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IN THIS ARTICLE PARVATHY DEVI RAJA MOORTHY LOOKS AT THE IMPORTANCE OF ASCERTAINING THE IDENTITY OF THE EMPLOYER WHEN LODGING A COMPLAINT OF UNFAIR DISMISSAL ESPECIALLY IN SECONDMENT CASES.
Introduction
The correct identification of an employer is essential in the lodging of an unfair dismissal complaint pursuant tosection 20of theIndustrial Relations Act 1967where the relationship between the employee and the company is unclear. The court would have to determine whether the company before it is the employer prior to determining whether it is guilty of the complaint. In such a situation, the employee bears the burden of proving that the company is his employer. If he fails to do so, his claim against the company would fail.
A dispute as to who the employer is usually arises in cases of secondment where, unlike a transfer, the company posting the employee to another company still remains the employer. The Industrial Court in the case ofBank Simpanan Nasional Finance Bhd & Anor v Omar Hashim[1]held that secondment is a temporary transfer where the employee is subject to recall by his employer and is not a permanent employee of the other.
Based on the above definition, it would appear that the company to which the employee was seconded cannot be liable for a claim of unfair dismissal since it was not the employer and, therefore, did not have the power to fire and hire[2]. This suggestion is supported by the recent case ofGeoffrey Allan William(“Geoffrey”)vThe University of Nottingham in Malaysia Sdn Bhd[3](“UN”) where the Industrial Court had to determine whether or not UN was Geoffrey’s employer. In this instance, Geoffrey was seconded to UN vide a secondment contract executed with his employer in the United Kingdom (“UK”). After the secondment contract ended, Geoffrey reported back to his employer in UK. However, to complicate matters, UN later offered Geoffrey a two-year contract and paid his salary. This led to Geoffrey’s claim that UN was his employer.
In considering whether the new contract resulted in UN being the employer of Geoffrey, the Industrial Court found that “the new contract given by the Malaysian University still referred to the terms and conditions of the claimant’s substantive contract of employment of 2003 with the UK University”and in the circumstances held that “a new contract of employment could not be made with the Malaysian University”.
Accordingly, the Industrial Court cited fromThe Law of Industrial Disputes[4]
“…so long as the contract of service is not terminated, a new contract is not made and the employee continues to be in the employment of the original employer even if the employer orders the employee to do certain work for another person. The employee still continues to be in his employment.… The hirer may exercise control and direction in the doing of the thing for which he has hired the employee … But if the employee fails to carry out his direction, he cannot dismiss him and can only complain to the actual employer”
and held that UN had no power to terminate Geoffrey’s employment as it was a third party in the tripartite agreement.
The Industrial Court held that the fact of who pays the salary is not conclusive of who the real employer is[5]. This is consistent with the decision of the Industrial Court in the case ofActacorp Holding Bhd v Helen Tang Chiew Yien[6]. However, companies should be aware that the position is different when it comes to statutory contributions, as the Court of Appeal inChong Kim Sang v Metratrade Sdn Bhd[7]has stated that it would be one of the factors which indicate whether or not a person is an employee.
Conversely, there have been instances where the court, in perusing the facts of the case, had determined that the company to which an employee had been seconded to was the employer. For example, in the case ofKPMG Consulting (ASPAC) Sdn Bhd vChristopher M Meneze[8]the Industrial Court found the claimant tobe an employee because he was not treated in the same manner as other secondees, but instead was treated in the same manner as other employees.
Conclusion
In light of the above decisions, companies may minimise the risk of being found to be an employer of a secondee by keeping in mind that they do not have the power to hire or fire a secondee and, therefore, in the event there are issues with a secondee’s performance or conduct, companies should report the same to the secondee’s employer. Accordingly, if a company intends to make any statutory contributions on behalf of the employer, it is essential to ensure that there is clear documentation that states that the same is paid on behalf of the employer and a record of the reimbursement for such contributions is kept. Although this is not foolproof, it would show that the company was merely doing it on behalf of the employer. It is therefore advisable for the company to ensure that the secondee is aware of this arrangement and the fact it does not create an employee–employer relationship in writing. Lastly, the company should as far as possible ensure that the secondee, who is not an employee, is not treated like an employee.
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[2]Yen Chee Yung and Matrix Valley Holding Sdn Bhd[Award No 859 of 2009] — “This Court agrees that Matrix Valley Holding (Southern) Sdn. Bhd. being the employer of the Claimant should be the competent authority to terminate the Claimant’s service since it is still in existence”.
[3](Award No: 491 Of 2014) Decision handed down on 8 April 2014.
[4]Vol 1, 3rd Edition by O P Malhotra at p 246.
[5]“Under the new contract, the Malaysian University had offered to pay him in ringgit. But this was merely an agreement the Malaysian University had with the UK University, it did not have the effect of transferring the service of the claimant to the Malaysian University.”
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