IN THE INDUSTRIAL COURT OF MALAYSIA CASE NO: 15(1)/2 - 1333/07 BETWEEN KESATUAN PEKERJA-PEKERJA PERUSAHAAN LOGAM SEMENANJUNG MALAYSA

AND SYARIKAT NSG (M) SDN. BHD. AWARD NO: 1615 OF 2010 Before: PUAN ONG GEOK LAN MR. OOI KOK WAH MR. MOHAMED BIN OSMAN : CHAIRMAN EMPLOYERS PANEL EMPLOYEES PANEL

Venue

Industrial Court Malaysia, Kuala Lumpur. 30.05.2007 01.02.2007; 03.10.2007; 06.11.2007; 10.12.2007; 03.03.2008; 09.04.2008; 10.06.2008; 09.07.2008; 22.07.2008; 21.01.2009; 26.05.2009; 14.04.2009; 16.04.2009; 08.09.2009; 09.10.2009; 21.04.2009; 22.04.2009; 14.09.2009; 04.02.2010; 06.08.2010; 01.09.2010; Mr. Vijayan Veeriah Industrial Relation Officer Metal Industry Employees' Union representing the Union. Mr. Balan Nair from Messrs Seah Balan Ravi & Co Counsel for the Respondent.

Date of Reference : Dates of Mention :

Date of Hearing Representative

: :

REFERENCE

This is a reference under section 26(2) of the Industrial Relations Act 1967 (the Act) pertaining to the trade dispute involving the 1st Collective Agreement Company). Company) AWARD The reference pertains to the trade dispute between the Kesatuan Pekerja-Pekerja Perusahaan Logam Semenanjung Malaysia (the Union) and Syarikat NSG (M) Sdn. Bhd. (the Company) over the terms and conditions of employment to be incorporated into the 1st Collective Agreement for those of the Company's representation. By his decision contained in the Form D dated 10.5.2005 the Honourable Minister of Human Resources accorded recognition to the Union pursuant to section 9(5) of the Act. The Union submitted to the Company its proposals for the 1st Collective Agreement vide its letter dated 10.4.2006. The Company, however, refused to negotiate with the Union of the ground that they were challenging the decision of the Honourable Minister. When the dispute was called up for hearing on 6.11.2008 before the then President, Y.A. Dato' Umi Kalthum bt. Abdul Majid, Mr. Balan of Messrs Seah Balan Ravi & Co. raised a preliminary objection that the Court had no employees who are within the Union's scope of between Kesatuan Pekerja-Pekerja Perusahaan Logam Semenanjung Malaysia (the Union) and Syarikat NSG (M) Sdn. Bhd. (the

jurisdiction to proceed with the hearing on merits of the dispute relating to the Collective Agreement between the Company and the Union. It was the Company's case that the Company had not granted recognition to the Union. According to the Company, the Honourable Minister's decision under section 9(5) of the Act was only a deeming provision. The Company had applied to the High Court to review the Minister's decision and until a final determination of the issue of recognition is secured, the Court should not proceed with the hearing of the dispute. It was not disputed that the Company did not obtain a stay order from the High Court. The Union's representative submitted that the Minister's decision under section 9(5) of the Act was final. The Court unanimously dismissed the preliminary objection and directed the parties to proceed with the hearing. The parties requested for an adjournment to enable them to negotiate on the terms. The Court noted that both parties were not ready for trial. The Union's representative informed the Court that out of 32 articles, 15 had been agreed upon leaving a balance of 17 articles which they intended to negotiate on further. The Company on its part complained that till that day it did not know who were the Union members. The Court directed the Union to inform the Company on members of the Union post haste. The dispute was fixed for mention on 3 occasions at the Industrial Court in Kuala Lumpur before the then President, Puan Amelia Tee Hong Geok. The parties were directed to file their witness statements. This dispute was called up for hearing before Y.A. Puan Amelia Tee Hong Geok on 21.4.2009.
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The parties informed this Court that they had reached an agreement on the following 19 Articles:1. ARTICLE 1 PARTIES TO THE AGREEMENT This Agreement is made this ____ day of _________ between the METAL INDUSTRY EMPLOYEES' UNION being a trade Union of employees registered pursuant to the Trade Union Act, 1959 (hereinafter called the Union) of the one part and NSG (M) SDN. BHD. (hereinafter called the Company) of the other part wherein it is agreed that the terms and conditions of employment shall be observed by the Union and the employees coming within the scope of this Agreement on the one part and the Company on the other part. 2. ARTICLE 3 SCOPE OF AGREEMENT a) i) ii) iii) This Agreement shall cover all employees eligible for the Union membership excluding:Directors and Managers Employees in confidential capacities Managerial and Executive Staff having authority in the interest of the Company to hire, transfer, suspend, lay-off, recall, promote, dismiss, assign, reward or discipline other employees or responsible to direct them or rectify their grievances iv) All employees engaged in security work

