Planning for redundancies – A legal perspective

In view of the current scenario we are facing with the COVID-19 pandemic and with the economic repercussions reverberating across the globe, some companies will need to take painful but necessary steps to survive the storm. In a previous article entitled “How can an employer strive to avoid redundancy?” reference is made to various options that employers may take to save jobs while diminishing the impact to their operation. Whilst making employees redundant is often seen as a last resort, this may be the only viable option in some circumstances and in this article, we shall look at the legal implications and the salient features when taking such action.

Unlike countries like the US where an employer can make employees redundant at will, Maltese legislation protects employees from redundancies that do not have an economic justification. Tribunal interpretations indicate that the main reasons for which a redundancy may be resorted to, are fundamentally two:

• either in the event of a dire financial situation in the operations of the employer, or,
• in cases of restructuring, whereby certain tasks/roles are no longer relevant within the operation of the company.

Let’s first look at what the law stipulates when making an employee redundant. In the case of individual redundancies, an employer should discharge the employee who was engaged last in the class of employment affected by such redundancy – the Last In First Out Rule. By ‘class’ we refer to the groups or categories listed in a collective agreement. Provided that there is no collective agreement or where a collective agreement does not stipulate groups or categories of employees, it shall refer to the work performed or expected to be performed independently of the title or name given to the post. 

While the main condition for individual redundancies is the last in first out rule, in cases of collective redundancies, further obligations are imposed on an employer. Before delving into the main requirements and obligations linked with collective redundancies, it is worth highlighting what The Collective Redundancies (Protection of Employment) Regulations (S.L.452.80) defines as collective redundancies. This regulation specifies that termination of employment by an employer of the following number of employees over a period of thirty days will constitute collective redundancies:

• ten or more employees in an establishment normally employing more than twenty employees but less than hundred employees;
• ten percent or more of the number of employees in an establishment employing hundred or more, but less than three hundred employees; and
• thirty employees or more in an establishment employing three hundred employees or more.

The following are the main responsibilities and measures which need to be addressed by an employer in case of collective redundancies:

• An employee representative should be notified that redundancies will be taking place and within 7 days of notification, consultation with said representatives should begin.
• All the necessary and required information needs to be given to the employees’ representatives, such as the reasons for the redundancies and the number of employees being impacted.
• How the employer aimed and strived to avoid collective redundancies and how it sought to reduce the number of redundancies.
• Provide the employees’ representative and the Director of the Department of Industrial and Employment Relationships (DIER) with a written statement providing all the details relevant to the redundancies.

An employee whose employment is to be terminated by way of redundancy shall be given a notice period in Malta (depending on the time that s/he has been in employment) and shall be entitled to payment in terms of any accrued and unutilised vacation leave. In the event of collective redundancies, the notice of termination of employment may start running from the date when consultations between the employer and the employees’ representative are concluded. Any projected collective redundancies may only take effect on the lapse of thirty days from the notification sent to the Director of the DIER.

In the event that within twelve months from the termination of an employment by way of redundancy, the situation within the operations of the employer improves to the extent that the employer is seeking to recruit replacement for the posts earlier declared redundant, the redundant employees have an entitlement for re-engagement under conditions which should be as favourable as those conditions availed of before redundancy. A re-engagement under this premise will imply that the employee shall be deemed by law to have continued in the employment notwithstanding the termination.  

This article discussed the legal obligations on the part of the employer, setting the parameters within which redundancies can take place. Needless to say, employers might need further guidance on how to carry out redundancies in a manner that is sensitive and that is also mindful of the potential repercussions to the operation and employer brand. These aspects are discussed in a separate article entitled, “Key considerations when planning redundancies – An HR perspective”.

About the Author

This article has been authored by Dr Maria Tabone, CSB Group's Senior Business and Corporate Advisor.

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