Insights — 5 Min Read

Critical terms in your Employment Agreement

by Shamila Nair – 5th June 2020

Insights — 5 Min Read


by Shamila Nair – 5th June 2020

The excitement over being hired can be overwhelming. Don’t you think? Now, you are finally financially independent of your family. Maybe, you get to move to a different city, experience new life challenges and save up more cash for your future, and some of you may, at last, afford that magical Barcelona trip you’ve been dreaming of.

In this article, we will be discussing a few common yet important terms in your Employment Agreement.

Hiring Process

Typically, a hiring process leading to the creation of an Employment Agreement would flow in the following manner:

  • Application
  • Shortlisting
  • Interview
  • Second-tier interview (in some cases)
  • Third-tier interview (in some cases)
  • Fourth tier interview …
  • A call or email to inform if you are hired or rejected
  • Receive a Letter of Offer
  • Receive an Employment Agreement
  • The signing of the Employment Agreement
  • You return the signed Employment Agreement to the hiring company

Counter Proposal

A critical step that you should not leave out between receiving your Employment Agreement and signing it is to:

  • Carefully examine all terms contained in the Employment Agreement forwarded to you.
  • Counter propose the removal of or changes you would like to make on specific terms to the Employment Agreement.

Yes, you have the right to counter propose terms included in your Letter of Offer and Employment Agreement. This is vital towards your employment, as you will want to ensure the terms are balanced and fair for you and your employer.

An open-minded employer will take steps to consider your counter proposals to create a healthy work relationship with you. There is no obligation for you to sign the first copy of Employment Agreement forwarded to you. You may seek clarifications on your Employment Agreement from the hiring company. Be prepared also to receive replies, such as “This is our standard Employment Agreement.” On the one hand, there are mandatory terms to be stipulated in your Employment Agreement. However, the terms of your Employment Agreement can be altered and tailored to fit an intended employer-employee relationship. It can vary from one employee to another.

No one employment agreement fits all, like no one shoe size fits everyone, even if it carries the same design.

If you have finished looking at terms concerning your monthly salary, working hours, including overtime, sick leaves, annual leave, and 13th-month wage, we can move towards the main topic of this article.

Other Critical Terms in Your Employment Agreement

There are other critical terms in your Employment Agreement, which you must pay close attention to.

1. Restraint of Trade (preventing you from working with a competitor in the future)

2. Confidentiality (duty to maintain confidential information)

3. Restraint of Legal Proceedings (Preventing you from commencing a suit against your employer)

4. Governing Law (laws and processes you will rely on in case of a dispute)

1. Restraint of Trade/Non-Compete Clause

Can I work for a competitor after leaving my current job?

Yes, you can. According to Section 28 of the Contracts Act 1950 of Malaysia, non-compete clauses in an employment contract is not enforceable. Nothing prevents you from joining a competitor, provided you maintain the confidentiality of your former employer’s confidential information.

2. Confidentiality

Is the Confidentiality clause binding after my resignation or termination?

Yes. It is needful to respect your former employer’s confidential information. Your obligation to maintain your former employer’s confidentiality continues even after you have left your employment.

3. Restraint on Legal Proceedings

Can my employer stop me from taking legal action against the company?

No. Your employer cannot stop you from taking legal action against them. Section 29 of the Contracts Act 1950 of Malaysia prohibits one party from restraining another party to enforce his right to commence legal proceedings. An exception to this will be if your Employment Agreement contains an arbitration clause. If an arbitration clause exists in your Employment Agreement, you must first seek recourse through arbitration before commencing an action in court.

4. Governing Law

Whether you will be employed, currently employed by a foreign entity, or a Malaysian company, it is crucial to note the governing law term in your Employment Agreement.

A “Governing Law” term would determine which laws will apply to your dispute and which courts of law will have the power to make legal decisions and judgments to your disputes.

You do not want to end up in a scenario of:

(i) having to seek recourse and engage lawyers in a foreign jurisdiction while being employed in Malaysia; or

(ii) having to go broke trying to enforce your rights under your Employment Agreement; or

(iii) forced to disregard the right to enforce your rights as you are unable to afford foreign legal fees.

Briefly, you have the right to negotiate fair employment terms with your employer. If you need to know more about the enforceability of the terms in your Employment Agreement and its legal implications, it is always best to consult a lawyer to guide you through the process, especially if you need to commence or defend against legal action.