Crystal Crown Hotel & Resort Sdn Bhd (Crystal Crown Hotel Petaling Jaya) v Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia (02(f)-4-01/2018)

(a) Whether under the NWCCA 2011 hoteliers are entitled to utilise part or all of the employees’ service charge to satisfy their statutory obligations to pay the minimum wage; and

(b) Whether having regard to the NWCCA 2011 and its subsidiary legislation, service charge can be incorporated into a clean wage or utilised to top up the minimum wage. Amicus Brief [9] In addition to the Hotel and the Union, the Malaysian Employers Federation and four Hotel Associations (‘Amicus Parties’) were granted permission to appear and submit an amicus brief vide amicus curiae in respect of this appeal. The 4 Hotel Associations are:

(a) Association of Hotel Employers Peninsular Malaysia;

(b) Malaysian Association of Hotels;

(c) Malaysia Association of Hotel Owners; and 8

(d) Malaysia Budget Hotels Associations. [10] Collectively, these 5 associations represent a large number of hotel operators and hotel employers in the country. They are not party to the present appeal but obviously, as employers, have a considerable interest in the outcome of the appeal. Appearing through amicus curiae, Dato’ Dr Cyrus Das, it was submitted that they collectively represent the cross-section of hotel operators and employers, ranging from major established hotel chains to mid-range hotels and budget hotels, all of whom, he stressed play an important role in the tourism and hospitality industry in Malaysia, contributing to the economy of the country. They support the Hotel’s stance that service charge should be utilised for either the clean wage system or top up salary structure. The Facts [11] The salient facts are gleaned from the comprehensive submissions of learned counsel for the Hotel, Mr Sivabalah Nadarajah and learned counsel for the Union, Dato’ Ambiga Sreenevasan. 9 [12] The Hotel commenced operations in January 1995. At the outset the employees enjoyed individual contracts of employment with the Hotel where their remuneration comprised a basic salary as well as service charge. [13] The Union was granted recognition in 1999. In October 2011, the Union invited the Hotel to commence collective bargaining in respect of the terms and conditions of employment to be contained in the parties’ 1st collective agreement. The Hotel was not willing to do so resulting in the dispute being referred to the Industrial Court for adjudication under section 26(2) of the Industrial Relations Act 1967 (‘IRA’) in February 2012. [14] The dates are of significance because it evidences the fact that the appeal relates to the adjudication of the components of a minimum wage for the eligible workmen of the Hotel from the year 2012. The workmen have been awaiting the outcome of this dispute for eight years. This hardly meets one of the most basic requirements of the IRA, namely that industrial disputes ought to be dealt with expeditiously. That too when it relates to 10 a matter as fundamental as the minimum wage, which Parliament has legislated on from as early as 2011. [15] In 2012, the MWO 2012 was enacted as subsidiary legislation under the NWCCA 2011. [16] The dispute in the Industrial Court related to the terms to be incorporated into the 1st Collective Agreement. For the purposes of this appeal, the primary issue relates to salary structure and service charge contained in articles 10 and 12 of the 1st first Collective Agreement. This naturally involved the effect of the MWO 2012 on salary structure. [17] The Union proposed the retention of the service charge system together with a salary adjustment of 10%. The Hotel proposed the introduction of a “clean wage system” to replace the service charge altogether or alternatively, if service charge was to be maintained that the Hotel implement a “top up structure” whereby it could utilise service charge to pay the minimum wages. 11 Industrial Court [18] Vide Award No. 874 of 2015 dated 18 July 2014, the Industrial Court ordered, amongst others:

(a) That employees’ minimum salaries be increased from RM900 to RM1,300-00;

(b) That the service charge system be retained and limited to only employees covered under the scope of the 1 st Collective Agreement;

(c) That the effective date for the 1 st Collective Agreement was 1 October 2011. [19] The learned Chairman reasoned, premised on an employee’s contract of employment, that salary and service charge comprised fundamental terms of his contract of employment and could not be unilaterally varied at the instance of the employer, namely the Hotel. As such the Hotel was bound to pay the minimum statutory wage as well as the contracted share of service charge as provided for in the collective agreement. The latter could not be varied either. 12 [20] The Hotel computes the resultant increase in costs as follows - the service charge value for unionised staff increased from RM74,730.77 to RM107,612.31 based on the Hotel’s then salary costs (inclusive of service charge points) of RM267,688.54. [21] The Hotel applied for judicial review to quash the award of the Industrial Court, and for the matter to be remitted to be re-heard before another panel. High Court [22] The Hotel challenged the Industrial Court award in the High Court by way of judicial review on three separate grounds:

(i) The Industrial Court had made a fundamental error in failing to recognise its ‘power’ to resolve trade dispute when it held that the service charge comprised a fundamental term of the employee’s terms and conditions of service that could not be unilaterally varied; 13

(a) The definition of “wages” envisaged the basic minimum wage as comprising that part of the price of labour that the employer must pay to all workmen 14 regardless of the category to which the workman belonged. It did not include emoluments or any other emoluments;

(b) Prior to the coming into force of the MWO 2012, it was open to the employer to negotiate the restructuring of wages with the workman or union provided however that the restructured wages should be in accordance with the minimum rate of wages prescribed under the MWO 2012, should not be less than the wages currently earned by the workman, should be remuneration for work done during normal hours only and should not result in the workman losing any remuneration defined under ‘wages’ in the statutes regulating the minimum conditions of labour throughout the country;

