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Malaysia | Gig workers — where do they stand?

Introduction

Based on a statistic published by World Bank¹, in 2020 alone, about 26% of the Malaysian workforce were “gig workers” — a term that is familiar to many by now. Working relationships and patterns have changed drastically over the recent years. With the demand for more flexibilities in a working relationship and low entry level, it is not surprising that the gig economy has been a constant growing trend, not only in Malaysia but also globally.

One of the biggest debates that the gig economy has sparked is whether gig workers should be treated as employees and be accorded legal protections such as minimum wages, social security and protection against unfair dismissal — rights that are generally enjoyed only by individuals engaged as “employees” or “workmen”. The status of gig workers was highlighted during the COVID-19 pandemic which caused many uncertainties in the demand for manpower across various sectors.

Current position in Malaysia

Employee, workman, independent contractor

Under the law, the definitions of “employee” and “workman” refer to personnel engaged via contracts of [emphasis ours] service. For those who are engaged under contracts for [emphasis ours] services, they are considered as “independent contractors”.

The classification status of a person is important from an employment law perspective as it will determine the rights and protections that such person is entitled to under the law. These include:

protection against unfair dismissal under the Industrial Relations Act 1967;
entitlement to minimum terms and conditions of employment under the Employment Act 1955; and
entitlement to minimum wages, provident fund and social security protections, minimum retirement age under various legislation.

At the time of writing, the law in Malaysia has yet to recognise gig workers as employees/workmen as was decided in the case of Loh Guet Ching v Myteksi Sdn Bhd (berniaga atas nama Grab)².

In that case, the High Court held that e-hailing drivers are not workmen under the definition of the Industrial Relations Act 1967, and that the contract between Grab and its drivers is essentially a commercial agreement. Hence, as it stands, e-hailing drivers are considered “independent contractors” and do not have the right to be heard before the Industrial Court for the alleged unfair dismissal by Grab.

Currently, gig workers only receive social protection under the Self-Employment Social Security Scheme under the Social Security Organisation (“SOCSO”).

Proposal to presume gig workers as employees

In December 2021, the Deputy Human Resources Minister of Malaysia indicated in the Dewan Rakyat that pursuant to the proposed Employment (Amendment) Bill 2021, gig workers would in effect be included into the definition of “employees” under the Employment Act 1955.

It is proposed that new provisions will be added to the Employment Act 1955 which will presume that a person is an employer or employee based on the following criteria:

Degree of control as to the manner the work is conducted;
Degree of control as to the hours of work;
Whether tools, materials or equipment are provided;
Whether the work constitutes an integral part of the business;
Where payment is made in return for work done whether such payment constitutes most of the the personnel’s income; and
Where the work is performed solely for the company’s benefit.

These criteria are largely consistent with the common law test enunciated in the leading case of Dr A Dutt v Assunta Hospital³. The main impact of the proposed provision will be on the shift in burden of proof from the individual to prove that he/she is an employee, to the engaging entity to disprove that such individual is not an employee.

If the Deputy Minister’s proposal to include gig workers under the purview of the Employment Act 1955 is eventually passed, Malaysia would be one of the first countries in the region to expressly recognise gig workers as employees.

Whether this a welcomed move remains to be seen — to recognise gig workers as employees under the law would mean that the gig workers are bound by the usual obligations of employees, that is, to subject themselves under the full control of their employer, to provide their services exclusively or faithfully for the employer, etc. After all, the ethos of the gig economy is to move away from the strict control ala master-servant of an employment relationship.

It is therefore important for stakeholders to bear in mind the purpose in including gig workers under the category of “employees”. If the main concern is on the legal rights of gig workers, just including them as “employees” under the main legislation governing private sectors employment may not be ideal.

Other jurisdictions

The Supreme Court of the United Kingdom recently ruled in the case of Aslam v Uber⁴ that gig workers may be classified as “workers” instead of “independent contractors” under the law. It must be cautioned that this decision should not be adapted directly and cited as the blanket ruling that gig workers’ employment status is being recognised by the Court. This is because in the UK, there is an intermediary category of workmen between “employees” and “contractors”, that is, the “workers”. Workers in the UK are entitled to lesser rights and protections as compared to “employees”. In Malaysia, there is no class comparable to that of “workers” in the UK.

In Australia, the States of New South Wales and Victoria have recently introduced a new minimum standard which will be applicable to all workers in the gig economy to offer certainty and protections to them.

The standards aim to set a unified approach to force platforms to outline “key information” about their potential pay packets, and what they can expect to face on the job, along with additional resources about why workers might be booted from a platform for poor performance.

Takeaways

Gig and non-employee workers often have little bargaining power, and sometimes few options but to work in a precarious and insecure work environment.

Whilst the idea of allowing gig workers to enjoy the same rights as “employees” may sound attractive, there are differences in the way gig workers work from 9to-5 employees. Flexibility in working hours and locations, lower entry level, option for side income rather than primary way of earning a living, are the reasons why people moved away from the traditional sense of employment in the first place.

Given its characteristics, gig economy may be better considered a sui generis⁵class with different legal rights and obligations from 9-to-5 employees as a new dimension to the labour force.

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