1 Factory, 1 Employer, please

By Aliran, on 30 September 2011

Charles Hector alerts us to attempts to amend the Employment Act, which could fundamentally dilute or obscure the employer-worker relationship through the use of labour outsourcing contractors.

The Barisan Nasional government once again shows itself as being anti-workers and anti-unions, by trying to change the very nature of employment relationships in Malaysia. 

They are trying to ‘save’ companies and corporations from the ‘burdens’ of being employers. They are trying to free them from their obligations as employers to provide for the welfare and rights of the workers who work for them – the same workers who produce the products or carrying out the services that earn these employers their profits.

If you do not have employees, then you do not have to worry about any unions, collective bargaining agreements, employment agreements, getting rid of workers, rest day, annual leave, sick/hospitalisation leave, maternity leave, retirement age, social security schemes (Socso/Workmen’s Compensation), contributions to employees provident funds (EPF) or other retirement schemes, Labour Department complaints and cases by your worker-employees, Industrial Relations Departments or courts, levy payments, lay-offs and retrenchments. If you want to get rid of a worker, just pick up the phone and call their ‘employer’ and ask them to take the worker away – no worry about due process, domestic inquiry, termination notices, and wrongful dismissal allegations.

The situation in Malaysia today is that already many workers in many factories and workplaces are already not being considered as employees of the factories where they work. Instead, they are considered to be ‘outsourced workers’ – employees of the agents or companies that supply these workers to the factory (the principal).

One interesting phenomenon is that factories are not just using one supplier of workers, but many different suppliers each supplying a certain number of workers. Hence, we have workers in the factory, some still direct employees of the factory, while the others are employees of many different employers. If this trend continues, then soon the majority, if not all, workers in a factory may no longer be employees of the factory but employees of external third-party employers, whose business is just supplying workers.

Even though, in my opinion, this is illegal and contrary to the laws in Malaysia, especially the Employment Act 1955, the Malaysian government seems to have chosen to ignore this breach in law – and is once again trying to legalise this by amending the Act. The latest attempt is through the Employment (Amendment) Bill 2011 that was tabled in Parliament on 21 June 2011.

1Factory, 1Employer, 1 Union

It becomes very important for us to remind ourselves what an employment relationship is, and why it must be a direct relationship between the owner/operator of a factory (the principal) and the workers that work in the factory producing the products that earn profits for that factory. There should never be some third party inserted into this current relationship or partnership.

On the one hand, there is the person/entity that has the capital and owns the means of production (the factory, plantation, construction company and workplace). To carry out production or services, this entity needs labour, and this is provided for by human workers.

A relationship or partnership is thus created between the entity that owns the means of production and the workers who can provide the required labour. This relationship justly has been an employer (the principal)–worker relationship, which naturally always is an employer-employee relationship.

The employer (the principal) thus enters into a contract of service with its workers. For the work done, workers are paid wages and provided other benefits and rights including rest days, annual leave, public holidays, paid medical/hospitali-sation leave, maternity benefits, social security, retirement provisions, and bonuses.

In the determination of this contractual relationship between the employer and workers, negotiations and interaction between the worker/s and the employer on all aspects related to the work, including wages, better and safer working conditions and other benefits will take place.

To better negotiate with the employer in a more just manner, workers can and will likely do so collectively as a trade union or as a workers association. The strength or power that a worker has in this negotiation process is of course the capacity for collective worker actions, which could include joint demands, protests, pickets, strikes, go-slow actions and other forms of collective action. This is the only bargaining strength that a worker has, and the law recognises these rights including the right to strike.

To protect this right, there are laws that guarantee freedom of association and the right to form trade unions and take workers’ action. Employers by law are prohibited from impeding this right to associate and form trade unions. Employers are clearly prohibited from getting rid of workers who try to form unions.

Realising also that workers generally are in a less favourable bargaining position compared to employers, governments have stepped in with laws, like our Employment Act 1955, that stipulates the minimum rights that workers are entitled to, and employers are obliged to provide. This law also clearly provides that “any term or condition of a contract of service… which is less favourable to an employee than a term or condition of service prescribed by this Act…shall be void and of no effect to that extent and the more favourable provisions of this Act ….shall be substituted therefore….”

If there is a breach by the employer or the worker-employee (or their unions), the law has set up mechanisms or avenues for justice, including the Labour Department, Industrial Relations Department, Labour Courts, Industrial Courts and other civil courts.

