Redundancy In Malta: Legal Requirements And Strategic Considerations

At Maltese Law, employers may only terminate employment contracts for two reasons; redundancy and a good and sufficient cause.

In Malta, redundancy occurs when an employer terminates an employee's contract due to lack of work following economic changes, and technological shifts. Companies may downsize, or automate to adapt, become more efficient, and maintain competitiveness. Therefore, such termination is not linked to the employee's performance or conduct.

Although article 36 (3) of the Employment and Industrial Relations Act (Cap. 452 of the Laws of Malta) ("EIRA") indicates that a redundancy means the abolition of a role at the place of work, the Act does not expressly define redundancy. Rather, it lays down the fundamental principles on how an employer can implement a redundancy. More legal interpretation and legal guidance is drawn from local case law and English jurisprudence.

Redundancy should always be treated as a measure of last resort given its significant long-term legal, financial, social, and psychological implications for affected employees.

Re-engagement Obligations

Article 36(3) of EIRA imposes a statutory obligation on the employer to re-engage the redundant employee if the position formerly occupied by the said employee becomes available within a period of one year. Failure to do so allows the employee to seek remedy before the Industrial Tribunal within four months of the breach (the re-engagement of another person for that particular role) on the basis of an unjustified dismissal.

This obligation was highlighted in the case of Rose Brockdorff vs Mellieħa Holiday Centre Limited¹, where the Tribunal found that the applicant's position had not genuinely been abolished, as her duties were redistributed to other employees and subsequently outsourced. The Tribunal held that the employer's failure to offer the reinstated role to the claimant was unlawful, and such termination was not for a valid genuine cause of redundancy.

The 'Last In, First Out' Principle

At law, specifically article 36 (4) of EIRA, where an employer intends to terminate the employment of an employee on grounds of redundancy, he shall terminate the employment of that person who was engaged last in the class of employment affected by such redundancy. In essence, employers must observe the 'last in, first out' rule for employees performing in the same class of work. Under this principle, the most recently recruited employee is terminated first, thereby preventing redundancy from being used as a proxy for dismissing underperformers. The only exception to the application of the 'last in first out' principle is where the employee is related to the employer (not being a limited liability company or a statutory body) by consanguinity or affinity up to the third degree. In this case, the employer may, instead of terminating the employment of such person, terminate that of the person next in turn.

The Court of Appeal (Inferior Jurisdiction), in the case 'Philippe Guillaut vs HOSI Malta Limited'², noted that the Industrial Tribunal had failed to refer to any evidence which proves that the requisites established by law were observed.

Mr Guillaut had been dismissed by a simple termination letter without a reason for termination. During the Tribunal sittings, the Chief Executive Officer had insisted that the termination was based on restructuring, and the Tribunal did not investigate this stand further. When the employee filed an appeal on points of law, the Court of Appeal stated that the Industrial Tribunal is obliged to determine whether the process carried out by the defendant company was a legal one, meaning, whether it strictly observed what is provided by the law or otherwise.

This means that the last person to join the company is the first to be made redundant. Therefore, the Industrial Tribunal is to evaluate whether the person assuming the role of the employee being made redundant, was employed with the company before the said employee or otherwise.

In this case, the Industrial Tribunal did not consider this legal requisite, and the Court sent the case back to the Tribunal for the determination of the award.

Notice Periods

Employers are under a legal obligation to provide proper notice periods to the employee being made redundant. Such period depends on the amount of time the employee has been in continuous employment with the same employer as per Article 36(5) of the Chapter 452. The notice periods are outlined as follows:

If the employee has been in the employment of the same employer continuously:

• for more than one month but not more than six months .... one week;
• for more than six months but not more than two years .... two weeks;
• for more than two years but not more than four years .... four weeks;
• for more than four years but not more than seven years .... eight weeks;
• for more than seven years, an additional 1 week for every subsequent year of service or part thereof up to a maximum of twelve weeks.
• or such longer periods as may be agreed by the employer and employee in the case of technical, administrative, executive or managerial posts.

Collective Redundancies

While individual redundancy is not expressly defined under Maltese law, Collective Redundancy is regulated under Article 37 of the Employment and Industrial Relations Act and under Subsidiary Legislation 452.80, the Collective Redundancies (Protection of Employment) Regulations.