3.

ARTICLE 4 INTERPRETATION a) Where any clause in any current contract of service exists which is in conflict with the terms of this agreement then such clause shall be superseded by the relevant terms of this agreement. b) c) If this agreement is translated into other languages, the English version shall be the authoritative edition. This agreement supersedes all contracts signed by any individual employee with the Company regarding general terms and conditions of employment which are covered by this agreement.

4.

ARTICLE 6 GENERAL UNDERTAKING The Union agree that none of its worksite officials, who are employees of the Company, shall engage in the Union's activities in the Company's time and in the Company's premises except with the Company's prior consent. Provided that matters relating to members grievances shall not be treated as union activity. Both parties shall ensure that Labour Management relations shall always remain calm and harmonious.

5.

ARTICLE 7 RECOGNITION OF THE COMPANY The Union recognises the right of the Company to operate and manage its business and authority to execute all the various duties, functions and responsibilities incident thereof shall be vested with the Company. However, such authority shall be exercised in a justifiable manner and shall not, in anyway, violate any of the provisions of this agreement or any law.
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6.

ARTICLE 8 PROBATION a) All newly engaged employees shall serve a probationary period of three (3) months. This period of probation may be extended in writing to the employee concerned, but the entire period of probation shall not exceed six (6) months in total. b) On completion of probationary period, the employee may be confirmed in writing within seven (7) working days and shall be considered as a permanent employee back-dated to the date of appointment if the Company deems that the employee has reached the set standards as in the appraisal form. c) The Company may require new employees to undergo medical examination either before appointment, on probation or before confirmation. The fees incurred shall be borne by the Company.

ARTICLE 10 TRANSFER/RELOCATION a) An employee may be transferred from one section to another with the Company provided that such transfer does not entail a change to the detriment of the employee in regard to his terms and conditions of employment. The employee shall also retain his salary or wages. b) A female pregnant employee under her request shall be transferred to light duty section which can protect her health concern. c) In the event that the Company relocates to different premises, the employees would be required to relocate to new premises.

d)

In the event the transfer or relocation entails expenses on the part of the employee, the Company will reimburse all reasonable expenses in accordance with its policy.

8.

ARTICLE 11- HOURS OF WORK/REST DAYS a) b) All employees shall work an average of forty-eight (48) hours per week with alternative Saturdays as off days. The working hours are as follows:Normal 7.30 a.m. to 4.30 p.m. with one (1) tea break for 15 minutes Lunch break for 45 minutes. Shift A Shift 7.30 a.m. to 4. 30 p.m. 1 tea break for 15 minutes. Lunch break for 45 minutes. B Shift 4.30 p.m. to 12.30 a.m. Dinner break for hour from 7.30 p.m. to 8.00 p.m. C Shift 12.30 a.m. to 7.30 a.m. Break for hour.

9.

