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A primer on the rights to form unions and collective bargaining
By Edwin Goh, Ooi Kok Hin & Khairil Ahmad26 May 2023
Unions play a vital role in improving workers’ rights, pay, and working conditions. In Malaysia, organised labour movement began before independence, when public and private sector workers formed the General Labour Unions (GLUs) in the 1920s. At that time, GLUs and other unions were not only active in promoting workers’ rights but were also involved in the fight for the country’s independence.
Fast forward to the present day, Malaysia’s unionisation rate has been declining in the last four decades (Figure 1). According to the most recent data from the Department of Trade Union Affairs, there were 767 trade unions in 2022, representing only 5.8% of the Malaysian workforce, with less than 2% of all workers covered by collective agreements. One reason for this decline is the low union awareness among Malaysian workers, especially the younger generation.
So what exactly is a union, and how do unions protect workers? To promote a better understanding, this primer provides a list of essential FAQs to shed more light on unions, unionisation, and the possible reasons that have hindered workers from unionising in Malaysia.
A union is defined in Malaysia by the Trade Unions Act 1959 as an association of formal employees or employers in the same or similar trade, occupation, or industry. A union allows its employee members to exercise two fundamental labour rights1: the right to express work-related grievances without fear of retribution, and the right to bargain collectively for better working conditions.
There are three types of unions: public sector employee unions, private sector employee unions, and employer unions. Among the private sector employee unions, some are national unions that represent employees in the same or similar sector, while others are in-house unions comprising employees who are hired by the same employer. Aside from these, some union members have also come together to form a society registered under the Societies Act 1966 to foster stronger member solidarity such as the Malaysian Trades Union Congress and the Malaysia Employers Federation2.
1 These two enabling labour rights are also featured in the fair representation pillar of the Fair Work Act, which we have proposed as an omnibus legislation to bring about labour law reforms in Malaysia. Read the research series here.
2 Interestingly, MEF also permits individual employers to join as ordinary members, as highlighted in the Rule 7 of its constitution.
Generally, unions protect workers in three ways. First, they can represent workers in labour disputes with employers to combat labour exploitation. Second, some may provide members access to additional welfare services, such as skills training, childcare support, and cost of living allowances. Finally, and more importantly, unions can engage in collective bargaining with employers on behalf of their members for better rights, pay, and benefits, which are critical for shaping inclusive and effective governance of work.
But why should employees engage in collective bargaining when they can improve their working conditions through individual negotiations with their employers? The difference between collective bargaining and individual negotiation lies in the employment power relationship (Figure 2).
Through collective bargaining, workers from the same segments can form a single voice to negotiate a collective agreement with employers to set mutually agreed terms as the minimum labour standards. Meanwhile, the extent to which an individual employee’s working conditions may improve via individual negotiation depends on the employee’s job performance and negotiation skills. The former establishes minimally humane and fair working conditions for a group of workers, whereas the latter is often a strategy workers use to seek compensation that is commensurate with their performance.
According to the Trade Unions Act 1959 and the Industrial Relations Act 1967, all formal employees can join and form a union unless they hold a managerial, executive, confidential, or security position. Seven or more eligible employees can apply to register a union with the Trade Union Director-General to represent workers from the same or similar trade, occupation or industry.
Before a new union can bargain with an employer, it would need employer recognition with approval from the Trade Union Director-General and the Human Resources Minister (Figure 3) to justify its competency in representing workers. If the union does not receive employer recognition, it can seek government intervention. But the process is complicated as it involves filing a complaint with the Trade Union Director-General, organising a secret ballot, and seeking ministerial approval (i.e. Ministry of Human Resources).
The union can begin inviting the employer to collective bargaining after receiving employer recognition to represent workers. If an employer-employee consensus is reached, both the employer and the union shall file a request for cognizance of the collective agreement with the Industrial Court. The court would decide, approve, and announce an Award to tie the employer and the union to the collective agreement for enforcing the mutually agreed labour standards.
If collective bargaining fails, the union may seek government approval to adopt other tactics to gain concessions from the employer, such as picketing and striking (Figure 4). Any union of employees that plans to go on a labour strike must gain support from at least 60% of the total eligible members, and submit the result to the Industrial Relations Director-General within seven working days. That said, unions are not permitted to picket or strike in response to a labour dispute that has already been referred to the Industrial Court or without ministerial approval.
Looking ahead, unions will remain an essential part of a healthy labour market. The government recently passed the Trade Union (Amendment) Bill 2022 on 5 October 2022, which allows multiple unions to be formed in a single workplace. Although employer federations and some worker unions had previously opposed it, the former Human Resources Minister Datuk Seri M. Saravanan claimed that it would increase Malaysia’s unionisation rate, and the Labour Law Reform Coalition has lauded the legislative updates and called for the government to enforce it in March 2023 fully.
This legislative update, however, is unlikely to ensure workers’ right to unionise. We hope that policymakers will take the time to look into ways to address the underlying issues that are causing Malaysia’s union membership decline. For workers and the general public, we hope this primer helps you better understand and exercise your right to unionise.