Collective Bargaining and Trade Disputes: The Process Under the Industrial Relations Act

A worker who wants their employer to sit down at the table and negotiate wages cannot simply ask — there is a legal flow that must be followed, and every step has its own deadline. That flow is contained in the Industrial Relations Act 1967 (Act 177), enforced by the Department of Industrial Relations Malaysia (JPPM), and it determines who may negotiate, what may be negotiated, and when industrial action such as a strike is permitted.

How does a union obtain recognition?

Everything begins with recognition. A trade union that wishes to represent a group of workers serves a written claim for recognition in the prescribed form on the employer (section 9(2)).

The employer has 21 days to act (section 9(3)): either grant recognition, or notify the union in writing of the grounds for refusal. If recognition is refused or the employer simply does not respond within that period, the union may — within 14 days — report the matter to the Director-General of Industrial Relations (section 9(4)). If no report is made, the claim is deemed to have been withdrawn.

The Director-General then investigates the scope of the union’s membership and, through a secret ballot, measures the workers’ support for the union in question (section 9(4A)). Based on that investigation, he makes a decision; if recognition is decided to be given, it is deemed to have been accorded by the employer (section 9(5)).

Throughout the recognition proceedings under section 9, the law restrains both sides: workers may not strike and the employer may not declare a lock-out or terminate the workers’ services (section 10), subject to certain exceptions such as disciplinary action or the expiry of a fixed-term contract.

What are sole bargaining rights when there is more than one union?

Sometimes more than one union is recognised to represent the same group of workers. This is where sole bargaining rights come in. Only one union may hold the right to bargain on behalf of that group (section 12A).

The unions concerned may decide among themselves which of them holds that right and inform the Director-General. If there is no agreement, either party — the employer or a union — may apply in writing to the Director-General to determine it. The Director-General resolves it through a secret ballot, and the union with the highest number of votes obtains sole bargaining rights (section 12A(2) and (4)). Once obtained, that right remains exclusive for three years, unless the union ceases to exist (section 12B).

How is collective bargaining commenced, and what may be negotiated?

Once a union holds the bargaining right, it (or the employer) may invite the other party to commence collective bargaining. The invitation must be in writing and set out proposals for a collective agreement (section 13(1) and (2)). Where a collective agreement is already in force, an invitation may only be made within 90 days or less before its expiry date.

However, not everything is open to negotiation. A union may not include proposals on the following management-prerogative matters (section 13(3)):

• the promotion of an employee to a higher grade or category;
• the transfer of an employee within the organisation (so long as it does not entail a change to the disadvantage of the terms of employment);
• the recruitment of any person to fill a vacancy;
• dismissal by reason of retrenchment or reorganisation;
• termination and reinstatement of an employee; and
• the assignment or allocation of specific duties consistent with the terms of employment.

General questions on these matters may still be raised in discussion, but they may not form part of the formal proposals.

The following table summarises the key timeframes in this flow:

Step	Timeframe / condition	Section
Employer answers claim for recognition	21 days	9(3)
Union reports to Director-General if refused	14 days	9(4)
Invitation to bargain where an existing agreement applies	90 days or less before expiry	13(2)
Reply accepting/rejecting the invitation to bargain	14 days	13(4)
Commence bargaining after invitation accepted	30 days	13(5)
Deposit of collective agreement with the Registrar	1 month	16(1)
Minimum duration of a collective agreement	3 years	14(2)(b)
Notice of strike/lock-out in essential services	42 days	43

Every timeframe, threshold and section number in this table and throughout this article is drawn from the official text of the Industrial Relations Act 1967 (Act 177) listed in the sources, except for changes specifically attributed to the 2020 amendment.

If an invitation is refused, not answered within 14 days, or bargaining does not commence within 30 days, the inviting party may notify the Director-General, who may take steps to bring both parties to negotiate (section 13(6)). If the refusal persists, a trade dispute is deemed to exist over the matters in the invitation (section 13(7)).

How does a collective agreement become binding?

A collective agreement must be in writing and signed, and must state the period during which it is in force — which must be not less than three years (section 14). Any term less favourable than written law is void to that extent, and the statutory provision replaces it.

A signed copy must be jointly deposited with the Registrar of the Industrial Court within one month, and the Registrar brings it before the Court to be taken cognizance of (section 16(1)). The Court may decline to take cognizance or require amendments if the agreement does not comply with section 14.

Once taken cognizance of, the collective agreement is deemed to be an award and binds the parties concerned as well as all workers who are employed or subsequently employed in the undertaking concerned (section 17(1)). The rates of pay and terms of employment in it become implied terms in the contract of employment (section 17(2)).

What happens when negotiations reach a deadlock?

When a trade dispute exists or is apprehended, it may be reported to the Director-General, who takes steps of conciliation to encourage a settlement as quickly as possible (section 18). This conciliation is the principal stage of settlement before a dispute is referred to court.

If conciliation fails, the dispute may be referred to the Industrial Court. Since the Industrial Relations (Amendment) Act 2020 came into force on 1 January 2021, the power to refer a dispute to the Industrial Court has been transferred from the Minister of Human Resources to the Director-General of Industrial Relations. However, for disputes concerning a refusal to bargain or a bargaining deadlock, referral requires the written consent of both parties — unless it involves a first collective agreement, an essential service in the First Schedule, a situation that could result in an acute crisis, or a party not acting in good faith (the new proviso to section 26(2)). An award issued by the Industrial Court is final and binding.

When are strikes, lock-outs and picketing permitted?

Malaysian law permits industrial action only within a narrow space. Picketing is lawful only if it is carried out peacefully to obtain or communicate information, or to persuade workers to work or not to work — and not in numbers or in a manner intended to intimidate, obstruct passage, or cause a breach of the peace (section 40(1)). Breaching these limits is an offence punishable by a fine of up to RM5,000 (section 40(3)).

Strikes and lock-outs are altogether prohibited in several circumstances (section 44), among them:

• during proceedings of a Board of Inquiry appointed by the Minister, and for seven days afterwards;
• after a dispute has been referred to the Industrial Court and the parties notified;
• for a matter already covered by a collective agreement taken cognizance of by the Court or by an award; and
• for management-prerogative matters under section 13(3).

In essential services listed in the First Schedule, a strike or lock-out requires 42 days’ notice and may not be commenced within 21 days of the notice being given (section 43). A strike that contravenes section 43 or 44, or that is not in furtherance of a trade dispute, is deemed unlawful (section 45). After the 2020 amendment, the penalty under section 46 is a fine of up to RM5,000 and a further fine of RM50 for each day the offence continues; the imprisonment penalty that previously existed has been abolished. The Minister may also direct a strike or lock-out to stop if it endangers the life or health of the public (section 44A).

Separately from Act 177, before a strike is carried out, the Trade Unions Act 1959 (section 25A) requires a secret ballot. After the amendments, the threshold for consent was lowered to more than half of the votes with at least 60 per cent of members entitled to vote actually voting — compared with the two-thirds majority threshold required previously.

What next

If you are a union official, the first practical step is to make sure the claim for recognition is served in the correct form and to keep a record of the dates — because those 21-day and 14-day periods are absolute. If you are an employer, answer the claim in writing within the period to avoid the matter passing into the hands of the Director-General. For both sides, the full text of the Industrial Relations Act 1967 and the Trade Unions Act 1959 should be consulted for exact details, and industrial legal advice should be obtained before any industrial action. To understand related processes, see our articles on unfair dismissal and the Industrial Court and trade unions in Malaysia.