ARTICLE 12 OVERTIME & OVERTIME PAY AND WORK ON REST DAY AND PUBLIC HOLIDAYS a) Employees may be required to work overtime and on rest days and public holidays only at the request of the Company and with the consent of the employees. b) Employees would be paid at rates based on the ordinary rate of pay (ORP) as follows for overtime work and work on rest days and public holidays. a) i) Rest days: (Normal hours) Monthly Rated: For work not exceeding the normal hours/day For work exceeding but not exceeding normal hours/day b) c) Public Holidays (Normal hours) For any work not exceeding normal hours of work Overtime (Work in excess of normal hours) Normal days Rest days Public holiday c. d. : 1.5 times the hourly rate for each hour : 2 times the hourly rate for each hour : 3 times the hourly rate for each hour : 2 ORP : 1 ORP :1/2ORP

Employees who are required to do such work shall not unreasonably refuse to do so. As far as possible, the Company shall distribute overtime work equitably between personnel in each of the various job categories.

10).

ARTICLE 15 MATERNITY LEAVE a) All female employees will be entitled to paid maternity leave for a total of sixty (60) days for each confinement subject to the following conditions: (i) They have been in employment for some time during the four (4) months preceding confinement and for 90 days during the nine (9) months preceding confinement. (ii) b) They do not have 5 or more surviving natural children.

Absence from work due to illness or miscarriage prior to 28 th week of pregnancy shall be considered as maternity leave but normal sick leave. Any absence from work after maternity leave supported by medical certificate from the Company's doctor or the General Hospital or other registered medical practitioner shall be treated as normal sick leave.

c.

The Company shall grant paid time off to the pregnant employees who go for medical check-up on presentation of relevant documents.

d.

Employees are expected to notify the Company at least 2 months before they intend to commence maternity leave inform the Company of the person they have appointed as their nominee.

11)

ARTICLE 16 PUBLIC HOLIDAYS a) All employees shall be granted paid holidays on all public holidays, either gazetted or declared, by the Federal Government of Malaysia or by the State Government of Penang.
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b) c)

If a holiday falls on a weekly rest day, the next working day shall be observed as the holiday. Where a holiday falls during the period of sick leave, annual leave or the period of temporary disablement under SOCSO, another day shall be granted in substitution.

d)

An employee who is absent on the working day before or after a holiday, without reasonable excuse, shall not be entitled to the holiday pay for that holiday.

12)

ARTICLE 18 RETIREMENT a) b) Employees shall retire upon attaining the age of 55 years. The Company may invite an employee to continue in the employment of the Company for a further period beyond the age of 55 years for male or female but such extension of employment shall be with the written consent of the employee concerned. The Company will give six (6) months' notice of its intention to either call for retirement or to invite the employee to extend the period of employment for one year. c) All such extension of employment beyond the age of 55 years for male or female employees shall be for a period of not more the one (1) year at a time and shall be subject to the employee being certified physically fit by the medical practitioner appointed by the Company.

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13)

ARTICLE 21 UNIFORMS The Company shall supply free uniforms and safety shoes to all employees.

14)

ARTICLE 24 GREIVANCE PROCEDURE Objective Of Grievance Procedure The objective of the grievance procedure machinery is to resolve all complaints and/or grievances of employees swiftly and equitably. Towards this objective the following procedure, for the settlement of complaints and/or grievances, is agreed:a) All complaints and/or grievances shall be brought to the attention of the Company by either the employee concerned or by the Union. b) The Company shall, on receipt of such a complaint and/or grievances, investigate the said complaint and/or grievances, within three (3) working days. Thereafter the Company shall take all the necessary steps to resolve the issue within a further period of seven (7) working days. c) Where the Company fails to resolve the complaint and/or grievance or where the employee or the Union is not satisfied with the Company's actions in the matter, the complaint and/or grievances shall be jointly referred to the Minister of Human Resources or reported to the Director General for Industrial Relations for conciliation.

