INDUSTRIAL COURT OF MALAYSIA CASE NO. : 1/1-8/18 BETWEEN NATIONAL UNION OF HOTEL, BAR & RESTAURANT WORKERS, PENINSULAR MALAYSIA AND

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1 INDUSTRIAL COURT OF MALAYSIA CASE NO. : 1/1-8/18 BETWEEN NATIONAL UNION OF HOTEL, BAR & RESTAURANT WORKERS, PENINSULAR MALAYSIA AND ALOR SETAR HOLIDAY VILLA SDN. BHD. AWARD NO. : 1375 OF 2018 CORAM: YA TUAN EDDIE YEO SOON CHYE - PRESIDENT EN. KAMARUL BAHARIN B. MANSOR - EMPLOYEES' PANEL EN. SIMUNIR BIN ABBAS - EMPLOYERS' PANEL VENUE : Industrial Court Malaysia, Kuala Lumpur FILING OF FORM S : DATE OF MENTION : DATES OF HEARING : ; UNION'S SUBMISSIONS : RESPONDENT'S SUBMISSIONS : REPRESENTATION : Lim Chooi Phoe (Rusli Affandi with him); Representative for the Complainant/Union. A. Ramadass (T. Kavita with him) of Messrs Ramadass & Associates; Counsel for the Respondent/Hotel. 1

2 A W A R D [1] This is a complaint of non-compliance filed in Form S pursuant to Rule 56 (1) Industrial Relations Act 1967 and Rule 24A (1) of the Industrial Court Rules 1967 in respect of the Fourth Collective Agreement between Alor Setar Holiday Villa Sdn. Bhd. and National Union of Hotel, Bar & Restaurant Workers, Peninsular Malaysia for the period from 1 October 2010 to 30 September 2013 (Cognisance No, 237/2011) registered on 20 September [2] When the case was called for hearing on 5 April 2018 and 7 May 2018 representative from the Union and counsel from Messrs Ramadass & Associates for the Hotel made their oral submissions on the respective dates before this Court based on their written submissions, Bundle of Authorities and pleadings filed. [3] A complaint was hereby lodged by the National Union of Hotel, Bar & Restaurant Workers, Peninsular Malaysia that the provisions of the above-mentioned Collective Agreement have not been complied with: Article 28: Retrenchment/Redundancy Benefits. Article 12: Service Charge. [4] Article 28 (UB1 p. 31) reads as follows: ARTICLE 28: RETRENCHMENT / REDUNDANCY BENEFITS (a) The provisions of this Article shall apply only to those employees who are declared redundant by the Hotel and shall not apply to dismissals for disciplinary reasons, resignations, retirements or termination of employment for any other case or reason. 2

3 (b) Employees whose services are terminated by reasons of retrenchment or redundancy shall be entitled to retrenchment or redundancy benefits in accordance with the Employment Act (Termination & Lay off Benefits) Regulation (c) The Hotel shall give written notice of retrenchment to employees in accordance with section 12 Employment Act 1955 or pay wages in lieu of notice. (d) The principle of 'Last In, First Out' shall be followed within each category of employees subject to the need for the efficient operation of the Hotel. (e) In the event of a vacancy arising within 12 months of retrenchment, the Hotel shall give preference to applications from ex-employees declared redundant previously. [5] Article 12 (UB1 p. 126) reads as follows: ARTICLE 12: SERVICE CHARGE (a) The Hotel shall retain 10% out of the 100% service charge imposed on all bills monthly. The remaining 90% service charge shall be distributed to all employees covered within the scope of this Agreement as listed in Appendix C. (b) The Hotel shall furnished to the Union Head Office not later than the fourteen (14 th ) working day of the following month, a copy of the monthly statement of accounts of the service charges and to extend the same to the House Committee as follows: (i) The total service charge for each outlet; (ii) The grand total service charge; (iii) The total number of service charge points of the employees; (iv) The total number of service charge points increased or decreased; (v) The value of service charge per point; (vi) The names, designation, department, date of employment and individual service charge together with the individual value. 3

