Gig economy workers are independent contractors or freelance workers who typically do short-term work for different clients. This includes ride-hailing apps, food delivery apps, holiday rental apps, and so on. The gig economy was defined in Malaysia’s 2021 Economic Outlook review as:

“… a free market system, characterised by temporary job positions where corporations tend to engage independent workers for short- term durations. Unlike the traditional economy, the gig economy is characterised by flexible, temporary, or freelance jobs with irregular income and working hours”.[1]

The number of gig workers has grown, especially since the COVID- 19 pandemic. Many people lost their full-time/traditional jobs as a result and are in need of a new source of income or a more flexible working arrangement. It was reported that Malaysia has around four million freelance workers, and the number is anticipated to grow continuously given the rise of such digital platforms.

How are employment statuses determined?

Workers in the gig economy are often seen as self-employed or independent contractors due to the flexibility in terms of working hours, place of work and the method in which the job is done. This is obviously very different from employees in the traditional sense, as the latter are controlled by their employers and bound by their employment contracts.

A person will only be considered an “employee” or “workman” for the purposes of the Employment Act 1955 (EA 1955) and Industrial Relations Act 1967 (IRA 1967) if he or she is under a contract of service[2] or contract of employment.[3] Generally, when determining whether there was an “employer-employee” relationship in any given case, the courts will apply the “control test” as laid down in Hoh Kiang Ngan.[4]

The Federal Court in Hoh Kiang Ngan expressed that:

“… In all cases where it becomes necessary to determine whether a contract is one of service or one for services, the degree of control which an employer exercises over a claimant is an important factor, although it may not be the sole criterion…”.

In order to ascertain whether a person is an employee, the courts will look at the amount of control in which the employer has over the particular employee. A person who is engaged under a contract for services, however, is an independent contractor and does not fall under the definitions of either “employee” or “workman”. The Industrial Court in Bu Yoon Lian[5] referred to the English case of Ready Mixed Concrete,[6] where the conditions to determine a contract of service were identified:

(i) The servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in the performance of some service for his master;

(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subjected to the other’s control in a sufficient degree to make that other master;

(iii) The other provisions of the contract are consistent with it being a contract of service.

This goes to show that the courts will also look beyond the written agreement between the parties, i.e. whether the label given to a contract reflects the reality of the facts in any given case. For example, an employer cannot claim that an employee is an “independent contractor” merely because their contract was labelled as such, if the reality of the facts is that the relationship between the parties was akin to an “employer-employee” relationship.

Recent decision on status of Grab drivers

Grab drivers provide services to end users as part of Grab’s

business, i.e. driving customers who book rides with the Grab app. Even though gig economy workers enjoy the freedom to decide when and how long they work, the downside to it would be that they are unprotected in the event of termination of a contract. This was confirmed by the High Court in July 2021,[7] when it ruled that Grab drivers fall outside the ambit of “employees” and “workman” for the purposes of the EA 1955 and IRA 1967, and thus not entitled to claim for unfair dismissal. It was held that the relationship between Grab and its drivers was purely built on a commercial contract basis.

A similar case was decided rather differently by the UK Supreme Court where Uber drivers were found to be “dependent contractors” who are registered as self-employed but provide a service as part of someone else’s business,[8] given the degree of control that Uber has over its drivers.[9] This decision effectively allowed Uber drivers to enjoy limited statutory protection such as the national minimum wage and holiday pay.

However, Grab drivers in Malaysia do not enjoy the same privileges, since they fall outside the ambit of the EA 1955 and IRA 1967 and they will not be entitled to the basic benefits provided under Malaysian employment law such as minimum wage, rest days, sick leave and maternity benefits.

As gig workers in Malaysia do not fall within the ambit of the EA 1955, they are similarly not covered under the Minimum Wage Order 2020.[10] It was reported in the news recently that Amazon Flex gig-style drivers have been granted enforceable minimum pay rates for the first time in the world following a landmark decision by the New South Wales (NSW) industrial relations tribunal.[11] The historic ruling, which Amazon was not involved in, will see NSW couriers who use their cars to transport customers’ orders earn at least AUD37.80 an hour by 1 July 2025, about a 40 per cent increase from the online giant’s current pay. This was a decision hailed by unions and making it the world’s first jurisdiction to compel the retailer to follow laws on such payments,[12] despite the status of the drivers as being akin to independent contractors.