BMB 2113 / BHB 2013 HUMAN RESOURCE MANAGEMENT TOPIC 9: TRADE UNIONS AND INDUSTRIAL RELATIONS LEARNING OBJECTIVES

At the end of this chapter, you will be able to: Explain why employee join unions Describe the historical development of trade unionism in Malaysia Describe the significant characteristics of Malaysia's trade unions Understand the Trade Union Act (1959) and Industrial Relations Act (1967) and how both regulate labor-management relations Describe the roles of managers in unionized organizations Understand the managerial skills required in managing labor relations process.

9.1 WHY EMPLOYEES JOIN TRADE UNION

A trade or labor union is an organization formed by a group of employees who represents their interests to employers. Many studies have examined why workers unionize. Most of these studies surveyed blue-collar employees. Results indicate that employees unionize because of the following reasons: 1. 2. 3. 4. Economic Needs Social and Leadership Needs Unfair Managerial Practices Channel to Voice Concerns

9.1.1 Economic Needs

Economic needs such as ensuring better wages and benefits, and better working conditions is the strongest motive for employees to unionize.

9.1.2 Social and Leadership Needs

Employees feel that they are denied the social and leadership needs. As a result they may turn to organizing a union to promote social and leadership opportunities to members.

9.1.3 Unfair Managerial Practices

Employees may unionize when they believe that managerial practices are unfair and/or administered in a biased way. This is true particularly of those issues that greatly affect the employment conditions of employees. Issues here include those involving transfer, promotion, discipline, performance appraisal, and salary increases.

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9.1.4 Channel to Voice Concerns

Employees want to have some voice in the decisions affecting their employment conditions. The failure of managers to allow employees a chance to become involved in decisions affecting their jobs also may encourage unionization. Employees also regard unionization as a medium to solve their problems with the management.

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9.2 THE ORIGIN OF MALAYSIAS LABOR UNIONS

Historically, in Malaysia, trade unions started to be established in the early 1900s revolving around the issues and activities of immigrants working in the mining and plantation industries. Among the major labor issues at that time pertained to the welfare of the immigrant labor force, condition of work, housing and health. The first trade union law was passed in the Straits Settlement and Federated Malay States in 1940. Unfortunately, due to the Second World War, the Act was ineffective. After the Second World War, the General Labor Union (GLU), which was started in Singapore, grew rapidly in membership. However, the GLU was very much influenced by communism. As a result, in 1947 the Trade Union Act of 1940 was reinforced. This Act requires all labor unions to register with the Registrar of Trade Union, and to prevent them from getting involved in illegal activities.

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9.3 TRADE UNIONISM IN MALAYSIA TODAY

Over the years, trade unions in Malaysia have been quite active and important. This is due to the changing needs of the employees. Employees have becoming more aware to the fact that unionism can protect their interests and well-being. The table below shows the increase in the number of trade unions and total memberships.

Year 1984 1985 1986 1987 1988 1989 1990 1991 1992

Peninsular Malaysia Sabah and Sarawak Malaysia Unions Members Unions Members Unions Members 291 547,936 95 46,050 386 593,938 296 560,952 96 47,454 392 608,406 305 561,099 96 45,395 401 606,494 311 561,248 98 45,284 409 606,532 322 568,893 92 48,623 414 617,516 344 589,031 95 43,721 439 632,752 364 613,221 104 46,059 468 659,280 380 609,552 104 51,599 484 661,151 397 638,711 104 53,718 501 692,429
Figure 1: Increase in the Number of Trade Unions and Total Memberships [Source: Ministry of Human Resources]

The table below shows the Trade Unions Membership by Size of Union, 1990 1992.

