Malta: Curbing Redundancies In Terms Of The Employment And Industrial Relations Act

The unpredictability of COVID-19 has put many business owners and employees on edge. Notwithstanding the financial aid which has been made available to employers and employees in hopes of easing their financial burdens, the looming thought that employers might not be able to keep their business afloat, resulting in the unavoidable dismissal of employees, still remains.

The Employment and Industrial Relations Act (Chapter 452 of the laws of Malta) (the "Act") strives to protect and safeguard the rights of employees. In order to achieve these proposed aims, the legislator introduces very limited grounds on which an employee may be dismissed from employment. One of these grounds for dismissal includes redundancy, in line with the last in, first out principle. Nevertheless, dismissal of employees on grounds of redundancy should not constitute an automatic solution and cannot be regarded as a simple cost-cutting measure. Indeed, employers are strongly encouraged to resort to less draconian measures aimed at guaranteeing that employees are retained as part of the workforce.

One solution is filing a request in terms of Article 42 of the Act with the Director General of Industrial and Employment Relations for a change of working conditions to less favourable conditions, which could include a reduction of the working hours an employee is bound to undertake. These conditions are reviewable every four (4) weeks by the Director and only to be considered in extraordinary circumstances. It is to be emphasised that the employer in this case, is expected to restore the status quo  once the business affairs have improved. Such temporary arrangements are not to be unilaterally implemented by the employer, but the employee or a representative of the employee, must approve of such changes prior to implementation. Furthermore, in view of the restriction contained under Article 15 of the Act, which prohibits a reduction of wages unless expressly permitted by law, a competent court, by agreement between the employer and an organisation or trade union, it is unclear whether any changes requested under Article 42 may be accompanied with a deduction in wages.

Alternatively, the employer may seek to retain the employee under the same conditions whilst temporarily altering an employee's responsibilities and duties. A change in said responsibilities and duties, cannot be unilaterally implemented by the employer and it is subject to the employees express and unequivocal consent.

It should be noted that, even during these current extraordinary times, an employer remains duty bound to honour all contractual and statutory obligations including inter alia  paying the employee Statutory Allowances¹ and Bonuses²  taking into consideration any reductions which may be availed of in terms of Article 42 of the Act, in which case any such remuneration is to be calculated on a pro-rata basis.

Even if the worst is inevitable, and the employer has no other option but to dismiss the employee, the Act provides for additional safeguards aimed at ensuring that an employee's redundancy is not permanent in nature. Article 36(3) of the Act provides that if and when the post is available again within a period of one (1) year from termination, the employer is obliged to re-employ the employee who had been dismissed on grounds of redundancy to his/her former position and under the same employment conditions.

Footnotes

1. A Statutory Bonus is a bonus which is granted to all public and/or private employees payable every six (6) months by the employer, calculated at seventy-four cents (€ 0.74) per calendar day including Saturdays and Sundays which amount to one hundred, thirty five Euro and ten cents (€ 135.10).

2. Bonuses includes an additional government bonus granted in terms of 'Weekly Allowance National Standard Order', Subsidiary Legislation 452.62, of one hundred twenty-one euro and thirty cents (€ 121.13) which is to be paid by the employer every March and September, the sum of which is calculated at four euro and sixty six cents (€ 4.66) per week. Part- time employees are entitled to a pro-rata of both the Government and Weekly bonuses mentioned above, based on the number of hours worked. These amounts are to be paid to the employee together with the employee's wages and are taxable in the same manner.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.