(c) The High Court then went on to consider the history and nature of the service charge which is unique to the hotel industry. It held that service charge did not belong to the employer/hotel, but was collected and held for distribution by the hotel on behalf of all 15 eligible employees. As such, the Hotel could not be permitted to meet its obligations under the NWCCA 2011 or MWO 2012 to pay a minimum wage by utilizing the service charge payments made by patrons or customers of the Hotel. Therefore, the Industrial Court had correctly rejected the proposal for the ‘clean wage’ system;

(d) On the issue of utilizing the service charge component to supplement the basic wage stipulated under the MWO 2012, the High Court held that service charges are not a part of basic wage of a workman and could not be given to the Hotel to be utilized to pay the workman the minimum wage. This component comprised a fundamental term of the employment contract and could not be removed. The High Court also concurred with the Industrial Court that the proportion of 9:1 for service charge computation was to be maintained in accordance with preceding case-law. 16 [25] In conclusion, the High Court upheld all the findings of the Industrial Court and stated that the latter had not acted irrationally, disproportionately or illegally in making its determination within the ambit of the IRA. The Court of Appeal [26] The Court of Appeal:

(i) Held that based on the NWCCA 2011, the implementation of the minimum wage could not result in employees getting anything less favourable than their current wages;

(v) The obligation of the Hotel to provide a minimum wage is separate from its obligation to comply with the contractual entitlement of its employees to a share of the service charge collected from the customers;

(x) The use of the service charge to meet this financial responsibility would defeat the purpose and object of the MWO 2012. 19 [27] In summary, all of the courts below, namely the Industrial Court, High Court and Court of Appeal held that service charge cannot be utilised to pay minimum wages whether by incorporating the same into the “Clean Wage System” or implementing a “Top Up Structure”. Their primary reason for so holding was that “minimum wages” in the NWCCA 2011 are defined as ‘basic wages’ which do not encompass the element of service charge. Our Analysis and Decision [28] It is evident that this entire dispute arose as a consequence of the introduction of the NWCCA 2011 and the MWO 2012. Therefore, a useful starting point for the analysis of this Court is to consider the purpose and objective of the NWCCA 2011 which is implemented vide the MWOs issued periodically. [29] Learned counsel for the Hotel, Union and the amicus brief are all seemingly united in their comprehension of the purpose and objective of the NWCCA 2011 and MWO 2012. They all made reference to the Hansard at the 2 nd and 3rd reading of the NWCCA 2011 (much as I have alluded to at the outset). 20 [30] In our view, the purpose and rationale for the introduction of such legislation may be summarized in this manner:

(a) It is an anti-poverty device – it applies to all employees across all sectors and will alleviate the working poor by enhancing their purchasing power and thereby raising their living standards;

(b) It increases motivation by providing a greater incentive to work and should increase productivity. Accordingly the quality of goods and services so produced should increase;

(c) It addresses the problem of the exploitation of labour through the payment of unduly low wages. To this end it allows for a more equitable distribution of income between employer and employee. [31] It is evident from the foregoing that this legislation serves as social legislation in that it has been implemented with a view 2 See Minimum Wage Policy in Malaysia: Its Impact and the Readiness of Firms by Joyce Leu Fong Yuen (Department of Business Studies HELP University, Kuala Lumpur, Malaysia) 2013 Proceedings Book of ICEFMO, 2013, Malaysia, Handbook on the Economic, Finance and Management Outlooks iSBN:978-969-9347-14-6 21 to achieving higher equality in terms of income distribution between the poorest earning members of the workforce and capital, as a whole. The Perspective of the Hotel and the Amicus Parties The Hotel [32] The Hotel maintains that the Industrial Court ought to have utilized its powers and obligations under the IRA to resolve the trade dispute before it under section 26(2) IRA. The thrust of this particular contention is that as service charge is a contractual term it was open to the Industrial Court to exercise its powers so as to balance the seeming inequity to the Hotel in having to meet the large increase in the statutory minimum wage imposed on the Hotel, by adjusting or reworking the content of such wages by incorporating a part or all of the service charge element to alleviate the new and high operating costs thrust upon the Hotel. In making this submission, the Hotel relied inter alia on the following provisions of the IRA:

(i) The preamble to the IRA which is to promote and maintain industrial harmony and provide for the regulation of relations between employers and 22 workmen… or dispute arising therefrom. The point made is that in order to maintain industrial harmony it was open to the Industrial Court to “regulate” wages by modifying the minimum wage to include an element of service charge;

