INDUSTRIAL COURT OF MALAYSIA

CASE NO : 3(13)/3-112/14

BETWEEN

TANJONG ARU HOTEL SDN. BHD.

AND

KESATUAN KEBANGSAAN PEKERJA-PEKERJA HOTEL, BAR DAN

RESTORAN SEMENANJUNG MALAYSIA

AWARD NO : 972 OF 2018

Before : Puan Anna Ng Fui Choo

Chairman
Mr. Mohd Khir bin Mansor
Employees' Panel Member
Mr. Chua Kim Lin
Employers' Panel Member

Venue : Industrial Court Malaysia, Kuala Lumpur

Date of Reference : 4.2.2014

Dates of Mention : 20.3.2014, 28.4.2014, 17.6.2014, 6.8.2014,

19.9.2014, 28.10.2014, 8.12.2014, 12.5.2015,
10.6.2015, 15.9.2015, 1.10.2015, 8.10.2015,
30.11.2015, 16.2.2016, 8.3.2016, 28.3.2016,
7.6.2016, 6.9.2016, 15.12.2016, 7.2.2017,
7.7.2017, 7.8.2017

Dates of Hearing : 8.8.2017, 25.10.2017

Union's Written
Submission : 4.12.2017
 3(13)/3-112/14

Hotel's Written
Submission : 4.12.2017

Union's Written
Submission in Reply : 8.1.2018

Hotel's Submission in
Reply : 8.1.2018

Union's Written
Submission in Reply : 26.1.2018

Representation : Mr. Lim Chooi Phoe and Mr. Ladis bin Yaman
From National Union of Hotel, Bar &
Restaurant Workers, Peninsular Malaysia
Representatives for the Union

Dato' Firoz Hussein, Mr. Choo Shi Jin and Ms

Cheng Mai
From Messrs Zaid Ibrahim & Co.
Counsels for the Hotels

Reference :
This is a trade dispute reference made under section 26(2) of the
Industrial Relations Act 1967 (the IRA) between Tanjong Aru Hotel
Sdn. Bhd. (hereinafter referred to as “the Hotel”) and Kesatuan
Kebangsaan Pekerja-Pekerja Hotel, Bar dan Restoran,
Semenanjung Malaysia (hereinafter referred to as “the Union”).

AWARD

[1] This is a Ministerial reference made under section 26(2) of the

IRA dated 4 February 2014 arising out of the trade dispute in respect of
“Perlaksanaan Gaji Minima” between Tanjong Aru Hotel Sdn. Bhd.
(the Hotel) and Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar
dan Restoran, Semenanjung Malaysia (the Union).

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Background

[2] There are five (5) different cases involving five hotels in sequence
from Case No. 3(13)/3-109/14 to 3(13)/3-113/14 which were heard
together by this court because of common issues involved. These five
(5) hotels are:

(a) Hotel Jen, Penang, which was formerly known as Traders

Hotel Penang (hereinafter referred to as “Hotel Jen
Penang”);

(b) Shangri-La Hotel Kuala Lumpur (hereinafter referred to as

“Shang KL”);

(c) Golden Sands Resort (hereinafter referred to as “Golden

Sands”);

(d) Shangri-La's Tanjung Aru Resort & Spa (hereinafter

referred to as “Tanjung Aru”); and

(e) Shangri-La's Rasa Sayang Resort & Spa (hereinafter

referred to as “Rasa Sayang”);

(collectively referred to herein as “the Hotels”).

[3] The Hotels are part of the Shangri-La chain of hotels and resorts
in Malaysia. Shangri-La Hotels (M) Berhad (“SHMB”):

(a) is the holding company of Komtar Hotel Sdn. Bhd. which

owns and operates Hotel Jen, Penang;

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(b) is the holding company of Shangri-La Hotel (KL) Sdn. Bhd.,

which owns and operates the Shangri KL;

(c) is the holding company of Golden Sands Beach Resort

Sdn. Bhd. which owns and operates Golden Sands; and

(d) owns and operates Rasa Sayang.

Tanjung Aru Hotel Sdn. Bhd. which owns and operates Tanjung Aru, is
40% owned by Orange Grove Holdings Private Ltd which in turn shares
a common ultimate shareholder with SHMB, namely Shangri-La Asia
Ltd.

[4] The trade dispute between the Hotels and Kesatuan Kebangsaan
Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia (the
Union) and Kesatuan Pekerja-Pekerja Hotel, Resort & Restoran Sabah
(Sabah Union) arises from the deadlock during the negotiation of
restructuring of wages. This was in relation to the implementation of the
minimum wages at the Hotels which was carried out by the Hotels
pursuant to Order 6 of the Minimum Wages Order (MWO) 2012. The
MWO 2012 came into effect on 1 October 2013 for the hotel industry.

[5] Pursuant to section 3 of the National Wages Consultative Council

Act 2011 (the NWCC Act), the National Wages Consultative Council
(NWCC) was established with the responsibility to conduct studies on all
matters concerning minimum wages and to make recommendations to
the Government regarding minimum wages orders according to sectors,
types of employment and regional areas (page 3 of COB2). Following
the recommendation of the NWCC, the Government, pursuant to section
23 of the said Act, by notification in the Gazette, made the Minimum
Wages Order 2012 (pages 5 and 6 and 15 of COB2). Order 4 of the

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MWO 2012 provided that the minimum wage for an employee in

Peninsular Malaysia be fixed at RM900 per month and for Sabah,
Sarawak and the Federal Territory of Labuan at RM800 per month.
Order 6 of the MWO 2012, inter alia, allows for an employee and a union
to negotiate on the restructuring of wages before the MWO 2012 comes
into operation and sets out the provisions for such restructuring (pages
14 and 15 of COB2).

