Redundancy in Malta: Understanding the Law and Key Tribunal Decisions
Redundancy is common ground for termination of employment, provided it is reasonable, implemented in good faith, and in accordance with the applicable legislation. As established in common law and reflected in Maltese jurisprudence, redundancy occurs when “there was a diminution or cessation in the employer’s requirements for employees to carry out work of a particular kind” (Selwyn’s Law of Employment; 19th Edition, para. 18.19).
What is redundancy?
Cited by the Maltese Industrial Tribunal in the case Angela Vassallo vs Milano Due Limited, decided on the 15th July 2016, which makes reference to the case David D’Anastasi vs Thermoplastics Limited, decided by the Industrial tribunal on the 26th of June, 2012, the Tribunal adopted the English definition of redundancy, which provides that:
“L-artiklu 2 tal-Kapitlu 452 tal-Ligijiet ta’ Malta ma jaghtix tifsira tal-kelma redundancy, izda tifsira komprensiva tal-istess kelma tinsab fil-Ligi Ingliza li maghha l-Ligi Maltija ghanda hafna xebh. Il-Ligi Ingliza taghti t-tifsira talkelma redundancy kif isegwi:
“Redundancy is considered to have taken place when:
- The employer ceases to carry on the business in which the employee was engaged or closes down the place in which he/she was working;
- The business ceases to require people with the particular skills of the employee or needs fewer of them to carry out the work;
- 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.”
Redundancy can be classified into 3 scenarios, therefore, them being:
- Where the employer has stopped, or intends to stop carrying on the business for the purposes for which the employee was employed; or
- Where the employer has stopped or intends to stop carrying on that business in the place where the employee was employed; or
- Where the requirements of that business for employees to carry out work of a particular kind, or at a particular place, have stopped or diminished or are expected to stop or diminish.
Notably, redundancy must not be based on personal attributes of the employee but must instead reflect a pure organisational or economic change. The core feature is the cessation or reduction of work, and not any conduct or performance issue.
Hence, as highlighted by Chairperson Sir Edmund Tabone in the Industrial Tribunal decision of David Serge vs Stargate Studios Malta Ltd (C-55605) (decided on the 29th of May 2025) “It-Tribunal jaghraf li redundancy hija sitwazzjoni fejn post tax-xoghol irid jigi ghal kollox abolit u li xejn minn dan ix-xoghol u l-rwol ma jigi mwettaq minn xi hadd iehor jew ohrajn. Importanti hafna li terminazzjoni fuq bazi ta’ redundancy ma tridx tkun bl-ebda mod ghal ragunijiet relatati ma l individwu koncernat. Aspetti ohra li jridu jigu evalwati huma jekk l-employer waqafx jopera jew naqqas drastikament l-operat u ukoll jekk it-tali employer waqafx ghal kollox mill jkollu bzonn nies b’kapacitajiet direttament relatati ma dawk li kellu l-inidividwu li gie tterminat. It-Tribunal ifakkar li l Ligi Maltija ma taghtix definizzjoni ta’ redundancy.”
Although Maltese law, namely under the Employment and Industrial Relations Act (Cap. 452), does not provide a detailed statutory definition of redundancy, the concept is well developed in certain legislative provisions and case law.
The law: Re-employment and LIFO
Primarily, under article 36(3) of CAP.452, an employee who is terminated on grounds of redundancy is entitled to be re-employed if their former position becomes available within one (1) year from the date of termination. The conditions of re-employment must not be less favourable than those that would have applied had the employment relationship continued uninterrupted.
This provision underscores the importance of ensuring that redundancy is genuinely tied to a lack of work rather than to individual circumstances, as employers remain legally obliged to reemploy redundant employees if the work resurfaces within the prescribed time of one (1) year from their redundancy. This obligation to offer re-employment reinforces the fact that redundancy is a temporary organisational response and not a vehicle for permanent exclusion of particular employees. Where the role is re-established and the former employee is not offered reinstatement, and evidence moreover shows that another employee or individual has been employed in that same role or position, the employer may very well be in breach of article 36(3).
More directly relevant to the selection of employees for redundancy is article 36(4) of CAP.452, which introduces the Last In, First Out (LIFO) principle. This provision mandates that when redundancy affects a particular class of employment, the employee who was last engaged in that class should be selected for termination, meaning “jtemm l-impieg ta’ dik il-persuna li tkun impjegata l-aħħar fil-klassi tal-impieg milquta minn dik ir-redundancy”. It is important to note that the law does not refer to the employee’s overall length of service with the company but to their engagement within the affected class.