(v) And finally under section 30(6) that the Industrial Court is not restricted in its award to the specific relief sought but was empowered to include in its award “any matter or thing” which is necessary to resolve the trade dispute – again the contention is that this 24 sub-section also required the Industrial Court to utilise its powers to resolve the matter by utilization of the service charge or a part of it towards meeting the statutory minimum wage. [33] In maintaining that the Industrial Court and the superior courts below had failed to appreciate the jurisdiction and power of the Industrial Court to “regulate” or modify the terms and conditions of service of the hotel employees, reliance was placed on Dr Dutt v Assunta Hospital [1981] 1 MLJ 304 where it was held, (relying in turn, on the judgment of Mukherjea J in Bharat Bank Ltd Delhi v Employees of the Bharat Bank Ltd, Delhi AIR 1950 SC 188) that the function of the Industrial Court was not merely to interpret or give effect to the contractual rights and obligations of the parties. It was open to the Industrial Court to “create new rights and obligations between them” which it considered essential for keeping industrial peace. As such the contention is that wages for the hotel workmen in the union ought to have been altered, modified or replaced with a “clean wage system” by utilizing the service charge benefit that they have been contractually entitled to thus far; or that the statutory wage be achieved by utilizing the service charge benefit to top 25 up the existing wage. The failure of the Industrial Court to do this amounted to a failure to adhere to or undertake its “mandatory” statutory obligations as provided under section 26(2), section 30 and the general tenor of the IRA as encapsulated under the IRA. [34] They also made reference to several other cases which referenced the powers of the Industrial Court to create rights in order to resolve claims between employer and employee. (See Colgate Palmolive (M) Sdn Bhd v Yap Kok Foong & Another Appeal [2001] 3 CLJ 9; M/S Viking Askim Sdn Bhd v National Union of Employees in Companies Manufacturing Rubber Products & Anor [1990] 2 ILR 634 (‘Viking Askim’) per Edgar Joseph Jr and Mersing Omnibus Co Sdn Bhd v Kesatuan Pekerja-Pekerja Pengangkutan Semenanjung Malaysia & Anor [1998] 2 CLJ Supp 53 (‘Mersing Omnibus’) and Lam Soon (M) Bhd v Kesatuan Pekerja-Pekerja Perkilangan Perusahaan Makanan [1998] 1 LNS 354 (‘Lam Soon’). The Hotel concluded on this point that the Industrial Court had “abdicated its duty and committed a grave error of law” by failing to vary or create new terms in view of the introduction of the NWCCA 2011 and MWO 2012. 26 Amicus Parties [35] The Amicus Parties took a similar stance stressing in particular the importance of section 30(4) of the IRA on this case, as it affects the entire hotel industry. They highlighted that the words “shall have regard to” in section 30(4) IRA made it mandatory that in any industrial adjudication the Industrial Court is obliged to take into account the financial impact of its award on the relevant industry. All the more so where the issue of wages would have a direct financial impact on other employers in the same industry. [36] Like the Hotel, the Amicus parties relied on Mersing Omnibus, Lam Soon as well as Paper & Paper Products Manufacturing Employees Union v Tri-Wall (Malaysia) Sdn Bhd (2015) 3 CLJ 615 to bolster their submissions that:

(i) Section 30(4) had to be taken into account in determining a trade dispute which included a dispute relating to wages; 27

(v) The “interpretation” of the implementation of the salary increase in line with the NWCC 2011 and MWO 2012 by the Union resulted in an “unanticipated salary increment” which is not the objective of the minimum wage legislation.

(a) section 26(2) relating to the powers of the Industrial Court when determining a trade dispute; and

(b) section 30(4) relating to the mandatory obligation of the Industrial Court to consider the implications on the industry, country and economy that what the Hotel (and the Amicus Parties) are asking this Court to do is to construe and utilize section 26(2) and section 30(4) IRA to alter, modify, vary or supplement the statutory effect and consequences of the NWCCA 2011 and MWO 2012. [42] Why do we so surmise? This is because the net effect of these parties’ submissions is that the Hotel and the hotel 31 industry respectively, ought not to be compelled to pay the statutorily imposed increase in minimum wages from their own resources, as stipulated under section 23 NWCCA 2011. Instead they maintain that the NWCCA 2011 and MWO 2012 should be construed or read in such a manner that the definition of ‘basic wages’ in the NWCCA 2011 and MWO 2012, includes the element of service charge which is unique to the hotel industry. [43] The grievance, in effect, is that the Industrial Court failed to accede, or accord permission for the utilization of the service charge element of the workmen’s existing salaries (which is collected from third parties) to offset or substitute the wage increase that has been statutorily imposed throughout the country on all employers. The Hotel (and the Amicus Parties) maintain that this should necessarily have been awarded by the Industrial Court vide sections 26(2) and 30(4) IRA. The question that then arises is whether statutory provisions in the IRA can or ought to be construed such that they effectively abrogate clear and express legislation enacted by Parliament under the NWCCA 2011 and 32 consequently MWO 2012. Can or should one Act be construed so as to undermine or stultify the purpose and object of another? [44] The answer must necessarily be no. This is so for several reasons. [45] The object and purport of the NWCCA 2011 and MWO 2012 is to enhance and alleviate the plight of labour, more particularly the working poor. That is not in dispute. Similarly, the IRA was enacted to protect the livelihood of labour i.e. workmen, while taking into account the interests of capital or employers, in the interests of the economy of the country. Both pieces of legislation comprise social legislation enacted to meet the needs of particular sections of society, more particularly the vulnerable and marginalized sections. The IRA and the NWCCA 2011 (and MWO 2012) therefore seek a similar objective and purpose, namely to protect and alleviate the plight of workmen and the working poor. As such the IRA cannot and ought not to be construed so as to read down or abrogate the purpose, object and effect of the minimum wage legislation. On the contrary, the 33 IRA and NWCCA 2011 and MWO 2012 should be construed harmoniously. Social Legislation [46] Our Federal Constitution guarantees equal protection of laws to all citizens. However, the full purport of such a guarantee may not be available to all segments of society, particularly the poor and vulnerable sections. It is to ensure social justice that special measures are taken by Parliament in the form of, for example the enactment of minimum wage legislation and industrial adjudication legislation to ensure that there is equality of justice available and accessible to these marginalized persons. The Decision of this Court in PJD Regency [47] This Court had occasion to address this issue of the construction of social legislation recently in the case of PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & 7 Others. That series of cases dealt with housing developers and housing purchasers under the Housing Development (Control and Licensing) Act 1966 (‘HDA 1966’), more particularly the mode of computation of liquidated and ascertained damages for 34 late delivery. The Chief Justice, Tun Tengku Maimun binti Tuan Mat held inter alia, as follows, in relation to social legislation: “[31] All legislation is social in nature as they are made by a publicly elected body. That said, not all legislation is ‘social legislation’. A social legislation is a legal term for a specific set of laws passed by the legislature for the purpose of regulating the relationship between a weaker class of persons and a stronger class of persons. Given that one side always has the upper hand against the other due to the inequality of bargaining power, the State is compelled to intervene to balance the scales of justice by providing certain statutory safeguards for that weaker class. A clear and analogous example is how this Court interpreted the Industrial Relations Act 1967 in Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia & Anor [1995] 3 MLJ 369 (‘Hoh Kiang Ngan’) … [33] When it comes to interpreting social legislation, the State having statutorily intervened, the Courts must give effect to the intention of Parliament and not the intention of parties. Otherwise, the attempt by the legislature to level 35 the playing field by mitigating the inequality of bargaining power would be rendered nugatory and illusory. [48] The Court went on to refer and cite with approval the dictum of Bhagwati J in Workmen of Indian Standards Institution v Management of Indian Standards Institution

