Time for a Time Limit on EPF Lawsuits

by Nicholas Wong ~ 18 April 2019

Time for a Time Limit on EPF Lawsuits

Imagine you are a sleeping company director and not an active part of the company’s management. Your fellow (active) director, who has been internally tasked to handle the company’s Employees Provident Fund (EPF) contributions, overlooks several payments. The affected employees do not check their EPF accounts. Soon after, you leave the company.

Over a decade later, the employees finally notice the missing payments (perhaps they tried to make a withdrawal) and lodge a complaint with EPF. EPF takes a year or two to chase the company for the missing contributions. Finally, after nearly two decades, EPF decides to sue you, not only for the unpaid EPF contributions but also for dividends and late payment charges on the same. By this point, you may have long moved on from this company.

Are you liable, despite the fact that there was a gross delay in the making of the claim and despite the fact that you have never at any time known about the problem or been put on notice of it?

Yes, you are.

We recently represented a director who was in a similar situation. He was being sued some 17 years after the fact for unpaid contributions he knew nothing about.

We attempted to argue, among others, that EPF’s claim ought to be time-barred, despite the Court of Appeal’s decision to the contrary in Sivamurthy s/o Muniandy & Ors v Lembaga Kumpulan Wang Simpanan Pekerja [2013] 5 MLJ 533. Not surprisingly, the Court was not with us on this issue.

The gist of the Court of Appeal’s decision  in Sivamurthy was that, as a social piece of legislation, the EPF Act 1991 ought to be given a broad and liberal interpretation – specifically in that case, to exclude the entirety of the Limitation Act, 1953.

This imposes excessive, unnecessary and (most importantly) avoidable liability on directors. The inclusion of dividend charges and late payment charges (which might range from 5-7% each) on a compounded basis mean that such unlucky persons end up paying far more than the principal sum in missing contributions.

The present situation encourages delays and stale claims, prejudicing both employees and employers. Employees who only discover missing contributions when they need to draw on their EPF savings are stuck until the money is recovered. Directors are forced to pay much more than they would have had they been notified of the missing payments earlier.

There are straightforward ways to both limit the exposure of such unknowing directors and safeguard employees’ savings, without the time and cost wasted by litigation. Employees ought to take steps to periodically check their EPF account or otherwise report unpaid contributions in a timely manner. EPF ought to decline to pursue stale complaints.

To this end, perhaps it is time for the Court to revisit its decision or for the EPF Act to be amended.

The information and views set out in this note are those of the author(s) and do not necessarily reflect the official opinion of Thomas Philip.