Two things happen every time we publish a boss illegal things article. First, the comment section fills up with people saying “this happened to me.”
Second, a different group comments saying they had no idea what their boss was doing was against the law, because it was presented so matter-of-factly, wrapped in authority, and delivered with such confidence that questioning it never felt like an option.
That second group is who Part 3 is for.
These are the violations that tend to fly under the radar the longest, often because they are either disguised as company policy, buried in contract language, or involve rights that most Malaysian employees simply do not know they have.
The law exists. It just does not always announce itself.
A blanket “use it or lose it” annual leave policy is not automatically enforceable in Malaysia. Section 60E of the Employment Act 1955 provides that an employee is entitled to annual leave and, critically, that any leave not taken due to the employer’s requirements must be paid out rather than forfeited. An employer cannot simply declare that unused leave expires at year-end if the reason it was not taken was operational, if the employee was denied the leave request, or if the employer’s policy conflicts with the statutory minimum entitlement.
Salary deductions in Malaysia are tightly controlled. Section 24 of the Employment Act 1955 lists the only permitted deductions: overpayment recovery, absence from work, EPF contributions, income tax, and a few other specific categories. Lateness is not a category that allows arbitrary monetary deductions unless the deduction is calculated proportionally on the actual time absent and documented properly. A flat penalty of RM150 for three late arrivals, without any contractual basis calculated on actual time missed, is not permitted. The employer may take disciplinary action through the proper process, but may not simply reach into your salary to do it.
Requiring employees to purchase equipment, tools, or uniforms that are necessary to perform the job, and then recovering the cost through salary deductions, is impermissible without the employee’s written consent and where it falls within the categories allowed under Section 24 of the Employment Act. More broadly, employer deductions for items provided for the employer’s benefit, such as a company uniform or work tools, are not permitted unless they fall under the specific categories in the Act and the deduction does not reduce the employee’s wage below the minimum wage. This practice is particularly common in food and beverage, retail, and certain service sectors.
An employer does not have unrestricted rights to access an employee’s personal device or private communications. Accessing a personal phone, reading personal messages, or demanding passwords to private accounts without the employee’s genuine consent may constitute a breach of the Personal Data Protection Act 2010 (PDPA). The PDPA requires that personal data, including private communications, can only be collected and processed with consent and for a legitimate, disclosed purpose. The situation is different where a company-issued device is concerned and where a clear policy permitting monitoring has been disclosed at the start of employment. Even then, covert or blanket monitoring of all personal communications goes beyond what is generally permissible. If an employer suspects misconduct, the proper channel is a domestic inquiry under Section 14 of the Employment Act 1955, not warrantless access to your private accounts.
Sick leave under Section 60F of the Employment Act 1955 covers illness certified by a registered medical practitioner. There is no provision in Malaysian employment law that limits sick leave to physical conditions only. A registered medical practitioner can certify that an employee is unfit for work for mental health reasons, and that certification carries the same legal weight as one for a physical illness. An employer who refuses to accept a valid medical certificate citing mental health, or who treats mental health-related sick leave differently from physical illness leave, is not acting in accordance with the law. Since the 2022 amendments, the Act also strengthens protections around medical certification and the conditions under which sick leave can be legitimately disputed.
An employer cannot unilaterally impose materially worse terms on an existing employee and then threaten dismissal for refusing to sign. Under Malaysian contract law (Contracts Act 1950) and the Industrial Relations Act 1967, a valid variation of employment terms requires genuine mutual agreement. Coercing an employee into signing a new contract by threatening termination as the alternative is not consensual agreement. If the new terms are materially worse, an employee who is forced to accept them or face dismissal may have a claim for constructive dismissal under the Industrial Relations Act 1967. The employee does not have to sign. They can escalate to the Industrial Relations Department.
Training bonds are legal in Malaysia under the Contracts Act 1950, but only when the terms are reasonable, disclosed clearly before the training begins, and not so onerous as to constitute a penalty clause rather than a genuine pre-estimate of loss. Courts have struck down training bonds where the amount is disproportionate to the actual cost of training, where the bond was introduced after the employee had already started, or where the duration is unreasonably long. An employee who signs a training bond under duress, without being given adequate time to review it, or after the training has already been completed, has grounds to challenge its enforceability. Training bonds cannot be used to effectively trap an employee in a role.
Since the 2022 amendments to the Employment Act, Section 81B requires employers to inquire into any sexual harassment complaint received. The inquiry must be conducted properly: it cannot be dismissed without investigation, it cannot be handled by the alleged harasser or their close associates, and the complainant must be informed of the outcome. An employer who simply declares the case closed after an internal review that amounts to asking the accused if they did it, and concluding they did not, has not fulfilled the statutory obligation. The employee whose complaint was dismissed improperly can escalate to the Director General of Labour. Failure to properly inquire is itself an offence under the Act.
Calling someone a freelancer or contractor does not make them one in the eyes of Malaysian law. The distinction between an employee and an independent contractor is determined by the actual nature of the working relationship, not the label the employer applies. Factors courts and the Industrial Relations Department consider include: who sets the working hours, whether the worker works exclusively for one party, whether the employer controls how the work is done, and whether tools and workspace are provided by the employer. If the relationship is substantively one of employment, the worker is entitled to EPF contributions, SOCSO coverage, and the protections of the Employment Act regardless of what the contract says they are called. This misclassification is increasingly common in gig and creative sectors.
Threatening or retaliating against an employee for making a complaint to a government authority is a serious matter. The Whistleblower Protection Act 2010 (Act 711) provides protection to individuals who disclose improper conduct to enforcement agencies, including the Department of Labour. An employee who is dismissed, demoted, harassed, or threatened after making a complaint to a government authority may have protection under this Act, and the employer’s conduct itself may constitute an offence. Separately, the threat to blacklist someone from an industry for exercising their legal rights may also give rise to claims under contract law and the Industrial Relations Act. This threat is designed to intimidate. It is not as legally sound as the person making it usually believes.
