Redundancy in Maltese Law: Rights, Procedures, and Employee Protections
One of the most common cost-cutting measures available to employers is dismissal on the grounds of redundancy. Simply put, redundancy arises when the employee’s role is no longer required – whether due to a full business closure, the shutdown of a particular workplace, or a reduction in the number of employees needed for certain work.
Redundancy under Maltese Law
In Malta, redundancy is regulated by the Employment and Industrial Relations Act (EIRA), which sets out the rights of employees and the obligations of employers. However, the EIRA does not actually define what constitutes redundancy or specify the circumstances that justify it, leaving the concept open to interpretation and somewhat unclear in employment law.
Broadly speaking, redundancy is legally valid in three main scenarios:
- Where the employer has ceased, or intends to cease, the business for which the employee was hired.
- Where the employer has ceased, or intends to cease, operating the business at the employee’s specific workplace.
- Where the employer’s need for employees to perform particular work (or to perform it at a particular location) has ceased, diminished, or is expected to diminish.
Nonetheless, redundancy is not a “catch-all” excuse for dismissal. For it to be valid, there must be a genuine reduction in the need for the employee’s role. Examples include downsizing, automation through technological advancements, financial difficulties, or business restructuring that renders certain roles obsolete. Therefore, redundancy is about the job itself disappearing, not about the employee’s performance. For example:
- In Doreen Sciberras vs Powerplan Limited (2017), the Tribunal ruled that terminating an employee because of long sick leave was unfair, as the employer failed to prove the actual role was redundant.
- In Lorraine Farrugia vs B. Tagliaferro & Sons Ltd (2016), the Tribunal found that dismissal linked to maternity leave was unlawful since the employer had not followed the proper redundancy procedures.
These cases confirm that redundancy cannot be used as a pretext for getting rid of employees for reasons tied to health, family status, or other personal circumstances. Similarly, simply assuming future financial loss is not enough to justify redundancy – there must be tangible evidence.
The key question in redundancy cases is therefore straightforward:
- Are the employee’s duties still necessary for the employer’s business to operate as usual?
- If not, is there a genuine need to eliminate the role?
Only when the answer to both questions is “no” can redundancy be validly applied.
Therefore, for a redundancy to be lawful, it must not only be genuine – meaning that there are real changes in the business’s operational needs – but it must also follow a fair process. This includes consulting with employees, considering whether there are alternative positions available, and ensuring that the selection of employees for redundancy is done transparently.
A common question employers face is: How do we decide who should go? Naturally, many would prefer to let go of underperformers while retaining the strongest team members, but Maltese law takes a stricter approach to prevent abuse. Employers cannot choose freely — selection must follow the last in, first out principle.
Under this principle, the most recently hired employee within the affected class of employment is the first to be made redundant, regardless of performance or contribution. This safeguards against redundancy being used as a cover for performance-based dismissals.
But what exactly is a “class of employment”? In Victoria Spiteri vs St. Catherine’s High School, decided on the 18th of October 2006, the Court of Appeal held that a class of employees is defined by “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 key element is interchangeability of work – whether employees can reasonably perform the same duties.
The only exception to this rule is where the last employee hired happens to be a close relative of the employer (up to the third degree of consanguinity or affinity). In that case, the employer may retain the relative, and the next most recent hire in the class would be the one made redundant.
Notice Periods Still Applicable
Even an employee is dismissed on the grounds of redundancy, the notice period must still be observed. The length of notice depends on how long the employee has been continuously employed.
During this period, employees have a choice: they can either continue working until the end of their notice or stop earlier and receive half of the wages due for the unworked portion. If the employer fails to give proper notice, however, the employee becomes entitled to full payment in lieu.
Reinstatement of Employment
Maltese law goes a step further by offering additional protection. If the position for which an employee was made redundant becomes available again within one year, the employer must give that employee first preference for re-employment. In such case, the offer must be on the same terms and conditions as before and the role cannot be offered back on less favourable terms, unless there are objective, long-term reasons, and as long as the agreement is temporary, and even then, only with the approval of the Director of Employment and Industrial Relations (reviewed every four weeks).
Employers must also allow a reasonable acceptance period, giving redundant employees time to respond to a reinstatement offer. If the employee refuses, the employer may hire a new candidate. But if the employee accepts, the law treats it as though the employment relationship had never been interrupted.
Collective Redundancies
Redundancy can affect a single employee or a group of employees. Under Maltese law, when redundancies reach a certain scale, they are classified as collective redundancies, which are subject to stricter rules and oversight.
Subsidiary Legislation 452.80 defines a collective redundancy as the termination of employment by an employer, on grounds of redundancy, within a 30-day period involving:
- 10 or more employees in establishments with more than 20 but fewer than 100 employees;
- 10% or more of employees in establishments with 100–299 employees; or
- 30 or more employees in establishments with 300+ employees.
Unlike individual redundancy, a collective redundancy is not just an internal company matter. The law obliges employers to both inform and consult the employees’ representatives and must notify the DIER before dismissals take effect.
Where employees are not represented by a union, the employer must organise a secret ballot so that workers can elect their own representative. The consultation must address:
- Whether redundancies can be avoided altogether;
- If not, whether the number of affected employees can be reduced; and
- How to mitigate the impact of redundancies on those affected.
Within seven days of notifying representatives in writing, the employer is required to enter into consultation. Alongside this, a written statement must be provided, setting out:
- The reasons for the redundancy;
- The number of employees to be dismissed;
- The number of employees normally employed;
- The criteria used to select employees for redundancy; and
- Details of redundancy payments and the timeframe for dismissals.
Copies of both the notification and the written statement must also be submitted to the DIER on the same day.
Dismissals may not take effect until 30 days have elapsed from notification to the DIER. This standstill period allows for meaningful consultation and, where possible, solutions. The Director may extend or shorten this period if circumstances warrant.
If an employer fails to follow the legal procedure for collective redundancies, employees may bring claims against them, and the DIER itself has the power to initiate proceedings. Employers in breach of the Collective Redundancy (Protection of Employment) Regulations may face both civil and criminal liability, including fines of at least €1,164.69 per redundant employee.
Conclusion
Redundancy should always be regarded as a measure of last resort. Employers are expected to do everything possible to avoid it – whether through proper consultation, restructuring, or offering alternative roles within the company.
Ultimately, redundancy does not give employers a free hand to dismiss staff at will. The process must be genuine, transparent, and fair. Notice periods must be respected, selection must follow the legal ‘last in, first out’ rule (save for limited exceptions), and employees remain protected even after dismissal through their right of first refusal if the role reopens.
Put simply, redundancy is not just about cutting costs – it is a tightly regulated process designed to balance business needs with employee rights. Employers who overlook these obligations risk legal challenges, reputational harm, and significant financial penalties.
This article is for information purposes only and should not be construed as legal advice. The information provided reflects the law as it stands on the blog’s publishing date. For the most updated version or advice tailored to your specific circumstances, you are strongly encouraged to consult a lawyer.
Article and research done by Ms Caitlin Turner, LL.B. (Hons) (Melit.), currently reading a Master of Advocacy at University of Malta.
Sciberras Advocates founded by Dr Adrian Sciberras, is a law firm based in Malta. The firm prides itself to be multi-disciplinary, innovative and flexible in order to meet the changing times and any challenges in the local and international legal scenario. No matter what private or corporate complex demands are called for, Sciberras Advocates offers practical and cost-effective legal solutions to achieve your desired results. You may reach Sciberras Advocates by phone on +35627795222 or via email on [email protected].
