An employment relationship might come to an end for various reasons. Whether it is the employee’s or employer’s decision to end an employment relationship, it is essential to keep in mind the legal obligations and rights of each party.
1. Probation
During the first six months of employment based on an indefinite period contract, both the employer and the employee may terminate the employment relationship without providing any reason for the said termination. The probationary period is generally also referred to as the trial period and it provides both parties with the opportunity to decide whether the employment in question is a good fit or otherwise. If employees employed on the basis of an indefinite contract hold a technical, executive, administrative or managerial position and if their wages are at least double the national minimum wage, the probationary period for such employees shall be twelve months.
In the case of employees engaged for a definite duration, the probationary period shall be proportionate to the expected duration of the contract and the nature of the work. This means that for fixed-term contracts of a duration between six and fifteen months, the probationary period shall be calculated on the basis of two months probationary period per six (6) months contract duration. For a fixed-term contract exceeding the duration of fifteen months, the probationary period shall be of six months However, the probationary period may be a shorter period upon the agreement of both parties.
2. Resignation from Employment based on an Indefinite Contract
In the case of an indefinite contract of employment, an employee may resign from their employment by notifying the employer of their resignation in advance. The applicable notice period will be determined based on the duration of employment in virtue of Article 36(5) of the Employment and Industrial Relations Act, Cap 452 of the Laws of Malta.
Upon receiving notice of resignation from employment, the employer has the option of allowing the employee to work the notice period and pay the full wage for that period or to stop the employee from working but still paying them the full wage. If the employee leaves and fails to give notice or gives notice but leaves employment before the lapse of the notice period, then the employee must pay half of the wages which would have accrued during the notice period to the employer.
3. Termination by Employer for a good and sufficient cause
An employer cannot terminate an employment relationship based on an indefinite contract unless there is a good and sufficient cause for such termination or in the case of redundancy. Should an employer have a good and sufficient cause for termination, then the employer may dismiss an employee with immediate effect, without any obligation to offer a notice period. The law does not define what constitutes a “good and sufficient cause” and if the reason for termination is contested, the Industrial Tribunal determines the validity of the reason given on a case-by-case basis.
4. Redundancy
An employer may terminate an indefinite contract of employment based on redundancies. Redundancies may either be individual or collective in nature.
Employers are obliged to give notice periods to their employees in virtue of Article 36(5) of Chapter 452 of the Laws of Malta. Upon receiving notice, the employee may opt to work the notice period and receive a full wage. Otherwise, the employee may ask the employer to pay half of the wages due and not work during their notice period. If the employer fails to give the employee their notice period, then the employer will be obliged to pay the employee their full wages covering the notice period.
If a post which was previously held by an employee who was made redundant becomes available within a year of the redundancy, the employer is obliged to offer that post to the former employee in question.
5. Termination of a Definite Contract
Generally, it is understood that employment based on a definite contract will only come to an end upon the lapse of the fixed term initially agreed upon. In the event that either party decides to terminate the employment relationship before the lapse of the fixed term, no notice period will apply. Instead, the party terminating the employment will be obliged to pay the other party an amount equivalent to half of the wages which would have been due for the remaining duration to the employee.
6. Unfair Dismissal
Unfair dismissal takes place when an employer dismisses an employee for no good and sufficient reason. The Employment and Industrial Relations Act, Chapter 452 of the Laws of Malta provides some examples of when an employer might dismiss an employee unfairly. This includes dismissal due to an employee getting married, announcing a pregnancy or being absent whilst on maternity leave, joining a trade union or seeking recourse from competent administrative authorities.
7. Constructive Dismissal
Constructive dismissal occurs when the employee terminates the employment contract him/herself, with or without notice, due to the employer’s conduct leaving them with no other choice but to tender their resignation. When constructive dismissal takes place, the termination of employment would still be deemed as a form of unfair dismissal by the employer and the employee may ask to be compensated accordingly.
8. Retirement
An employment relationship may also be terminated simply because the employee would have reached retirement age.
9. Mutual Agreement
Although by law, the employer is not obliged to provide the employee with a severance package, it is becoming increasingly popular for parties in an employment relationship to terminate the said relationship in virtue of a Mutual Termination Agreement. This allows both parties to reach an agreement on a severance package, and to settle any disputes in relation to the termination of employment, if any.
Av. Charlene Gauci
Senior Associate
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