(a) …

(b) …

(c) …

(d) …

(e) …

(f) … [62] And section 23 of NWCCA 2011 provides: “23. (1) Where the Government agrees with the recommendation of the Council under paragraph 22(2)(a) or 22(4)(a) or determines the matters under 45 paragraph 22(4)(b), the Minister shall, by notification in the Gazette, make a minimum wages order on the matters specified in paragraphs 22(1)(a) to (e) as agreed to or determined by the Government.

Effect of the minimum wages order

(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;…

(v) 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 ours) 54 [79] The amicus curiae rightly disclosed to the court that while these Guidelines “strongly and clearly set out the desired meaning of “minimum wage” and the intention of the NWCCA 2011”, these Guidelines were subsequently held to be ultra vires the NWCCA 2011 by the High Court in 2016 in Shangri-la Hotel (KL) Bhd v National Wages Consultative Council & Ors [2017] 1 LNS 657. This decision was affirmed by the Court of Appeal No: W-01(A)-484-12/2016 on 14 August 2017 and leave to appeal to the Federal Court was refused on 25 January 2018. The Hotel did not point this out and continued to rely on the Guidelines. There is no reason, as pointed out by amicus curiae, to revisit this issue. [80] However the point sought to be made by counsel for the Hotel and the amicus curiae is that it was envisaged that the Clean Wage Structure and the Top Up Structure were alternative or plausible wage structures for the hotel sector that were considered at the time. It is maintained by counsel and the amicus curiae, that these Guidelines comprise useful guidance as it was produced by those seeking to administer the minimum legislation themselves. To that extent it is argued that the Guidelines, namely paragraph 3(v) is of persuasive value more 55 particularly in relation to section 30(5A) of the IRA, which recognises the application of codes and guidelines in industrial adjudication. [81] Ignoring the fact that these Guidelines have been struck out for being ultra-vires the primary legislation, it appears to us that paragraph 3(v) of the Guidelines, even if coupled with section 30(5A) IRA cannot override the specific statutory definitions set out in the primary legislation, for the reasons we have set out at length earlier on in the judgment in relation to the use of section 30(4) IRA to override the effect of the minimum wage legislation. [82] Neither can the Guidelines and section 30(5) IRA override the specific object and purpose of the minimum wage legislation. If given the effect sought by the Hotel and the Amicus Parties, solely for the hotel industry, it would, at the very least mar, and at worst, injure and transform beyond recognition, the express meaning attributed to “minimum wage” as specifically defined in the legislation. 56 The Privy Council Decision in Pereira [83] Nonetheless, the Hotel argued rigorously that the element of “service charge” does comprise a part of “wages” by reason of the Privy Council decision in Peter Anthony Pereira & Anor v Hotel Jayapuri Bhd & Anor. [1987] CLJ (Rep) 12 (‘Pereira’). The Hotel utilised the case in this context: It made reference to the decision of the Court of Appeal which held, inter alia that the utilisation of service charge for the payment of minimum basic wages is, “akin to using the employees’ monies to pay their own salaries”. The Hotel then submitted that this was in direct contradiction to Pereira because there the Privy Council had held, inter alia that: “…it is plain that Mr Pereira’s entitlement to his share of the service charges collected by the hotel company arises under his contract of service with the hotel company and therefore, even if the hotel company in terms of that contract is acting as his agent to collect for him and other employees from the hotel’s customers, the service charges which they pay to the hotel company, that money is due to them by the hotel company under their contracts of service as a reward for the service which the employees render their contracts 57 of service to the hotel company itself. Accordingly, the share of service charge is properly to be regarded as due to Mr. Pereira under his contract of service as remuneration and for the reasons already given it is in respect of the normal periods of work. That money, once in the hands of the hotel company is due by them as employer to Mr. Pereira in terms of his contract of employment.” [84] The Hotel submits, premised on the passage above, that the service charge, like basic salary, is due to the workman under the contract of service. It is further contended that the service charge, like salary, only belongs to the employees as and when it is paid out to the employees, but not before that. As such service charge is said to be part of “wages” under section 2 of the Employment Act 1955 premised on the definition of the same as comprising “basic wages and all other payments in cash payable to an employee for work done in respect of his contract of service”. [85] A perusal of Pereira in its entirety discloses that: 58