4 (c) The Hotel shall permit the Union to inspect at a time suitable to both parties the documents pertaining to the 10% service charge and the Union shall give at least seven (7) working days advance notice of its intention. (d) In the event of an employee filling a newly created position where the service charge point entitlement is not shown in Appendix C to this Agreement, the Hotel together with the Union shall determine the number of service charge points for the category of employee. STATEMENT OF CASE [6] The Union avers that the Hotel has not taken into account the service charge into the computation of the retrenchment benefits. The whole list of the 30 employees is exhibited in UB 1 (pp. 12 & 13) 'Holiday Villa Alor Setar Computation solely on Service Charge' amounting to RM127, [7] The Union states that the Hotel has wrongfully computed the retrenchment benefits based on basic salary for each year of service instead of wages for each year of service which would include the service charge. The service charge under Article 12 is a contractual term in the Collective Agreement and is not excluded by the definition under section 2 of the Employment Act and therefore, it is wages. The technical rule of estoppel is inapplicable in industrial adjudication and the employees legitimate claims ought to be taken into account. The failure of the Hotel to include the service charge in the computation of the retrenchment benefits of the employees is in breach of the terms of Article 28 & Article 12 of the said Collective Agreement. 4

5 [8] The Union prays that the Court orders the Hotel to: i) comply with the terms of the Collective Agreement by including the service ii) charge in the computation of retrenchment benefits; made the payment of RM127, through the Union within two weeks from the date of Award. STATEMENT IN REPLY [9] The Respondent denies the contention by the Union that Mohd Rizal bin Ismail had written to the Company protesting against the non-inclusion of service charge in the computation of retrenchment benefits. The Respondent puts the Union to strict proof that service charges should be taken into consideration in computing the retrenchment benefits and that failure to do so amounts to non-compliance of Article 28 & Article 12 of the Collective Agreement. THE UNION'S SUBMISSIONS [10] The Union submits that service charge is a contractual term in Article 12 of the Collective Agreement and is not an ex-gratia payment. It is not excluded under wages in section 2 of the Employment Act 1955 and therefore has to be included in the computation of retrenchment benefits. [11] The Union submits that the complaint under section 56 falls within the jurisdiction of the Industrial Court to simultaneously interpret Article 28 & Article 12 of the Collective Agreement which are in consonance with section 56 (2A) of the Industrial Relations Act

6 [12] The Union further submits that the Hotel has committed a breach of the terms of the Collective Agreement by refusing to include the component of the service charge into the computation of the retrenchment benefits. [13] The Industrial Court in the case of Hotel Fortuna Management Services Sdn. Bhd. v. National Union of Hotel, Bar & Restaurant Workers, Peninsular Malaysia [2000] 2 ILR 159 at pp. 161, 162 (Award No. 361 of 2000) decided as follows: The issue before the court is whether the hotel is in compliance of the above provision of the collective agreement by not including service charge as an element of 'wages' when computing the retirement benefits. It is the unanimous finding of the court that as the Employment Act 1955 does not exclude service charge from its definition of 'wages' and the collective agreement is silent on this point, service charge forms a part of 'wages' for the purpose of computing retirement benefits. [14] The Industrial Court in the case of Hotel Fortuna Management Services Sdn. Bhd. v. National Union of Hotel, Bar & Restaurant Workers, Peninsular Malaysia [2000] 2 ILR 163 at pp. 165, 166 (Award No. 362 of 2000) decided as follows: The issue before the court is whether the hotel is in compliance of the above provision of the collective agreement by not including service charge as an element of 'wages' when computing the retirement benefits. It is the unanimous finding of the court that as the Employment Act 1955 does not exclude service charge from its definition of 'wages' and the collective agreement is silent on this point, service charge forms a part of 'wages' for the purpose of computing retirement benefits. [15] The Kuala Lumpur High Court in Originating Summons No. R dismissed the application for judicial review by Hotel Fortuna in respect of Awards No. 361 & 362 of 2000 on 19 August Subsequently the Court of Appeal in Civil Appeal No. W