The term “class” is defined in article 2 of CAP. 452 to mean “the work performed or expected to be performed independently of the title or name given to the post.” This explains that job titles alone do not determine the class of employment; but it is the nature of the work performed by the employees that is relevant. The law thus requires a functional assessment of the employee’s role when identifying which class is affected by redundancy, assessing the day-to-day tasks and responsibilities of the employee, and not simply the job description delineated in the employee’s employment contract.
Date of Engagement: The Relevant Test in Redundancy Selection
A common point of confusion in claims of redundancy arises when an employee is given a promotion, transferred internally to a different department, or reassigned to a different role within the same organisation. In such scenarios, the question becomes whether the date to be considered for redundancy selection under the LIFO principle is the employee’s original commencement date with the company or instead the date they began working in the affected class.
Maltese law, through article 36(4) and its interpretation of “class” in article 2, supports the position that the relevant date is the date the employee commenced work within the specific class of employment that is being made redundant.
The rationale behind this approach is to prevent arbitrary and unfair selections by employers. If the employer were permitted to use the overall employment start date, they could circumvent LIFO protections by assigning new labels to positions with the aim of eliminating such role within the department or class.
Judicial Clarification: Case Law Examples
This position was recently confirmed in the Industrial Tribunal decision of David Serge vs Stargate Studios Malta Ltd, decided on the 29th of May 2025. The Tribunal held that redundancy must reflect a genuine business need and that employers must not use redundancy as a tool to remove particular individuals from the organisation. The Tribunal expressed concern where the redundancy followed personal disputes or workplace incidents, noting that a termination on these grounds, if disguised as redundancy, would be deemed an unfair dismissal.
The importance of identifying the correct class of employment and applying the LIFO principle appropriately was also highlighted in the Court of Appeal decision in Alessandro Francesco Cutuli vs Asfaltar Construction Ltd decided on the 12th of June, 2024. In this case, the employer argued that the employee’s redundancy was justified by a decline in the demand for skilled concrete workers. The company sought to distinguish between the claimant’s role and that of newly recruited ‘shutterers’, contending that they fell within different classes of employment.
The Court however rejected this argument, holding that the new employees were carrying out very similar work and thus fell within the same class of employment as the claimant. The Court further observed that the redundancy coincided suspiciously with an altercation involving the employee in question and a colleague, raising doubts as to the authenticity of the redundancy. In its ruling, the Court remarked:
“Mill-provi jirriżulta li t-tliet ħaddiema li ġew ingaġġati, qegħdin jaħdmu bħala shutterers, u għalhekk l-argument tas-soċjetà intimata, safejn tikkontendi li ma kellhiex bżonn aktar xogħol speċjalizzat, u li l-ħaddiema l-ġodda ma kinux mill-istess klassi ta’ impjieg tar-rikorrent, tfalli.”
This statement reflects judicial scepticism when redundancy is applied selectively or as a pretext. The Court ultimately affirmed the Tribunal’s finding that this was a case of “fake redundancy”, not based on a legitimate organisational need in that “Din il-Qorti taqbel mal-konklużjonijiet tat-Tribunal li dan kien każ ta’ fake redundancy, u mhux redundancy li seħħet għaliex ma kienx hemm aktar xogħol għar-rikorrent.”.
Redundancy is a valid ground for termination of employment only when it is grounded in genuine operational, economic, or structural needs. Maltese employment law imposes safeguards to ensure that redundancy is not used arbitrarily or as a substitute for disciplinary action, and it requires that the affected class of employment be properly identified based on the functions performed, not the job titles assigned.
Once the class is determined, the employer must apply the LIFO principle and consider the date when each employee commenced work in that specific class, not their overall length of service with the company.
When employers do not adequately terminate one’s employment on the basis of a fair and true redundancy, motivated by individual conflicts or applied to remove unwanted employees in disguise, they risk findings of unfair dismissal in accordance with article 2 of CAP.452 which includes the “termination by the employer in respect of that worker …being a termination which is not made solely on the grounds of redundancy or for a good and sufficient cause in accordance with the relevant provisions of this Act or any regulations prescribed hereunder.”
How Can AE Help
Navigating redundancy situations requires a careful balance between operational needs and compliance with employment law. At AE Legal, we assist both employers and employees in understanding their rights and obligations under Maltese law.
Whether you need guidance on implementing redundancies in line with the Employment and Industrial Relations Act (Cap. 452), support in applying the LIFO principle correctly, or representation in cases before the Industrial Tribunal, our team provides practical, informed advice grounded in experience and case law.
We help ensure that redundancy processes are handled lawfully, transparently, and with fairness at their core.