(a) There is a distinction between “basic wages” and “wages” as is evident from a construction of the definition of “wages” under the Employment Act

In this appeal we are concerned with “minimum wage” under the NWCCA 2011 and MWO 2012 which incorporates the definition of “wages” in the said Act, by making reference to the “basic wages” element only in the said definition, not “all the other payments in cash payable to an employee under his contract of service.” To that extent these other payments are not relevant to construing what is meant by a “minimum wage” under the minimum wage legislation. Only the element of “basic wages” is relevant;

(b) The question in Pereira was whether the hotel employer in that case and Pereira himself were obliged to pay contributions under the Employees Provident Fund Act 1951 (‘EPF Act 1951’) in respect of not only basic salary and food allowance, but also in respect of service charge. If service 59 charge fell within the definition of “wages” (as defined in the Employment Act 1955), EPF contributions fell to be paid, otherwise such contributions did not. Therefore it is clear that Pereira is not authority for the proposition that service charge comprises a part of “basic wages”. Instead it is authority for the legal proposition that service charge (then) comprised a part of “wages” under section 2 of the EPF Act for the express purpose of the EPF Act. That however, does not have bearing on ascertaining the definition of “minimum wage” under the NWCCA 2011 and MWO 2012, which relates only to the element of “basic wages” (and not wages as a whole) under section 2 of the Employment Act 1955 and section 23 of the NWCCA 2011.(The EPF Act was subsequently amended);

(c) The statement in Pereira that the employee’s entitlement to service charge arises under his contract of service as a reward which the employee renders to the hotel company under his contract of 60 service, however, has no relevance to the definition of “minimum wage” under the minimum wage legislation. The statement in Pereira means that the employee’s entitlement to the service charge component of his remuneration arises from his contract of service, without which he would not enjoy such remuneration. The service charge becomes due or attributable to his salary or wages as a whole, by reason of his contract of service with the hotel. However, the fact that service charge becomes due to the employee as a consequence of his contract of service, does not transform service charge into a part of “basic wages”. It becomes a part of the additional emoluments he receives under his contract of service for work done, and to that extent amounts to remuneration or, at the time of the case, “wages”. The element of “basic wages” is different from “wages”. The latter includes components in cash other than basic wages. Basic wages is recognised under section 2 as the minimum sum which is payable by the employer to the employee; 61

