Director or Employee? The Federal Court’s Decision in Woon Kim Choy v Acexide Technology Sdn Bhd

A Director May Also Be an Employee

The COA's judgement is consistent with the realities of modern corporate governance. It correctly recognised that there is no legal incompatibility between holding office as a director under the Companies Act 2016 and simultaneously serving as an employee under a contract of service. In this way, a director may discharge corporate responsibilities while remaining protected as a “workman” under the Industrial Relations Act 1967 (IRA).

Wearing Two Hats

The company contended that the appellants' extensive involvement in the company's decision-making process, coupled with the fact that they did not formally apply for leave like ordinary employees, demonstrated that they were the “minds and brains” of the company rather than simple employees.

The Court of Appeal rejected this contention, holding that an individual may “wear two hats” by simultaneously performing duties as a director and as an employee. Although the appellants participated in the management of the company as directors, they also carried out specific technical and project management functions pursuant to their role as Technical Director and Project Director respectively.

The Control Test and Senior Management

In reaching this conclusion, the Court of Appeal also observed that the traditional “degree of control” test has become increasingly archaic when applied to senior management. The court recognised that modern business practices differ significantly from traditional employment relationships. Senior executives are entrusted with greater autonomy precisely because they bear greater responsibilities.

Accordingly, the absence of close supervision, fixed working hours or formal leave applications does not negate the existence of an employment relationship. Rather than being measured by day-to-day control or “clocking-in”, the employment relationship of senior executives is characterised by accountability to the Board of Directors, the achievement of strategic objectives and responsibility for the overall growth and management of the company.

Evidence of an Oral Contract of Employment

Not only that, in the absence of a written contract of service between the parties, the court looked at the conduct of the parties as well as documentary evidence to prove that there was indeed an oral contract of employment.

For example, the company consistently treated the appellants as employees by making EPF, SOCSO and PCB contributions on their behalf, maintaining them in the “register of employees” as well as issuing EA Forms reflecting salary payments.

The Court of Appeal rightly rejected the company's attempt to characterise these statutory contributions as mere benefits attached to their directorships, as most of them were strictly for insured employees engaged under a contract of service with a company. Therefore these documents constituted strong evidence that the appellants were employees notwithstanding their concurrent roles as directors and shareholders.

Company Law Remedies and Employment Law Remedies

When it came to claiming for relief, the Court of Appeal clarified that remedies under company law and employment law are not mutually exclusive. The company argued that the appellants' minority oppression proceedings in the High Court as a shareholder precluded them from pursuing claims for unfair dismissal under the Industrial Relations Act 1967 as an employee.

The COA rejected this contention, emphasising that the two causes of action arise from distinct legal capacities and protect different legal interests. A minority oppression claim is founded upon the rights of an individual in their capacity as a shareholder, whereas an unfair dismissal claim arises from the existence of a contract of employment, whether express, implied or oral.

Consequently, the pursuit of one remedy does not bar or prejudice the other. This clarification is particularly significant for closely held companies, where individuals frequently occupy multiple roles as shareholders, directors and employees.

Practical Implications for Companies

From a practical perspective, this decision serves as a reminder that the removal of a director is not synonymous with the termination of an employee. Where an executive director also serves under a contract of employment, the company must comply with the procedural and substantive requirements of the Industrial Relations Act 1967 before bringing the employment relationship to an end.

Mere removal from the Board by way of an Extraordinary General Meeting does not extinguish an individual's employment rights and may expose the company to liability for back wages and compensation in lieu of reinstatement if due process is not observed.