Monthly Archives: May 2012

Abolish the ‘Contractor for Labour’ system

Withdraw the 2012 amendments to Employment Act 1955.

We, the undersigned trade unions, civil society groups and organizations object to the actions of the government of Malaysia in destroying direct employment relationship between the principal, as employer, and their workers, as employees, with the latest amendments to the Employment Act 1955.

The Malaysian Trade Union Congress (MTUC) , which not only represents the about 800,000 unionized workers but also the over 12 million workers in Malaysia, have strongly and consistently opposed the proposed amendments since it was first tabled in Parliament vide Bill No: D.R.25/2010 in July 2010, which the government later withdrew. The government re-introduced the Bill with minor changes in June 2011 vide Bill No: D.R.15/2011. MTUC came out even more strongly and also picketed at the Parliament House on 3rd October 2011 and in spite of strong resistance from many quarters, including on the Dewan Rakyat floor, the controversial Bill was passed on 6th October 201, did finally come into effect on April 1st 2012.

We would like to address just one of several aspects of the new amendments that is the main bone of contention, i.e. the introduction of the new provision for the definition of “contractor for labour”.

With the amendment, the contractor for labour will be the third party (or the middleman) who will come in between the now direct employment relationship between the owner-operator of trade or business (defined as the “principal”) and their worker-employee.


The Employment Act 1955 was introduced before independence (Merdeka) by the British Administration effectively abolishing indentured labour, bonded labour and the “kanggani” system in Malaya. (collectively then known as the “contract system”). The Act also did establish two very important principles of law which are considered sacrosanct to this day. They are, security of tenure – ensuring permanence of employment, and proprietary right to the job – where termination of worker, shall be only with just cause and excuse and by due process.

The employment scenario in the country began to change in the early 1990s. In 1992 the government allowed migrant workers for the construction and plantation sector. In 2000, it was extended to manufacturing and service (hotel and restaurants) sectors and in 2002, it was extended to all sectors.

Originally migrant workers were employed directly by the principal employer but this started to change in 2005, when the Cabinet Committee on Foreign Workers in its meeting on 5-July 2005 agreed to the recruitment of foreign workers through outsourcing companies (now known as ‘Contractor for Labour’ in the amended Act). The issuance of these outsourcing licenses was strangely done by the Ministry of Home Affairs, not the Ministry of Human Resources. There are today about 277 registered labour outsourcing companies in the country today. (The Star, 23-Feb 2010).

This establishment of the outsourcing companies allowed for the re-emergence of the old ‘contract system’. It opened doors resulting in a direct assault on the basic foundation of labour rights, the undermining dignity of labour, perpetuating the establishment and operation of dehumanized and bonded labour. The practice, which started with migrant workers, was then extended to local workers.

These outsourcing companies recruited local workers and migrant workers, some on fix term contracts, with terms and conditions usually less favourable than that of workers directly employed by principals.

The incidence of principals using workers supplied by outsourcing companies is growing. The principal company pays the outsource company an agreed sum of money for the number of workers supplied, whether they be local or migrant workers. The principal company effectively is able to avoid the employer’s duty and obligation to ensure their workers’ rights and welfare are protected. This practice also saved principal company money that would have ordinarily been expended for workers like medical cost, insurance, bonus, wage increments, retirement benefits, transportation and accommodation, service awards, and several other benefits. It also allows them to evade statutory contributions to the Employees Provident Fund and for social security schemes. The principal company also evades all obligations and safeguards in law when workers are hired or terminated, including domestic inquiries and lay-off and termination benefits. If the principal wants to now get rid of workers, it now merely have to inform the outsource company.

To convert the workforce from permanent employees to short-term contract employees, and now outsourced workers, most principals either retrenched their workers, used “voluntary separation schemes” or other methods, or simply terminated their employees substituting them now with workers supplied by the outsourcing companies.


These outsourcing companies have been allowed to operate outside the law with no law regulating them. Even though they were manpower/labour suppliers, they were not created under and/or regulated by the Private Employment Agencies Act 1981, which would have also ensured these manpower/labour suppliers would only provide workers and not become employers of workers supplied.

The recent amendment to the Employment Act is to give these outsourcing companies statutory recognition under the Employment Act, and at the same time institutionalize and legitimize employment through the outsourcing companies, which now legally will be legally known as the “contractor for labour”.