[6] Paragraph 3 of the “Guidelines on the Implementation of the

Minimum Wages Order 2012” (the Guidelines) issued by the NWCC sets
out the method of restructuring of wages. It states that “subject to
negotiation between the employer and employee, the method of
restructuring of wages is based on the following conditions:

“(i) the restructuring process is made only once before the

commencement date of this Order and not a continuous
process after the commencement date of the Order; …

(iv) for the hotel sector where the service charge collection is
implemented, the employer may convert all or part of the
service charge meant for distribution to the employee, to form
part of the minimum wages; ...”
(emphasis added)
(See page 20 of COB2).

Application to Expunge

[7] The Union had made an application that the Collective

Agreement (CA) of Shangri-La Rasa Sayang Resort & Spa in Case No:
3(13)/3-113/14 exhibited in H9 from page 43 to page 64 in the Hotel's
Statement of Case dated 21 April 2014 and at pages 169 to 189 of

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COB3 be expunged for the following reasons: (i) It was not signed by
the Union as it was a unilateral CA imposed on the Union (ii) It was not
deposited in the Industrial Court and there was no Cognizance Number
given before the hearing commenced.

[8] The court had directed the parties to raise this issue in the
submissions after the hearing has been completed. Consequently,
learned Hotels' counsel Dato' Firoz submitted that at all material time, for
a period spanning almost five years specifically from 30 July 2012 until
26 April 2017, the said CA was the valid collective agreement which was
subsisting and implemented between the parties for Shangri-La Rasa
Sayang. This was pursuant to the High Court order on 30 July 2012
which was subsequently upheld by the Court of Appeal on 2 September
2014. Specifically on 30 July 2012, the High Court in Shangri-La Hotels
(Malaysia) Bhd v. National Union of Hotel, Bar and Restaurant Workers
Peninsular Malaysia & 1 other [RT-25-112-2011] held that the Hotel was
entitled to use the said CA. It was only on 26 April 2017 that the Federal
Court ordered that the old CA be implemented (as reported in [2017] 5
CLJ 513).

[9] The Hotels argued that there is no doubt, pursuant to the High
Court and Court of Appeal decisions, the said CA was valid and
subsisting at all material times from 30 July 2012 to 26 April 2017. It
was not disputed that when parties were in negotiations for the
restructuring of wages under the MWO 2012, it was between December
2012 to September 2013. This was followed by the trade dispute which
was referred to the DGIR for conciliation in September 2013. Thereafter,
the trade dispute was referred by the Minister to the Industrial Court in
February 2014 and the Statement of Case was filed by the Hotels in
court in April 2014.

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[10] It was argued by the Hotels the fact that the Federal Court had
subsequently on 26 April 2017 set aside the decisions of the High Court
and the Court of Appeal and ruled that the old CA be implemented, does
not make the said CA inadmissible. The said CA was said to be still
relevant as it reflected the factual circumstances existing at the material
time. Therefore, it was submitted that the subsequent decision of the
Federal Court does not erase what had happened at the material time
and does not alter the facts as they had transpired at the material time.

[11] Many authorities were cited to support the Hotels' case the said
CA ought not be expunged. This court will only make reference to the
Federal Court case of Desa Samudra Sdn. Bhd. v. Bandar Teknik Sdn.
Bhd. [2012] 1 CLJ 429, at page 445 when it was held that:

“[40] We therefore agree with the respondents' argument. In

the law governing documentary evidence, as in oral evidence,
three matters come to mind – relevancy, admissibility, and
weight. They must be considered in that order. Only
evidence which is relevant ought to be admissible. Irrelevant
evidence should be rendered as inadmissible and the matter
ends there. Now, relevant evidence which is rendered
admissible is still subject to the element of weight. The court
can either attach due weight to the evidence, or some weight,
little weight, or no weight at all. Due regard must be given to
the authenticity of the evidence, its source, its contents, and
more importantly, the surrounding circumstances of the case.
This is where contemporaneous evidence would come in
handy.”.

[12] The court is of the opinion that the said CA had formed a part of
the factual matrix of this case and it had been a relevant document to the

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trade dispute when the trade dispute was referred to the court as the
said CA had been held to be valid and subsisting at the material time.
The decision of the Federal Court on 26 April 2017 on the said CA is not
disputed by the court and the parties to this dispute. This court must
stress that the Federal Court order states that the “old Collective
Agreement is be implemented forthwith”. The Federal Court never
expunged the said CA but merely ordered that the old CA be
implemented instead. Thus, it is also the decision of this court that the
said CA need not be expunged. Nevertheless, since the old CA is to be
implemented as per the Federal Court's ruling, this court will therefore
not attach any weight to the said CA.

The Hearing

[13] The Hotels called three (3) witnesses in the hearing before this
court and they were:

(a) Mr Christopher Sakayaraj (COW1) – Area Director of

Human Resources of the Shangri-La group of hotels and
resorts;

(b) Mr. Kumaraguru a/l Kanagasabai (COW2) – Executive

Director of the Association of Hotel Employers (AHE); and

(c) Mr. Tay Keng Hock (COW3) – Regional Financial Controller

of the Shangri-La group of hotels and resorts.