Number of Members Under 100 100 - 200 200 - 500 501 - 1000 1001 - 2000 2001 - 5000 5001 - 10000 Above 10000 Employer's Union Federation of Trade Unions Total

Number of Unions Total Membership Percentage of Total 1990 1991 1992 1990 1991 1992 1990 1991 1992 99 102 104 4,601 4,998 5,177 0.7 0.77 0.75 72 73 79 10,237 10,521 11,258 1.6 1.59 1.63 85 92 92 27,715 31,155 29,698 4.2 4.71 4.29 76 77 82 52,325 54,238 58,006 7.9 8.20 8.38 50 56 58 72,622 82,824 84,560 11.0 12.53 12.21 35 33 34 109,045 105,984 109,507 16.5 16.03 15.81 19 18 16 130,437 122,601 108,205 19.8 18.54 15.63 10 11 14 251,517 248,226 285,278 38.2 37.54 41.20 17 18 18 621 513 639 0.1 0.08 0.09 4 4 4 91 101 0.01 0.01 467 484 501 659,120 661,151 692,429 100.00 100.00 100.00

Figure 2: Trade Unions Membership by Size of Union, 1990 - 1992 [Source: Ministry of Human Resources]

Services sector has the most members as well the highest number of trade unions followed by manufacturing and agriculture sectors. These three sectors account for almost 80% of number of unions and memberships. Currently, only 10 % to 11 % of the Malaysian workforce is organized. This shows that trade unionism is not very strong in Malaysia. The rate of growth of trade unions is

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also rather small. Furthermore, the growth is more in the form of in-house unions rather than national or federations of trade unions.

9.4 TYPES OF TRADE UNIONS IN MALAYSIA

Trade unions in Malaysia can be classified according to the following categories: 1. National Trade Unions vs. In-house Unions A national trade union is formed when two or more trade unions join together. In order to form a national trade union, it requires one half of the union members' vote. The votes must also consist of at least 60% in favor for the proposal. One example of a national trade union is the National Union of Teaching Profession (NUTP). Usually a trade union comprises of members from single occupation or industry. However, the law has also allowed employees to form an in-house union. In house unions are trade unions whose members are employees working in the same establishment regardless of occupations. 2. Public and Private Sector Union Public sector unions are trade unions whose members are employees of a local authority, statutory body or government agency. A private sector union is a trade union whose members are from organizations in the private sector. 3. Employees and Employers Unions An employers' union is a union whose members are employers in a particular industry or sector formed mainly to assist member organizations in the negotiation and bargaining process with employees' unions. 4. Federation of Trade Unions There are three federations of trade unions in Malaysia. They are the Congress of Unions of Employees in the Public and Civil Services (CUEPACS), the Congress of Unions of Teachers in the Education Service (CUTES), and the Sarawak Wharf Laborers Unions Federation (SWLUF). CUEPACS, the largest of the federations, has 51 affiliated unions in the public sector in Peninsular Malaysia with 105,557 memberships. CUTES has 9 unions affiliated to it with 30,000 memberships, while SWLUF has 15 unions in affiliation with 1400 membership. 5. Other Labor-related Organizations Some organizations are not classified as trade unions. This is because they do not fulfill the criteria stated as in the Trade Union Act as they are registered under the Societies Act 1966. Two examples of such organization are the Malaysian Employers Federation (MEF) and the Malaysian Trade Union Congress (MTUC).

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9.5 LABOR RELATIONS AND THE LEGAL ENVIRONMENT

Currently, trade union movement in Malaysia is governed by two major laws: Trade Union Act 1959, and Industrial Relations Act 1967. The Trade Union Act (TUA) 1959 is concerned with matters relating to registration of trade unions, while the Industrial Relations (IRA) 1967 regulates the relationships between employees, unions and employers. In light of these two Acts, the process of setting up a trade union from the start until the signing of the collective agreement with the employer is depicted in the diagram below.

