Re-visiting Disciplinary Proceedings In Employment: Compensation, Re-instatement, Or Both?

In a recent judgement of the 6^th of June 2025, the Maltese Court of Appeal addressed a significant case concerning unfair dismissal in Malta, confirming a decision of the Industrial Tribunal. The case not only re-visited the procedural rules for dismissing an employee, but also established an important precedent insofar as what remedies are available for unfair dismissal.

In Rueben Fenech vs L-Awtorità għas-Servizzi Finanzjarji ta' Malta, the COO of the MFSA alleged that his dismissal, which was based on poor performance at the workplace, was unjust and unlawful.

Key principles governing unfair dismissal in Malta At first instance, the Industrial Tribunal pronounced several legal principles commonly applied under Maltese employment law when taking disciplinary proceedings against an employee:

1. The clause on discipline in a collective agreement or a handbook is one of the most important clauses therein since it lists the process by which justice at the workplace is to be exercised when an employee is accused of breaching the rules of the Company.
2. An employer is justified in taking a decision without necessarily following the disciplinary process when the case is an obvious one, like when the employee admits an accusation serious enough to deserve dismissal.
3. In all other cases, however, for a disciplinary procedure to be just, the principles of natural justice (i.e. both parties must be heard, and the decision-maker must be impartial) have to be respected, and so do the collective agreement or the staff handbook.
4. When a disputed allegation is made against an employee, a careful and conscientious investigation must be carried out, and the investigator must focus no less on evidence which may exculpate the employee, or at least point to his innocence.
5. A person who is a witness in investigatory proceedings should not act as a judge in disciplinary proceedings, otherwise this could be regarded as a breach of the principle of natural justice.
6. Although it is justified that an employee in an executive role is scrutinised for his behaviour more intensely and in more detail, this does not detract from that employee's right to be subject to disciplinary proceedings which are just and transparent, like any other employee in the organisation.
7. There is no reason why poor performance should not be considered an offence which brings about a disciplinary procedure.
8. The employee is entitled to know the nature of the charges against him in sufficient detail to enable him to prepare his case. He is entitled to be represented or accompanied in accordance with procedure, and he should be informed of his right to appeal to a higher level of manager, who have not previously been involved in the decision, or to an independent arbitrator.
9. Terminating employment without carrying out the disciplinary procedure which has been incorporated into the employee's contract is tantamount to wrongful dismissal
10. If the principles of natural justice are not followed, the decision is null even if it is substantially correct.

Non-Adherence with staff handbook renders dismissal unfair

When applying these principles to the facts of the case, the Tribunal found that there were a number of feedback letters and informal conversations between the CEO of the MFSA and the plaintiff, where the two individuals could not agree about the plaintiff's standard of performance: the former insisted that it required improvement, and the latter holding firm the contrary.

The Tribunal held that this disagreement warranted an investigation in terms of the Staff Handbook, where the parties' claims could be supported by evidence, and the disciplinary procedure against the plaintiff could commence. The Tribunal rhetorically asked why such a formal investigation did not take place, and instead the CEO took the decision on his own to terminate the plaintiff, despite the serious risk of bias. The Tribunal observed that in doing so, the CEO had positioned himself both as prosecutor and judge.

Thus, the Tribunal held that the CEO's failure to honour the terms of the Staff Handbook, which formed an integral part of the plaintiff's employment contract, amounted to unfair dismissal in Malta, as the required procedural safeguards were not respected.

Reasons for dismissal must also be valid

The Tribunal did not stop at analysing the procedural requirements involved in dismissing an employee. It went a step further and analysed the validity of the reasons tendered by the MFSA as constituting the poor performance on which the dismissal was based.

Following this analysis, the Tribunal concluded that such reasons were not sufficient at law, and this also rendered the dismissal unjust. Amongst its salient observations, the Tribunal held that:

• It was not valid to hold certain deficiencies (such as lack of communication) against the employee when the CEO and the HR chief never discussed this with the employee;

• Warning letters should make clear the nature of the conduct which will not be tolerated, and spell out in no uncertain terms that the consequences of a failure to heed the warning will be a dismissal. The accusations must be specific, and not based on simple vague suspicious or reduced to generic references; and

• Employers should not allow their lack of chemistry or compatibility with an employee to influence their judgement, especially with respect to the competence of that employee.

Compensation and re-instatement in cases of unfair dismissal in Malta

What is particularly noteworthy about this decision is the manner in which it reshapes the available remedies for unfair dismissal in Malta, by recognising the possibility of awarding both reinstatement and compensation.

In terms of Article 81(2) of the Malta Employment and Industrial Relations Act (Cap. 452 of the Laws of Malta), the Industrial Tribunal shall make an award for compensation only where the Tribunal decides not to make an order for reinstatement or re-engagement.

This provision, however, did not stop the Industrial Tribunal from ordering both the re-instatement of the employee in a role equivalent to that which he occupied prior to his dismissal, with the seniority which he had at the time, as well as compensation to the employee for the financial and moral damages suffered.

The Tribunal calculated the actual income which the employee had garnered since his dismissal, and compared it with the wage he would have earned with the MFSA had he not been unjustly terminated. The Tribunal ordered that the MFSA compensates him the difference, together with €10,000 worth of moral damages for each year that had passed.

The MFSA felt aggrieved by this dual remedy afforded by the Tribunal, and appealed on this point to the Court of Appeal. The Court held that the Industrial Tribunal's decision to order both compensation and re-instatement was correctly made, in view of various factors which could not be ignored in such a determination:

1. Plaintiff's dismissal from a high-profile position seriously limited his employment opportunities, his financial income, and his statute in the sector.
2. Operators in the sector had a close statutory and institutional relationship with the MFSA, which made it much more difficult for the employee to find a good job in the sector.
3. Given the employee's profession, his opportunities for employment were strictly limited to the sector regulated by the MFSA.
4. The employee's quarrel was primarily with the CEO, and he never lost the trust of the Board of Governors.
5. The employee and his family suffered greatly without any fault of their own, as the employee had his career unjustly interrupted despite having worked in a professional manner.

Thus, the decision of the Industrial Tribunal, despite seemingly contradicting the provisions of the law, was confirmed, and the MFSA's appeal was ultimately rejected.

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.