The Court of Appeal (Inferior), presided over by Mr Justice Raymond C. Pace, on June 26, 2012, in the case “Mario Psaila vs Melita plc”, held, among other things, that there were no grounds to dismiss Mario Psaila on grounds of redundancy, simply because the company created a new post of chief financial officer to substitute the post of the finance manager.

The facts in this case were as follows:

The company’s allegations of reduncancy were not found to be credible

Mario Psaila requested the Industrial Tribunal to declare that his termination of employment by Melita plc was not based on good and valid reasons and that his dismissal was unfair. The company, on the other hand, claimed that Mr Psaila’s contract of employment was terminated for reasons of redundancy.

It resulted, from evidence produced by the company, that Melita plc implemented an internal management re-organisation.

Steps were taken to restructure the company’s finance department. There was no evidence the company faced financial difficulties or that there was a decline of work, nor that the company had surplus employees.

Mr Psaila occupied the post of finance manager for several years. The company later established a new grade of chief financial officer to substitute the post of finance manager. The post of chief financial officer included all duties, tasks and responsibilities appertaining to the finance manager.

It subsequently engaged a third party to occupy the post of chief financial officer and the duties of the finance manager were now assumed by this new employee. There was no work for Mr Psaila, not because there was a loss of business. It was still necessary for the work he carried out to be continued.

On May 6, 2011, the tribunal declared Mr Psaila’s dismissal to be unfair and condemned the company Melita plc to pay him €40,000 compensation in terms of Article 81 (2) (a) of Chapter 452.

It considered it was up to the company to prove that the post of finance manager became “redundant”. The concept of “redundancy” was not defined in our law. Reference had to be made to case law: re: in Stephen Muscat vs Armstrong Co. Ltd dated February 9, 2011 (Tribunal), the author Selwyn was cited as well as English and Maltese case law.

In English law, the termination of employment had to be attributed to an excess number of employees.

The fact of redundancy was created by the company and not imposed owing to financial constraints or industrial action, beyond the control of the company. Just as an employer had the right to organise and restructure itself, an employee had a right to his job.

The tribunal found no valid reasons to justify the termination of his employment. Though his post was abolished, his duties and responsibilities were allocated to another person, who now occupied a new post in the company.

Payment of notice money: The company laid emphasis it paid notice money. If an employer terminated an employee’s employment, an employee had the right to be paid. By receiving this notice money, it could not be stated that an employee renounced his rights under the law. The law itself did not permit the renunciation of these rights: Article 41 of Chapter 452.

Alleged Agreement with Melita plc: The company made reference to an alleged agreement and that it paid Mr Psaila the agreed amount.

Mr Psaila, however, disputed any such agreement and claimed the company violated his employment rights.

Aggrieved by the decision of the tribunal, Melita plc entered an appeal, calling for its revocation.

It was stated that the tribunal gave an incorrect interpretation to the meaning of ‘redundancy’. The company said that redundancy was not limited to cases where there was loss of work beyond its control.

It also applied to cases of structural redundancy, where as a result of a reorganisation an employer ended up having a surplus of employees and this even, if it was not in financial distress. The company explained that Mr Psaila’s position as finance manager was absorbed in the post of chief financial officer who had wider responsibilities.

The post of finance manager was abolished and was no longer necessary. It said that Mr Psaila had neither applied for this post nor was he suitably qualified to act as chief financial officer.

Further, the company maintained that once Mr Psaila accepted the “notice money”, he could not now contest his redundancy.

Mario Psaila, in reply, maintained that the decision of the tribunal was correct and merited confirmation.

On June 26, 2012, the Court of Appeal gave judgment by dismissing the appeal and by confirming the tribunal’s decision of May 6, 2011.

The following reasons were given for the court’s decision.

No renunciation: The court considered that when an employee received, according to law, notice money or completed the relative form on termination of his employment, he did so, without prejudice to his rights to contest his dismissal for reasons of redundancy; re: Tonio Calleja vs Vitafoam Ltd dated January 19, 2005.

Any renunciation had to be clear, specific and express; re: Carmelo Mifsud vs Gużeppi Schembri (PA) dated June 28, 2006; Joseph Grima vs Brian Grima (PA) dated October 3, 2001; Anton Spiteri vs Alfred Borg (PA) dated November 30, 2000. In this respect, the company did not prove that Mr Psaila renounced his rights.

Burden of proof: As the company alleged ‘redundancy’, it bore the burden of proof. In absence of any definition of ‘redundancy’ in our law, reference was made to principles in English law; re: Alessandro Theuma vs Alfred Mangion et dated May 23, 2008. In this context English case-law established the following rules of guidance:

“(a) Was the employee dismissed?;

(b) If so, had the requirements of the business for the employees to carry out the work of a particular kind ceased or diminished (or were to be expected to do so)?

(c ) If so, was the dismissal caused wholly or mainly by that state of affairs.”

In Safe Stores plc vs Burrell 1977, the crucial element was whether there was really a drop in business requirements.

What was asked in cases of redundancy was whether the post in question was still required by the employer, whether the work of the employee was still necessary, whether the restructuring was necessary and whether the post was abolished.

The court said that what happened effectively was that a third party was employed to take Mr Psaila’s place. It could not be stated that his post became surplus to requirements even in the context of a restructure. His post was assumed by another person who was employed to replace him.

In its letter dated March 12, 2009, the company offered Mr Psaila compensation provided he agreed to sign a waiver of any claims against the company but he refused. The company reacted by terminating his employment on March 13, 2009.

The company’s allegations of redundancy were not found to be credible. In addition, there was no evidence that the work allocated to the chief financial officer could not be performed by the finance manager.

For these reasons the Court of Appeal concluded that in the circumstances the company unfairly dismissed Mr Psaila and replaced him by another person.

Dr Grech Orr is a partner at Ganado & Associates.