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15)

ARTICLE 25 ARBITRATION Any dispute relating to the interpretation or implementation of this agreement shall, unless settled by negotiations between the Company and the Union, be referred to the Industrial Court in accordance with the relevant provisions of the Industrial Relations Act 1967.

16).

ARTICLE 27 INDUSTRIAL ACCIDENT All employees are to be properly registered with SOCSO. Any employee who meets with an accident during the course of employment will be entitled to apply for benefits from SOCSO. The Company shall provide all assistance to the employee in recovering benefits from SOCSO.

17).

ARTICLE 28 HEALTH AND SAFETY a) The Company shall agree that whilst the Union recognises its right to operate and manage its business in all respects, it shall at all times strictly follow the provisions of the Occupational Safety And Health Act, 1994 or any subsequent amendments to the said Act which will contribute to the well-being and interest of all parties concerned. b) In the event of the Union being able to justify that the Company has breached any of the provisions as stipulated in the Occupational Safety and Health Act, 1994, in relations to safety, health and welfare, the Company shall make rectification in accordance with the requirements of the said Act. c) A Health and Safety committee, with Union representation shall be formed and chaired by the departmental heads of either the
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production or maintenance departments. The said committee shall be independent of its functions. d) In recognition of the importance of a better working environment, placing emphasis on the safety, health and welfare of its employees, the Company shall endeavour to implement any suggestion or recommendation that may be put forward by the said committee. 18). ARTICLE 30 LEGISLATION a) If any legislation provides for a lower level of benefits than which is provided in this agreement, then the benefits to which the employee is entitled to shall be the terms of this agreement. b) If any legislation provides for terms which are more favourable than of this agreement, then the terms of such legislation shall supercede the relevant provisions contained in this agreement. 19). ARTICLE 31 CASUAL/COMPASSIONATE LEAVE Casual leave with full pay shall be granted for the following:Employees' first legal marriage Death of member of his immediate family which expression shall include wife, husband, children or parents Death of parent-in-law, grandparents, brothers or sisters Birth of child Natural Disaster affecting the employees residence
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3 working days

2 working days 2 working days 2 working days 2 working days

per occasion. The dispute was called up for continued hearing on 22.4.2009 before Y.A. Puan Amelia Tee Hong Geok. The parties informed the Court that after further negotiations, they had agreed on another 4 articles. They were as follows:1) ARTICLE 9 PROMOTION/ACTING APPOINTMENTS a) Promotion i) Where vacancies occur or are created in higher grades or post, the Company shall promote serving employees. Where no serving employee is found to be suitable, the Company may fill such vacancy from outside recruitment. ii) An employee of the Company who has been selected for promotion to a new grade or group may be required to serve a probationary period not exceeding three (3) months. On completion of the prescribed probationary period, if any, the employee shall be notified in writing within 7 working days whether he has been confirmed in his new grade or group. iii) During the period of probation, an employee shall have his wage or salary adjusted to the minimum starting wage or salary for the new grade if his wage or salary in the previous grade was lower than the minimum wage or salary for the new grade but such adjustment shall not be less than one (1) increment in the previous scale.

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On confirmation of probation, the employee shall be granted a salary adjustment equivalent to one increment of the promoted scale. iv) Salary adjustments, granted under clause (iii) above shall not affect the employee's entitlement to his normal annual increment of the year. v) Whenever it is decided not to confirm the promotion, the employee shall revert to his former grade or group or be given another job compatible to his capability and shall be paid the same salary or wages that he last drew or would have drawn including the annual increment in his former post. 2). ARTICLE 13 ANNUAL LEAVE a) Employees shall be eligible for paid annual leave as follows for every twelve (12) months of continuous service: Calendar Year b) less than 2 years' service More than 5 years' service : : 14 days 16 days 18 days More than 2 to 5 years' service :

All applications for annual leave shall be submitted at least 3 days before such leave is required, and employees can only physically commence such annual leave after the leave has been approved.

c)

Every effort will be made by the management to approve any annual leave applied for, but if due to certain exigencies such leave cannot be approved, then the employee concerned will be compensated for such leave not taken.
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3).

