationship; and
(vii) The structure of the trade and profession concerned and the arrangements within it.
Section 2 of the Self-Employment Social Security Act 2017 (“SESSA”), defines a “self-employed person” to mean any citizen or permanent resident of Malaysia who is carrying out a self-employment activity under any of the 20 sectors listed in the First Schedule of SESSA to gain earnings in the industry. Hence, this would effectively cover gig workers as well.
In light of the fact that a workman is defined under the IRA as someone who possesses a contract of employment, the absence of such a contract would mean that gig workers are not considered as an “employee” or “workman” for the purposes of the EA and IRA respectively, but instead, they are defined as a “self-employed person” under the SESSA.
Section 101C of the Bill
Section 101C proposes to create a presumption of employment in the event there is an absence of a written contract of services relating to any category of employee under the First Schedule of the Employment Act. However, the presumption only applies if any of the following 6 elements are satisfied:-
(i) Where manner of work is subject to the control or direction of another person;
(ii) Where hours of work are subject to the control or direction of another person;
(iii) Where tools, materials or equipment are provided for by another person to execute work;
(iv) Where the work constitutes an integral part of another person’s business;
(v) Where work is performed solely for the benefit of another person; or
(vi) Where payment is made in return for work done at regular intervals and such payment constitutes majority of income.
The elements in Section 101C seem to be an amalgamation of the control test and the integration test [please see: Vincent Manickam S/O David (Suing By Himself And As Administrator Of The Estate Of Catherine Jeya Sellamah, Deceased) & Ors v. Dr S Hari Rajah & Anor [2018] 2 MLJ 497].
Impact of S.101C of the Bill
The presumption of employment under Section 101C would bring a gig worker within the meaning of an “employee” under the EA and by extension, within the definition of a “workman” under the IRA. This would give a gig worker all the benefits currently enjoyed by an employee and a workman such as entitlement to annual leave[7], sick leave[8], the mandatory contributions towards the Employees Provident Fund[9] and the right to not be unfairly dismissed[10]. This means that gig workers (who meets the requirements of Section 101C) can now enjoy benefits and protections under the EA and the IRA that they previously lacked.
From a social security standpoint, if a gig worker manages to trigger the presumption of employment under Section 101C of the Bill, then they no longer have to make optional self-contributions under the SESSA, but rather, they would be mandatorily covered under the Employees’ Social Security Act 1969 (“SOCSO Act”), where the contributions are payable by both the employee and employer.
From a business and financial standpoint, the implementation of Section 101C may pose many challenges for companies. Certain companies may decide to terminate their operations in sectors where they are unable to absorb the gig workers (who may be presumed as employees under the new Section 101C) into their current financial scheme, due to the statutory obligations placed on an employer-employee relationship, although such a relationship was never intended[11]. In terms of liability, companies will also be vicariously liable for any tort/wrongdoing committed by the gig worker during his course of employment.
Comparison with other jurisdictions
In the recent case of Uber BV and Others v Aslam and Others [2021] UKSC 5 (“Uber case”), the UK Supreme Court handed down a landmark ruling that drivers for technology applications are recognized as workers. The case recognized a new category of employees known as “Dependant Contractors” amongst independent contractors. These Dependant Contractors are recognized as “workers” for limited employment benefits given under certain laws only, such as entitlement to minimum wage and paid holidays. It is however important to note that the case did not determine that the Uber drivers were “employees”.
In another case involving a food delivery service, Deliveroo, in The Independent Workers Union of Great Britain v The Central Arbitration Committee [2021] EWCA Civ 952 (24 June 2021) (Deliveroo case), the Union attempted to bring their riders within the meaning of “worker” within the Trade Union and Labour Relations (Consolidation) Act 1992 so that they can be accorded with collective bargaining powers. The Court of Appeal held that due to the nature of ‘personal’ work being undertaken and that riders could send substitutes to undertake work even after they had accepted a delivery through the Application, this meant that they could not fall within the meaning of a “worker”.
Aside from the UK, the protection of gig workers seem to be expanding in other jurisdictions as well. Laws in Australia and New Zealand have adopted broader statutory language and extended occupational safety and health coverage to all workers, including platform workers. [12]
What can employers do moving forward?