The Union called one witness in the person of Mr. Rusli bin Affandi
(UW1), the Union's General Secretary.

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[14] It is the Hotels' case that on 11 December 2012, the management

of Shang KL had held a preliminary meeting with the Union wherein the
management of Shang KL discussed with the Union the idea to convert
a portion of service charge to form part of the minimum wage. By way of
a letter dated 24 December 2012, the Union stated that it was not
agreeable with the proposal. It then took the position that the Order
required Shangri KL to pay the minimum wage of RM900 monthly and
the source of funds should come from the Hotel. The Union also stated
that the service charge is payable to the employees under the collective
agreement and the Hotel could not use that as part of the minimum
wage (page 55 of COB3 and pages 56 to 83 of COB3 respectively).

[15] Considering the fact that the MWO 2012 and the Guidelines were
already in place, the Hotels decided to conduct an in-depth study and
came up with a Proposal (the Hotel's Proposal) for Restructuring of
Wages pursuant to Order 6 of the MWO 2012 and paragraph 3 of the
Guidelines on the Implementation of the Minimum Wages Order 2012
issued by the National Wages Consultative Council and endorsed by the
Minister of Human Resources. The Hotels' Proposal was thought to be
consistent with paragraph 3 (v) of the Guidelines and illustration no. 6
set out in the Explanatory Notes to the Guidelines. Illustration no. 6 of
the Guidelines expressly allows an employer to restructure part of the
cash payment from service charge collection to be made part of the
minimum wage (page 28 of COB2).

[16] SHMB, acting on behalf of Shang KL, Hotel Jen Penang, Rasa
Sayang and Golden Sands (the four Hotels in Peninsular Malaysia) sent
a letter dated 29 August 2013 to the Union requesting for a meeting with
the Union to discuss and negotiate the proposed restructuring of wages
pursuant to the MWO 2012 (page 1 of COB3). The Union responded

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vide a letter dated 29 August 2013 confirming the date of the meeting on
5 September 2013 (page 2 of COB3).

[17] Across the sea in Sabah, Tanjung Aru also sent a similar letter to
Sabah Union requesting for a meeting with the Sabah Union to discuss
and negotiate the proposed restructuring of wages pursuant to the
Minimum Wages Order 2012 vide a letter dated 5 September 2013
(page 118 of COB3). The Sabah Union responded vide a letter dated 6
September 2013 confirming a meeting date of 10 September 2013 (page
119 of COB3). The Hotel's Proposal was tabled before the Union at the
meeting between the Union and SHMB, representing the four Hotels in
Peninsular Malaysia on 5 September 2013 (pages 3 to 5 of COB3). In
Sabah, the Hotels' Proposal was also tabled before the Sabah Union on
10 September 2013, the only difference being the minimum wage of
RM800 as opposed to RM900 in Peninsular Malaysia (pages 120 to 122
of COB3). The Hotels' Proposal set out a top-up mechanism, by
converting part of the service charge meant for distribution to the
employees to form part of the minimum wages (top-up structure), to
comply with the Minimum Wages Order 2012.

[18] However, the Union rejected the Hotels' Proposal outright during
the meeting on 5 September 2013 and had refused to negotiate further
with the Hotels. As the parties had reached a deadlock at the said
meeting on the negotiations regarding the restructuring of wages, each
of the four Hotels in Peninsular Malaysia immediately vide letters dated 5
September 2013 respectively referred the matter to the Director General
of Industrial Relations (DGIR) under section 18(1) of the IRA for the
conciliation of the trade dispute concerning the proposed restructuring of
wages and specifically, the proposed top-up structure for the Hotels.
The letter dated 5 September 2013 from Hotel Jen Penang (pages 6 to

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10 of COB3), letter dated 5 September 2013 from Shang KL (pages 84

to 88 of COB3), letter dated 5 September 2013 from Golden Sands
(pages 94 to 98 of COB3), letter dated 5 September 2013 from Rasa
Sayang (pages 161 to 165 of COB3) are in point. The Union then issued
a letter dated 6 September 2013 to SHMB rejecting the Hotels' Proposal
and reiterated its stand that the Hotels should use their own funds to pay
the difference to all those employees who earn less than RM900 in basic
salary (pages 11 and 12 of COB3).

[19] Likewise, the Sabah Union rejected the Hotels' Proposal during
the meeting on 10 September 2013 and refused to further negotiate with
Tanjung Aru. Immediately after the meeting, the Sabah Union also
issued a letter dated 10 September 2013 to Tanjung Aru rejecting the
Hotels' Proposal and highlighting its stand that they did not allow the
Hotel to use service charge in the implementation of the minimum wage
(page 123 of COB3). As Tanjung Aru and the Sabah Union had reached
a deadlock on the negotiations regarding the restructuring of wages,
Tanjung Aru immediately vide a letter dated 10 September 2013 referred
the matter to the DGIR under section 18(1) of the IRA for the conciliation
of the trade dispute concerning the proposed restructuring of wages and
specifically, the proposed top-up structure for the Hotel.

[20] On 1 October 2013 when the MWO 2012 came into effect for the
hotel industry, the four Hotels in Peninsular Malaysia and Tanjung Aru in
Sabah claimed that they had no alternative but to adopt the top-up
structure to comply with the Minimum Wages Order 2012. As at 1
October 2013, the trade dispute had already arisen and had earlier been
referred to the DGIR under section 18(1) of the IRA on 5 September
2013 and 10 September 2013. Therefore, it was the Hotels' stand that
the matter was out of their hands, pending resolution by the DGIR or the

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Industrial Court, as it eventually falls to be decided by this court. Each

Hotel then issued a notice dated 1 October 2013 informing employees of
the Hotel of the implementation of the top-up structure.