(d) The Court of Appeal decision of Abdul Aziz Abdul Majid & Ors v Kuantan Beach Hotel Sdn Bhd & Ors [2012] 1 LNS 1294 which affirmed the decision in Thomas George v Hotel Equatorial Sdn Bhd (which in turn affirmed the decision of the Labour Court in that case) that service charge came within the meaning of “wages” in section 2 of the Employment Act 1955, and was therefore to be included when determining retrenchment benefits, are both distinguishable on the same reasoning. These cases were dealing with the construction of the ordinary rates of pay or retrenchment benefits which turned on the definition of “wages” rather than “basic wages”. More importantly perhaps, none of these cases was dealing with the definition to be accorded to “minimum wage” under special legislation (NWCCA 2011 and MWO 2012) which carries a specific legislative definition within that legislation. In view of the legislated definition, there should be strict adherence to the same. 62 [86] For the reasons we have expressed, it follows that we are unable to concur with the Hotel’s submission that the decision in Pereira supports its contention that service charge, being a part of “wages” therefore or in like manner should be construed as comprising a part of “minimum wage” under the NWCCA 2011 and MWO 2012. Service Charge [87] It is necessary to consider the element of service charge because it is the core source of difference between the parties. It is not in dispute that service charge is a benefit or cash emolument that is specific to the hotel industry. It has been in practice since at least the ‘80’s as borne out, inter alia, by the case of Pereira (above). The nature of service charge is captured succinctly in that decision as it is in the judgment of the Court of Appeal here. In Pereira, the Privy Council said this: “…Service charges are demanded by the hotel company from their customers who have to pay them since they form part of the bill. The object of the service charge is to replace tipping which only benefited those who had personal contact with the customers, like waiters and waitresses.” 63 [88] Service charge is therefore not a tax nor any other form of payment which customers are forced to pay out under any statute. As submitted by the Union, the Hotel has been collecting service charge for its employees from the date when it commenced business, i.e. from 1995. In the instant case a ten per cent (10%) service charge is imposed on all bills to customers. It is essentially for services rendered. The Industrial Court has generally continued to utilise this 9:1 formula. The Hotel collects this monies for and on behalf of the employees. Out of the 10%, the Hotel keeps one per cent (1%) by way of administrative charges and the remaining 9% is distributed to the employees on the basis of service charge points. It is the scale and number of service charge points that comprise the basis for industrial adjudication in contracts of service and collective agreements. There is no question of dealing with the quantum as the monies are derived from a third party source, and not the Hotel. The Hotel has no control over the quantum of service that may be collected from customers in any given month. The actual quantum available for each workman will depend on the business of the Hotel and the number of employees who are eligible to receive the service charge. The purpose of the service charge was to supplement the very low 64 monthly salaries paid to workmen in this industry. It will also be recalled that in introducing the minimum wage, this particular group of employees was singled out as a vulnerable group, who were intended to benefit from the introduction of such legislation. [89] To put matters in perspective it is pertinent to refer to the example utilised by the Industrial Court in this matter, where the basic wage was RM300-00. The service charge is utilised to bring the basic wage up to a survival rate. In the context of the Hotel, most employees, have a minimum of 2.5 service charge points, which based on its 2012 average value over a period of 7 months would provide these employees with an average of about RM975-00 (RM390 x 2.5) per month in addition to their basic wages. To that end, service charge is an additional cash emolument that comprises a part of their total remuneration or “wages” as a whole. It is therefore clear that service charge is and does not comprise a part of the Hotel’s funds. Neither is it reflected as revenue in the Hotel’s financial statements. [90] When analysed in law, the service charge, being an entrenched part of the workmen’s contract of service, and which 65 becomes due to them because they are workmen/employees employed by the Hotel under a contract of employment or collective agreement, is an express and established term of their contracts of service. Accordingly such contractual terms of service cannot be unilaterally removed or varied without their consent. The Industrial Court cannot therefore be faulted for refusing to remove or vary this express term of service which comprises a part of their “wages” as a whole. [91] But as pointed out earlier this case goes much further than a simple contractual entitlement that may be varied in the course of industrial adjudication under the IRA to meet the needs of the Hotel, or to save the Hotel in terms of its ability to operate. As pointed out at the outset, what we have here is the introduction of minimum wage legislation by Parliament nationwide, which is specifically targeted to increase the basic wages of workmen under contracts of employment, such that all workmen in the country receive a minimum wage which does not fall below a certain level. In short, in the context of the Hotel Industry, it means that the basic wage, say of RM300-00 or less, is no longer considered to be tenable by Parliament. 66 [92] Hence the myriad provisions of the NWCCA 2011, which ensure that the quantum of the minimum wage that is implemented from time to time meets the needs of the workmen or working poor in the nation. Under the NWCCA 2011, the National Wages Consultative Council under sections 4, 21 and 22 are bound to take into consideration according to sectors, types of employment and regional areas as well as other matters relating to minimum wages. They are also to consult the public on the minimum wages rates, collect and analyse data and information and research on wages and socio-economic indicators, coordinate, supervise and evaluate the impact of the implementation of minimum wages, review the same and to disseminate information and analysis on wages when determining the quantum and setting of the minimum wage. The National Wages Consultative Council is also empowered to make a recommendation on the non-application of the recommended minimum wage rate to any sector or type of employment. [93] It is also pertinent that the employers or Hotels were represented in the Wages Consultative Council from 2011 to

They comprise persons who served on the Amicus Parties 67 from time to time. They continue to do so. In point of fact, as submitted by the Union, the Minister did defer the commencement date of the MWO 2012 from 1 January 2013 to 1 October 2013 for member hotels represented by 4 of the 5 Amicus Parties that implemented the service charge before 1 December 2012. But no further exemptions have been made for the hotel industry since the MWO 2012. There have been three further MWOs, in 2016, 2018 and 2020. [94] In short, this means that in determining the minimum wage, the Wages Consultative Council and thereby Parliament had access to all relevant data and advice and therefore did consider all these matters before determining the application and quantum of the minimum wage rate to all sectors in West Malaysia and a different quantum for East Malaysia. There is therefore absolutely no reason for the industrial adjudicators to tamper or meddle with the clear sentiments, object and purpose of the minimum wage legislation. It would be a fundamental error for the Industrial Court or the superior courts to do so, given the clear reference to “basic wages” in the Employment Act 1955 and “minimum wage” in the NWCCA 2011 and MWO 68

