High Compensation awarded by the Industrial Tribunal for Unjust Dismissal from Employment

Background and Facts of the Case

The Industrial Tribunal recently heard the following four cases simultaneously, (Dr. Jeremy Debono representing the absent Gordon Clark vs Dragonara Gaming Limited, Dr. Jeremy Debono representing the absent Giancarlo Vecchoni vs Dragonara Gaming Limited, Dr. Jeremy Debono representing the absent Andrew Smith vs Dragonara Gaming Limited and Stephen Thornton vs Dragonara Gaming Limited), and awarded abnormally high compensation to the four employees who were made redundant following a transfer of business.

The facts of the cases were very similar; all four employees received a letter on the 8th of June 2010 confirming that their employment had been transferred from Dragonara Casino Limited to Dragonara Gaming Limited. Subsequently, the employees received a letter on the 18th June 2010 terminating their employment due to redundancy. Dragonara Casino Limited had a concession to manage the Dragonara Complex in St. Julian’s and the terms and conditions of the agreement transferring the management of the Dragonara Complex from Dragonara Casino Limited to Dragonara Gaming Limited included an obligation to transfer all the employees.

With such redundancy letter, the employees also received payment in lieu of notice and payment for outstanding leave. Gordon Clark received the amount of €6,968.37, Giancarlo Vecchoni received €13,763.59, Andrew Smith received €11,763.71 and Stephen Thornton received €19,354.71. Gordon Clark accepted this payment without prejudice to his rights under law whilst the other three refused their payments.

The Tribunal quoted from Norman Selwyn who says that:

If the employee is unfairly dismissed in connection with the transfer, his rights lie against the transferee, not the transferor. This is so even if the dismissal took place before the transfer, if the reason was connected with the transfer.

Thus, in this case the employees’ right of action lay against Dragonara Gaming Limited.

During the course of the proceedings before the Tribunal, it was revealed that subsequent to the alleged redundancies, assistant managers had been promoted to managers and given a raise in pay following such promotion. The promoted employees were instructed to stay quiet about their promotions due to the possible legal action which the employees who had been terminated could take. One should keep in mind that the law states that should the post formerly occupied by employees who have been made redundant become available again within one year from redundancy, that post should be offered to the employees made redundant.

The employer argued that the employees who had been made redundant did not have the relevant skill set needed in order to modernize the running of the casino. However, the Tribunal noted that the employees were never offered alternative employment or a downgrade in employment within the company itself prior to being terminated on the basis of redundancy.

It was also revealed that the General Manager of the casino had been paid a year’s salary and his employment was terminated because he was due to retire within a year.

The Tribunal quoted further from Selwyn who says that

Potentially ‘economic, technical or organisational reasons’ is a wide concept, but it is generally a restricted meaning… The decision must be made on the need to entail changes in the workforce. Generally, this could be a change in the number of employees employed, or a change in the functions of those employed. Thus, if whole job contents have to be changed because of the transfer, this may constitute a change in the workforce. If something else is sought to be changed (eg the pay of the employees who are transferred) the resultant dismissal will be unfair. However, this does not prevent a mutually agreed variation for an ETO reason.

The phrase ETO is not defined in the regulations and is therefore the subject of interpretation by the courts and tribunals.

Subsidiary legislation 452.85, Transfer of Business (Protection of Employment) states that:

The transfer of the undertaking, business or part of the undertaking or business shall not in itself constitute sufficient grounds for dismissal of employees by the transferor or the transferee.

Provided that this provision shall not stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce.

The Tribunal’s Decision

The Tribunal was of the opinion that the employer declaring the 4 employees redundant was a strategy which had tried to hide behind the proviso in the law allowing dismissal to take place for economic, technical or organisational reasons after a transfer of business and thus, this amounted to unjust dismissal in all four cases.

The Tribunal noted that Gordon Clark had accepted the payment offered in lieu of notice and outstanding leave and that he was unemployed for 2 months and awarded compensation at €35,000.

With respect to Giancarlo Vecchoni, the Tribunal noted that he had not accepted payment in lieu of notice and outstanding leave and had found work after 2 months but had to emigrate to Morocco for work; compensation was set at €60,000.

For Andrew Smith compensation was set at €75,000. The Tribunal noted that Andrew Smith had not accepted payment in lieu of notice and outstanding leave and had found work after 10 months but had to incur expenses in order to move back to England for work.

Stephen Thornton was awarded €140,000 in compensation. The Tribunal noted that he refused payment in lieu of notice and outstanding leave and was unemployed for 16 months after the unfair dismissal.

These cases are noteworthy due to the high amounts of compensation awarded by the Tribunal. Following some cases decided during 2019, namely Publius Davison vs De La Rue Currency and Security Print Limited and Carmel Borg vs Malta Transport Services (Operations) Limited, the Industrial Tribunal based itself on the Court of Appeal’s instructions on the way compensation due should be computed and on the criteria which should be considered when computing such. When computing compensation in these cases, the Tribunal took into consideration the period of time the employees remained unemployed following the redundancies, the length of the employment relationship of each employee and whether the employees rejected or accepted the sum of money owed to them as payment in lieu of notice and outstanding leave.

For further information about how GVZH Advocates can help you with your employment legal queries, kindly contact us on employment@gvzh.com.mt.

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