The Recharacterisation of Employment – A Reality

A preliminary ruling given by the Industrial Tribunal on the 15th of December 2020 in the case of Bourgeais vs. Sara Grech Ltd.[1], has shed some well needed light on the matter of recharacterisation of employment in terms of the Employment Status National Standard Order, Subsidiary Legislation (‘SL’) 452.108[2].

This case was filed against Sara Grech Limited (a real estate agency), where an ex-employee sought to request the Tribunal to declare the recharacterisation of her arrangement with the company and to also deem the termination of her employment as being unjust at law.

From the proceedings, it transpired that Ms. Bourgeais had two contracts with the company, one dated 4th September 2013 and the other dated 29th February 2016. These agreements were in fact ‘sub-agency agreements’, whereby the company was the agent and Ms. Bourgeais was the sub-agent. Having said this, Ms. Bourgeais claimed that the agreement was of an employment nature. The relationship between Sara Grech Limited and Ms. Bourgeais was terminated on the 7th November 2016.

Ms. Bourgeais used to pay social security as a self-employed person and was in fact registered as such with the Employment and Training Corporation (‘ETC’). Moreover, she was registered for VAT purposes, to pay VAT on her earnings. The company explained that the arrangement that Ms. Bourgeais had was that she was not eligible for sick leave or vacation leave, and was not entitled to receiving the Government bonus which would be due in the case of an employment relationship.

The company also explained that the contract with Ms. Bourgeais was terminated as it was brought to their attention that Ms. Bourgeais was not abiding by the obligations stated in her contract and neither was she acting with the level of diligence requested in the industry, including withholding information from the company.

During the proceedings, the Tribunal examined the criteria established by the above-mentioned SL 452.108 in relation to determining whether a relationship is to be deemed one of employment, and it was determined that Ms. Bourgeais satisfied all such criteria.

In fact, the Tribunal stated that:

  1. 80% of Ms Bourgeais’ income was from the company;
  2. The company held management meetings once a week, during which Ms Bourgeais was assigned work;
  3. She was granted a company phone and laptop, and had a car made available to her;
  4. Ms Bourgeais had a strict confidentiality clause in her agreement and therefore, could not sub-contract;
  5. Without estate agents there are no sales, and without sales there is no company; and
  6. Other estate agents were employed with the company as evidenced by JobsPlus records.

The law also states that notwithstanding the fulfilment of five or more of the criteria established in SL 452.108, the parties may, before entering into such a relationship, submit a written request to the Director General responsible for Employment and Industrial Relations, to exempt such a relationship from being considered as an employment relationship. The Director may exempt such relationship in writing, if it is considered that there are particular grounds relating to that activity providing for its exemption, including for example, that the activity being carried out is an uncommon occurrence or of a very short duration. Such exemption shall remain valid unless rescinded by the Director.

The company claimed that the Department of Industrial and Employment Relations (‘DIER’) had been approached by all estate agents in 2012, when the law had been enacted, and the DIER had indicated that estate agents do not fall within the purview of the regulations as they do not satisfy five out of the eight criteria in terms of law. However, in this particular case, the Tribunal determined that this did not apply to Ms. Bourgeais as she was not employed as an agent at the time (2012), and noted that her contract stipulated conditions far more onerous than those indicated in the said petition that had been sent to the DIER.

After examining all of the eight conditions as established by SL 452.108, the Tribunal concluded that the relationship between the company and Ms. Bourgeais satisfied all eight conditions and that Ms. Bourgeais should therefore be deemed to be an employee of Sara Grech Limited.

Thus, the Tribunal dismissed the plea that it had no jurisdiction to determine this case as it was not an employment contract. The Tribunal shall now proceed with determining whether the termination of the engagement was unfair as claimed by Ms. Bourgeais and if so, shall determine the amount of compensation to be awarded. It remains to be seen whether this judgement shall be appealed following a final determination by the Tribunal.

In conclusion to the above, it is strongly advisable that employers engaging personnel on a self-employed basis, stray clear from adopting contractual clauses or practices akin to that of an employment relationship as one might infer that such arrangement is actually one of employment, with the sole aim of circumventing employment regulations.

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

[1] Perrine Marie-Louise Eulalie Bourgeais (holder of French ID Card Number 081231308026) vs Sara Grech Limited (C 7360), decided by the Industrial Tribunal (Mr. Harold Waltz) on the 15th December 2020;

[2] Employment Status National Standard Order of the 31st January 2012;

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