It is not the function of the Industrial Court or the Judiciary to intrude upon the functions of Parliament. The Subsistence of a Trust situation between the Hotel and Union in Law [95] A further reason subsists as to why the service charge collected from third parties ought not to be utilised to introduce a “clean wage” restructuring or to “top-up” the basic salaries of the Hotel’s employees under the collective agreement. [96] Service charge, being monies collected from third parties, does not belong to the Hotel. When it is paid by a customer as part of the bill, ownership in those monies does not vest in, or transfer to the Hotel. Ownership of the monies is immediately transferred and lies with the employees who are eligible to receive those monies. And the employees eligible are those who enjoy a contract of service granting them service charge points under their individual contracts or under their collective agreement. [97] The Hotel collects the monies and does not mix or intermingle it with its own funds. These funds are kept 69 separately, effectively in trust for the eligible employees to be distributed on a specific date as provided for in their contracts. This is further evidence of a lack of transfer of ownership of these funds. The Hotel in point of fact, acts as a fiduciary or trustee who holds the monies until distribution to the beneficiaries who are the eligible employees. [98] Therefore the correct analysis in law of the payment and receipt of service charge, is that it reflects a trust situation whereby the customer pays, and the eligible employees receive, the monies they are entitled to, through the trustee or fiduciary namely the Hotel. [99] It follows that as the monies did not, at any point in time, belong to the Hotel, there is no entitlement in law for the Hotel to appropriate and utilise those monies to meet the statutory obligation created by the NWCCA 2011 and the MWO 2012. Those monies at all times belonged to the eligible employees. It is in that context that the Court of Appeal likened the top up structure or the clean wage system as amounting to asking the employees to pay themselves from their own monies. Wages, by their very definition, envisage monies belonging to the 70 employer being paid to the employee under a contract of service. It does not envisage monies that are collected for the benefit of the employees being utilised by the employer to offset its own liabilities. The NWCCA 2011 and MWO 2012 certainly did not statutorily provide so. The Clean Wage Structure [100] By reason of the above, we concur with the Union that the clean wage system amounts to a relabelling of service charge. The Hotel continues to charge a customer the same sum without calling it service charge. But the source of the monies remains the customer. It avoids the effect of the minimum wage legislation by substituting service charge with a new label. It does this by taking away service charge as it has traditionally been charged as a means of rewarding employees as a whole, and utilises these monies meant for the employees for itself. The effect on the employee is that he loses his service charge component. This does amount to the removal of an entrenched term of service unilaterally, and arguably, taking and utilising monies that were paid on trust for the employees for itself. Neither the Industrial Court nor the superior courts by way of 71 judicial review are justified in allowing this as it does not meet the object or purpose of the minimum wage legislation. The Top Up Structure [101] The position is the same with the top up structure as it amounts to an appropriation and utilisation by the Hotel in like manner of the service charge. Ultimately the nature of service charge, by reason of its unique development, is one of monies held on trust by the Hotel and therefore it cannot be utilised haphazardly. It has come to be referred to as a contractual term simply because the courts have adjudicated on the manner of distribution of the monies between different categories of employees or by reason of the employer wanting to retain a greater portion of the sum collected. But that in no way alters the fact that ownership of the monies vests in the eligible employees after the customer has paid his bill and is simply held on trust for them by the Hotel. The Ripple Effect of the Imposition of the Minimum Statutory Wage [102] Both the Hotel and the Amicus Parties complain of the “ripple effect” that inevitably follows the imposition of the 72 minimum statutory wage as it was intended to be under the NWCCA 2011 and the MWO 2012. The ripple effect refers to the fact that as the minimum wage is implemented across the board, more senior employees further up the wage scale enjoy indirect wage increases or “increments” (as the Hotel refers to it) in order that the differences in job status, or higher wages for employees with more seniority or skill. [103] Again given that the function of the Courts is to interpret and give effect to the intention of Parliament in legislation it is asked to interpret, it can only be concluded that the Legislature comprehended and took into account the ripple effect that would result when enacting the minimum wage legislation. In this context sections 4, 21 and 22 of the NWCCA 2011 are relevant in that these provisions ensure that the recommendations take into account all the relevant factors we have discussed above. Our statements above in relation to the composition of the Wages Consultative Council would apply with equal force here. [104] In this context it cannot be stressed enough that it is not open to the Court to modify, alter or vary the object and intent of enacted legislation to meet the needs of a single group of 73 employers in a one sector. That in effect is what the Hotel and the Amicus Parties are asking this Court to do. [105] Further, as submitted by the Union, the ripple effect of the minimum wage has been acknowledged as a benefit or a consequence of minimum wages by the ILO. In like vein the ripple effect would have an effect on all employers in all industries. The hotel industry perhaps feels the difference more keenly because it has until now been relatively insulated by relying on its customers or third parties to meet its basic costs and overheads in relation to its employees. Without this sizeable subsidy or supplement, which other industries have had to cope with, the effect of the implementation of the minimum wage has been particularly grim and challenging. However, that in itself cannot justify a distorted or biased construction of the definition of “basic wages” and “minimum wage” as specified, or of the purpose and object of the minimum wage legislation. [106] It has also been highlighted by the Union that it did not in the negotiations with the Hotel ask for any increase of salaries to reflect the difference in seniority. In these 74 circumstances, the ripple effect does not afford any rational basis for the implementation of