Director vs Workman: The Federal Court’s RM2 Million Answer
The legal test that turned directors into employees
⚖️ Industrial Relations Act 1967In 2019, two founding shareholders and directors were ousted by a majority‑led EGM. The company insisted they were never employees. After a five‑year legal battle that reached the highest court in the land, the Federal Court disagreed. The flowchart below traces the legal test that turned directors into “workmen” — and what it means for companies, directors, and employment lawyers.
Is a director also a “workman” under section 2 of the Industrial Relations Act 1967?
The Court of Appeal said the answer depends on whether a contract of service exists — not on the person’s title.
Inchcape rule
Directors are the “directing mind and will” of the company and can never be employees. (Expressly overruled)
Contract of service test
A director‑employee relationship exists where the company exercises control, pays wages for services rendered, and a genuine employment contract (written, oral, or implied) is in place. (Gopala Krishnan; Hoh Kiang Ngan; Salomon)
Factors that indicated Woon & Chang were employees
- Monthly salary (not director’s fees)
- EPF & SOCSO contributions
- EA tax forms classified as “SG” (salary)
- Listed in the company’s Register of Employees
- Defined operational roles (Technical Director / Project Director)
- Reported to the Board of Directors
Also relevant: the company’s argument that a pending minority oppression action barred the employment claim was rejected — the two actions can coexist.
Woon & Chang were “workmen”
The Industrial Court had jurisdiction. Their dismissal was without just cause or excuse. Compensation was awarded.
From Industrial Court to Federal Court
- Industrial Court – Not a workman → claim dismissed
- High Court – Upheld; judicial review dismissed
- Court of Appeal – Allowed Woon & Chang’s appeals; quashed the Industrial Court’s dismissal and set aside the High Court’s order; awarded ~RM2 million
- Federal Court – Dismissed the company’s appeal; affirmed the Court of Appeal’s decision (the ~RM2 million award stood)
Download this flowchart as a PDF →