Malaysia: FAQs For Businesses During COVID-19 Movement Control Order (MCO)

1. What exactly is the Movement Control Order (MCO)?

Due to the sudden spike in Covid-19 cases in Malaysia, the Government on 16 March 2020 announced the MCO to take effect from 18 to 31 March 2020. The MCO is meant to drastically curb or slow down the spread of the virus across Malaysia. In general, the MCO imposes:

• Restriction on unnecessary movement and public gatherings including religious, sporting, social and cultural activities;
• Restriction on Malaysians from travelling abroad;
• Restriction on foreign nationals from coming into Malaysia;
• Closure of all government and private pre-schools, schools, boarding schools, international schools and pre-universities;
• Closure of all public and private higher education institutions; and
• Closure of all government and private premises except for "essential services".

2. Does the MCO mean that I have to temporarily shut down my business?

No, the MCO only requires "non-essential" businesses to close their business or office premises. This means that these businesses should not service their customers/clients at the premises and should not permit their employees to work in the premises. However, this does not mean that the business has to shut down or stop running, especially if the business can continue running or be operated remotely on a work from home basis.

3. Which private businesses can remain open and operational during the MCO?

"Essential" businesses in the private sector can continue to operate from their premises during the MCO. These include financial services, courier, petrol stations, hospitals, clinics, pharmacies, registered traditional medicine shops, telecommunications, restaurants and food hawkers (take away and home delivery only), supermarkets, markets, convenience stores, e-commerce and hotel services

However, the Government has advised that the general administration of these businesses should be at a minimum level only or on a work from home basis.

4. What about "non-essential" businesses in the private sector?

As at 18 March 2020, the National Security Council has allowed the following critical sectors and industries to continue operations from their premises (subject to conditions by the Ministry of International Trade and Industry):

(i) Sectors that manufacture important goods, including food and beverage, agriculture and fisheries, household cleaning products, personal protective equipment, pharmaceuticals, packaging and printing and medical and surgical equipment.

(ii) Industries that manufacture products that are part of the chain of the supply of important goods, including oil and gas production, petrochemical production, chemical products – fertilizer and poison and electrical and electronic including semiconductors.

The National Security Council has also allowed several "non-essential" services to remain open and operational, including vehicle repairs (minimum level only), vehicle towing and construction (subject to assessment by the Ministry of Works and Department of Safety & Health).

Other industries and "non-essential" services may be opened only with prior written approval of the Director General.

5. Can "non-essential" private businesses continue operations on a work from home basis?

Yes, the MCO only requires that businesses close their premises. Accordingly, businesses can continue operating remotely on a work from home basis.

6. Can businesses require employees to work from home?

Yes, businesses can require their employees to work from home if the employees' job scope and the nature of the business permits a work from home arrangement.

7. What if an employee voluntarily agrees to continue working at the business premises?

Under the MCO, it is the duty of the business owner or employer to ensure that the "non-essential" business premises are closed. If the owner or employer allows an employee to continue working at the office premises, the premises cannot be said to be closed and the employer will be in breach of the MCO.

If the volunteering employee continues to work at the business premises without the knowledge of the employer, the employee would effectively be committing trespass and insubordination against the employer, both of which are serious misconduct.

8. What if my business is an 'essential service' under the MCO but my employee refuses to come to work?

If a business is permitted to continue operations at its business premises during the MCO, the employees of that business are required to continue to come to work. An employee's failure to turn up at work would amount to absenteeism.

In general, absenteeism without leave is a serious misconduct. Employees do not have the right to go on leave without the approval of their employers. Absenteeism without leave warrants disciplinary action and justifies the immediate dismissal of the employee. (Click here to read more on handling absenteeism)

9. Do "non-essential" businesses have to pay their employees' salary for the period of the MCO even though the business premises are closed?

Generally, yes. The argument for continued payment of salaries is stronger if the nature of the business allows the employees to be productive from home; and even stronger if the employer requires employees to work from home.

Section 24 of the Employment Act 1955 does not allow employers to deduct their employees' salary on the ground of shut down due to the MCO. For employees not subject to the Employment Act 1955, any right to impose a pay cut will depend on the employment contracts between the employers and their employees.

The Courts have held that any unilateral deduction in salary of the employee when there is no contractual right for the employer to do so is almost always considered a fundamental breach of the contract of employment and amounts to a repudiation of the contract by the employer.