[21] UW1 testified that the Union rejected the Hotels' proposal as
service charge is payable to the employees under the respective
Collective Agreement. Further, the Hotels cannot use part of the service
charge for the minimum wages as it is unfavourable to the employees.
The Union emphasized that it had advised the Hotels to comply with the
Minimum Wages Order 2012 and that the source of funds should come
from the Hotels. However, UW1 said the Hotels had gone one step
ahead to top up the minimum wage with the employees' service charge.
Hence, the Hotel had unilaterally implemented the top up of the
minimum wage with the service charge. He explained that in reality, it
becomes ''composite wages'' and not minimum wages. He stressed that
the Hotels could not adopt such a proposal because the Hotels are using
the Guidelines to top up with the service charge, but the Guidelines have
no force of law.

[22] More importantly, the Union said that it has a Collective

Agreement with the Hotels and Article 12 on service charge is
abundantly clear that 90% of the service charge shall be distributed to all
employees as listed in Appendix C of the CA according to the years of
service of the employees. Article 12 is a contractual term in the
Collective Agreement and binds the parties.

The Submissions of the Parties

[23] Interestingly, it was submitted by the Hotels' that the issue before
this court is not whether in law, service charge forms part of basic

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wages. Instead, it was contended that the real issue before the court
relates to the trade dispute arising from negotiations on the restructuring
of wages under Order 6 of the MWO 2012. Consequently, it was argued
by the Hotels that when considering the restructuring of basic wages, if it
has been accepted by all parties, then it is indeed possible to convert
service charge to form part of the minimum wage, subject to negotiations
and agreement of the parties. It was submitted that this was evident
from UW1's testimony when he conceded during cross-examination that
subject to negotiations, one could use service charge to form part of the
basic wage in the restructuring. Flowing from this, the Hotels submitted
that with such an express concession from the Union, the role of this
court is to purely decide on the trade dispute and in doing so, this court
must take into account the factors set out in section 30(4) and 30(5) of
the IRA.

[24] To this end, the court must reiterate that this is a ministerial
reference relating to the trade dispute between the parties on the
“implementation of minimum wage” as stated in the reference itself. This
court is duty-bound to decide on the trade dispute related to the
implementation of minimum wage. It is germane that the court considers
the law before it and indeed, if the restructuring of wages has been
accepted by all parties, it is possible to convert the service charge to
form part of the minimum wage, subject to negotiation and agreement of
the parties. Apparently this was not the case here, thus the trade
dispute before us.

[25] It was highlighted to the court that the Unions' repeated

contentions that the Hotels' Proposal was “unfavourable” to the
employees or would “lose out” on remuneration are untrue and
misleading. It was alleged that the Union was deliberately not

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comparing the restructured wages of the Hotels' proposed top-up

structure with the existing wages (as required under Order 6(b) of the
MWO 2012). Instead, the Unions are comparing the Hotels' proposed
top-up structure with what the Unions are demanding, that is, Hotels
“top-up” with its own funds. It was contended that these all show that the
comparison which the Unions are making are not with “existing wages”
(namely wages prior to the implementation of MWO 2012, as envisaged
by Order 6 of the MWO 2012) but with the Unions' own
proposal/demand labelled as “Top-up with Hotels' own funds” and
“Unions' calculation using Hotels' own funds” perspective.

[26] On this point, the court must express its gratitude to the parties
for laboriously putting up some of the employees' payslips and making
the comparisons of their wages before and after the top-up with the
service charge and using the Hotels' own funds, found in the witnesses'
statements and other documentary evidence in the bundles of
documents. The Hotels had also painstakingly collected the figures and
given the consequential financial effects if service charge is not allowed
to top up the wages to meet the minimum wage.

[27] The Union has been consistent in its argument in all minimum
wage trade dispute cases that minimum wage is basic wages and this is
in consonance with the NWCC Act. It was submitted by the Unions that
it is the bare minimum that the Hotels are obliged to pay to the
employees earning less than RM900.00 a month, with its own funds
without recourse to service charge. This is therefore opposed to the
unilateral conversion of the service charge by the Hotels with effect from
1 October 2013. The Union further argued that this obligation is
absolute and since it is the bare minimum, it is not tied up with the profit
and loss of the Hotels, nor is it related to the financial or paying capacity

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of the Hotels. It was contended that the circumstances and the

Guidelines relied upon by the Hotels are without basis and that if the
Hotels are unable to pay the minimum wages, they have no right to exist.
Therefore, the provision under section 30 (4) of the IRA has lost its
relevance when it comes to making a decision on the issue of the
payment of minimum wages, a submission point which this court readily
agrees.

[28] It was the Union's case that profit and loss account has no
relevancy with regard to the payment of minimum wages. The Unions
submitted that even COW3 admitted that whether the Hotels made a
profit or had incurred a loss, they must still pay the minimum wages.
COW3 further agreed that financial capability was irrelevant in the issue
of minimum wages. Moreover, the 90% service charge was not an
income or revenue of the Hotels. COW3 had testified that basic salary
was distinct from service charge. Consequently, the Union submitted
that distinctly, service charge could never be included into the basic
salary to form the minimum wages. COW3 had agreed that there were
two sources of funds being paid, that of service charge by the Hotels'
guests and basic salary being paid by the Hotel.