Figure 3: The Process of Forming a Union

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9.6 INDUSTRIAL RELATIONS ACT 1967

Industrial Relations Act 1967 (IRA) provides the legal structure in regulating the relationship between employer and employees. IRA includes the rights to form a trade union, recognition of workmen's trade union, collective bargaining, trade disputes, dispute resolution, and the industrial court. 1. Rights to Form a Trade Union An individual can decide whether or not to join a trade union. The Act also prohibits any coercion to join a union. Section 4(1) Part II of the IRA states that "no person shall interfere with, restrain, or coerce a workman or an employer in the exercise of his right to form and assist in the formation of and join a trade union and to participate in its lawful activities". 2. Recognition of Workmen's Trade Union It is important for employees to obtain recognition from the employer for the trade union. This is because employers may refuse to deal with trade unions that they do not recognize. In addition to that, trade union that has not been recognized does not have the collective bargaining power. i. Types of Recognition There are two types of recognition available to the employer. The employer can either give limited recognition or general recognition. Limited recognition implies that the union is entitled to make representation on individual grievances and to negotiate on behalf of its members only. General recognition implies that the trade union is entitled to make representation not only in relation to individual grievances, but also in relation to general questions of terms and conditions of service on behalf of all workmen, whether or not they are members of the trade union. ii. Criteria for According Recognition The employer will decide whether the union is competent in representing the workmen. Based on this criterion, the employer will accord recognition or refuse to grant recognition. If the union is the representative of a majority of the workmen, then general recognition can be accorded. On the other hand if the union only represents a minority or a class of workmen, then limited recognition is accorded. Procedures for Claiming Recognition Below are the procedures for claiming recognition:

iii.

a. The trade union makes a claim to the employer by filling in the prescribed
form. b. The employer must reply within 21 days upon receiving the claim. According to Section 9(3) of IRA, the employer has three possible responses: Accord recognition If recognition has been accorded, the trade union is deemed to be the formal representative of the workers or a class of workmen.

Refuse recognition

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If the employer refuses recognition, he has to notify in writing the workmen's trade union giving the grounds for not according recognition. Delaying recognition to check the status of members The employer may apply to the Director General of Industrial Relations to ascertain the competency and membership of the union. This may delay the recognition of the trade union. The employer is required to give written notice to the union of his application to check the status and membership of the union.

c.

If recognition is refused or the employer has not responded within 21 days in writing, the union may file a complaint in the form of a written report to the Director General of Industrial Relations. The Director General will then investigate or make inquiry to resolve the matter. If the Director General cannot resolve the matter, he is required to notify the Minister of Human Resources. The Minister will decide whether recognition is to be accorded. The decision of the Minister is final and cannot be questioned in any court.

d. After recognition has been granted, no other union can make a claim in respect of the same workmen or class of workmen for a period of three years. If a union's claim for recognition has been rejected, either by the Director General or by the Minister, the union cannot make another claim for a period of six months from the date when the claim was rejected. iv. Ways Employers Make Seeing Recognition Difficult Not all employers favor the idea of unionism. Some even discourage the notion. Ways that employer can discourage the activities of a trade union can include: a. Employer may challenge the representativeness of the trade union concerned. Employers will ask the Director General of Industrial Relations to do a membership check or by taking a secret ballot to determine the position of the union. Thus, making the process of seeking recognition more difficult. b. Employer may resort to victimization and unfair labor practices that are difficult to prove. For example, the employer may resort to transferring union leaders, harassing workers through personal interviews on union activities and so on. c. Employer may try to sabotage the union's activities by sponsoring another rival trade union and by giving recognition to this trade union. 3. Collective Bargaining Collective bargaining is the process where representatives from employee and employer trade unions meet and negotiate regarding certain arising matters. IRA defines the procedure for collective bargaining and Collective agreement (CA). Below are the procedures for collective bargaining: i. ii. When the employer has accorded recognition of the workmen's union, either party may invite the other party to commence collective bargaining. The invitation must be made in writing and set forth the proposal for a collective agreement. The party to whom the invitation is made must reply in writing within 14 days of its receipt. The reply must indicate whether to accept or reject the invitation. If an invitation has been made and accepted, collective bargaining must commence within thirty days of the receipt of the acceptance.

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iii.

iv.

v.