An employment relationship beyond contractual and legal obligations

This employment relationship also goes beyond contractual and legal obligations. Better employers will reward workers with bonuses, employee outings and holidays when the business is doing well. Worker-employees also do not just do the work but also develop a sense of responsibility, belonging, care and pride in being part of the company. A relationship that goes beyond merely a ‘work-for-pay’ relationship also encourages better productivity and an improved relationship between the factory and workers, akin to a family. It is also not uncommon for workers, when times are bad, to agree to take part-pay first until the situation improves or even work overtime and on rest days when there is a need. Sports and other social activities develop this kind of environment. Workers develop a sense loyalty and will generally stay on working for the factory until retirement. Good employers reward this loyalty with wage increments and better benefits.

This was how a employment relationship was and should always remain – and this is also reflected in the employment laws of Malaysia that provide for increased entitlement for longer service, like annual leave and medical leave. Length of service is also a consideration when it comes to calculating termination and lay-off benefits.

This employment relationship has a humane caring element about it, and this is good. It was never driven just by profits and losses, and it should never be so since we are dealing with human beings.

Government out to destroy just employment relationships

Sadly, our current Barisan Nasional government seems to be determined to destroy this just employment relationship, by the introduction of third parties into what should be a two party relationship. The government is trying to make new employers out of suppliers of workers to factories, by legalising ‘contractors for labour’. This was something that , I believe, was intentionally left out from the Employment Act 1955 by earlier law-makers.

In July 2010, the government tried to amend our Employment Act (vide Bill DR 25/2010). They tried to clearly and transparently extend the definition of “employer” to include also “any person who supplies or undertakes to supply any employee engaged by him to any employer, principal, contractor or sub-contractor”. This Bill, after much protest was withdrawn in October 2010.

Now in June 2011, they have introduced again the Employment (Amendment) Bill 2011 (DR152011E), but this time they hide the intention to make the supplier of workers employers. Again, they try to introduce the “contractor for labour”, and that same new section 33A, which states “a contractor for labour who intends to supply or undertakes to supply any employee”, which from the wording used can imply that after the worker is supplied to the factory by the ‘contractor of labour’, that worker may still remain the employee of the supplier – and not the employee of the factory. They are still trying to make ‘suppliers of workers’ into employers, even after the worker has been accepted by the factory and started working there.

This is wrong, for once a factory accepts the worker, it should be the factory that becomes the employer, and the ‘supplier’ should cease to be in the picture.

One of the main objections in 2010 was about the introduction of this ‘contractor for labour’, but somehow this BN government does not listen to workers, their unions and others.

Because they have the majority of Members of Parliament (MPs), and given the fact that BN MPs do not have the guts or the freedom to vote against Bills put forward by the government, these Bills are pushed through and made law. As an example, the last so-called ‘minimum wage’ Bill, was tabled on 21 June, debated for about four hours and passed in less than 10 days. There was no time for public consultation, let alone time for MPs to even study the Bill and get feedback from their constituents.

Why the objection about “contractors for labour”?

Well, the current Employment Act recognises the ‘sub-contractor for labour’, who can only supply workers to contractors and sub-contractors but not the principal (being the factories, plantations and workplaces). This was intentional to ensure that as far as principals are concerned, there will only be one kind of employment relationship, that is the one between the principal and the workers that work for them – an employer-employee relationship.

Contractors and sub-contractors, are those who are given certain, usually short term, contracts at the premises/workplaces of the principal – generally nothing to do with the usual work/business of the principal. This work would be maybe some electrical/piping work or repair, painting, some construction work, and the duration that they generally need workers is usually significantly shorter. Of late, some kinds of work, again not related to actual production, like security and cleaning services have also been contracted out – or rather ‘outsourced’ to some security companies or cleaning/maintenance companies. There is a doubt whether these security and cleaning companies would come under the original meaning intended for the words contractor or sub-contractor that is found in the Employment Act.

Malaysian law already allows for the private employment agency that “acts as intermediary for the purpose of procuring employment for a worker or supplying a worker for an employer”, but this is very different from what the ‘contractor for labour’ is expected to do. They would not be supplying workers for an employer, rather supplying their own employees to work for the employer (principal), and this is very different. There is really no need for ‘contractors for labour’ – for the problem of finding workers can already be handled by these private employment agencies.

Now, employers (principals) can always use agents to assist them in certain aspects of recruiting, housing and management of workers, but these will always be the employer’s agents, and the ultimate responsibility of being the employer rests with the principal. The government did state once that they never wanted ‘outsourcing agents’ to be the employers – but alas, lack of enforcement of the law has allowed many bad employers (principals) to try to evade/disguise employment relationships with workers in their own factory, claiming that workers supplied by these ‘outsourcing agents’ (contractors for labour) are not their employees.

How will this affect unions and bargaining powers?