Decision

[29] The earliest decision of the Industrial Court on the issue of

minimum wage and the use of service charge was the Crystal Crown's
case. The court would like to refer to the High Court judgement in the
case of Crystal Crown Hotel & Resort Sdn. Bhd. (Crystal Crown Hotel
Petaling Jaya) v. Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar &
Restoran Semenanjung Malaysia (Crystal Crown's case) [2015] 1 LNS
1450. The appeal of Crystal Crown Hotel & Resort Sdn. Bhd. (Crystal

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Crown Hotel Petaling Jaya) against the decision of the High Court was
decided in the Court of Appeal on 31 July 2017 vide case No. W-02(A)-
1601-09/2015. The High Court's decision has been affirmed by the
Court of Appeal and it is now pending in the Federal Court.

[30] In the written judgement in the aforesaid case supra, the learned
High Court judge YA Dato' Asmabi Mohamad gave a brief introduction
on the concept and rationale for imposing a national minimum wage in
Malaysia. Her Ladyship explained,

“16. The National Wages Consultative Council Act 2012

(“NWCC”) was introduced to prevent exploitation of
labour through payment of unduly low wages. NWCC
recognizes that wages cannot be left to be determined
by market forces and imposes an obligation on an
employer to pay a minimum wage, irrespective of the
employer's capacity to pay. The minimum wage system
had been introduced in Malaysia by way of the Minimum
Wages Order 2012 (“MWO”), made pursuant to NWCC.

17. The process for the determination of the minimum

wages system had been provided under sections 21 and
22 of NWCC. After the minimum wages rates had been
recommended by the National Wages Consultative
Council (“Council”) to the Government and the same had
been agreed by the Government, these minimum wages
system would be gazetted pursuant to section 23 of the
NWCC.

18. What then is the minimum wage? The International

Labour Organization had defined minimum wage as the

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lowest wage that should be paid to the employees for

work or services done. This is to ensure that the bare
minimum needs of these employees and their families
are met based on the socio-economic conditions of the
country. The minimum wage would be set at a level that
is reasonable both for the employees and the employers
so that it would not be too high as to burden the
employer or too low as to exploit the employees. Its
purpose is not only to provide for bare subsistence of life
but also to take into consideration some measure of
education, medical requirements and amenities to
enable the worker to preserve his efficiency as a
workman (see OP Malhotra's The Law of Industrial
Dispute Sixth Edition at page 594-597).”.

[31] The learned High Court judge had found in favour of the Union
and dismissed the hotel's judicial review application. The learned judge
said that by examining the definition of “wages” and “minimum wages”
provided under section 2 of the NWCC Act, the definition of “wages” has
the same meaning assigned to it under section 2 of the Employment Act
1955; and the definition of “minimum wages” means the “basic wages” to
be or as determined under section 23. The learned judge cited an
Industrial Court award as to what is “basic wages” in the case of Decor
Wood Industries (Terengganu) Sdn. Bhd. v. Timber Employees' Union
[1990] 1 ILR 423:

“... does not include additional emoluments which some

workmen may earn on the basis of a system of bonus related
to production. Nor does it include any other supplements and
allowances, such as housing and cost of living which is not
directly related to the work in that category.”.

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From the above, her Ladyship concluded that it would appear that the
concept of “basic wages” under the Act does not include any other
additional components. Her Ladyship stated that this concept had been
illustrated in OP Malhotra's “The Law of Industrial Disputes” at page 84.

[32] The learned judge then continued by examining Order 6 of the

MWO and said,

“The law had envisaged that the implementation of the

minimum wage system must not in any way result in the
employee getting anything less favourable than the
employee's current wages. Neither could the basic
restructured wages be less than the amount of wages earned
by the employee pursuant to the contract of service. The
concept of service charge had been discussed in the case of
National Union of Hotel, Bar and Restaurant Workers,
Peninsular Malaysia v. Masyhur Mutiara Sdn. Bhd. [2014] 1
MELR 286. The rationale for the introduction of the service
charge in the hotel industry was to replace the practice of
tipping.”.

[33] Her Ladyship agreed with the Industrial Court that the applicant
(hotel) could not be permitted to meet its obligation to pay the minimum
wage as envisaged by the NWCC Act and the MWO 2012 by utilising the
service charge paid by its customers. The learned judge was of the view
that the Industrial Court was justified in rejecting the hotel's proposal for
the service charge to be utilised to make up for the minimum wage
provided under the law. The same rejection was also applicable to the
hotel's proposal for a portion of the service charge to be utilised to
supplement the basic wage to meet the minimum wage of RM900.00.

