In the midst of the current situation, the impact on the economy is being felt across all industries and various employers will inevitably consider looking into cost cutting measures. One of the most impactful cost-cutting measures would be that of reducing the cost of the salaries.
This would naturally result in two possible avenues; either by effecting changes to the employees contracts thereby reducing their salary packages and working hours, or through the outright dismissal under the grounds of redundancy of the employee. Even under such extreme circumstances, the laws and procedures to carry out such cost-cutting measures, continue to exist and must be adhered to by employers.
What does the term Redundancy mean?
The term redundancy has been unscrupulously utilised by both the stakeholders affected by this crisis and by the media. Therefore, it is important to consider what the implications of this term are and also to have an understanding of when and how to instigate/opt for such a measure.
A dismissal shall be for reason of redundancy if it is wholly or mainly attributable to:
- The fact that the employer has ceased, or intends to cease, to carry on that business for the purposes for which the employee was employed
- The employer has ceased or intends to cease to carry on that business in the place where the employee was employed
- The fact that the requirements of that business for employees to carry out work of a particular kind or for them to carry out that work in the place where they were so employed have ceased or diminished or are expected to cease or diminish.
Considering that the situation we are dealing is one of a global and national crisis, it is implied that most employers can predict a substantial loss of revenue and profit in the coming months. A natural misconception would be that dismissal on the grounds of redundancy will be more easily accepted in this irregular situation, however this assumption is not sufficient to justify a redundancy with concrete evidence of the drastic and actual reduction in business being crucial to justify such a measure.
Therefore, this type of dismissal should still be applied as a measure of last resort and the employer should be able to prove that it did everything in its power to avoid this outcome. Consequently, an employer is bound to find alternative work for the employee, perhaps by transferring the employee into a different department prior to the dismissal, and ensure that it can prove that “the work, being carried out by the relative employee, was necessary or no longer necessary for the employer and whether the role of the employee was necessary to continue such work”1and “Remi Armeni vs Francis Busuttil & Sons Limited” (A.I.C. (RCP) – 28.06.11). This theory was dealt with in detail both by the local Tribunals and the UK Courts in several cases.
It would therefore be premature to dismiss employees simply based on the assumption of future loss of revenue and profits.
Applicable procedure for dismissal under the grounds of redundancy?
One of the first questions that comes to mind when an employer is considering dismissal under the grounds of redundancy, is how to decide which employees are to be dismissed. Is one able to pick and choose? Any employer would ideally want to dismiss employees who are underperformers and hold onto the employees who have given more to the company. The law however, to limit abuse clearly prohibits this and the only applicable method is that known as the ‘last in first out’ basis. This means that dismissal should take effect in a staggered manner, and the last employee that was employed in the same class of employees should be the first to be dismissed, regardless of performance.
The only exemption to this rule allowed at law, is when an employee is related to the employer by consanguinity or affinity up to the third degree. In this case the law provides that one may decide to hold onto that employee (relative) and dismiss the next employee in line in accordance to the ‘last in first out’ criteria.
Furthermore, it is relevant to highlight that even in the case of redundancy the applicable notice period is still effective. Unless the dismissal under the grounds of redundancy are tantamount to collective redundancies, then one may conclude the matter internally and does not need to seek the approval of the Department of Industrial and Employment Relations (DIER).
Nonetheless under these special circumstances’ employers are being encouraged to contact both the DIER and the Malta Employers Association due to the government aid being provided in the current situation.
The obligation of re-employment
Under Maltese Law any employee whose employment is terminated on grounds of redundancy shall be entitled to re-employment if the post formerly occupied by him is again available within a period of one year from the date of termination of employment:
Provided further that such an employee shall be so re-employed at conditions not less favourable than those to which he would have been entitled if the contract of service relating to him had not been terminated.
Provided, finally, that any employee who shall have been so re-employed shall, for the purposes of this Act, be deemed to have continued in his employment.
What is a collective redundancy?
Maltese Law defines collective redundancy as: “the termination of the employment by an employer on grounds of redundancy, over a period of thirty days, of:
(a) ten or more employees in establishments normally employing more than twenty employees but less than one hundred employees;
(b) 10% or more of the number of employees in establishments employing one hundred or more but less than three hundred employees; and
(c) thirty employees or more in establishments employing three hundred employees or more;
Provided that for the purposes of calculating the number of redundancies, termination of an employment contract which occurs on the employer’s initiative for one or more reasons which are beyond the control of the individual employees, shall be assimilated to redundancies, provided that there are at least five redundancies”
In the case of collective redundancies the procedure forfeits to be one of an internal nature to the employer, as the law requests that prior to making these redundancies the employer must inform both the ‘employees representative’ and the DIER with information regarding the redundancies in question. In cases where there is no union representing the employees, the employer is bound to call a secret ballot for the non-unionised employees to elect one of the employees to be their representative.
This article is based on the Laws of Malta that were effective at the time of writing, it does not take in consideration the effect any future legal notices, which may be issued in virtue of the Covid19 situation in the coming days. This should not be considered as legal advice but only as informative of the general law and employers should always seek legal advice prior to making any terminations, due to any specific regulations applicable to their individual situation.