INDUSTRIAL COURT OF MALAYSIA

CASE NO: 26(4)/2-657/08

BETWEEN

KESATUAN KEBANGSAAN PEKERJA-PEKERJA HOTEL, BAR DAN RESTORAN SEMENANJUNG MALAYSIA

AND

PERANGSANG HOTEL & PROPERTIES SDN. BHD.(QUALITY HOTEL SHAH ALAM)

AWARD NO: 1278 OF 2010

Before : AHMAD TERRIRUDIN BIN MOHD SALLEH - CHAIRMAN

Panel Members : Mr. Chua Kim Lin - Employer's Panel

: Mr. Jufri bin Masri - Employee's Panel

Venue : Industrial Court Malaysia, Kuala Lumpur

Date of Reference : 06.11.2008

Dates of Mention : 22.01.2209, 14.04.2009, 14.05.2009, 23.06.2009 02.12.2009 & 05.07.2010

Dates of Hearing : 14.01.2010 & 24.05.2010

Representation : Mr. Lim Chooi Phoe of National Union of Hotel, Bar & Restaurant Workers, Peninsular Malaysia Representative for the Union

Mr. P. Jayasingam with Ms. Jacinta Johnson

1

of Messrs. Zul Rafique & PartnersCounsel for the Respondent/Hotel

Reference:

The reference of the Honourable Minister of Human Resources, Malaysia

is regarding the trade dispute (“the dispute”) is over the Collective

Agreement (“the CA”) between the Kesatuan Kebangsaan Pekerja-

Pekerja Hotel, Bar & Restoran, Semenanjung Malaysia (“the Union”) and

Hotel Perangsang Hotel & Properties Sdn. Bhd. (Quality Hotel Shah Alam)

(“the Hotel”).

AWARD

(NO. 1278 OF 2010)

The dispute referred to by the Minister under section 26(2) of the

Industrial Relations Act 1967 (“the Act”) is over the Collective Agreement

(“the CA”) between Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar &

Restoran, Semenanjung Malaysia (“the Union”) and Perangsang Hotel and

Properties Sdn Bhd (“the Hotel”).

The dispute is over the proposals terms and conditions of employment to

be incorporated in the 6th Collective Agreement (“the CA”). It is to be

noted that the duration for the said CA is from 1 January 2007 to 31

December 2009. Prior to the hearing, parties have informed the court

2

that majority of the terms and conditions to be incorporated into the said

CA. As such, the only disputed articles are as follows:

(a) Article 8(a) - Probation and Confirmation

(b) Article 10 - Salary.Structure (Annual Increment and

minimun/maximun salary

(c) Article 23(a) - Paid Leave For Trade Union Courses

(d) Article 27 - Retirement Benefits

(e) Article 28(b) - Retrenchment and Retrenchment Benefits

(f) Article 39 - Outside Catering Allowance

The case was called for hearing on 14 January 2010, 28 April 2010 and 24

May 2010 in the presence of Mr. Lim Chooi Phoe, Industrial Relations

Consultant who was representing the Union and Mr. P.Jayasingham with

Ms. Jacinta Johnson from Messrs Zul Rafique & Partners who were

representing the Hotel.

The Union and the Hotel had both filed their respective pleadings. Other

documents tendered and relied on by the parties at the hearing are as

follows:

(a) Common List of Disputed Articles filed on 1 December 2009

(b) Union's Bundle of Documents (ULB1)

(c) Hotel's Bundle of Document (COB)

3

(d) Hotel's Breakdown Expenses from 2009 to 2005 (ULB2)

(e) Hotel's Event Order (ULB3)

In the instant case, the sole witness for the Hotel is Jasmine Yew Siew

Moy (COW1) and currently the Business Support Manager of the Hotel. It

is also germane to note that in this case the Union did not call any

witness to testify. At this juncture, the court does not intend to state in

full the evidence given by the witness in this case. However, if there is a

need the court will highlight it in its evaluation and findings.

The court received written submissions from the representatives of the

respective parties as regards to the disputed articles.