ARTICLE 19 RETIREMENT BENEFITS Employee who retire after 10 years of service with the Company shall be paid an ex-gratia sum of RM1,500.00.

4)

ARTICLE 22 RETRENCHMENT/CLOSURE & RETRENCHMENT/ TERMINATION BENEFITS 22.1 The Company's general policy is not retrench employees and so will take all necessary action to avert retrenchments. However if retrenchment becomes inevitable, the Company will attempt to give as much notice as is practically possible to employees and will endeavour to obtain alternate employment for affected employees. 22.2 Where the Company has to retrench employees, the selection would made bona fide and based on the following criteria: Operational needs of the Company; Skill, experience and qualification of the employees; length of service; Age and family situation of employee; Other criteria like medical, performance and disciplinary records. 22.3 Retrenchment benefits be paid based on the provisions of the Employment (Termination and Lay Off Benefits) Regulations 1980. In respect of all the agreed articles, this Court shall incorporate them

into this award as consent items. The Court then proceeded to hear the parties on the remaining disputed articles. The Company's witness was Md.
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Rashid bin Abdul Rauf, the Human Resources Executive in charge of Human Resources and General Affairs Department of the Company. However, during the course of the hearing, the parties came to an agreement on certain of the remaining disputed articles:1) ARTICLE 5 RECOGNITION OF THE UNION a) The Company recognises the Union as the exclusive Collective Bargaining principal in respect of and on behalf of such categories of employees who are eligible for Membership thereof, and who are employed by the Company and defined as coming within the scope of this agreement in accordance with the provisions of Article 3 herein before stated. b) The Company undertakes to inform all employees coming within the scope of this agreement, that their terms of employment are governed by the provisions of this agreement and a copy of the notification shall be given to the Union Worksite Committee. The Company shall supply free of charge to all employees a copy of the collective agreement. ARTICLE 6 GENERAL UNDERTAKING The Union agreed that none of its worksite officials, who are employees of the Company, shall engage in the Union's activities in the Company's time and in the Company's premises except with the Company's prior consent. Provided that matters relating to members' grievances shall not be treated as union activity. Both parties shall ensure that Labour Management relations shall always remain calm and harmonious.
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2)

ARTICLE 14 SICK LEAVE/MEDICAL LEAVE a) Employees certified unfit for work by a registered medical practitioner or by a registered dental surgeon shall be entitled to paid sick leave. b) Where no hospitalisation is necessary, an employee shall be entitled to paid sick leave of: (i) (ii) (iii) c) 14 days per year if an employee has been employed for less than 2 years. 18 days per year if an employee has been employed for 2 years or more but less than 5 years. 22 days per year if an employee has been employed for 5 years or more. Where hospitalisation is necessary, the sick leave entitlement shall be sixty (60) days in each calendar year inclusive of the days taken in preceding clause (b). d) Sick leave granted immediately after the hospitalisation period shall be considered as hospitalisation leave coming within the meaning of clause( c ) of this article provided it is in respect of the same clause of hospitalisation. e) All employees will be entitled to medical treatment at any registered medical clinic or dental clinic subject to a maximum reimbursement of RM300.00 per year. Employees would be required to submit claims for reimbursement of medical expenses supported by receipts. f) In the event of hospitalisation, the Company shall provide free treatment at any government hospital.

