How can an employer strive to avoid redundancy?

It goes without saying that the current situation we are living in has brought challenges on employers and employees alike. Challenges which are unprecedented and to a certain extent, unavoidable.

Employers, who have worked to build a healthy employment relationship with their employees, strive to avoid redundancies, or at least postpone this measure to as late as possible.

One should recognise that certain situations within specific industries have called for immediate termination of employment relationships due to hardships that the sudden impact within their industry has left, however, other industries, despite not having the immediate impact, are now experiencing some repercussions on their day-to-day operations, which may eventually lead them to take measures within their workforce to address the situation.

Forced leave, followed by unpaid leave

The first measure which is utilised by employers to address the situation is forced leave, which in essence is applied by the employer requesting the employee to take up the accumulated vacation leave. Prior to adopting this measure, the employer shall present the employees with a written justification explaining why the forced leave is to be applied. It is important that this written statement reaches the employees prior to the term of forced leave starts running. The application of this measure shall be in line with Subsidiary Legislation 452.115 of the laws of Malta. 

In applying this measure internally, members of staff should be asked to first avail of the vacation leave which was carried forward from the past year (2019). Once this is consumed, employees should avail of the vacation leave of this year (2020) which has accrued to date of the measure, and is still unconsumed. 

The employer should not use any of the vacation leave entitlement which has not yet accrued. This is because the utilisation of forced leave does not give rise to a civil debt in favour of the employer should the leave taken exceed the annual leave entitlement of the employee. Even if the employee resigns at a later point in the year having taken more than his/her leave entitlement till that date, the employer cannot make any wage deductions in this regard.

The forced leave measure is usually followed by an unpaid leave measure. It is worth stressing that any statutory entitlements, including vacation leave, do not accrue during periods of unpaid leave. Employees on unpaid leave are also not entitled to apply for unemployment benefits since they are still employed despite the fact that they are not earning any salary from their employer.

Change in working conditions

In cases where the current situation has adversely affected the employer’s undertaking, an employer may elect for the exceptional application of Article 42 of Chapter 452 of the laws of Malta. Following a written approval from the employees, the employer, may resort to request an exceptional permission from the Director of the Department of Industrial and Employment Relations (DIER) to temporarily change the applicable conditions of work of his employees. This measure is only a temporary measure for the survival of the business in question.

In order to grant the permission to change working conditions of employees, the Director of DIER shall be convinced, that the measure undertaken is a means to avoid redundancies within the employer’s operations. In adopting this exceptional process, the employer shall ensure that the employees may exercise the right to information and consultation.

This is only a temporary measure requested and applied to avoid redundancies. The Director of DIER’s review shall be sought every four (4) weeks. Thus, every four (4) weeks, the Director of DIER will analyse whether this measure is still necessary.

The above points are some of the measures which Maltese legislation caters for, and which may be utilised in the present context in light of the current pandemic and its adverse implications on a number of industries. Having said all this, there may be instances where an employer, after having utilised all option available, will have no other viable option other than resorting to redundancies.

More information on the implications of redundancies from a legal perspective and considerations that employers may take to minimise the impact of redundancy on their employees and their business can be found here.

About the Author

This article has been authored by Dr Maria Tabone, a Senior Business and Corporate Advisory at CSB Group.