Evaluation and Findings

Before proceeding further, it is important to note that in interpreting a

CA, the court must consider the environment in which it operates in

particular it governs the relationship of an employer, a union and its

members.

(a) Article 8 (a) – Probation and Confirmation

Under the current CA, it is provided that an employee who is

employed by the hotel shall have to serve a probationary

period of not exceeding three months and the hotel may

extend it for a period not exceeding one month. According to

COW1's witness statement (COWS1), the proposal to change

4

the probationary period to 3 + 3 months is because to give

more time to the employee to improve on his or her

performance. Further, she said that the hotel is of the view

that the current 1 month is not sufficient to give the

necessary training and guidance in the event an employee

failed to perform after the initial 3 months' probationary

period.

In response to this proposal, the Union contends that the hotel

did not provide any evidence to show which category of

employees needs the 3 + 3 months. Further, it is the

contention of the Union also that the positions within the

purview of the Union are rank and file employees and they do

not need six months to confirm. The representative for the

Union also highlighted to the court that in the hotel industry

the normal practice was that probationers were only required

to serve a probationary period of 3 + 1 months. To support

this contention, the Union highlighted the case of Daikoku

Company Sendirian Berhad v. National Union of Hotel, Bar &

Restaurant Workers (1986) 1 ILR 1144.

As for this proposal, the court, after scrutinizing arguments of

both parties finds that there is no reason to depart from the

existing clause. The court is of the view that the present

probationary period that is 3 + 1 months is sufficient for the

company to evaluate the performance and to guide the

5

employees since they are only rank and file employees which

does not possess high degree of skill. The court also agrees

with the Daikoku's (supra) case cited by the Union where it

was held as follows:

“If he or she, as a waiter/waitress, dish washer,

cleaner, bartenders, clerk typist, driver, assistant

cooks, cannot be confirmed within a period of four

months in his/her occupation which does not require a

high degree of skill, he or she becomes more of a

liability than an asset to the Company and there is no

place for such an employee in the Company. For these

reasons, we accept the Union's proposal.”.

The court is of further view that with the probationary period

of 3 + 1 months, the concerned employee will know latest the

fourth month whether he/she will be confirmed by the Hotel.

However, if we adopt the probationary period 3 + 3 months,

the employees has to wait longer and if he/she is not

confirmed by the Hotel he/she has lost 2 months of waiting

for decision from the Hotel when in actual fact he/she can

seek other job elsewhere. As such, the court feels that the

proposed article will not be fair to the employees.

Lastly, the court notes that probationary period of 3 + 1

months is an industry norm. Thus, there is no valid

6

justification for this court to depart from what has been the

practice of the hotel industry.

(b) Article 10 Salary Structure (Annual Increment & Minimun/

Maximun Salary)

As for this proposed Article, the Union suggested that an

immediate increment of 10% of basis salary be given to every

employee.

However, the Hotel did not agree with the proposal put up by

the Union because COW1 said the Hotel is certainly not in the

financial position to meet the demand for the 10% immediate

increments made by the Union but willing to concede if the

amount is 4%. This is because based from the financial

statements for Perangsang Hotel and Properties Sdn Bhd

(“Perangsang Group”) for the year as at 31 December 2006

(pages 60 to 135 of COB), it is clear that the Hotel' s net profit

after tax has declined to 43.42 % from the previous year.

Further, she said that for the year 2005 to 2008 there was no

dividend declared and there is no prospect of dividend being

declared for the year 2009. In addition, COW1 testified that

the uncertain global economy in particular the unfavourable

climate in tourism due to the present threat of epidemic has

seriously affected the hotel's business. It is also the contention

of COW1 that although it may appear that the adjustment

proposed is low but in actual fact the employees in the Hotel

do not earn lower income or take home a lesser pay compared

7

to other Hotels. This is because the service points that the

employees earn in the Hotel is much higher than the service

charge points that the employees earn in other hotels.

