Surviving Covid-19: Redefining the employment landscape
By Suganthi Singam
Posted: 7th April 2020 14:49
The global pandemic caused by Covid-19 has presented challenges which many employers were unprepared for. As a result, it has made employers re-evaluate the way in which their businesses are run and the dependence on not only resources but the environment in which services are delivered.
In Malaysia, the government imposed a Movement Control Order with effect from 18 March 2020, which was initially meant to be for a fortnight but has subsequently been extended to 14 April (as of the time of writing). During the period of the Movement Control Order, only essential businesses listed in the Prevention and Control of Infectious Diseases (Measures Within the Local Areas) Regulations 2020 or manufacturers who obtained exemptions from the Ministry of International Trade and Industry (MITI) are allowed to operate. The Movement Control Order however did not cater to the needs of all businesses or more specifically to small and medium enterprises (SMEs). Whilst larger companies would have the resources to withstand the impact of such measures imposed by the government, for SMEs, resources would be tight and correspondingly the impact could detriment the survival of the business. This not only raises the question of what measures could be implemented by employers but also what could employees expect from this pandemic when their livelihood is at stake?
Employers are expected to retain its workforce although the employees are prohibited from going into the office. Not all companies were prepared for providing their employees with the ability to work remotely and hence for many they were caught between a rock and a hard place. This in turn raises fundamental issues of employers and employees rights in such a situation. Whilst employers have the obligation to provide work, equally entrenched is the right to work of employees. The difficulty which arises is when employers cannot provide work on account of a government initiated restriction and yet the employer is obligated to pay the employees in full during the period of such a closure.
Although it cannot amount to a breach of contract on the part of the employer for the inability to provide work given that this was on account of extraneous factors, the failure to pay salaries during this period of the government imposed Movement Control Order would certainly amount to a breach of its contractual obligations save where there are express contractual provisions enabling it to do so. The reality of the situation though is that employment contracts would not have catered for such a situation as the situation brought about by Covid-19 was unprecedented and certainly not one which was foreseeable. Moving forward employers will incorporate such clauses in employment contracts as lessons learnt from past experiences and move away from the traditional employment contracts that parties have become accustomed to.
What employees need to recognise equally is that whilst there is the contractual obligation to pay salaries even during the period of the Movement Control Order, if an employer is prohibited from running his operations, without a source of revenue, how is the employer expected to pay salaries? The larger organisations will be able to withstand such measures however not all are on equal footing. Over a prolonged period of time, even larger organisations will feel the impact of such restrictions.
Employees must equally recognise that they must be realistic in their expectations. Whilst one can hold strictly to contractual rights under the employment contract, if an employer has no revenue to pay towards salaries, how is the employer expected to fulfil its contractual obligations towards the payments of salaries? In desperate times like these, employees must have a change of mind set; the need to be practical and flexible towards the situation faced by the employers. Flexibility is paramount from both parties as stakeholders in the employment relationship. This in turn means a corresponding reduction towards the salaries that are due to be paid by the employers where consent should be readily given by employees. This should not be used as an opportunity for drastic salary reductions but one where the employer must be able to justify and rationalise the percentage reduction that is sought for from employees.
Consent is always the most feasible approach to adopt, however the difficulty with this method lies in the risk where not all provide consent. It would not be practical, nor prudent, to have a mixed implementation. In these circumstances, would it not be better to have a unilateral imposition with the same rationale and justification advanced towards the employees? In effecting unilateral reductions, whilst not palatable, if it corresponds to the survival of the business then it’s a classic instance of the ends justify the means.
Alternative methods are available towards utilising annual leave; unpaid leave all of which require the underlying consent of employees who are equally stakeholders in the business. Until and unless there is a paradigm shift from the perspective of employees, employers may be hard pressed to implement unilateral changes for fear of the absence of unanimous consent to any one of the proposed mechanisms for balancing the survival of the business with that of the employees. The unilateral mechanism imposed will bring about the risks of potential litigation however it is a risk that employers will have to face given the circumstances that they are placed in. Perhaps it is also timely for the courts to revaluate tried and tested norms against the challenges that have been thrown to employers and employees.
Though more extreme, a furlough is an alternative that can be implemented as consent would not be required. In Malaysia, however, this requires advance notice to the Labour Department at least 30 days prior to effecting the exercise. Although this exercise removes the need for consent and accords the employer flexibility to revamp its organisation structure to deal with the viability of the long term survival of the business, this leaves employees at the shorter end of the stick. Given a furlough, a salary reduction may prove to be more manageable from the employee’s perspective. The above are serious considerations to be weighed not only by employers but employees as well in determining how to move forward together.
Employers as well as employees will weather through this pandemic or a possible economic recession with the cooperation and mutual trust of both parties. What continues to be vital is openness, trust and commitment on the part of both affected parties, employers and employees to find a balance in interests. The months to come and thereafter will be interesting times in the employment landscape as the time is ripe for solutions out of the box.
Ms. Suganthi specialises in the field of employment and immigration law and attends to matters at all tiers in the Labour Court, Industrial Court, High Court, Court of Appeal and Federal Court. Her area of work ranges from inbound applications for employment and professional visit permits, mergers and acquisitions, retrenchment, sexual harassment at the workplace, domestic inquiry proceedings and other subject matters related to employment and immigration practice. Apart from advisory services, she has also presented various papers on current issues and developments in the field of employment law at several seminars as well as conducted in house training sessions for the firm’s corporate clients.
Suganthi Singam can be contacted on +603 2027 2829 or by email at email@example.com