If the invitation has been made and it has not been accepted within 14 days, or refused or it has been accepted, but bargaining has not commenced within 30 days of receipt of acceptance, the party that initiate the invitation may file a complaint in the form of a written report to the Director General of Industrial Relations (DGIR). The Director General is then authorized to take such steps as may be necessary to get the parties involved to commence bargaining. If, despite his efforts to conciliate, there is still a refusal to commence bargaining, a trade dispute is deemed to exist. If an invitation has been made and accepted, and collective bargaining has been successfully concluded, the end result would be a collective agreement. The agreement must be made in writing. But if the bargaining has not been successfully concluded, a trade dispute is deemed to exist. If the collective bargaining has not been successful and the DGIR has failed in his conciliation the DGIR and the parties to the collective bargaining can refer the trade dispute to the Minister of Human Resources. The Minister will refer the matter to the Industrial Court for arbitration.

A Collective Agreement is defined as an agreement in writing between an employer trade union and a workmen's union. Every CA must be in writing and signed by both parties to the agreement or by persons authorized to sign on their behalf. 10 copies of the CA must be deposited with the Registrar of the Industrial Court within 30 days of the signing of the agreement. The CA must also specify the terms and conditions of employment such as salary scales, bonus payment, overtime rates, retrenchment benefits, retirement benefits, holidays, leave benefits, medical benefits, mileage allowance, and many others. However, it must not include items, which are considered to be managerial prerogatives. These prerogatives are sets of list of non-bargainable subjects at the option of the employer. They include the promotion, transfer, employment, termination, dismissal and reinstatement of employees and the assignment or allocation of duties by the employer. A CA usually specifies the names of the parties to the agreement, the period for which the agreement is to be effective (which cannot be less than 3 years). It should also prescribe the procedure for modification or termination of the agreement, and the procedure for settling any question over the interpretation or the implementation of the agreement. A collective agreement relating to a pioneer status enterprise or any industry specified by the Ministry, cannot, without the approval of the Ministry, contains better terms and conditions than those legislated in Part XII of the Employment Act. 4. Trade Disputes IRA defines trade disputes as any disputes between an employer and the employees regarding employment and non-employment issues and can be caused by reasons such as wrongful dismissal, discrimination and so forth. In trade disputes, trade unions will only acts as an agent for its members. Employees and employer may express their dissatisfaction by taking industrial actions. There are many types of industrial actions that can be taken by employees or employers in order to force the other party to give in to their demands. This is done if other peaceful methods fail to bring any settlement. Among a few that are recognized by law are: Strike A strike is a stopping of work by a group of workers including any attempt to limit or to slow down work on purpose. The strike must be connected with the employment or non-employment of workmen and for the purpose of furtherance of a trade dispute. A strike for other purposes will be considered illegal.

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 Lockout IRA defines lockout as the closing of a place of employment, or the suspension of work, or the refusal by an employer to continue to employ any number of workmen employed by him. Picket A picket is where the workers gather outside the workplace for the purpose of putting pressure on the management to accept their demands. 5. Dispute Resolution Some of the dispute resolution tools are i. Direct negotiation Direct negotiation is a method of settling disputes where the two parties involved, directly come together for discussion until a satisfactory compromise is reached. Conciliation Conciliation is a process of bringing together the parties involved in a dispute to resolve the dispute between them. Under the IRA, DGIR has the power to act as conciliator. If conciliation by the DGIR has failed, the DGIR will bring the dispute to the Minister. The Minister can also refer the dispute to the Industrial Court for compulsory arbitration. Arbitration Arbitration is a method of dispute resolution through the use of a third party. Arbitration is where the third party is given the authority to settle the trade dispute. This is only taken when other methods of dispute settlement have been exhausted and have failed to settle the matter. In Malaysia, only the Industrial Court has the authority to arbitrate trade disputes.

ii.

iii.

6. The Industrial Court The industrial court is established by IRA to provide a peaceful and unbiased means of settling trade disputes through arbitration. Two main functions of the Industrial Court (IC) are: i. ii. To hear and decide disputes or cases of non-compliance of awards and collective agreements. To scrutinize, vet and take cognizance of collective agreements.