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[34] In the Kuala Lumpur High Court case involving these five Hotels
in Originating Summons No. 24-74-11/2015 between (1) Shangri-La
Hotel (KK) Bhd. (2) Komtar Hotel Sdn. Bhd. (3) Golden Sands Beach
Resort Sdn. Bhd. (4) Shangri-la Hotels (Malaysia) Berhad (5) Tanjung
Aru Hotel Sdn. Bhd. v. (1) National Wages Consultative Council (2)
National Union of Hotel, Bar & Restaurant Workers Peninsular Malaysia
(3) National Union of Hotel, Bar & Restaurant Workers Sabah, the
plaintiffs had sought the following declarations:

“a) The Guidelines on the Implementation of the Minimum

Wages Order 2012 issued by the 1st Defendant is intra
vires the National Wages Consultative Council Act 2011
and is issued pursuant to the powers and functions of
the 1st Defendant under section 4 of the National Wages
Consultative Council Act 2011;

b) The Plaintiffs are entitled to use paragraph 3 (v) and

illustration No. 6 of the Guidelines on the Implementation
of the Minimum Wages Order 2012 issued by the 1 st
Defendant as an aid of interpretation of the meaning of
“minimum wage” and “basic wage” under the National
Wages Consultative Council Act 2011 and Minimum
Wages Order 2012 for the purpose of implementation of
the Minimum Wages Order 2012; and

c) The Plaintiffs are entitled to convert all or part of the

service charge meant for distribution to the employees to
form part of the minimum wages for the purposes of the
implementation of the Minimum Wages Order 2012.”.

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[35] The learned High Court judge YA Dato' Hanipah Binti Farikullah
(as Her Ladyship then was) in her judgement dated 10 March 2017 ruled
that the Guidelines issued by NWCC are ultra vires the NWCC Act and
do not have the force of law. Her Ladyship added,

“26. The Guidelines stipulate that it is “subject to negotiation”

which means that it cannot be unilaterally imposed on the
Unions.

27. This interpretation is consistent with paragraph 6 of the

MWO 2012 which stipulates that any restructuring of wages is
by way of “negotiation”.

28. Therefore, the Hotel cannot force the Union to accept

the Top Up Structure if the Unions do not agree to the
proposal otherwise it would render the clear words of
paragraph 6 of the MWO and even paragraph 3 of the
Guidelines redundant.”.

[36] An appeal of the above mentioned case was filed to the Court of
Appeal in Case No. Rayuan Sivil No.: W-01(A)-484-12/2016 and the
said appeal was heard on 14 August 2017. The appellants' appeal was
dismissed by the Court of Appeal. Subsequently, the appellants filed for
leave to appeal to the Federal Court. The Federal Court comprising of
YA Ahmad bin Haji Maarop FCJ, YA Balia Yusof bin Haji Wahi FCJ and
YA Aziah binti Ali FCJ heard the application for leave on 25 January
2018 and unanimously dismissed the Hotels' application for leave to
appeal to the Federal Court in Mahkamah Persekutuan Permohonan
Sivil Case No. 08-413-09/2017(W).

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[37] The above mentioned two cases are apt and relevant for this
court to come to a decision on this trade dispute. Since the Guidelines
are ultra vires the NCCW Act, they are of no assistance at all. It is
clear to this court that “subject to negotiation” means whatever proposals
the Hotels had made cannot be unilaterally imposed on the Unions but
must have been successfully negotiated upon. Having said that, the
interpretation is consistent with paragraph 6 of the MWO 2012 which
stipulates that any restructuring of wages is by way of “negotiation”.
Thus, the Hotels cannot force the Unions to accept the top up structure if
the Unions do not agree to the proposal.

[38] Nevertheless, learned Hotels' counsel also submitted that even if

the Guidelines have no force of law, the court should take judicial notice
of the same, on the principle of public policy as well as section 30 (5A) of
the IRA. The court is unable to agree with this argument of the law,
when the higher courts have already decided on the fate of the
Guidelines. Further, there is no justification and basis for this court to
take judicial notice of the same.

[39] In the Court of Appeal's case in Civil Appeal No. W-01(A)-272-

07/2016: National Union of Hotel, Bar & Restaurant Workers Peninsular
Malaysia and Mahkamah Perusahaan Malaysia Kuala Lumpur v.
Mashyur Mutiara Sdn. Bhd. (Sheraton Langkawi Beach Resort), the
appeal was against the whole of the learned High Court Judge's decision
dated 19 May 2016 which had granted a certiorari order to quash the
Industrial Court's Award No. 151 of 2015. The sole question which was
argued before the Court of Appeal was whether the service charge
should be included in the calculation of wages in the retirement benefits
of one Ms Zurriyani. The decision of the learned High Court Judge was
reversed by the Court of Appeal and the learned Chairman's award was

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confirmed. The learned High Court Judge had relied on the decisions of
National Union of Hotel, Bar & Restaurant Workers, Peninsular Malaysia
v. The Plaza Hotel Kuala Lumpur [2015] 1 ILR 443 and in Mohd. Faizal
Md. Sari & Satu Lagi v. Touch Mobile Guard Sdn. Bhd. [2016] 1 CLJ 44.

[40] After considering the cases cited by the appellant and the
respondent in the appeal and the authorities relied by the learned High
Court Judge, His Lordship Mohd Zawawi Salleh JCA explained,

“With respect, the learned Judge seems to us to have fallen

into very serious error in deciding that the service charge
should not be included in the calculation for wages in the
retirement benefits of Puan Zurriyani. The cases relied upon
by the learned Judge are cases on minimum wages under the
National Wages Council Act 2011 and not under the
Employment Act 1955. These cases are rightly decided
because the minimum wages does not include the service
charge.”.

[41] It was submitted by learned Hotels' counsel that the above

mentioned case was not concerning the NWCC Act nor the MWO.
Therefore, the Court of Appeal's one-liner at paragraph 2 of the
judgement above, as cited by the Union in the Union's submissions, is
not the ratio decidendi of the case but obiter, akin to a mere mention in
passing. The court agrees that the above mentioned case was not
about minimum wages but 'wages' under the Employment Act 1955 and
whether the service charge should be included in the calculation of
wages in the retirement benefits of the employee. Therefore, the
statement made by the learned Judge in the case above must not be
read as an affirmation of the cases which decided on minimum wages.

