Employment and Industrial Relations Law

Case Study on Transfer of Business

08 Feb 2024

4 min read

Authors: Ann Bugeja, Christine Borg Millo & Sarah Xuereb

Company A employs 60 employees, and have decided on the transfer of employees from their existing Malta subsidiary company, as ‘Company A’ to their newly established branch ‘Company B’. They wish to seek advice regarding the legal process and proper method for the transfer of employees from Company A to Company B. This is with the scope that the transfer of employees is carried out on an equal footing, meaning that the employment conditions of the employees remain the same following the transfer of business.

Transfer of Business

Whenever a business, undertaking or part thereof is transferred to another entity, the rights of the employees must be safeguarded and all contracts and rights emanating therefrom of employment between the employee and their new employer must continue to have full effect. In consideration of a transfer, any contract of employment shall be retained and considered as if originally entered between the employee and the new employer.

The transfers of business in Malta are regulated by 2 salient laws:

  • The Transfer of Business (Protection of Employment) Regulations (S.L. 452.85 and hereafter referred to as the “Regulation”);
  • The Employment and Industrial Relations Act (Chapter 452 of the Laws of Malta, and hereafter referred to as the “Act”).

Note that the Regulation, along with the relevant provisions of the Act, are only applicable to the following types of business transfers:

  • A business, undertaking, or part of a business transferring to another employer due to a legal transfer or merger; or
  • A service provision change; or
  • A business or undertaking which is involved in economic activities, regardless of whether it is operating for economic purposes or not; or
  • The transfer of any business, undertaking or part of an undertaking or business which is situated in Malta; or
  • The transfer of a seagoing ship which forms part of a transfer of a business, undertaking, or part of an undertaking or business which is situated in Malta.

Electing or Selecting the Employee Representative

In this discussion, and according to the Employee (Information and Consultation) Regulations (S.L. 452.96), an employee representative is required in the case that an undertaking employs 50 or more employees, from the 23rd of March 2008.

This is necessary in order for the employer to make the practical  arrangements, at the appropriate level, to allow his employees which are being transferred from Company A to Company B, to effectively exercise the right to information and consultation. Therefore, in essence, should such representative not yet exist, then their election must take place.

Generally, elections are carried out by system of ballot and the election system to be adopted needs to be notified to the Director of Industrial Relations and Employment (the “Director”) at least 1 month before date of proposed ballot date.  Moreover, the period for submission for nominations of the employee representative needs to be a minimum of 2 weeks. Once the date of nominations closes, the ballot is to take place not earlier than 1 month from this date.

If only one (1) employee submits nomination, then he/she is automatically appointed as employee representative, and the need of ballot is NOT required.

The transfer of Employees

Once the branch is set up, and the election of the employee representative is finalised, the provisions of the Transfer of Business (Protection of Employment) Regulations begin to apply.

The employee representative would be notified with a written statement containing the following information regarding the transfer of business:

(i) the proposed date of the transfer;

(ii) the reasons for the transfer;

(iii) the legal, economic  and social  implications  of  the transfer for the employees; and

(iv) the measures envisaged in relation to the employees. 

This written statement is provided to the employee representatives at least 15 working days before the date of proposed transfer of business of Company A. It must also be sent to the Director, on the same day that the employee representative/s have been notified therewith.

However, if the transfer would in any shape or form impact the conditions of employment of the transferred employees, the transferring employer, and the new employer must engage in consultations with the employee representatives from the day on which the representatives would have received notice of the transfer. Any individual in breach of the Regulation shall be liable to pay a fine.

Following the Transfer

On the date of transfer, the relative transfer of employment of each individual as a transferred employee is to be notified to the competent authority, which in Malta is JobsPlus.  It is also good practice to have an addendum to the employment contract, signed by both the new employer (Company B), and the respective employee.