As for the minimun salary, maximun salary and annual

increment, COW1 again stressed that the Hotel does not have

the financial capacity to pay RM50.00 increase in the

minimun salary, 20 steps as maximun salary and annual

increment.

In rebutting the contentions put up the Hotel, the Union said

that it is not true that the Hotel is not in financial position to

meet the Union's obligation. This is because from the said

audited accounts (page 60 to 135 of COB), it is clear that

Perangsang Group did make profits before tax from the years

2005 to 2008 and for the Hotel it showed that from year 2004

to 2008 the Hotel has been making profits. The Union also

claimed that the profits for the Hotel will be much higher if

we did not take into account depreciation, renovation,

purchase of fixed assets and share options granted under

ESOS. This is because these expenses are not operating

expenditure. The demand for 10% immediate increment is

reasonable claimed by the Union since the CPI is 12.86% and

2/3 of it is 8.6%. Further the request for the said 10% is

because the Union has lost out from 1 January 2007 to 31 May

2008.

8

Pertaining to the minimun, maximun salary and annual

increment, again the Union contends that the Hotel has the

financial ability to meet the Union's proposal. The Union also

highlighted to the court that it is currently the practice in the

hotel industry that the minimun salary range is from RM 350 to

RM400. As for the salary steps the Union is of the view that 20

steps is reasonable as compared with Hotel Saujana

(“Saujana”) which has a minimun salary of RM310 and 22

steps. Regarding the annual increment the Union is asking for

another band of RM700 and above at RM55 which is in line

with Saujana .

In the present case, the court has carefully perused all the

documents tendered and guided the case of Penfibre Sdn Bhd,

Penang v. Penang & S. Prai Textile & Garment Industries

Employees' Union [1986] 1 ILR 323 at 329 as follows:

“It is well established in Industrial Law that in deciding on

the question of wage structure and wage increases, the

court has to take into account the following factors:

(a) Wages and salaries prevailing in comparable

establishments in the same region;

(b) Any rise in the cost of living since the existing wages or

salaries were last revised; and

9

(c) The financial capacity of the company to pay the

higher wages/increases.”.

In the case of Hagemeyer Industries (M) Sdn Bhd v. National

Union of Petroleum & Chemical Industry Workers [1983] 1 ILR

325 at 341, it was held as follows:

“We agree that we have to take into

consideration the financial capacity of the

company when we determine the wage scales. It

will not be in the interest of the union that, by

fixing a wage scale beyond the capacity of the

employer to pay, some of its members are

perforced to leave their employment. And it is,

in our view, our responsibility to keep the entire

work force in employment, especially in times of

world economic recessions, and not to make any

award which causes unemployment to some.”.

It is pertinent to note that for purposes of evaluating and

deciding whether the Hotel has the financial strength to meet

the demand of the Union, the court will only consider audited

accounts of the Hotel and not the Perangsang Group. It is not

disputed by the parties that from year 2006 to 2008 (page 60

to 135 of COB), the Hotel's net profit after tax has declined

from RM498.355 to RM281,506 but at the same time the court

must not ignore the request made by the Union despite COW1

pleading to the court that the total cost the Hotel will have to

pay for this exercise is RM180,725.00. The is because CPI has

10

increased over the years. Therefore, an increment in the

salary will at least reduced the impact of increase of CPI on

the employees. In the same vein, the court finds that the

demand for 10% immediate increment by the Union is

unreasonable considering the modest profit made by the Hotel

from years 2004 to 2008. With regards to the calculations for

CPI, the court agrees with contention by the counsel for the

company that is should be based on the actual duration of the

CA. Thus, the average CPI for the corresponding period is 9.2%

and 2/3 of it is 6.13%, but it is not mandatory for the court to

adopt the Harun J.'s formula in the case Malayan Commercial

Banks Association v National Union Of Bank Employees [Jan-

June 1982] MLLR Award 117 of 1982 since it is only a guideline

for the court (see: Felda Oil Sdn. Bhd. v. Kesatuan Pekerja-

Pekerja Pekilangan Perusahaan Makanan [1998] 3 ILR 374).