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[42] Learned Hotels' counsel also submitted that the doctrine of stare
decisis is only applicable when the higher court's decision is on all fours
with the case at hand and it is not applicable when the factual matrix is
fundamental different. In support of the proposition, learned Hotels'
counsel cited the Federal Court case in Asia General Equipment and
Supplies Sdn. Bhd. & Ors v. Mohd Sari Datuk Hj Nuar & Ors [2011] 8
CLJ 749. Hence, it was contended that the doctrine of stare decisis is
not applicable for the case of Crystal Crown against this case before the
court. It was argued that the factual matrix of Crystal Crown's case is
fundamentally different from this case and the basis on which the matter
had gone to court was also different.

[43] It was further submitted that as the grounds of judgement of the

Court of Appeal in Crystal Crown's case have not been issued, learned
Hotels' counsel is not in a position to concede that this court is indeed
bound by the decision of the Court of Appeal in Crystal Crown because
that case purportedly dealt with many issues, which learned Hotels'
counsel allege are not relevant to this case. In any event, if the decision
of the Court of Appeal were based on those issues, it was further
contended by the Hotels' learned counsel, that the principle of stare
decisis is not applicable to this case and several reasons were thereafter
given.

[44] It was submitted that the various distinguishing factors of the

Crystal Crown's which are not applicable to this case are, inter alia, that
the matter there had arose from the negotiations of a 1 st Collective
Agreement and in this case, it was due to negotiations pursuant to Order
6 of the MWO 2012. In addition, it was contended that the Crystal
Crown's case mainly dealt with the issue of clean wage, namely whether
the hotel could do away with the basic salary and service charge

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structure. It was argued that the Crystal Crown's case had dealt with the
issue for changing the ratio of service charge from 9:1 (namely 90%, of
the 10% collected from customers to go to employees; and the balance
10% collected from customers to go to the employer) to enable it to be
utilized to supplement basic wage. It was further submitted that there
was also an issue there whether service charge could be distributed to
employees not within the scope of the Union's representation and also
the backdating of the 1st Collective Agreement.

[45] In contrast, it was stressed that this case seeks a resolution of a

trade dispute whereas the Crystal Crown's case in the High Court and
Court of Appeal, the matter stems from a judicial review wherein the crux
lies was whether there has been irrationality and unreasonableness by
the Industrial Court. With respect, the court is unable to agree that this
court is not bound by the High Court and Court of Appeal's decisions in
Crystal Crown. Although the Crystal Crown's ministerial reference was a
trade dispute over the terms and conditions of the 1 st CA, 'minimum
wage' under the NCCW Act and the MWO were canvassed and the
issues strenuously argued and decided in the Industrial Court and
subsequently considered and reviewed by the learned High Court Judge.
The relevant parts of the High Court judgement as reproduced in the
earlier part of this award was the ratio decidendi of the Crystal Crown's
case and this court is bound by that decision.

[46] If this court strays from the decision of the High Court, it will run
foul of the doctrine of stare decisis. Not only is this court bound by the
decision of the High Court in Crystal Crown Hotel & Resort Sdn Bhd
(Crystal Crown Hotel Petaling Jaya) dan Kesatuan Kebangsaan
Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia supra, it
is also now bound by the Court of Appeal's decision in the aforesaid

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case – the judgement in the Federal Court case in Metramac

Corporation Sdn Bhd v. Fawziah Holdings Sdn Bhd [2006] 3 CLJ 177 on
the doctrine of stare decisis is in point.

[47] It is not disputed that parties in this case have a binding CA

between them. Clearly, Article 12 provides for the distribution of the
service charge and that service charge could only be utilised if both
parties consent to vary the terms and agree (as stated in Article 2.2 of
the CA) to use the service charge to be converted to meet the difference
in the minimum wages. The parties had failed in their negotiations and
could not agree to vary the term in the said CA, thus the trade dispute
was referred to the Industrial Court. However, the Hotels had unilaterally
converted part of the service charge to top up the minimum wage,
without the consent of the Union.

[48] In the case of OYL Condair Industries Sdn. Bhd. v. Razuan bin
Arshad & 127 Ors [1993] 3 CLJ 650 at page 651, the High Court held:

“As for the view that I hold to begin with, s.17(2) of the IRA
provides:

17 (2) As from such date and for such period as may be

specified in the collective agreement it shall be an implied
term of the contract between workmen and employers bound
by the agreement that the rates of wages to be paid and the
conditions of employment to be observed under the contract
shall be in accordance with the agreement unless varied by a
subsequent agreement or a decision of the Court.

In my view, what the section (and equally the Article)

stipulates is that, after the coming into force of the CA, the

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provisions of the contract of service relating to the rates of

wages to be paid and the conditions of employment to be
observed should be in accordance with the provisions of the
CA.”.

[49] In a recent Federal Court judgement dated 26 April 2017 in the

case of National Union of Hotel, Bar and Restaurant Workers Peninsular
Malaysia v. Shangri-La Hotels (Malaysia) Bhd. [2017] 2 ILR 433, leave
was granted to the Appellant to refer this question to the Federal Court:

“Whether a collective agreement or terms and conditions of

employment can be unilaterally imposed by an employer on a
union without going through the collective bargaining process
provided for in the Industrial Relations Act 1967.”.

