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Which employer?

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When agencies ‘out-source’ workers to clients, a gap in the labour hirers’ relationship with the workers arises, observes Angeline Loh. Who exactly is the real employer?


The general public and the migrant workers can be forgiven for the confusion they face when asked who, in fact, is the employer they are working for. It may seem simple enough on the face of it, but when it comes down to legal brass tacks, there is a web of confusion in clearly identifying the actual employer.

In this day and age when individuals and corporations have taken to using job recruitment agencies and out-sourcing agents, it is less clear to the ordinary hirer of labour what their responsibility is to the workers working for them or what their role really is in this employment relationship.

From a lawyer’s viewpoint, there may be two answers to this dilemma, depending on the terms of the contracts in this triangular relationship i.e. the agent, ’employer’ and employee.

Yet, the confusion arises when there seems to be an ‘agent-employer’ and ’employer-client’. To simplify, this occurs when an out-sourcing agent claims in ‘black and white’ that they are the employer of workers they ‘hire out’ (out-source), thus being the ‘agent–employer’.

On the other hand the employer receiving out-sourced workers i.e. the ’employer-client’ of the ‘agent-employer’ is the one at whose house or firm the out-sourced employee works for eight hours or more a day, everyday, until the contract between the two employers expires or the employee’s contract term expires.

So, who exactly is the actual employer of these apparently out-sourced employees? The answer to this might lie in who has the most control or authority over the ‘out-sourced’ employees. However, this is not as simple as it seems as ‘agent-employers’ do not appear to have clear-cut roles regulated by definite rules and regulations laid down concretely in law.

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Agents only have company names and employers may be business entities of any description as well as other social groups such as families or individuals. Even if the Employment Act 1955 clearly outlines the employer-employee relationship through specifying the duties and rights of these two parties, the situation becomes more complex and ambiguous when a third party (the agent/out-sourcer) apparently becomes a second employer of the same group of employees.

There appears to be a gap (lacuna) in the agent-employer relationship with employees they out-source except for a tenuous contractual employer-employee relationship not defined under any existing labour statute in Malaysia.

This legal loophole can in circumstances be abused by either the agent-employer or the employer-client to shift responsibility to each other when a situation arises involving these out-sourced employees.

An agent-employer may abscond after receiving any financial payment meant to be paid to his/her out-sourced employees, leaving the responsibility to the employer-client.

If the employer-client denies responsibility to pay wages to the group of out-sourced employees given by the agent-employer, these out-sourced employees become disinherited by both ’employers’ and are left high and dry without a sen for all the work they have done for both these parties.

Although there are contractual remedies that can be sought in the civil courts, these are normally far from affordable by any migrant or local shop-floor worker.

Due to such practices, migrant workers in this country are denied job security and can be stranded penniless and undocumented. To add salt to the wound, they attract the evils of detention as ‘illegal immigrants’ under immigration law, official corruption and criminal extortion and become potential human trafficking victims.

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At any rate, neither the government nor parliament seems to have noticed this problem or made any effort to close the gap by devising a law, regulation or legal mechanism that will clarify the role of an out-sourcing/recruitment agency. Resort to principles of agency law will not alleviate this problem as an agent works solely for a principal (actual employer) unless the so-called ‘agent’ takes on the role of an actual employer adhering to the requirements of employment legislation and takes full responsibility and liability for all employees out-sourced by his/her company.

Angeline Loh is an Aliran executive committee member

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