Malta: Employment Law Overview

The right of all citizens to work and the state's role in promoting the conditions to make this right effective is enshrined in Malta's 1974 Republican Constitution. Indeed the Constitution's first clause states that "Malta is a democratic republic founded on work and on respect for the fundamental rights and freedoms of the individual". The Constitution also upholds the basic principles of workers' rights, including inter alia the maximum number of daily working hours, a weekly rest day, holidays without pay, the establishment of a minimum working age, gender equality, professional and vocational training for workers, contributory social insurance and the provision of the means of subsistence for those unable to work. The Constitution, however, leaves it to statutory acts to add flesh to these basic principles.

The Employment and Industrial Relations Act (EIRA) (Chap 452 of the Laws of Malta) represents Malta's primary source of employment law, including conditions of employment, protection against discrimination and industrial relations. This statute was enacted in 2002 with a view towards consolidating the previous primary sources of employment law namely the Conditions of Employment (Regulation) Act (Cap.135) and the Industrial Relations Act (Cap. 266). This consolidation exercise also served to bring Malta's employment law in line with European employment law.

Sources of Labour Law

The hierarchy of legal sources of Maltese labour law can be generally broken down as follows:

• Primary Legislation- The most notable of these primary legislative sources include the Constitution of Malta, the Employment and Industrial Relations Act (EIRA), the Employment Commission Act, the Employment and Training Services Act and EU Regulations and Directives which apply in virtue of the doctrine of direct effect
• Secondary Legislation - Regulations made under the EIRA, the majority of which serve to implement EU regulations and directives, fleshing out the basic legal framework provided by the EIRA. These include Wage Regulation Orders which represent administrative regulations which regulate certain conditions of employment for specific sectors. At present, there are 31 different WROs in force. The conditions specified in these Orders include inter alia maximum hours of work, minimum wages, overtime rates, sick leave and special leave.
• Public Service Management Code- Members of the public service have their conditions of employment regulated by means of the Public Service Management Code or "PSMC" which was introduced in 2002 to replace the EstaCode. The PSMC brings together all the standing regulations, circulars, policies on HR Management, in the fields of Employee Relations and Resourcing in the Public Service. This code falls within the competence of the Management and Personnel Office (the former Establishments Division) within the Office of the Prime Minister.
• Collective agreements- these are enterprise-specific agreements which regulate the conditions of employment of around a third of the total gainful employment in the private sector.
• Judicial Decisions
• Arbitration awards
• Custom and practice- These serve as a source of law in circumstances where the law is silent.

The Employment contract

Maltese Labour Law is essentially based on the contractual agreement entered into between employer and employee, provided that the statutory conditions of employment are respected. Thus, whereas certain conditions of employment are strictly regulated as a matter of law, other conditions are left entirely up to the parties to agree upon, as long as these are also considered to be objectively reasonable. Where the minimum conditions of employment are established by law or regulation, only those provisions that are more favourable to the employee are considered as being legally valid and enforceable. Collective agreements work in the same way, binding the employer party to the agreement and the members of the trade union negotiating on the employees' behalf. Individuals not belonging to the trade union in question may also agree to be governed by the terms of the collective agreement.

If the period of employment exceeds one month and the employee's working hours exceed eight hours per week, the employer is bound to give the employee within 8 working days from the commencement of employment, either (i) a written contract of employment, or (ii) a written statement of minimum conditions, which must be furnished to the employee. Such information is expected to include such basic things as the normal rates of pay, overtime rates, hours of work, place of work and leave entitlement. Wages should be paid at regular intervals not exceeding 4 weeks in arrears. Different periods of pay can be agreed in a collective agreement.

Contracts of employment may be entered into for a fixed term or for an indefinite term. A fixed term contract can be successively renewed up to a maximum period of 4 years after which the employee shall be considered to be under a contract of indefinite duration. The exception occurs when the employer has justifiable reasons for retaining the employee on a fixed term contract. An employee whose fixed term contract has expired and is retained in employment will also be considered to be under an indefinite contract if the employer does not produce a new contract of service within 12 days following the expiry of the previous contract.

A caveat worth making in the context of contracts of employment for a fixed term is that if the parties would like to terminate the contract prior to the expiry of the established term, the terminating party has to pay to the other a penalty which is established by law which is a sum equal to half the wages that the employee would have earned in the remaining period of employment.

The first 6 months of each employment contract constitutes probation, unless the parties agree to a shorter term. By way of exception to this rule, in the case of contracts of service, or collective agreements in respect of employees holding technical, executive, administrative or managerial posts whose wages are at least double the applicable minimum wage, such probation period is of 1 year unless a shorter period is agreed upon in the contract of service or in the collective agreement. During the probation period employment can be terminated by either party without assigning any reason, provided that at least 1 week's notice of termination is given by the terminating party to the other party where the employment relationship has exceeded 1 month.

Dismissal

Dismissal and the rights and obligations of the respective parties are matters which are subject to very strict regulation under Maltese law. The Employer may only terminate a contract of employment on the basis of:

1. a good and sufficient cause- a term which has no statutory definition and which constitutes the interpretational basis for each case of unfair dismissal brought before the Industrial Tribunal.
2. redundancy, or
3. the employee reaching retirement age.

Where an employer intends to terminate the employment of an employee on grounds of redundancy, he is required to terminate the employment of that person who was engaged last in the class of employment affected by such redundancy ("Last In First Out"), provided that, where the employer and the last employed employee are related by consanguinity or affinity up to the third degree, the employer may, instead of terminating the employment of such person, terminate that of the person next in turn.