Well, if there is a significant number of workers working in a factory who are not employees of the factory, that will certainly diminish the bargaining power of the unions. Why? Because if there is to be a union action like a protest, go-slow or even strike, it will not affect the factory much as operations can still proceed with the other workers who are not employees of the factory.

The factory will be practising a ‘divide-and-rule’ policy, and this will seriously jeopardise workers’ struggles for better working conditions, rights and benefits in the factory.

In fact, even the desire to join or form such a weakened union will decrease. As it is, when employers were allowed to avoid security of tenure for employees by resorting to the use of workers under fixed duration contracts and more recently that new class of ‘part-time employees’, interest in unions diminished significantly. The worry of fixed-term employees has always been that their contracts would just not be renewed if they joined unions or started claiming rights.

MTUC and the trade union movement

As it is, the number of trade unions and workers who are members of unions is already very low, about 8 per cent of the workforce. Apparently, only 3.2 per cent of private sector workers are unionised. The reason for this has not only been the difficulties in organising and forming unions that have been imposed by law, but also the new employment trends that our pro-employer government have been adopting. The entry of migrant workers, fixed-term contract employees and part-time employees has already affected trade unions. Soon, if we do not manage to stop it, we will see the emergence of a situation where in a factory, there will be a large number of workers who are just not employees of the factory, but employees of many different ‘contractors for labour’. That may be the last nail in the coffin that will put many unions in Malaysia to rest.

The problem of these ‘contractors for labour’, if they are to be legalised, is that they supply batches of workers to different factories and workplaces. As such, their own ‘employees’ not only would not be able to physically meet each other, organise and form unions – but they may also not be able to be part of any current national, state or regional trade unions that are all sector-based. The ‘contractor for labour’ may be supplying 500 workers to the plantation sector, 200 to the electronic sector, 200 to the textile sector – so, which national, state or regional unions will the employees of these proposed ‘contractor for labour’ come under – the National Union of Plantation Workers? The Regional Union of Electronic Workers? The Textile Workers Union? How then do they enter into collective agreements that deal with work conditions – for their working conditions will certainly differ depending on where they actually work. (Our proposed ‘contractor for labour’ really will not have any control about working conditions in the factory, would they?)

Will the rights and welfare of workers and their families be our priority?

Well, the problem in Malaysia is that workers’ rights and concerns certainly have not attracted much media attention, and one wonders whether the government had a hand in this. We do not see the Prime Minister or ministers visiting workers at their workplaces, listening to their grievances and doing something about them. Likewise, alternative media also do not give much coverage to workers’ issues. Sadly, there is also no regular workers’ magazine or periodical – and for this, maybe the bigger national unions, including the MTUC, have to bear part of the blame. Building up workers’ awareness and union-building activities is also much lacking.

What is sad is that at one time, the workers’ movement was a very influential player in society, and governments and political parties struggled to get their support, and to do that workers’ rights and welfare were a priority on the political agenda. Today, let us not forget that there are still more than 10 million workers in Malaysia, and they constitute a large percentage of the electorate who vote in parliamentarians and the government; so maybe there must be a renewed interest in matters affecting workers and their unions.

There is an urgent need for not just politicians, but all justice-loving Malaysians to come together in defence of workers and their unions. Maybe the first thing that we need to do is to lobby and ensure that the new Employment (Amendment) Bill 2011 does not get passed. We have to lobby for the maintaining of a just employment relationship, so that in a factory, there will only be one employer and all workers working there are employees of that one employer. We have to lobby against the turning of ‘suppliers of workers’ or ‘contractors for labour’ or ‘outsourcing companies’ into employers.

Some may not be bothered because they believe that all this will only affect migrant workers – but it is already affecting local Malaysian workers, who are already today being supplied by ‘outsourcing agents’ to factories, who do not regard them as employees of the factory. Some believe that it will only affect the private sector, and again they would be wrong: if the act is amended, then sooner or later, those working in government establishments may also end up not being employees of the government – but some third party ‘contractor for labour’. Many civil servants were indifferent when they started ‘fixed-term contracts’ in the private sector, but alas today, governments also are using workers employed on fixed-term contracts.

This is an issue that concerns all workers, now and in the future, and all Malaysians need to protest at our current Barisan National government’s attempts to destroy just employment relationships – which will be highly detrimental to all workers and their families. Given the state of affairs in our Malaysian Parliament, maybe we may need to come out again in large numbers in peaceful assemblies, as was done recently with regard to free and fair elections, to effectively communicate the position of Malaysians on this issue that will affect workers and their unions.

Aliran member Charles Hector is a lawyer with an interest in human rights and workers’ issues.