The Definition of Redundancy under Maltese Law

Author: Ann Bugeja

When terminating on grounds of redundancy, Maltese law states that an employer must always follow the last in, first out rule. Thus, the last person engaged within a class of employees affected by the redundancy should be the first to be made redundant. The only exception to the last in, first out rule is where the person who is last in, is related to the employer (not being a limited liability company or statutory body) by consanguinity or affinity up to the third degree, and thus, the employer may instead terminate the employment of the person next in turn instead.

A class of employees is defined by law as “the work performed or expected to be performed independently of the title or name given to the post in situations where there is no collective agreement in place.” This means that an employer must differentiate between the employees based on the tasks they perform in practice in their day-to-day job duties in order to categorise the employees into classes.

However, Maltese law does not define which circumstances constitute a redundancy and thus, this gives rise to a certain level of uncertainty when it comes to what constitutes a valid redundancy under Maltese law.

Since Maltese law does not define the concept of redundancy, we need to rely on authors and case law to guide us and traditionally the Industrial Tribunal and Maltese Courts rely on English jurisprudence and law when there is a lacuna in Maltese legislation.

Authors

With regards to jurisprudence, we look at Norman Selwyn in his book Law of Employment wherein he states that a dismissal shall be for reason of redundancy if it is wholly or mainly attributable to:

1. 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; or
2. The employer has ceased or intends to cease to carry on that business in the place where the employee was employed; or
3. 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.

Case Law – Definition of Redundancy

Court of Appeal

In Alessandra Theuma vs Alfred Mangion et[1] the Court of Appeal referred to English case law[2] which has established the following guidelines:

1. Was the employee dismissed?
2. If so, have the requirements of the business for the employees to carry out the work of a particular kind ceased or diminished (or were expected to do so)?
3. If so, was the dismissal caused wholly or mainly by that state of affairs?

The Court of Appeal continued to explain that the crucial element under point (b) of the guidelines, was to establish whether there was truly a reduction of business requirements. Furthermore, in deciding this, the adjudicating body should not introduce a ‘contract’ test whereby they just consider the specific tasks the applicant was employed for.

In Remi Armeni vs Francis Busuttil & Sons (Marketing) Limited[3] and Vanessa Fenech vs SL Shipping Management Company Limited[4] the Court of Appeal quoted English legislation which states that redundancy is considered to have taken place when:

1. The employer ceases to carry on the business is which the employee was engaged or closes down the place in which he/she was working;
2. The business ceases to require people with the particular skills of the employee or needs fewer of them to carry out the work;
3. The dismissal is for a reason not related to the individual concerned or for a number of reasons all of which are not so related.

In Remi Armeni vs Francis Busuttil & Sons (Marketing) Limited the Court of Appeal also referred to older case law[5] and stated that a difference needs to be made between dismissal for good and sufficient cause which includes dismissal “owing to the occurrence of an intervening event or change of circumstance so fundamental as to be regarded by the law as striking at the root of the agreement and as entirely beyond that was contemplated by the parties when they entered into an agreement” and dismissal on the basis of redundancy, because the legislator didn’t want to give rise to employers making employees redundant with the excuse that they have no control of the situation and thus avoiding paying what the legislator wanted the employer to pay in cases of redundancy.

Thus, in this case, the Court of Appeal felt that the questions which need to be asked and answered in cases of redundancy are whether the employee’s job duties are still necessary for the employer’s business and whether it is necessary for the employee to continue his/her job duties in order for the business to continue operating as normal.

Industrial Tribunal

The Industrial Tribunal, in Joseph Baldacchino vs F.S Engineering and Plastics Ltd[6]referred to the Court of Appeal cases discussed above and stated that in this case since no discussions where ever held with the employee prior to redundancy, no alternative employment was offered and no proof was brought regarding financial problems within the company, this did not constitute a valid redundancy. The Tribunal remarked on the fact that the Director could not take on the dismissed employee’s full time work himself.

In Lara Boffa vs Philip Toledo Ltd[7] the Tribunal noted that a redundancy needs to be made whilst taking into account various criteria including the below:

1. Reduction in business which results in a reduction of income and/or financial loss for the employer;
2. Changes in job duties required for work which result in the need for employees with different competences than those of current employees;
3. Changes in the nature of the work which result in the need for restructuring so that the company improves its operations and results in keeping a certain number of employees;
4. Presenting a restructuring plan in order to show the necessity of reducing employees.

In this case, the company had abolished the employee’s job role following a re-structuring process however the employee’s job duties were still necessary for the operation of the business and thus were absorbed by other employees. The Tribunal found it suspicious that only 1 employee was made redundant due to her role being abolished and the only alternative employment being offered was that of a demotion to a salary lower than employees of whom she had been the manager of. The Tribunal held that this was not a valid redundancy and awarded compensation to the employee for unfair dismissal.

Case Law – Class of employees

In Victoria Spiteri vs St. Catherine’s High School[8] the Court of Appeal discussed the provision in the law which states that redundancy should be made on a last in, first out basis within a class of employees. The Court of Appeal held that a class of employees is defined by law as “the work performed or expected to be performed independently of the title or name given to the post in situations where there is no collective agreement in place.” The Court of Appeal emphasized that an important element needed to determine one class of employees from another is the element of interchangeability of employment. In fact, in this case, the employer argued that the redundant employee was a religion teacher and the teacher employed after she was made redundant was employed to teach a different subject and thus they did not fall within the same class of employees however, the Court of Appeal disagreed with this argument.

It noted that the employee had been a teacher for 37 years and was only 2 years away from pensionable age. During her 37 years of service, the employee had taught various subjects and at the time of redundancy, besides being a religion teacher, she also acted as a substitute teacher where necessary, which meant that during her career she taught other topics as necessary. Thus, the Court was of the opinion that the whole staff of teachers needed to be considered as one class of employees since it was unfair to consider the employee as being in a specific class (religion teacher) just because she happened to be teaching that subject at the moment.

Conclusion

Chairpersons who adjudicate cases being heard before the Industrial Tribunal analyse the facts of the case, on a case by case basis and determine whether the facts of the dismissal constitute a redundancy based on the  discussed criteria since there is no fixed definition and no fixed pattern on which decided cases is followed.

Redundancy should always be resorted to as a last resort and an employer should always be able to prove that any possible steps to avoid redundancy were taken.

Where relevant, a re-structuring plan should be established and followed, and it is imperative that the employer establishes which employees perform interchangeable job duties and can thus be considered a class of employees prior to utilizing the last in, first out rule. Also, the employer should always offer alternative employment prior to making employees redundant, when possible.

Should you have any queries in relation to the above, kindly contact us on employment@gvzh.mt.

[1] Court of Appeal (Inferior Jurisdiction), 23rd May 2008

[2] Safeway Stores plc vs Burrell (1997)

[3] Court of Appeal (Inferior Jurisdiction), 28th June 2011

[4] Court of Appeal (Inferior Jurisdiction), 31st October 2016

[5] Dr. George Manara vs Perit Edwin Borg Costanzi, 14th May 1990

[6] 6th November 2014

[7] 15th October 2914

[8] Court of Appeal (inferior), 18th October 2006