A primary reason for the creation of the ‘contractor for labour’ and the introduction of labour outsourcing is to stifle workers and trade unions capacity to demand and negotiate for better rights and benefits. The MTUC Memorandum to the HR Minister dated October 7, 2008 refers to an interview with Datuk Ishak Mohamed, the Enforcement Director of the Immigration Department that was published in New Straits Time, July 20, 2008, where he, amongst others, said, ‘…outsourcing is good as it will attract foreign direct investment. Investors do not want unions to be formed in their establishments. Through outsourcing, it would be difficult for unions to be formed as outsourcing company, and not the factory, would be the employer…’ is indicative of the intention of the government.


The creation of this new sub-class of workers, who are not considered employees of the principal, also jeopardizes existing employment relationship between the principal and their current worker-employees, likewise the relationship with their trade unions. Today, these new sub-class of workers, made up of both local and migrant workers, are found in most workplaces, including even government-linked companies, whereby in some factories they currently make up about 50% of the total workforce. Trade unions are being weakened, and their bargaining powers for better rights and benefits for workers are slowly eroding by the increasing presence of workers who are not employees of the principal, and also by the loss of security of tenure created by short-term contracts.

‘Contractor for labour’ is actually outsourcing of labour which is very different from outsourcing of work. Outsourcing of work is when principal employer outsources some specified work or operations which are not their core operation, to another company who carries out the work for the principal using their own employees under their own control and supervision. For example, in several manufacturing companies, cleaning, turf/gardening, canteen and security services are examples of outsourced work. This outsourcing of work is legal, and the workers of those who are doing outsourced work are protected by the Employment Act.

Contrary to the principle that workers doing core operation work should be employees of the principal, this amendment to the Act now allows the ‘contractor for labour’ to supply workers to perform the core operation under the control and supervision of the principal’s supervisory staff and managers. The ‘contractor for labour’ merely collects the salary of the labour supplied and apportions a part to himself and pays his workers, usually less than the workers who are under the direct employment of the principal, though they do the same work. The principle of equal pay for equal work is thus breached.

The principal, who is considered not the employer of the workers supplied, absolves himself of all liabilities and employer’s obligations with regard these workers supplied by ‘contractor for labour’ who are working for the principal’s benefit,


The MOHR Minister, in an attempt to placate the MTUC, trade unions, civil society groups and workers issued an exemption order, effective April 1st 2012, which, amongst others, stated:-

“…Any person who enters into contract for service with a principal to supply employees required by the principal for the execution of the whole or any part of any work for the principal in any industry, establishment or undertakings other than the agriculture undertakings, is exempted from sections 31, 33A, 69 and 73 of the Act…”

However, the words used in the said exemption order, which by the way also did not include the amendment in section 2, which was the very amendment that gave statutory recognition to the ‘contractor for labour’ and its practices, only further affirms the contractor for labour and their practices. The exempted sections referred to in the said Order merely dealt with ancillary matters like registration of employees when supplied to principal and priority of debt. The exemption order also would deny access to justice for workers now being supplied by these ‘contractor for labour’ in all the exempted sectors.

MTUC and all groups that opposed the amendments were not appeased by this exemption order, and continue their objections to the ‘contractor for labour’.


We strongly object to the ‘contractor of labour’ system. All workers that work under the control and supervision of the principal must be the employees of the said principal not some third party. The Malaysian government’s action is in breach of article 8 of the Federal Constitution. In 1998, Malaysia also ratified the ILO Declarations on Fundamental Principles and Rights at Work but this amendment is in contravention of the said Declaration. Further, it also is in contravention of the ILO’s Decent Work Agenda which Malaysia has committed to.

The International Trade Union Confederation (ITUC), many trade unions and civil society groups, also opposed, and still oppose this amendment. The Malaysian Bar also recently passed unanimously a resolution on March 10th 2012, amongst others, calling for the maintenance of existing 2-party employment relationships, and also that labour suppliers and/or contractors of labour should never be or continue to be employers of workers after they are supplied, accepted and start working at the workplaces of principals.

The contractor for labour and their practices should not be allowed in any sectors including the plantation and agricultural sector.


We, therefore, demand for the repeal of all amendments to the Employment Act 1955, in particular the amendments to section 2, 31, 33A, 69, 73 brought about by Employment (Amendment) Act 2012 [ACT A1419] relating to the ‘contractor for labour’ and their practices, and pending repeal for an immediate stopping operation of the said amendments.

We call for the abolition of the contractor for labour and their practices and that all workers, currently supplied by these 3rd party manpower/labour suppliers (contractor for labour) who are still not direct employees of the principal employer be immediately made employees of the said principal and be accorded same benefits and treatment as accorded to all other employees without discrimination, including the right to form/join trade unions or afford protection and entitlement to the benefits accorded through their respective Collective Agreements.

We call for the abolition of precarious employment, and for retention of a just 2-party employment relationship between principals and workers, and for the respect of worker and trade union rights.

