Ahmad Zahri Mirza Abdul Hamid v Aims Cyberjaya Sdn Bhd [2020] MLJU 595

Recently, the Federal Court case of Ahmad Zahri Mirza Abdul Hamid v Aims Cyberjaya Sdn Bhd [2020] MLJU 595 dealt with and answered the following questions of law :-

Question 1: Does a contract of employment which is renewed successively without application by the employee and without any intermittent breaks in between, is in reality a permanent employment; and

Question 2: Whether a need for work permit is a material consideration in determining whether an employment contract is a genuine fixed term contract.

Brief facts:

The Appellant/Employee (“the Employee”), a Singaporean, received a contract for consultancy services from AIMS Data Centre 2 Sdn Bhd (“ADC”) for 2009 to 2010. The Employee’s contract was renewed successively on 4 occasions (12 months each), extending his term of employment until 2013. In the 4th renewal, the Employee was appointed as a Consultant for AIMS Cyberjaya Sdn Bhd (“the Company”), instead of ADC due to the phasing out of ADC. In 2013, the Company offered the Employee a contract for further employment from 2013 to 2014, with a change in the terms of employment, which the Employee was not agreeable to.

The Company then further renewed the Employee’s contract for 3 months from 1.10.2013 until 31.12.2013, a shorter duration than his earlier contracts, which the Employee also refused to accept. On 18.10.2013, the Employee was granted an early release from his employment with effect from 19.10.2013. The Employee brought a claim under s.20 of the Industrial Relations Act 1967 as he considered himself to have been dismissed without just cause or excuse.

Question 1

Piercing the corporate veil

The Federal Court was of the considered view that ADC and the Company were part and parcel of the same group. There was “an essential unity of group enterprise” which permitted the corporate veil to be pierced in order to establish or identify the true labour relationship between parties. Hence, the Employee’s employment with ADC and the Company was considered to be continuous.

Genuine fixed term contract
 
The Federal Court also held that in determining whether a contract is a genuine fixed term contract, there are 3 main consideration points, namely: -
 
  1. The intention of the parties;

  2. The employers’ subsequent conduct during the course of employment; and

  3. The nature of the employer’s business and the nature of work which an employee is engaged to perform.
 
The Federal Court was satisfied on the facts that the Employee’s contract of employment, which began with ADC before being terminated under the Company, was not one-off, seasonal or temporary employment. It was an ongoing, continuous employment without a break from 2009 to 2013 and he was therefore in reality a permanent employee. 


Question 2

Citizenship of the Appellant/Claimant

The Federal Court held that the citizenship of the Appellant/Claimant had no bearing in deciding whether the Appellant/Claimant was in permanent employment or employment under a fixed term contract. It noted that the Industrial Relations Act 1967 does not make any distinction between the citizens of Malaysia and non-citizens. The Federal Court also considered the Article 10 of the International Labour Organisation (ILO) Migrant Workers (Supplementary Provisions) Convention 143 of 1975, to which Malaysia is a party, which expressly provides that states should undertake to promote and guarantee equality of opportunity and treatment between migrant workers and nationals.  It was the Federal Court’s view that all workers should be treated with fairness, dignity, and equality without distinction on whether they are local or foreigners in consonant with Article 8(1) of the Federal Constitution which provides that all persons are equal before the law and are entitled to the equal protection of the law.

Conclusion

This Federal Court case provides further guidance on when a fixed term employment contract will be found to be in reality a permanent contract. When there is ongoing, continuous employment without a break and the nature of employment is long term, there is a serious risk that it will be found to be permanent employment notwithstanding that the express terms of the contract provide that it is for a limited term. The fact that the employee is a foreigner employed on a limited time employment pass will not be a material consideration in determining that the employee is engaged on a fixed term basis.

Based on the 3 consideration points formulated by the Federal Court, it is evident that the determination of whether a contract is a genuine fixed term contract is very fact sensitive and subjective. If an employee is found to be engaged on a permanent contract, an employer is exposed to the risk of being ordered to pay up to 24 months backwages and an award of reinstatement or compensation in lieu of reinstatement in the event that the employee is found to be dismissed without just cause or excuse. Due to the uncertainty and risk involved, when deciding not to renew a fixed term employee’s contract, an employer would be prudent to have sufficient proof of just cause or excuse to justify the non-renewal in case fixed term contract is subsequently found to be in reality a permanent contract of employment by the Courts and the non-renewal is found to amount to a dismissal.