[50] It was the unanimous decision of the Federal Court that the
answer to the 'Leave Question' must be in the negative. Hence,
reverting to the case before their Lordships, it was held that the
Respondent had no power to impose unilateral terms and conditions of
employment on the employees represented by the Appellant if there still
exist a valid collective agreement between the parties. The principle is
equally applicable in the case before us in that the Hotels cannot
unilaterally alter or impose terms and conditions on the Unions.

[51] This is a unanimous decision of this court to dismiss the Hotels'

trade dispute reference. Reproduced below is the learned decision of
the Honourable panel member of the employers Mr. Chua:

“The dispute in these cases relates to the implementation of

the Minimum Wages Order 2012 and whether the Hotel could

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use the service charge for purpose of restructuring of the

minimum wage, i.e. to use the service charge to top up the
difference from the basic salary, where it is lower than the
minimum wage, to meet the requirement of the minimum
wage under the Minimum Wage Order 2012.

After having reviewed the submissions from both parties and

taking cognizance of the doctrine of stare decisis where the
superior courts have ruled on the same subject matter
(Crystal Crown and Shangri-La Hotel (KL)), I am of the view
that the Hotel cannot use the service charge for of meeting
the requirement of the Minimum Wage Order. My views are
derived based on the following:

1. Whilst there is a dispute on whether the Guidelines

issued under the NWCCA has the force of law, it is
noted that the Guidelines also clearly stated that it is
“subject to negotiation between employer and
employee”. This is further reinforced by the relevant
provisos under Para 6 of the Minimum Wages Order
2012 which states that “nothing in this Order shall be
construed as preventing the employer and the
employee, or the trade union, as the case maybe, from
negotiating on the restructuring of wages under Section
7B of the Employment Act 1955”. Based on this, it is
obvious that the Union is against the proposal from the
Hotel and thus it cannot be arbitrarily enforced.

2. The remunerations of the hotel employees have always

had 2 key components, i.e. (a) basic salary payable by
the Hotel, and (b) service charge which are collected
from customers (of which the Hotel retain a certain

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percentage for administrative cost). This is provided

under separate articles in the Collective Agreement and
I believe it is to provide for separate compensation to the
employees.

3. When the Minimum Wage Order was implemented, it is

my view that the Government intends to provide a
minimum wage for all employees and the cost is to be
borne by the employer. It is the same for all other
industries and there do not seem to be any reason for
the hotel industry to be different, especially since the
service charge has been around for long period of time.

4. Service charge is not a fixed income and fluctuates

based on the business volume of the hotel. It is my
belief when the Guidelines of the NWCCA and Para 6 of
the Minimum Wages Order 2012 stipulates that the
employer and employee may negotiate to restructure the
wages of the employees, it may have referred to
situation where there are different components of wages
which are fixed.

5. Minimum wage has been defined in Section 2 of the

NWCCA as meaning basic wage or as determined under
Section 23. Since the Minimum Wage Order 2012 has
determined the minimum wage to be RM900, the
minimum wage payable to the hotel employees would
have to be at least RM900 without considering the
service charge.

Meanwhile, the Hotel's contention that the said Collective

Agreement was still valid and subsisting at all material times

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from 30 July 2012 to 26 April 2017 does not hold water as the
Federal Court had on 26 April 2017 ruled that the old
Collective Agreement remains. The Union had appealed
against the decisions of the High Court and Court of Appeal
and in view of the decision of the Federal Court, the previous
decisions are therefore overruled and the previous situation is
reinstated. Nevertheless, we do not agree with the Union's
request to expunge the evidence but the Industrial Court
should now rely on the old Collective Agreement.

The Hotel's counsel has argued that this case is a trade

dispute and not a question of law and in view of this, it is for
the Industrial Court to determine the dispute. Whilst I think
this is just a play of words, I am of the view that Hotel cannot
arbitrarily impose the Top Up rules to implement the
requirement of the Minimum Wage Order. As the Union is
against it, I am of the view that using the service charge to
supplement the minimum wage would not be equitable to the
employee.”.

[52] The Honourable panel member of the employees Mr. Mohd Khir
bin Mansor also opine that since there is a binding CA between the
parties, each party cannot unilaterally alter the terms of the CA.
Although there was a negotiation, that had failed but the Hotels' had
gone ahead to utilise the service charge to top up the employees'
minimum wages without the consent of the Unions. He stated that
under paragraph 6 of the MWO, there is nothing to prevent the parties
from negotiating or restructuring the employees' wages if the total wages
are not less favourable than the employees' existing total wages.

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[53] The court hereby dismisses the Hotels' unilateral implementation

of the minimum wages of utilizing the service charge of the employees
as it is not in conformity with the NWCC Act and the Minimum Wages
Order 2012 as from 1 October 2013 and also Article 12 of the Collective
Agreement. It is also the order of the court that the Hotels pay the
minimum wages of RM900.00 to the employees earning less than
RM900.00 a month with their own money without recourse to service
charge as from 1 October 2013. It is also ordered that the utilized
service charge be refunded to the employees as from 1 October 2013
within six weeks from the date of this award. Finally, the Hotels are to
provide a list of names of employees and arrears of service charge to be
forwarded to the Union within six weeks from the date of this award.

[54] In arriving at this decision, the court has acted with equity and
good conscience and the substantial merits of the case without regard to
technicalities and legal form as stated under section 30 (5) of the IRA.

HANDED DOWN AND DATED THIS 30 DAY OF APRIL 2018

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