Abuses still exist in Olympic supply chains, says Playfair 2012

Workers making Olympic sportswear for London 2012 for top brands and high street names including Adidas and Next are being paid poverty wages, forced to work excessive overtime and threatened with instant dismissal if they complain about working conditions, according to a new report from the Playfair 2012 campaign published today (Monday).

You can find this release online at

The report itself (PDF) is at

and a petition to various suppliers at

Last autumn researchers working on behalf of Playfair 2012 (which includes the TUC and Labour Behind the Label and which is the UK arm of the international Play Fair campaign) visited ten factories – eight of which were producing Olympic goods – in China, the Philippines and Sri Lanka. Across the three countries they talked to 175 workers about their working conditions.

The report, Fair Games? Human rights of workers in Olympic 2012 supplier factories, uncovers a range of abuses, providing more evidence to increase the pressure on the International Olympic Committee (IOC) to act to improve the working conditions in Olympic supply chains in the run up to Rio 2016, says Playfair 2012.

Fair Games? contains many examples where workers making Olympic goods have been badly treated including:

  • In China workers at a factory in the Guangdong Province which produces sportswear for Adidas were contracted to work in two separate locations 200km apart so lived in fear of suddenly being sent miles from home for their jobs.
  • Workers at the same Amerseas Enterprises Factory also complained of regularly having to do overtime in excess of the legal minimum (with working hours from 8am to 10pm not uncommon even at less busy times) and of not being able to wear the necessary safety masks to protect against dust because of unrealistic production targets.
  • In the Philippines workers complained of pay rates so low that they were forced to pawn their ATM cards to loan sharks for ‘pay day loans’ to see them through the month. Workers in the factories producing for Adidas said they were also told when they started that overtime was compulsory.
  • In Sri Lanka workers also said that their pay was not enough to meet their basic needs – those questioned said they earned a maximum of 25,000 LKR a month (£122), little more than half the country’s living wage of 45,000 LKR (£220).
  • Workers at the Next Manufacturing factory in Sri Lanka reported how the company used an external agent to hire short-term temporary workers.
  • The agent made the workers do double shifts each day – after completing a full shift plus overtime at Next they were transferred to another factory where they had to work until 2.30am. The next morning they had to report for their 8am shift at Next.
  • There were no unions permitted in any of the factories and in China, workers said that anyone talking to colleagues about the need to improve factory conditions would be dismissed instantly.

Following research undertaken by Playfair 2012 earlier this year

– which found evidence of child labour, excessive hours, poverty pay and dangerous working conditions in Chinese factories producing pin badges and London 2012 mascots – the London Organising Committee of the Olympic
Games and Paralympic Games (LOCOG) agreed to get tougher with the factories in its various supply chains.

This included making information about employment rights available in Chinese and establishing a Chinese language hotline so that workers could complain about ill treatment. Fair Games? shows that the abuse of workers in Olympic supply chains was also happening in other countries.

To illustrate the extent of the problem and to convince the IOC that it needs to do more to improve the treatment of workers making goods for the next Games in Brazil, the TUC has submitted a number of complaints to LOCOG on behalf of the workers from China and the Philippines who are featured in the report.

TUC General Secretary Brendan Barber said: “Despite the London organisers’ best intentions and its confidence that factory audits would be enough to expose any abuses, this report shows that there have been goods made in Olympic supply chains where the workers were treated in a way that cannot be described as ethical.

“We hope that the IOC can benefit from LOCOG’s experience and ensure that the lessons learned in 2012 lead to better and fairer working conditions for those producing sportswear or merchandise in the run up to Rio 2016. There is much too in this report for sportswear brands and our high street chains to take on board.”

Klaus Priegnitz, General Secretary of the International Textile, Garment and Leather Workers’ Federation (ITGLWF), which wrote the report, said: “Prior to the Beijing Olympics Play Fair called on companies to take action to ensure the human rights of all workers in their supply chains were respected.

“Four years on we see that the denial of the right to freedom of association, the payment of poverty wages and the widespread use of precarious work is still the norm. Companies need to step up their game and work with unions to support the development of mature systems of industrial relations in their supplier factories.”

Sharan Burrow, International Trade Union Confederation General Secretary (ITUC) said: “We need the IOC to take responsibility and make labour rights and decent work a reality for all workers producing for any Olympic Games.”

Anna McMullen, co-ordinator of the garment workers’ rights campaign Labour Behind the Label, said: “In an industry where exploitation is the norm, brands, like the IOC or Olympic sponsor Adidas, must take action in order to break the cycle of human rights abuse. If they just stand by and watch, reports like this will keep occurring. Now is the time to
make a difference.”