Therefore, employers must first consult and obtain the consent of its employees before applying any pay cut of salary deductions.

10. My business will not survive the MCO period if I have to pay my employees' salary in full. What if my employees refuse to accept a pay cut?

In the eventuality of extreme financial difficulty, an employer can impose a pay cut as a last resort after considering all other alternatives.

In the case of Lim Ban Leong v Gold Bridge Engineering & Construction Bhd, the Industrial Court held as follows:

"Traditionally, any salary cut to an employee's pay can be used as a ground by the employee to plead constructive dismissal. However, if the company is facing losses and is trying to fight off closure of its business or retrenchment of its employees, the company can appeal to the employees to ride through the rough times with it and take a salary cut which can then be reinstated and increased when the business picks up again . The Court notes that there should have been much more engagement by the Respondent with its employees in order to maintain industrial harmony."

Employers must bear in mind that imposing a pay cut on employees is a drastic measure and will attract bad public relations attention to the goodwill of the company name.

11. Can employers force their employees to go on unpaid leave?

Generally, no. In essence, imposing "unpaid leave" has the same effect as imposing a pay cut. Also, the Employment Act 1955 only has provisions regulating paid annual leave and sick leave, and does not sanction forced unpaid leave.

The Government announced on 16 March 2020 that employees with salaries under RM4,000 who are forced to take unpaid leave due to the Covid-19 pandemic will be provided financial assistance of RM600 per month for a maximum of six months. Employees who are given notice to take unpaid leave beginning 1.3.2020 will be eligible for financial assistance. However, specific details on how this will be implemented has yet to be announced.

It would be imprudent to assume that such financial assistance to affected employees amounts to permission by the Government to impose forced unpaid leave on employees.

12. Can employers force their employees to take paid annual leave?

Generally, no. Although paid annual leave is not an absolute right of the employee and is subject to the approval of the employer, the employer cannot unilaterally deduct the employee's annual leave entitlement to cover the MCO period. The employer must consult and obtain the consent of its employees.

13. What liabilities may employers be exposed to if they unilaterally impose a pay cut or unpaid leave on their employees?

Employers of employees subject to the Employment Act 1955 may be liable to an offence of contravening the Employment Act 1955 which is punishable with a fine not exceeding RM10,000.

The affected employee may lodge a complaint to the nearest Department of Labour where the Director-General may inquire into and decide on the dispute between the employer and the employee in respect of the unpaid wages due to the employee. However, this remedy is only open to complaints made by employees who earn more than RM2,000 but not exceeding RM5,000. A person who fails to comply with the Director General's decision commits an offence and may be liable to a fine not exceeding RM10,000.

For an affected employee earning more than RM5,000, he or she may commence a civil suit against the employer for breach of the employment contract and to claim for the unpaid salary sum.

All employees (whether or not subject to the Employment Act 1955) have the right to file a representation under Section 20 of the Industrial Relations Act 1967 if they consider that the pay cut or forced unpaid leave is a serious breach of their employment contracts and amounts to constructive dismissal by the employer. (Click here to read more on constructive dismissal)

14. What liabilities may employers face if they breach the MCO?

It is an offence under the Prevention and Control of Infectious Diseases Act ("Act") 1988 to violate the terms of the MCO. Section 11(4) of the Act provides that any person who does not comply with the directions issued particularly with regard to the isolation of a person at any of the infected areas shall be liable to penalties under the Act. Section 24 of the same Act then sets out the penalties as follows:-

• In respect of a first offence, imprisonment for a term not exceeding two years or fine or both;
• In respect of a second or subsequent offence, imprisonment not exceeding 5 years or fine or both;
• In respect of a continuing offence, a further fine not exceeding RM200 for every day during which such offence continues.

On 16 March 2020, the Prevention and Control of Infectious Diseases (Declaration of Infected Local Areas) Order 2020 was gazetted and declared all States and Federal Territories in Malaysia as infected areas.

"Non-essential" businesses that open their premises during the MCO in contravention of the Prevention and Control of Infectious Diseases (Measures within the Infected Local Areas) Regulations 2020 may be liable to a fine not exceeding RM1,000 or to imprisonment for a term not exceeding six months or both.

Originally published 19 March, 2020

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.