ARINAA KAMBYAN BERHAD v VIKNASWARAN A/L M.SUPPIAH

Case Significance

Confirms that whether a person is an employee under a contract of service or an independent contractor under a contract for services is a question of fact determined by the substance of the relationship, applying the established indicia of control, integration and financial responsibility.

This High Court decision at Shah Alam concerns an employer's appeal against a decision of the Director-General of Manpower allowing a claim for arrears of salary and salary in lieu of notice. The respondent had been appointed under a contract as head of a department at an academy, and claimed that he had not been paid his salary, resigning on notice and then seeking arrears together with several months' base fee in lieu of notice, amounting to RM247,400. The appellant raised a preliminary objection that the respondent was not an employee but an independent contractor, so that the labour authority had no jurisdiction to hear the claim, and thereafter did not participate in the hearing. The central question was whether the relationship between the parties was one of employment — a contract of service — or a contract for services, a question of fact to be determined on the substance of the arrangement. The labour authority approached the issue by asking whether the engagement was a contract of service or a contract for services, drawing on the established indicia distinguishing an employee from an independent contractor, including the degree of control, integration into the organisation and who bears responsibility for taxes, insurance and business expenses, with reference to authorities such as Employees Provident Fund Board v Bata Shoe Company (Malaya) Ltd. Examining the terms of the contract, under which the respondent had been appointed to direct and coordinate an internal function in compliance with regulatory requirements and was remunerated on a fee basis, the labour authority concluded, and the Court agreed, that on the facts the respondent was an employee. Finding no basis to disturb the labour authority's determination, the Court dismissed the appeal. The decision reinforces that a party cannot escape the labour authority's jurisdiction merely by labelling a working relationship as a contract for services; the court looks past the label to the reality of the engagement to decide whether, in substance, a contract of service existed.