Against LVMH Group on appointing Sebastian Suhl as COO of Givenchy while the candidate is in the case of sexual harassment and discrimination case in Prada Japan and Prada Luxemburg


LVMH Moët Hennessy – Louis Vuitton S.A.

Mr. Bernard Arnault

Chairman & Chief Executive Officer

22, avenue Montaigne, 75008 Paris, France

Tel.: + 33 (0) 1 44 13 22 22


Against LVMH Group on appointing Sebastian Suhl as COO of Givenchy

while the candidate is in the case of sexual harassment and discrimination case

in Prada Japan and Prada Luxemburg


Asian Transnational Corporation Monitoring Network (ATNC) is a regional network consisting of civil society groups and labour unions in various Asian countries. Recently it has been reported that your company has appointed Sebastian Suhl as the new Chief Operating Officer of Givenchy, who appears as the key player of sexual harassment and discrimination case in Prada Japan when he was the Chief Operating Officer at Prada SpA.  Sebastian Suhl is also involving in the decision making of countersuing the victim for “hurting the brand logo by voicing harassment and discrimination in public” in Prada Luxemburg where the logo is registered.

The case is still proceeding at Tokyo District Court and the case clearly states Sebastian Suhl was the one who ordered the firing of the former Senior Retail Manager after she reported for help to Sebastian Suhl on the sexual harassment and discrimination issues at work and illegal accounting based on forced purchase by store staff at Prada Japan.

As labour rights concern groups advocating labour justice and gender equality, we are shocked and very concerned about your company’s decision to hire a candidate involved in the discrimination and harassment case while you are stating the below as part of your recruiting policy under “Talent Recruitment”.

“The LVMH group considers diversity to be a great asset and commits to deflecting any discrimination linked to age, sex, background, opinion or any other personal characteristics during its recruitment process.”[1]

As reported in the media, the plaintiff of the case Rina Bovrisse and other former Prada employees filed a labour lawsuit with the Tokyo District Court in 2009. Sebastian Suhl appears as the Global COO who ordered Prada Japan on illegal actions taken to the victims. Hitherto, the case is still unresolved and is in legal proceedings.

As a world renowned multinational luxury business group, LVMH should show commitments in corporate social responsibility and ensuring its employees of a discrimination-free working environment and fully respected labour rights protection.

However, to public outrage and disappointment, as a luxury business group which targets women as the major consumers for its Fashion and Leather Goods division, LVMH Group appointed a candidate being alleged of sexual harassment and discrimination practices towards female employees in Japan, especially in the middle of the lawsuit.

It is not the first time that LVMH Group was involved in hiring a candidate with controversial record of discrimination.  John Galliano, the former chief designer of Dior under LVMH Group was arrested and found guilty by the French court of anti-Semitic behavior in two complaints in 2011.  The former Dior designer was charged in connection with incidents in October, where he was accused of verbally abusing an English language teacher at CafeLa Perlein Paris.


LVMH Group has the responsibility to ensure the fundamental recruiting policy that is internationally recognized labour rights as prescribed by the International Labour Organization (ILO), including the rights to freedom of association and organizing. To consumers, it is very regrettable to see unethical labour practices behind the luxury business.

While the aforementioned labour disputes at Prada Japan have not yet been settled, your company is reported of recruiting Sebastin Suhl who is being the sexual harassment and discrimination case defendant.

Indeed, last year we expressed our deep concern to Hong Kong Exchanges and Clearing Limited for Prada’s attempt to file an IPO at the stage when the legal disputes have not yet solved. As a multinational enterprise committed to corporate social responsibility, LVMH Group should proactively adopt measures to eliminate any forms of discrimination and fully observe the laws and regulations regarding labour rights, social justice and equal opportunities in all jurisdictions where you invest and operate, in order to fulfill the expectation of the society, investors and consumers as well.

We, therefore, demand LVMH Group:

  1. To give a satisfactory response to the public and to Ms. Rina Bovrisse over appointing a new COO suspected of sexual discrimination, harassment and unfair dismissal at Prada Japan;
  2. To explain whether your company has requirements on your suppliers in observance with the rights of freedom of association and union organizing; and explain the implementation measures and the monitoring polices concerned;
  3. To explain whether your company has adopted any policies or measures against sexual discrimination and harassment

We sincerely look forward to your written reply. Should there be any enquiries, please contact the coordinator of the ATNC Monitoring Network at email:

Thank you for your kind attention.

Yours sincerely,

Asian Transnational Corporations Monitoring Network


Ms. Chantal Gaemperle,

Group Executive Vice President, Human Resources and Synergies