Where employers and gig workers do not intend to enter into an employment relationship and prefer to maintain flexibility in their engagement, employers would need to ensure that the presumption of employment provisions in Section 101C(a) to Section 101C(f) of the Bill are not triggered. For example, some of the steps that companies can take would include, inter alia, avoid setting a regular pattern of daily or weekly hours; allow gig workers to supply their own tools, supplies, and equipment; allow contractors to hire their own assistants; compensate gig workers/independent contractors on a per-job basis rather than by hour or by week; ensure the contract for service requires proof of work done (eg: invoice) before paying for any work that has been performed by the gig worker/independent contractor; avoid directly reimbursing gig workers/contractors for any expenses they might have; if possible, make payment for services rendered by gig workers/independent contractors to a company rather than to an individual; or allow workers to set up their own “gig worker social security fund” as a way to exercise more control over these payments[13].
In the event gig workers fall within Section 101C and are presumed to be employees, some of the steps that employers can take to mitigate the risk of litigation for unfair dismissal include, inter alia, providing gig workers with clear explanation as to the process behind any investigation into any misconduct and this includes the right to answer any charges of misconduct. Further, for gig workers who operate through platforms that monitor their quality of work by using digital algorithms[14], these employers would need to include some form of human element in determining whether these gig workers should be subject to any disciplinary action or performance review. This is because the algorithm in digital platforms would assess a gig worker’s performance mainly based on customer ratings and feedback, hence, steps ought to be put in place to identify the feedbacks which may be baseless, biased or discriminatory.
Conclusion
In our view, the Bill should recognize a new category of workers as “Dependant Contractors”, i.e. a category of workers who are accorded limited benefits and protection such as occupational safety and health coverage or social security benefits, but still being regarded as “self-employed” or ”independent contractors”, much like in the Uber case discussed above. To accord all gig workers the status as ’employee” based on the 6 elements for presumption of employment under the EA, will no doubt place an onerous burden on employers as it will open the floodgates for all gig workers to claim for benefits under the EA and the right to claim unfair dismissal under the IRA. This is an onerous burden as both parties may never have intended to enter into an employer-employee relationship. Companies may now also be vicariously liable for the wrongdoing or tort committed by gig workers who are presumed as employees. As such, the current system that applies to employees under an employment relationship is not a one-size-fit-all system and may be impossible to apply to gig workers. Hence, a more tailored version of employment needs to be implemented. Rather than laterally applying the same rights for all workers, it would be more beneficial to both employers and gig workers to have a system that caters to their specific requirements and flexible pattern of work.
Moreover, from a business perspective, extending employment benefits to gig workers would result in an unsustainable financial impact which would in turn cause a severe reduction in job opportunities for gig workers[15]. It is also unclear whether gig workers actually want to be recognised as employees given the flexibility they currently enjoy[16]. The recognition of a separate category to cover those in the gig economy would not only accord more appropriate protections to gig workers while taking into account the methodology behind their work but also a more stable and financially sound approach for employers.
Authors
 |
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Disclaimer: The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.
Zul Rafique & Partners
22 April 2022
[1]https://www.thestar.com.my/news/nation/2021/10/25/bill-to-amend-employment-act-tabled-in-parliament#:~:text=Torture%20Bill%20gets%20green%20light,Saravanan
[2]https://www.nst.com.my/news/government-public-policy/2022/03/781909/approved-amendments-employment-act-covering-paternity
[4]https://www.dosm.gov.my/v1/uploads/files/6_Newsletter/Newsletter%202020/DOSM_MBLS_1-2020_Series-8.pdf
[5]https://www.nst.com.my/news/nation/2021/11/743555/minimum-wage-subsidy-does-not-apply-gig-economy-workers
[6] Section 2 of the Industrial Relations Act 1967
[7] Section 60E of the Employment Act 1955
[8] Section 60F of the Employment Act 1955
[9] Section 41 of the Employees Provident Fund Act 1991
[10] Section 20 of the Industrial Relations Act 1967
[11] “Global Trends in Gig Worker Policies and Its Lessons” https://www.centre.my/post/global-trends-in-gig-worker-policies-and-its-lessons
[12] https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_771672.pdf
[13] https://news.bloombergtax.com/daily-tax-report-international/the-u-k-uber-decision-and-the-gig-economy-worker
[14] Simoes Reis, Maria Julia, Regulatory Challenges of Unfair Dismissal for Gig Economy Workers in the UK (September 7, 2019). Available at SSRN: https://ssrn.com/abstract=3518341 or http://dx.doi.org/10.2139/ssrn.3518341
[15] “Global Trends in Gig Worker Policies and Its Lessons” https://www.centre.my/post/global-trends-in-gig-worker-policies-and-its-lessons
[16] “Global Trends in Gig Worker Policies and Its Lessons” https://www.centre.my/post/global-trends-in-gig-worker-policies-and-its-lessons
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Let's Connect!
➭ LINKEDIN: Zul Rafique & Partners
➭ INSTAGRAM: @zrplaw