Regarding the Hotel expenses for depreciation, purchase of

fixed assets and ESOS, the court finds that these expenses are

not operating expenses since it does not involved movement

of funds. As for renovation cost, the court is of the opinion

that it is not fair for the Hotel to use this excuse of financial

inability since this cost is unavoidable if the Hotel wants to

remain competitive in the industry (see: Kesatuan Kebangsaan

Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia

v Shangrila Hotel (KL) Sdn. Bhd. Award No. 482 of 2010).

Therefore, having this in mind and in adhering to the

mandatory provisions of section 30(4) and (5) of the Industrial

11

Relations Act 1967 (the Act) and in exercising the discretion

conferred by Parliament to attain the object and policy of the

Act, we are of the view that an adjustment of 5.5 % across the

board would be fair and equitable based on the peculiar facts

of this case.

Regarding the mininum salary, the court notes that the Union

is asking for an increase of RM50 across the board from the

present structure but the Hotel is only willing to increase to

only RM310.00. In determining the minimun salary for the

hotel industry, the court is of the view that one must look at

the overall wages earned by the employees Hotel at the

material time and must make comparisons with the other

establishments of equal standing in the same industry.

Therefore, in this case the Hotel tendered a comparison tables

showing the service charge points earned by the Hotel

employees as compared with other hotels (page 7 of COB) but

the court finds that the said table is for 2009 and not during

the disputed period. As such, the court cannot accept the

Hotel's contention that there is no need to increase the

minimun salary of the Hotel employees since service charge

points that the employees earn in the Hotel is much higher

than the service charge points that the employees earn in

other hotels in Selangor.

The court notes that the practice in the hotel industry for

minimun salary is between RM350.00 to RM400.00. As such,

12

the court finds that the minimun salary should be increased to

RM350.00 to reflect its standing in the hotel industry.

In relation to the proposed increase in salary steps, the court

has studied at length the salary scales proposed by the Union.

The court finds 4 additional steps, thus making a total of 20

steps is reasonable. The court is of the view that the inclusion

of the four additional steps would serve as an added incentive

to longer-serving employees to continue in service and thus

reduce the risk of high turn-over of experienced employees.

As for the annual increment, the Union is proposing is to

create another salary tier or band for employees who are

earning RM700 and above and having RM55 as annual

increment. However, the court cannot accede to the Union's

proposal because the court is the view that the the salary

increment given is already sufficient to cover the employees

who are earning RM600 and above.

(c) Article 23 (a) Paid Leave For Trade Union Courses

The Hotel did not want to maintain the existing clause

because COW1 said the Hotel's intention to allow only Union

House Committee members to attend the trade union courses

is to avoid unnecessary disruption to the operations of the

Hotel. The representative for the Union in his written

submission submitted that the present clause has been there

13

for the past 15 years without any problem so there should not

be there any change.

The court is of the opinion that the present clause should be

maintained because the court accepts the Union's contention

that this clause has been is existence for the last 15 years

without any problem. The court notes that the Hotel contends

that the proposed article is to avoid unnecessary disruption to

the operations of the Hotel but the court finds that it is unfair

to deny the employees the right to attend courses especially

courses which will benefit the employees and the Hotel. It is

the view of the court also that to minimise the disruption of

the operations of the Hotel that parties involved can planned

the courses in advance so due notice can be given to the

Hotel.

(d) Article 27 Retirement Benefits

The dispute is regarding the Union proposal to claim 4% in

excess of the EPF statutory rate instead of the current 2%.

According to the Union the rationale behind this proposal is

because Saujana is giving 4% in excess of the statutory rate

and the basic salary in the hotel industry is relatively low.

The Hotel refused to accede to this proposal and COW1 said

the Hotel did not have the financial capacity to meet the said

demand. Secondly, the present extra 2% is equitable and a

14

fair recognition of the employee's contribution to the Hotel.

Thirdly, this amount is comparable with other hotels.