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The case was called up for continued hearing on 13.7.2009. After discussions, the parties agreed on the following provisions on Article 17: 3) ARTICLE 17 ALLOWANCES a) Shift Allowance Shift allowance shall be paid to employees on shift duty as scheduled below:A B C b) Shift Shift Shift 7.30 a.m. to 4.30 p.m. RM2.50 RM5.50 RM5.50 4.30 p.m. to 12.30 a.m. 12.30 a.m. to 7.30 a.m. -

Transport Allowance The Company shall pay transport allowance as follows to employees who report for work: (i) (ii) (iii) First 1 to 5 km Next 5 to 9 km 10 km and more 45 sen/km 25 sen/km 20 sen/km

c)

Mid-Day Meal Allowance Employees who are required to work outside the Company's premises and who are unable to return to the Company before their lunch break, shall be paid a meal allowance of RM2.00 per occasion.

d)

Full Attendance Incentive The Company shall pay full attendance incentive of RM50.00 per month subject to full attendance at work.

e)

Heat and Dust Allowance Employees whose nature of regular duties entail exposure to direct sunlight for more than one half () their normal hours of

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work shall be eligible to receive RM70.00 as Heat and Dust Allowance. f) Overtime Meal Allowance A meal allowance of RM2.00 per occasion shall be paid to: (i) (ii) (iii) An employees who works overtime up to 2 hours or more on a normal working day An employees who works on a rest day or public holiday recognised by the Company Employees who work overtime shall be provided with transport. If transport is not provided, an allowance as per clause (b) of this Article shall be given. Upon Y.A. Puan Amelia Tee being appointed a Judicial Commissioner, this dispute was then transferred to Court 15 for continued hearing. The dispute was called up for continued hearing on 4.2.2010 and on 6.8.2010. The parties informed the Court that after further discussions the parties had agreed to the following Articles: ARTICLE 20 BONUS (a) All confirmed employees shall be paid an annual bonus equivalent to one (1) month's salary and an additional one (1) month's bonus shall be made at the discretion of the Company based on the Company's appraisal process. (b) Employees with less than one (1) year's service as at 31 st December will receive pro-rata bonus based on the number of months' service during that calendar year.

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ARTICLE 23 ANNUAL INCREMENT/INCREMENTAL DATE (a) Every employee shall receive an annual increment on 1st January of each year at the flat rate of three (3) % on the maximum scale across the board as set out in Article 32. (b) Confirmed employees who have completed less than one (1) year's service will have their 1st annual increment on 1st January on a pro rata basis calculating from the date of 1st appointment on probation. Thereafter they shall be granted one (1) full increment on 1st January of each year. ARTICLE 32 SALARY SCALE
Job Position (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Operator QA/QC/Storehand Clerk Senior Clerk Technician Minimum Scale RM546.00 RM600.00 RM750.00 RM800.00 RM850.0 Maximum Scale RM850.00 RM1,020.00 RM1,275.00 RM1,360.00 RM1,445.00 RM1,105.00 RM1,445.00 RM1,600.00 RM1,530.00 Annual Increment RM26.00 RM31.00 RM38.00 RM41.00 RM43.00 RM33.00 RM43.00 RM48.00 RM46.00

Leader/Storekeeper RM650.00 Assistant Supervisor RM850.00 Supervisor RM1,100.00 Boiler Man Grade II RM900.00

ARTICLE 29 EXISTING BENEFITS The Company shall continue any of the existing benefits not covered by or in excess of the provisions of this Agreement.

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The parties could not agree on Article 2 and Article 26 and this Court proceeded to hear the parties on those Articles. ARTICLE 2 DURATION AND TERMINATION OF AGREEMENT The date of the Honourable Minister's reference was 30.5.2007. The Union requested that the effective date of commencement be 1.11.2006 which was about 6 months before the date of reference. It submitted that it had first submitted its proposals to the Company on 10.4.2006. The Company's Counsel had proposed that the effective date be 1.4.2009 which was the month when the hearing of this dispute began. He submitted that if the Collective Agreement is backdated to the year 2006, it would be a heavy burden for the Company in light of the present economic climate. Section 30(7) of the Act allows for an award to be retrospective to such date which may not be earlier than 6 months from the date on which the dispute was referred to the Industrial Court. Section 14(2)(b) of the Act makes it mandatory for a Collective Agreement to continues in force for a period of not less than 3 years. The Court finds the demand by the Union for the effective date of the Agreement to be on 1.11.2006 to be unacceptable. could even execute the Agreement. It was submitted for the Company that it has been giving increments to its employees over the years except for the year 2009 when the Company's
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The agreement would

