MDA ordered to pay Perkeso arrears for ‘contract’ workers

 High Court rules that the workers were employees, saying contractual labels cannot override the substance of the relationship.

Perkeso is empowered under Section 14 of the Employees’ Social Security Act to recover unpaid contributions as a debt, the High Court ruled.

KUALA LUMPUR:

The Medical Device Authority (MDA) has been ordered to pay outstanding Perkeso contributions after the High Court ruled that workers engaged under “contracts for service” were, in substance, employees entitled to social security protection.

Justice Norliza Othman dismissed MDA’s appeal against a Social Security Appellate Board’s (SSAB) order and ordered the agency to pay RM5,000 in costs.

MDA had named the Perkeso director-general as the respondent.

The dispute arose after Fauzi Idris, an MDA worker, was injured in an accident while travelling to his office in October 2015.

Fauzi was initially denied a permanent disability benefit after Perkeso determined that he was not an employee under Section 2(5) of the Employees’ Social Security Act 1969.

However, SSAB allowed his appeal in August 2018 and ruled that Fauzi was an employee of MDA.

Following that decision, Perkeso demanded that MDA pay arrears of contributions for other workers whose employment contracts and terms were similar to Fauzi’s.

MDA argued that the workers were engaged under contracts for service and were therefore independent contractors rather than employees under contracts of service.

It also argued that Perkeso should be prevented from seeking the arrears because it instructed MDA to stop paying contributions in a November 2017 email.

In her 18-page judgment, Norliza said the main question of whether the workers were employees was a matter within the exclusive jurisdiction of SSAB under Section 84 of the ESSA.

She said SSAB had correctly considered the substance of the contractual relationship rather than merely the label attached to the contracts.

SSAB applied several tests, including the control, organisation and integration, entrepreneurship and composite tests.

Norliza said the workers’ duties were integrated into MDA’s business and involved functions linked to the medical device industry.

She also agreed that the duration of employment did not determine whether a person was an employee.

“The terms of the contract and the functions and duties discharged by the employee in the organisation are relevant in determining whether the relationship was one of service or for service,” she said.

On Perkeso’s 2017 instruction, Norliza held that the principle of estoppel could not prevent the organisation from enforcing its statutory duty.

“Estoppel, being a creature of equity, cannot defeat statute law,” she said.

She added that Perkeso was empowered under Section 14 of the Employees’ Social Security Act to recover unpaid contributions as a debt.

Norliza concluded that SSAB had properly appreciated the evidence and applied the relevant law in finding that Fauzi and other similarly engaged workers were MDA employees.

The MDA is a government agency under the health ministry that regulates medical devices and enforces safety laws.

Raden Fadhli Indra Didi Indra Tjahya and Siti Sarihah Sulaiman appeared for the MDA while Suhaib Ibrahim represented the respondent. - FMT