The IC consists of a President and four Chairmen and two Panels; a panel of persons representing employers and a panel of persons representing employees. The Agong appoints the President and Chairmen of the IC, while the panel members are appointed by the Court President from a list of names submitted by the MTUC and the MEF. The Act requires the Court President to have at least seven years of experience as a lawyer before his appointment. In presiding over cases that involve trade unions, the IC consists of a President or Chairman and two panel members, one from each of the two Panels. But for cases that only involve individual grievances, e.g. unfair dismissal, the President or chairman may sit alone without a Panel.

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In terms of jurisdiction, the IC can hear cases of trade disputes referred to it for arbitration by the Minister or at the request of both parties to a dispute after other means of dispute resolution have failed. However, the Minister cannot refer disputes concerning the public sector to the IC without the consent of the Agong. Other areas of IC's jurisdiction includes the following: Arbitration of grievances concerning unfair dismissal of non-unionized workmen when referred to by the Minister of Human Resources Interpreting the approved Collective Agreement or awards by any party or the Minister Hearing complaints over alleged contravention of trade union rights or non- compliance of awards or collective agreements Requiring the parties involved amending a collective agreement; and, if they refuse to do so, the IC has the authority to amend the agreement itself. The industrial court has the power to summon parties in disputes, call witnesses, hear and determine disputes in the absence of any party summoned to the proceedings, conduct its proceedings in private, call in the aid of experts, regulate the procedures and proceedings of the court and make an award. The decision or award of the IC is final and conclusive and shall not be challenged, appealed against, or quashed in any court of law.

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9.7 THE ROLE OF MANAGERS IN LABOR RELATIONS

Normally, managers are responsible to deal with employee or labor-management matters. However, the help of labor relations specialist is also required to resolve grievances, negotiate a labor contract, and to advise top management on labor relation strategy. The need for the specialist's advice is based on the legal aspects and the need for an associated control over a wide range of management decisions. The most important strategic choice affecting a company's labor relations is management's strategic decision to: Accept unions The acceptance strategy takes collective bargaining as an appropriate way of establishing work rules through an exclusive agent for the employees, i.e. the trade union. Avoid unions An avoidance strategy believes that unions have a disruptive influence on employees. This situation may develop into an adversarial relation where trust and respect between employees and employer may be undermined. In this case, both parties may suffer.

It is important for Malaysia to have a harmonious employer -employee relation to ensure that economic development continues. Besides that harmonious industrial relations can lead to higher productivity, which in turn benefits employees. However, employers should not take advantage of the employees by exploiting and manipulating the workers in denying their rights to a fair share of the economic cake.

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9.8 BUILDING MANAGERIAL SKILLS: MANAGING LABOR RELATIONS PROCESS

There are four to the labor relations process. These include: 1. Union organizing The union organizing phase is when employees work with a union to form themselves into a cohesive group. 2. Gaining recognition After registering the trade union with the DGTU, the trade union needs to obtain recognition before it can sit down with the other party to negotiate the terms and conditions of employment. 3. Collective bargaining (negotiating) The result of the collective bargaining is a labor agreement or contract, commonly known as collective agreement. 4. Administrating collective agreements The key aspect of the fourth phase is the administration of the contract and the grievance procedure. Managers are more likely to develop HRM policies based on efficiency. But, when a union is involved, policies must also reflect employees' preferences, which related to staffing, employee development, compensation, and employee relations.

SUMMARY
1. Employees join unions for several purposes; economic needs, social and leadership needs, unfair managerial practices and to channel to voice concerns. 2. There are different classifications of trade unions in Malaysia; national trade unions vs. inhouse unions, public and private sector union, employees and employers unions and federation of trade unions. There are also several other labor-related organizations such as MEF and MTUC. 3. In Malaysia, two major laws were established to govern industrial relations. They are Trade Union Act (1959) and Industrial Relations Act (1967). 4. There are basically 2 strategic choices that management has towards unions; acceptance or avoidance.

PRACTICE QUESTIONS
1. Explain the reasons for employees to join trade unions. 2. Describe the provisions in the two major laws that govern industrial relations in Malaysia. 3. In case of deadlocks during collective bargaining, what are the potential actions committed by both employers and employees? 4. Given a trade dispute, what are the methods used to resolve the disagreement?

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