the “Clean Wage Structure” or the “Top-Up Structure”. The Covid-19 Pandemic [107] It was urged upon us that the impact of the Covid-19 pandemic could not be ignored by this Court. And that section 30(4) IRA ought to be utilised together with judicial notice taken by this Court of the present circumstances and conditions faced by the hotel industry, which has been particularly hard hit by the pandemic. It would be impossible for this Court not to have noticed the pandemic or its effect on industry as a whole, and in particular the tourism, travel and thereby hotel industry. [108] However the reality is that the present appeal deals with wages relating back to 2012. The eligible employees have been waiting from then until now to have this trade dispute dealt with. They have not received any of the monies owed to them as a consequence of the implementation of the minimum wage legislation for at least six or seven years. It would have been anticipated by any prudent employer that monies due from those dates would have been set aside and therefore available for 75 payment to the eligible employees, who as members of the hotel industry are equally affected by the pandemic. [109] Shortly put, we are answering a legal question relating to the construction of the minimum wage legislation and our answer must be in accordance with accepted principles of law. We have dealt with these issues in extenso in this judgement and concluded that service charge cannot comprise a part of “basic wages” under the NWCCA 2011 and MWO 2012 in law, either vide the “Clean Wage Structure” or the “Top-Up Structure”. The fact of the pandemic in 2020 and 2021 cannot and does not alter our findings. Neither can section 30(4) IRA be utilised to alter a matter relating back to a trade dispute and award dating back to 2012. Distribution of the Service Charge to Eligible Employees [110] During the course of the hearing, we had expressed concern about the manner of distribution of service charge and queried whether all eligible employees had been included. The Union has answered that question satisfactorily in its further written submissions. Applying sections 17 and 32 IRA, it follows that only eligible employees under the Hotel and Union’s 76 Collective Agreement may participate in and be entitled to service charge. [111] Employees outside the scope of the Collective Agreement who cannot be represented by the Union, namely employees working in the security, personnel, confidential and managerial capacity are not entitled to participate by reason of the provisions of the IRA which expressly exclude such personnel from being represented by the Union. Although sections 17 and 32 IRA refer to all workmen who are employed by and subsequently employed in the undertaking, i.e. the Hotel here, it refers only to those employees who are capable of being represented by the Union. Employees employed under those excluded categories do not fall within the purview of the Collective Agreement. In these circumstances, there is no discrimination under Art 8 of the Federal Constitution as contended by the Hotel. [112] As for the other group that concerned us, namely foreign workers, the Union submitted that the issue does not arise here, as at the material time, there were no foreign workers employed 77 by the Hotel. As such, we make no further findings on this issue, as it does not arise for consideration. The Impact of this Decision [113] The Amicus Parties urged us to confine this decision to this appeal. This appeal deals with the trade dispute between the Hotel and Union. The Hotel refers to the Crystal Crown Hotel. To that end, the decision of this Court adjudicates on the existing trade dispute between those two parties. However, it cannot be denied that amicus curiae in the instant case, went beyond simply assisting the Court. There were arguments made, and stances taken in relation to the construction of the relevant legislation in relation to the questions of law before us. The reality is that this Court has considered, analysed and adjudicated on the numerous submissions put forward not only by the Hotel and Union, but also by the Amicus Parties. [114] Our analysis, moreover, has been predicated on questions of law rather than of fact. We determined the construction to be accorded to the relevant law, primarily the NWCCA 2011 and the MWO 2012. These are pronouncements on the material law by the apex court in this jurisdiction. The 78 construction of law, being a legal question does not vary from case to case, otherwise we would have the problem of the law changing with the proverbial length of the Chancellor’s foot. Perhaps more significantly the doctrine of stare decisis ought not to be eroded or ignored lightly. The doctrine stipulates that lower courts are bound by the decisions of higher courts, save in the well acknowledged exceptions. The impact of the present decision in law is clear from these grounds of judgement. The Two Questions of Law [115] We now answer the two questions of law before us: Question(a): Whether under the NWCCA 2011 hoteliers are entitled to utilise part or all of the employees’ service charge to satisfy their statutory obligations to pay the minimum wage? Answer: No, under the NWCCA 2011 hoteliers are not entitled to utilise part or all of the employees’ service charge to satisfy their statutory obligations to pay the minimum wage. 79 Question (b): Whether having regard to the NWCCA 2011 and its subsidiary legislation, service charge can be incorporated into a clean wage or utilised to top up the minimum wage? Answer: No, having regard to the NWCCA 2011 and its subsidiary legislation, service charge cannot be incorporated into a clean wage or utilised to top up the minimum wage. [116] We conclude and confirm that the courts below and the Industrial Court did not err in deciding that service charge was not to be included when computing and implementing the minimum wage in accordance with the NWCCA 2011 and the MWO 2012. We therefore dismiss the appeal. Signed NALLINI PATHMANATHAN JUDGE FEDERAL COURT OF MALAYSIA Dated: 24 March 2021 80 COUNSEL: For the Appellant: N. Sivabalah (E. Reena & Benedict Ngoh Ti Yang with him) MESSRS SHEARN DELAMORE & CO. 7th Floor, Wisma Hamzah Kwong Hing No, 1, Leboh Ampang, City Centre, 50100 KUALA LUMPUR For the Respondent: Dato’ Ambiga Sreenevasan (Shireen Selvaratnam & Lim Wei Jiet with her) MESSRS. SREENEVASAN Ground Floor, Block B, Kompleks Pejabat Damansara, Jalan Dungun, Damansara Heights, 50490, KUALA LUMPUR Amicus Curiae: Dato’ Cyrus Das (Frida Krishnan with him) THE CHAMBERS OF FRIDA 8-10-6, Menara Mutiara Bangsar Jalan Liku, Off Jalan Bangsar 59100 Kuala Lumpur Watching Brief (solicitors for Sunway Biz Hotel Sdn Bhd and Sunway Hotel (Seberang Jaya) Sdn Bhd in the related High Court Cases No. WA-25-44-01/2019 dan WA-25-45-01/2019]: Vilasini A/PVB Menon MESSRS VILASINI MENON No. 27-3, 3rd Floor, Subang Business Centre Jalan USJ 9/5Q, UEP 47620 Subang Jaya Selangor Darul Ehsan