7 03 dismissed the appeal by the Hotel Fortuna on 15 August [16] In the case of Ritz Garden Hotel Sdn. Bhd. v. National Union of Hotel, Bar & Restaurant Workers, Peninsular Malaysia [2000] 3 ILR 542 at p. 545 the Industrial Court decided as follows:. In the Employment Act 1955, however, wages means basic wages and all other payments in cash payable to an employee for work done in respect of this contract of service but does not include that is, all items enumerated from (a) to (f) are excluded. But in all the excluded items, 'service charge' has not been specifically excluded. Therefore, service charge falls within the definition of 'wages' under the Employment Act 1955, as one of the items of retrenchment 'benefits' agreed under art. 27 of the CA. [17] The Industrial Court in the case of PIHP (Selangor) Bhd. v. Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia [2003] 3 ILR 1365 at p decided as follows: Therefore, the court finds that the word 'wages' in art. 28 include service charges. The hotel had not included this in the calculation of the retrenchment benefits under art. 28. The hotel had therefore not complied with the said article. The court therefore orders the hotel to do so. [18] The Kuala Lumpur High Court in Originating Summons No. R dismissed the application for judicial review by PIHP (Selangor) Berhad (Beroperasi sebagai Hilton Petaling Jaya) in respect of Award No. 545 of 2003 on 17 February [19] The Industrial Court decided in the case of Kesatuan Kebangsaan Pekerja- Pekerja Hotel, Bar & Restoran Semenanjung Malaysia v. Impiana Casuarina 7

8 Hotel. Ipoh (Cash Hotel Sdn. Bhd.) [Award No of 2010] at p. 12 as follows: The court held that the retrenchment benefits as provided in Article 29 of the said collective agreement which was calculated in accordance with the said regulations included service charge. [20] The Court of Appeal decided in the case of Abdul Aziz Abdul Majid & 141 lagi v. Kuantan Beach Hotel Sdn. Bhd., Alam Venture Sdn. Bhd. & Industrial Court [2012] 1 LNS 1294 at p. 19 as follows: [38] In the third place, Article 39 of the Collective Agreement provides that where an employee's services is terminated for retrenchment by reason of redundancy, the employee shall be entitled to retrenchment benefits based on the last drawn wages for every year of service. Accordingly the service charge which is part of wages, will have to be dealt with in computing termination benefits or back wages. The schedule to the termination letter shows that the service charge element listed therein is in respect of salary paid and not in respect of termination benefits. Estoppel [21] The High Court in the case of Nadarajah & Anor. v. Golf Resort (M) Sdn. Bhd. [1991] 1 ILR 704 at p. 707 as follows: It is therefore to be observed that in view of the provisions of s. 30 (5) of the Act, the Industrial Court must act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal form. Technical rules such as estoppel, limitation, laches, acquiescence etc. (unless otherwise provided for in the Act) have no place in industrial adjudication and they should not be allowed to be invoked for defeating claims which are just and proper. [22] The Supreme Court in the case of Marlin bte Rajiman & Ors. v. MAA Services Sdn. Bhd. [1994] 2 MLJ 404 at p. 406 decided as follows: The learned High Court judge when considering an application for certiorari 8

9 to quash the award of the Industrial Court correctly decided that the industrial Court committed an error going to jurisdiction because estoppel does not under s. 30 (5) of the Industrial Relations Act 1967, apply to industrial adjudication. [23] The Supreme Court in the case of Kumpulan Perangsang Selangor Bhd. v. Zaid Mohd. Noh [1997] 2 CLJ 11 at p. 13 decided as follows: [8] It is trite that the Industrial Court must act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal form. The doctrine of estoppel hence, is not to be applied in industrial adjudication. [24] The Federal Court in the case of Tanjong Jara Beach Hotel Sdn. Bhd. v. National Union of Hotel, Bar & Restaurant Workers Peninsular Malaysia [2004] 3 ILR i at p. xiv decided as follows: A tedious and cumbersome cycle of events emerges with no resolution of the complaint in sight. It becomes an exercise in futility. Clearly, that cannot have been the intention of the legislature given the expansive powers provided to the court under s. 29, in particular para. (g) thereof which states that in any proceeding before it, the court may direct and do all things as are necessary or expedient for the expeditious determination of the matter before it. THE HOTEL'S CASE & SUBMISSIONS [25] The Hotel's counsel in his prelude to his oral submissions presented before the Court on 7 May 2018 referred the 'Notice of Payment' dated 31 March 2017 (Encl. 1 p. 10) sent by the Hotel to Mohd. Rizal Bin Ramli where there was no evidence that he raised any protest in respect of the payment received. The submissions made was based on the facts of the case. Since the entire service charge that was collected, the Hotel has not taken from the service charge as revenue, hence on what basis it should now include 9