have expired on 31.10.2009 which is more than a year before the parties

volume of sales dropped. However, the Company did on 1.4.2010 give its employees a salary adjustment. Therefore, the employees would not be prejudiced if the effective date of the Agreement be brought forward. The Court is of the view then that the Company's proposal for the effective date to be on 1.4.2009 to be reasonable. Based on the mandatory 3 years' duration, the Collective Agreement would only expire on 31.3.2012. Notwithstanding that the unexpired duration is about 1 year 3 months, that would give the parties sufficient time to work out and implement the terms of the Collective Agreement as in this case, the Company has only 188 employees. Accordingly, this Court orders that the effective date of this Award be 1.4.2009. The Collective Agreement shall remain in force for a period of 3 years expiring on 31.3.2012 and shall continue to apply thereafter until superseded by a new Collective Agreement or an Award of the Industrial Court. ARTICLE 26 SALARY ADJUSTMENT/CONVERSION Counsel for the Company submitted that there should not be any adjustment as the Company has been giving increment over the years and the Company had recently made the necessary adjustment in April 2010. He further submitted that if the Court is mindful of giving a salary adjustment, it should be at the rate of 3%. The Company is a subsidiary of Nansin Co. Ltd., a company incorporated in Japan. The principal activity of the Company at its factory in the Bukit Tengah Industrial Park in Bukit Mertajam is the manufacture of castor wheels, wheels and moulded and extruded rubber products for automotive, electrical and electronic industries and household applications.
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The Annual Statement of the Company for the Financial Year ending 31.3.2009 shows a gross profit of RM2.2 million. For the Financial year 2008, the gross profit was RM3.3 million. The Company pointed out that the profits for the year 2009 was due mainly to the higher value of the Japanese Yen as the volume of sales had dropped. The Company was making more money from the Other Operating Income instead of sales. The Company was not doing well compared to the Financial Years of 2004 and 2005 when its gross profits were in the region of RM11 million. The Union submitted that the Company paid annual increments based on the number of years of service of the employees. The recent adjustment by the Company was not given to all the employees. Looking at the Company's Financial Statement for the year 2009, the Company did make profits and therefore has the financial ability to pay. The Union demanded an adjustment at the rate of 5%. In the case between Arab-Malaysian Development Berhad and Perak Textile & Garments Manufacturing Employees' Union [1987] ILR February 118 at page 129, the Industrial Court has set out the principles involved in considering a revision of a wage system or a wage structure: In considering any revision of a wage system or

wage structure, it is well established that justice should be done to the interests not only of employer but also of employees. On the side of employees, the object of constructing a wage structure would be to ensure that they obtain a fair wage for their labour . This is their hope and
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aspiration in a claim for pay revision.

And there can be

little doubt that it the employees are paid a better wage, which will enable them to live in fair comfort and discharge their obligations to members of their families in a reasonable way, they will be encouraged to work whole heartedly and their work shall appreciably increase in efficiency and productivity. On the side of employer, his capacity to bear the burden of a new wage structure is a primary consideration, bearing in mind, inter alia, that it is right that he should be allowed a fair allocation from profits to reserves and depreciation and a fair return for his capital. Thus, the fixation of a wage structure is always a delicate task, because a balance has to be struck between the demands of social justice which require that the employees should receive their proper share of national income which they help to produce, with a view to improving their standard of living and depletion which every increase in wages makes in the profits, as this tends to divert capital from industry into other channels thought to be more profitable. It is well established in Industrial Law that in deciding on the question of wage increases and wage structure, the Court has to take into account the following factors: (i) (ii) Wages and salaries prevailing in comparable establishments in the same region; Any rise in the cost of living since the existing wages or salaries were last revised; and
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(iii)

The financial capacity of the Company to pay the higher wages/increases.