A collective redundancy arises when an employer intends to dismiss a specified number of employees within a 30-day period, depending on the size of the establishment:

• 10 or more employees in establishments normally employing 20 to 99 employees;
• 10% or more of the number of employees in establishments employing 100 to 299 employees; and
• 30 or more in establishments employing 300 employees or above

Under regulations 4 and 5 of S.L. 452.80, employers are legally obliged to consult with employee representatives to explore ways to avoid or reduce the number of layoffs and to mitigate the consequences before implementing the redundancies.

Furthermore, according to regulation 6, within the period of seven days, the employer shall supply the employee's representatives with a statement in writing giving all relevant information and shall provide him with

• 'the reasons for the redundancies;
• the number of employees he intends to make redundant;
• the number of employees normally employed by him;
• the criteria proposed for the selection of the employees to be made redundant;
• details regarding any redundancy payments which are due; and
• the period over which redundancies are to be effected.'

Copies of the written notification and statement notified to the employee's representative shall also be forwarded to the Director General responsible for Employment and Industrial Relations. Additionally, any employer found guilty of breaching S.L. 452.80 shall on conviction, be liable to a fine of not less than €1,164.69 for every employee that is declared redundant.

Redundancy Procedure

In the case of Keith Farrugia vs Dragonara Gaming Limited³, the Tribunal examined whether the employer followed a fair redundancy process after reorganising its reporting structure.

The law in no way hinders the possibility for a company to reorganise its human resources to improve efficiency. Citing Selwyn⁴, the Tribunal held that when 'faced with a redundancy situation, the reasonable employer considers whether it is necessary to act on it, or whether there is some other way of dealing with the problem.' Due to this reorganisation, this applicant's role of Head Cash Desk was abolished, and he was offered his previous role of Gaming Manager with an enhanced salary, which he declined.

After analysing the facts, the Tribunal noted that the respondent company had no other option but to terminate the applicant's employment on grounds of redundancy. Thus, it held that the respondent company acted reasonably towards the appellant and followed the proper redundancy procedure.

In contrast, in Derek Nicholson vs Henley & Partners Malta Limited (C 62190) and Henley & Partners Group⁵, the Tribunal found several procedural deficiencies. The employer failed to demonstrate genuine commercial or organisational changes, failed to engage in meaningful consultation with the employee, and reassigned the redundant employee's work to other staff before termination. The Tribunal concluded that the dismissal, though labelled as redundancy, was neither fair, nor genuine.

Strategic Considerations of Employers

To avoid having to resort to this avenue, and thus minimise legal risk, employers should conduct strategic considerations before resorting to redundancy, including:

• Financial and operational forecasting;
• Explore alternative cost-saving mechanisms;
• Offering voluntary redundancy schemes;
• Invest in reskilling or redeployment opportunities; and
• Improving productivity and engagement through organisational reforms.

Common risks include unfair dismissal claims before the Industrial Tribunal, criminal liability under the Employment and Industrial Relations Act, and reputational damage.

Conclusion

In conclusion, redundancy in Malta remains a strictly regulated process that requires employers to demonstrate genuine economic, organisational, or technological grounds for terminating employment, in simple words a genuine redundancy.

The statutory obligations set out in the Employment and Industrial Relations Act, and the applicable Regulations, together with consistent case law, make clear that employers must justify not only the reason for redundancy but also the fairness of the selection process and the proportionality of the measures taken. When these standards are not met, dismissals risk being deemed unjust. Ultimately, the Maltese legal framework seeks to balance employers' legitimate business needs against the protection of employees from arbitrary or disguised forms of termination, ensuring that redundancy is used only as an essentialmeasure of last resort.

Footnotes

1 Rose Brockdorff vs Mellieħa Holiday Centre Limited, decided by the Industrial Tribunal on the 29th of May 2025.

2 Decided on the 1^st June 2022 by Hon. Judge. L. Mintoff.

3 Keith Farrugia vs Dragonara Gaming Limited, decided by the Industrial Tribunal on the 3rd of September 2025.

4 Selwyn's Law of Employment 21st Edition para 18.44.

5 Derek Nicholson vs Henley & Partners Malta Limited (C 62190) and Henley & Partners Group, decided by the Industrial Tribunal on 20th March 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.