10 service charge in the computation of the retrenchment benefits. The Court was informed that the Hotel has ceased business from 30 April 2018 and one of the reason is because of higher wages to be paid by the Hotel. [26] The Hotel admits that there was a disagreement as to the correct computation of retrenchment benefits but avers that the meeting was held on 30 March The Hotel wrote to the employees regarding the computation of the retrenchment benefits. Apart from setting out the computation of the termination benefits, the Company had also notified the employees details regarding payment in lieu of short notice given, utilised leave entitlement and pro rate bonus payments to employees. The Law [27] In the case of Kesatuan Pekerja-pekerja Perkilangan Perusahaan Makanan v. Gold Coin Specialities Sdn. Bhd. [2017] 2 ILR 260 at p. 262 where the Industrial Court referred the case of Holiday Inn, Kuala Lumpur v. National Union of Hotel, Bar and Restaurant Workers [1988] 1 CLJ 133 in relation the application of section 56 of the Industrial Relations Act 1967 where the Supreme Court decided as follows: Now, section 56 is concerned with the enforcement in a summary manner of an award made by the Industrial Court or of a collective agreement which has been taken cognisance of by the court under section 17 after a complaint has been lodged as to its non-compliance. The non-compliance of a term of the award or collective agreement must exist as an antecedent fact before the Industrial Court can exercise its power contained in subsection (2) thereof. It is therefore, a condition precedent to the exercise of those powers that there should be in existence a breach or non-observance of a term of the award or collective agreement. There must be satisfactorily established by the complainant. 10

11 [28] The Supreme Court decided in the case of Dragon & Phoenix Berhad v. Kesatuan Pekerja-pekerja Perusahaan Membuat Tekstil & Pakaian Pulau Pinang & Anor [1990] 2 ILR 515 at p. 616 as follows: In a complaint of non-compliance with any term of a collective agreement or award under section 56 of the Industrial Court should, as a general rule, look at the terms of the contract by confining itself to within the four walls of the collective agreement or award and decide whether the term has or has not been complied with. It is purely enforcement function. Decision [29] The issue for the determination and decision of this Court is regarding the computation of the retrenchment benefits due to the employees concerned and whether the service charges should be taken into account when computing the retrenchment benefits. The failure to do so amounted to a non-compliance of Article 28 & 12 of the Collective Agreement. [30] The question of whether the service charge should be included in the calculation of wages in the retirement benefits was decided by the Court of Appeal in the case of National Union of Hotel, Bar & Restaurant Workers Peninsular Malaysia & Mahkamah Perusahaan Malaysia Kuala Lumpur v. Masyhur Mutiara Sdn. Bhd. (Sheraton Langkawi Beach Resort) [2018] 1 ILR 241 at pages referred to the Industrial Court findings as follows: [14] The learned Chairman went on to say:- The service charge system is unique to the hotel industry. We must note two important features of the system. One is that the money does not come from the employer but collected from the customers of the Hotel put in a fund. The fund is jointly owned by the hotel and its employees. The second is that pure income or the employee and it is paid to the employee under his 11