The employee, on the other hand, is free to terminate employment of employment of an indefinite term without assigning any reason.

Where the employer or employee are terminating a contract of employment of an indefinite term, the advance notice to be given by the terminating party to the other party is calculated according to the period for which the employee has been in the employment of the same employer continuously, which can be set out in the following table:

Longer notice periods may be agreed upon in the case of technical, administrative, executive or managerial posts due to the nature or responsibilities involved in such roles and the hand-over usually required in such cases.

By way of exception to what is set out above, in cases where employment is terminated for good and sufficient cause, the employer is not required to give advance notice of termination and/or pay the employee for any wages relating to such notice period or the unexpired period of a definite term agreed upon. Typically, the employer would be expected to provide a very compelling reason for the dismissal of any employee on this ground, particularly more so when the dismissal is not preceded by any verbal or written disciplinary warnings given by the employer to the employee over a period before the dismissal. Two written warnings given by the employer over a reasonable period of time prior to the final warning and contemporaneous dismissal should serve to demonstrate a degree of prudence on the part of the employer if such dismissal is challenged by the employee as unfair.

If both parties agree to the termination, it is possible to terminate the employment contract by mutual consent. The terms and conditions of the termination may be, and usually are, incorporated in a settlement agreement signed by both parties.

Special treatment

Maltese law affords additional protection from termination of employment to:

• employees suffering from any personal injury by accident in the course of their employment or any occupational disease occurring in the service of that employer, unless termination is agreed to by the employee;
• full-time female employees during the period of maternity leave for the period of 5 weeks following the end of such maternity leave, during which she may be incapable of working owing to a post-natal pathological condition. The law, however, also introduces a measure to reward the employer for supporting such full-time female employees during their pregnancy by providing that if the employee does not resume work after the birth of her child or, having resumed work, terminates her employment without good and sufficient cause within 6 months of the resumption of work, she would liable to refund the wages received during the maternity leave availed of.

The employer is also prohibited from using the following circumstances as a "good and sufficient cause" for terminating the employment of any employee/s:

• the employee is a member of a trade union or has acted or is to act as the employees' representative;
• the employee has filed a complaint or participated in proceedings against the employer involving any alleged violation of laws or regulations by such employer;
• the employee discloses information, whether confidential or otherwise, to a designated public regulating body, regarding alleged illegal or corrupt activities being committed by the employer or by persons acting in the employer's name;
• the employee has contracted marriage;
• the business in which the employee is engaged has undergone a transfer of ownership, unless such termination is shown to be necessary for economic, technical or organisational reasons entailing changes in the workforce.

It is also noteworthy that, by contrast, persons employed on Maltese-flagged vessels are not afforded the protection of many of the provisions of Maltese law dealing with minimum conditions of employment.

The Industrial Tribunal

The Industrial Tribunal has competence to settle trade disputes and to consider and decide all cases of alleged unfair dismissals, discriminatory treatment, breach of the principle of equal pay for work of equal value, victimization and harassment. Cases before the Tribunal must be presented within four months from the effective date of the alleged breach.

Collective redundancies

The provisions of EU Council Directive 98/59/EC apply in the case of collective redundancies, that is the dismissal of:

• 10 or more employees in establishments normally employing more than 20 employees but less than 100 employees;
• 10% or more of the number of employees in establishments employing 100 or more but less than 300 employees; and
• 30 employees or more in establishments employing 300 employees or more

In any such circumstances, the employer is expected to comply with the procedure of consulting with the employee's representative covering ways and means of avoiding the collective redundancies or reducing the number of employees affected by such redundancies. The employer must also provide the employees' representative and the Director of Labour with a written statement providing information about 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.

The collective redundancies may only become effective within 30 days from the date when the employees' representative and the Director of Labour are notified about the intended redundancies, unless this 30 day period is shortened or extended by the Director of Labour. If no resolution to the redundancies is attained, the employer would be bound to lay off the persons engaged last in the class/es of employment affected by such redundancies.

Data protection

Maltese Data Protection laws are fully compliant with applicable EU laws and these privacy matters affect various aspects of the employer-employee relationship. Thus, when processing employees' data, the employer must ensure that such data is:

• collected and recorded for specific, explicit and legitimate purposes
• accurate and, if necessary, updated
• pertinent, complete and not exceeding the purposes for which it was collected or subsequently processed
• strictly related to the purposes for which the data was collected or subsequently processed

It is also important that employers, in their capacity as data controllers, take measures to ensure that employees who will be involved in processing other employees' or customers' personal data are contractually bound to process such data acting only on the instructions of the employer and taking all those security measures available to the employer to protect the personal data against accidental, destruction or loss or unlawful forms or processing.

It is also good practice for employers to include in the contract of employment a clause to the effect that the employer's communication systems are made available to the employee with the understanding that these are used by solely and exclusively in furtherance of the employer's business and that all communications made through the employer's communication systems are subject to interception, surveillance and monitoring. This avoids potentially uncomfortable privacy-related situations for the employer by making things clear to all employees from the outset.

Zammit & Associates- Advocates is a leading Maltese law firm specialising in commercial and corporate law, mergers and acquisitions, investment and financial services regulation, e-commerce law, employment law, vessel registration and finance, immovable property law.

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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.