Permanent Employment For Foreigners – Yay or Nay

The principles concerning permanent employment for foreigners at a Malaysian company has long been established by the Malaysian courts. Let us briefly explain the rationale behind the deciding principle, based on the recent case of Aims Cyberjaya Sdn Bhd v Ahmad Zahri bin Mirza Abdul Hamid1.

Brief facts of the case

  • Employee – Ahmad Zahri, a Singaporean national (“Ahmad”)
  • Employer – Aims Cyberjaya Sdn Bhd (“ACSB”)

Ahmad had entered into an employment contract with ACSB on 1.10.2009. It must be noted that a total of 6 contracts was offered to Ahmad during his employment period with ACSB. Ahmad however, did not accept the terms of the 5th contract. He was therefore released from his employment by ACSB according to the terms set out in the 6th and final contract. The 6th and final contract was offered to Ahmad while he was considering the terms of the 5th contract. Upon his release, Ahmad brought his grievances to the Industrial Court.

The Industrial Court found in favor of Ahmad. In reaching the decision, the court found that Ahmad was a permanent employee. The court also found that Ahmad was dismissed without just cause. The court ordered ACSB to pay back wages of twenty-four (24) months and compensation of one and a half month’s salary for each year of Ahmad’s completed service in place of reinstatement. ACSB applied for a review in the High Court, but the High Court also upheld the decision. This was however overturned in the Court of Appeal.

One of the reasons given, amongst others, is that a foreign employee cannot be a permanent employee. Even though the Industrial and the High Court did not address the issue of whether a foreign employee can be a permanent employee of a company in Malaysia, the Court of Appeal took the liberty to deal with the issue and noted that at best, foreign employees are fixed-term contractors, i.e. their contract is may be renewed upon expiration.

Permanent employees vs Fixed-term contractors

Before we dive further into the court’s observation, why is there a need to determine whether an employee is a permanent employee or a fixed term contractor?

The answer is simply because a permanent employee can bring his employment grievances2 to the Industrial Court under the Industrial Relation Act3 while such remedy is not afforded to a fixed-term contractor. The employer retains the sole right to determine whether or not to renew the contract with a fixed-term contractor.

The court’s observation

Generally, the determination of whether employment is a permanent or a fixed-term contract depends on the facts of each case. There were instances where the court may find a fixed-term contract to have turned permanent after the contract was renewed several times. However, a foreigner cannot hold permanent employment with the company, because the employee is subjected to a valid working visa. The moment the working visa expires or canceled, or if the employee breached any conditions attached to the working visa, the employee is not allowed to continue employment in Malaysia. Since a work visa granted maybe can be retracted or canceled by relevant authorities at any time for whatever reasons, permanent employment for foreigners can become ironic.

The good news is, the flimsiness of a fixed-term employment contract is only prevalent where the employer does not renew the contract upon expiration. Foreign employees maintain a contractual right to seek recourse should his fixed-term employment be terminated prematurely or unjustly.

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1. [2018] MLJU 1975.
2. Ibid.
3. Section 20, Industrial Relation Act 1967.

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