12 contract of service with the hotel. [20] We are in full agreement with the view expressed by the learned Chairman of the Industrial Court that in the light of the definition as provided for by the Employment Act 1955, the word wages in art. 27 of the said CA is to include all payments paid to employees for work done in respect of his contract of service which not only confine to basic salary. Indeed, the Industrial Court s award followed a long line of authority on the issue. [21] The learned Chairman had dealt with the definition of wages in the said award at pp. 10 and 11 as follows: The material words in section 2 are work done in respect of his contract of service. In the Supreme Court case of Lee Fatt Seng v. Harper Gilfillan [1988] 1 CLJ 270 at p. 248 Wan Hamzah SCJ stated as follows: It seems that the words work done in the definition of wages are used so as to stress on the requirement that the remuneration must be for work done in respect of the contract of service of the employee concerned, so that any payment made to him by the employer ex gratia not for work done or to be done, and not in connection with the contract of service, is not part of the wages. What this case highlights is that payment must be made in connection with the employee s contract of service and it must be for work done, for it to be regarded as part of wages. But where the payment is made as gift or as a favour then it cannot be part of wages. In the present case, the hotel had paid the service charge to aggrieved retiree in connection with her contract of employment as a cook by virtue of Article 12 of the Collective Agreement. The hotel was contractually bound to pay in accordance with the service charge points as stated in Appendix B under Article 12 Clause (a). Further, by virtue of section 17(2) of the Industrial Relations Act 1967 the said Article of the Collective Agreement is also an implied term of her contract of employment. Hence, it is clear from the facts of the case that the hotel paid the service charge to her in return for her services as a cook and not given as a gift. As such, the payment of service charge points to her would be regarded as wages under section 2 of the Employment Act 1955 and further it has not been excluded by its definition. (Emphasis added). [22] The cases relied upon by the learned Judge are cases on minimum wages under the National Wages Council Act 2011 and not under the Employment Act These cases are rightly decided because the minimum wages does not include the service charge. [25] In Port View Seafood Village Sdn Bhd v. Rocelyn Tubal Raneses [2011] 4 CLJ 959, David Wong Dak Wah J (as His Lordship then was) had carried out an exhaustive recounting of the line of authorities relating to wages and 12

13 concluded at para. [13] of the GOJ as follows: [13] Reverting to the issue at hand and applying the established principle of constructing legislation of giving the words their natural meaning and bearing in mind that there was no amendment to the Employment Act after the Pereira case, I concur with the interpretation given by the learned Chairman. The pivotal words in my view are work done in respect of his contract of service and as long payments are made because of that service, it is caught by the definition of wages. In this case there cannot be any denial that the service charge is payment made for work done in respect of his contract of service. My view is of course fortified by the decision of the Privy Council. (emphasis added) [31] The Union's contention is undisputed that the computation of the retrenchment benefits should be based on basic salary for each year of service instead of wages for each year of service which would include the service charge. The service charge under Article 12 is a contractual term in the Collective Agreement and is not excluded by the definition under section 2 of the Employment Act 1955 and therefore it is wages. [32] In Article 28 of the said Collective Agreement, the calculation of the retrenchment benefits was based on the said Employment Act (Termination & Lay off Benefits) Regulation The Employment Act 1955 which is the parent Act does not expressly exclude service charge from its definition of 'wages' in section 2 of the said Act. It is crystal clear that service charge forms a part of 'wages' for the purpose of computing retirement benefits. Therefore, service charge falls within the definition of 'wages' under the Employment Act 1955, as one of the items of retrenchment benefits agreed under Article 28 of the Collective Agreement. [33] The Court finds that service charge should be included in the calculation of wages in the retirement benefits. The Court is of a unanimous view that the Union has 13

14 established satisfactorily the existence of a breach and non-observance of a term of the Collective Agreement in Article 28 and Article 12 and therefore finds that there was noncompliance of the said terms of the Collective Agreement. Accordingly, the application for an order of non-compliance is hereby allowed. [34] In conclusion, the Court in handing down the Award is unanimous in its decision having taken into consideration the totality of the submissions by both parties. In arriving at the decision, the Court has acted with equity and good conscience and substantial merits of the case without regard to the technicalities and legal form as stated under section 30(5) of the Industrial Relations Act Conclusion [35] The Court hereby makes the following order: (a) to comply with the terms of the Collective Agreement by including the service charge in the computation of retrenchment benefits; and (b) made the payment of RM127, through the Union within 30 days from the date of Award. HANDED DOWN AND DATED THIS 14 TH JUNE 2018 ~ signed ~ ( EDDIE YEO SOON CHYE ) PRESIDENT INDUSTRIAL COURT MALAYSIA 14