Of the aforementioned 3 factors, the primary consideration and essential pre-requisite is the financial capacity of the Company to pay. It is not the economic slow down as it has been found that there are companies who can and do make substantial profits in the face of general downturn of the economy. Cost of living generally and inevitably goes up and wages and salaries prevailing in comparable establishments are higher but the financial capacity of the Company has still to be considered. If the Company is not able financially to bear the burden of the revised wage system, it may eventually lead to the closure of its business resulting in the loss of jobs for the employees. That would not be in the interest of both the Company and its employees. It is not disputed that the Company has made profits. However, there had been a decline. The Company's Annual Statement for the Financial Year ended March 2009 shows a gross profit of RM2.2 million compared to the year 2008 where the gross profits was RM3.3. million. Notwithstanding the said decline, the Company had proposed a wage adjustment of 3%. The cumulative average increase in the Consumer Price Index (CPI) for the years 2007 to 2009 was 7.42%. The Court is of the view that it is fair and equitable that that the wage adjustment be fixed at 4.5% which approximately 2/3 of 7.42%. In coming to its decision the Court took into the account the following:-

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(a)

The general guideline laid down in the case between Malayan Commercial Banks Association vs. National Union of Bank Employees [1982] M.L.L.R. 246 or better known as Harun J's 2/3rd principle: As a general rule, salary increases based purely on increase in the CPI should not be less than 60% or more than 2/3 of the average increase in the CPI over the previous 3 years' period.

(b)

The Company with the 188 employees within the Union's scope of representation has the financial capacity to meet this adjustment. Though the Company for the Financial Year ended March 2009 had a decline in the amount of profits, there is an increase in the cost of living . The Court acting according to equity and good conscience is of the considered view that the adjustment rate of 4.5% is fair and equitable.

We now come to the issue of conversion.

The first principle of

conversion from present to new salary is that the employee should not take home less then what he is at present receiving. Where there is no previous wage structure and where a new wage structure is established for the first time, the employee's salary, plus COLA/Special Relief Allowance, if any, will be adjusted to scale with or without any additional step or steps, depending upon the financial ability of the Company to pay. But where there is an established salary scale and conditions of appointment and promotion are the same or at least similar, conversion on a point to point basis is fair and reasonable.

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In this case there is no alteration to the established wage structure except for the rates. This Court is of the view that the principle of point-topoint conversion fits in very well. We therefore order that a point-to-point conversion be adopted for all confirmed employees as at 1.4.2009. Hence the order will be as follows:(i) If the salary of an employee is more than the minimum of the new scale, convert to the same or the next higher point of the new scale; (ii) If the salary of the employee is less than the minimum, convert to the minimum. However, if the difference between his salary and the minimum of the new scale is less than one increment to add one step; (iii) If the employee is drawing the maximum or more than the maximum of the new scale, he will continue to draw that scale on a personal-to-holder basis and be given one increment. Thereafter, he will not be given any annual increment. In handing down this award, this Court did, as was required by section 30(4) of the Act, have regard to the public interest, the financial implications and the effect of the award on the economy of the country, and on the industry concerned and also the probable effect in related or similar industries. It has also, in compliance with section 30(5) of the Act, endeavoured to act according to equity, good conscience and substantial merits of the case.

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The parties may now draw up their Collective Agreement incorporating the Articles that are not disputed and those they had agreed upon subsequently together with the Award of this Court on the disputed articles.

HANDED DOWN AND DATED 22ND OF DECEMBER, 2010.

( ONG GEOK LAN ) CHAIRMAN INDUSTRIAL COURT MALAYSIA KUALA LUMPUR.

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