Although the court agrees with the Hotel' s contention that

the present rate is in excess of the Hotel' s contribution to

the EPF but to enhance greater commitment and loyalty from

its employees, the court is of the view that the amount should

be increased to 3%.

As for the retirement age, the Union is claiming 56 years old

retirement for male and female employees. However, the

Union said that they are willing to accept if the retirement

age is 55 years for all the employees. This is because to be

fair and consistent with Saujana. Further, if the retirement

age is set at 55 years the employees can withdraw all their

savings in the EPF and for the purposes of income tax the

employees will be exempted from tax if the retirement

benefit is in lump sum provided that the said employees have

worked for 10 years and above. The Hotel raised objection to

this proposal by stating that the Hotel is unable to meet the

Union's demand because being in the service industry certain

job functions will not be suitable for female employees above

the age of 50.

In this aspect, the court feels that there should not be any sex

discrimination pertaining to the retirement age and based on

15

the hotel industry norm the retirement age should be 55

years.

(e) Article 28 (b) Retrenchment and Retrenchment Benefits

In this matter, the Hotel proposed to change the existing

clause by allowing the Hotel to depart from the LIFO

principle. The Union did not agree to this proposal because

they claimed that the existing proposal has been working well

for over 15 years.

The court agrees with the Hotel's proposed amendment to the

existing article. This is because it is not mandatory for the

employer to follow LIFO (see: Supreme Corporation Bhd v

Doreen Danial Victor Daniel & Anor (1987)(Rep) 769. )

(f) Article 39 Outside Catering

In the existing clause it is provided that an employee who

performs outside catering services within the normal hours for

that day shall be paid RM4.00 per hour but the Hotel is

proposing to change it to RM25.00 per occasion. This is

because COW1 confirmed to the court that the Hotel does not

have the financial capacity to meet the demand or even to

maintain the current clause. She further explained that the

Hotel is losing out to other Hotels in the Klang Valley in terms

16

of outside catering because the Hotel charge higher costs and

this one of factors in the outside catering allowance. To the

Hotel the RM25.00 is fair, competitive and in line with the

prevailing rates given by other hotels. In countering this, the

Union contends that the RM25.00 is not reasonable as the

employee losses out from the existing quantum of RM4.00 per

hour and if RM25.00 is divided by 8 hours it gives a figure of

RM3.12 per hour which unfavourable that the existing rate.

As for this, the court accepts the Hotel's proposal that outside

catering allowance should be capped at RM25.00 per occasion.

This is because court agrees with COW1 that by maintaining

the prevailing rate the Hotel is losing out to other hotels in

the Klang Valley in terms of outside catering since their cost

in particular outside catering allowance is higher than the

other hotels. Further, based on comparison table tendered by

the Hotel (page 18 of COB), it is clear that proposed rate is

fair, competitive and in line with prevailing rates given other

hotels.

Conclusion

In handing down its award this court did, as is required by section 30(4)

of Act, in its deliberations, "have regard to the public interest, the

financial implication and the effect of the award on the economy of the

17

country, and on the industry concerned and also the probable effect in

related or similar industries"; and did also as required by section 30(5) of

Act, "act according to equity, good conscience and the substantial merits

of the case". For this court to be extravagant in its awarding of increased

monetary benefits to the employees of a Hotel it would not only have a

detrimental effect on the Hotel itself but also on its workers as well as on

the hotel industry generally. However, the court at the same time must

also taken into consideration the public interest.

This court in deliberating on the award was unanimous in its decisions.

The parties may now draw up their CA incorporating the articles that

were either not in dispute or which were agreed to by the parties

together with the award of this court on the disputed articles. The

parties are urged to take care to be consistent with regard to both

terminology as well as the numbering of the articles and clauses when

drawing up the new CA.

HANDED DOWN AND DATED THIS 5 DAY OF OCTOBER 2010

SIGNEDAHMAD TERRIRUDIN BIN MOHD SALLEH

CHAIRMANINDUSTRIAL COURT

18