Employed Or Self-Employed? Determining Employment Status In Malta

Understanding employment status in Malta is crucial for both employers and workers seeking to determine whether a person should be classified as an employee or self-employed.  The criteria for determining whether an individual is an employee or a self-employed are established by Subsidiary Legislation 452.108, entitled the 'Employment Status National Standard Order' ('the Order'), an Order published under the main piece of employment legislation in Malta, namely the Employment and Industrial Relations Act ('EIRA'). If a relationship meets at least five out of eight specific criteria, such as financial dependence, control over work, and use of equipment provided by the client, it is automatically deemed an employment relationship, potentially invalidating the classification of a contract as one of self-employment.

The worker deemed to be in such employment relationship would then be entitled to all employee rights, and the employer is subject to all corresponding obligations. These include annual and special leave entitlements, minimum-wage protection, government and statutory bonuses, amongst others. Such employee rights would otherwise not be afforded to the individual in question, as contractors otherwise lack the protections and obligations granted to employee under employment law.

The Order provides, in its opening provision, that any declaration by any person about their employment status that contradicts the Order is null and void. This ensures compliance with Maltese law and  prevents employers from circumventing their obligations under employment law in Malta simply by labelling someone as 'self-employed'.

Therefore, as confirmed by the Industrial Tribunal,¹ the raison d'être of this Order was to curb abuse by employers, who would guide employees to register as self-employed so that they could escape their obligations towards said employees. The Order plays a central role in clarifying employment status in Malta,  affording employment rights to workers who are wrongly classified as self-employed.

The Criteria for Employment Status

The aforementioned eight criteria governing a presumption of an employment relationship are outlined in the Order as follows:

1. If the person depends on one single person for whom the service is provided for at least 75% of his income over a period of one year;
2. If the person depends on the person for whom the service is provided to determine what work is to be done and where and how the assigned work is to be carried out;
3. If the person performs the work using equipment, tools or materials provided by the person for whom the service is provided;
4. If the person is subject to a working time schedule or minimum work periods established by the person for whom the service is provided;
5. If the person cannot sub-contract his work to other individuals to substitute himself when carrying out work;
6. If the person is integrated in the structure of the production process, the work organisation or the company's or other organisation's hierarchy;
7. If the person's activity is a core element in the organisation and pursuit of the objectives of the person for whom the service is provided; and
8. If the person carries out similar tasks to existing employees, or, in the case when work is outsourced, he performs tasks similar to those formerly undertaken by employees.

At face value, the satisfaction or otherwise of the majority of these criteria can be determined on an objective basis. Some of these criteria, however, more specifically the ones envisaged in sub-articles (f) and (g), present a strong dose of subjectivity, and can lend themselves to different interpretations: what constitutes a 'core element' of an organisation for the purposes of sub-article (g)? To what extent should a person be 'integrated' in the structure of an organisation for the criteria in sub-article (f) to be satisfied?

These two opaque criteria were analysed in detail in a preliminary ruling given by the Industrial Tribunal on the 15th of December 2020 in the case of Bourgeais vs. Sara Grech Ltd², where the issue arose as to whether a 'sub-agent' of a real estate company could be considered an employee³. The Tribunal found that said 'sub-agent' should be so considered, and lent crucial insights on the considerations to be made when determining whether sub-articles (f) and (g) can be considered satisfied

With respect to sub-article (f), the Tribunal held that the sub-agent was integrated in the structure of the work organisation or hierarchy, therefore satisfying this criteria. The considerations that were held to be relevant for this purpose were the following:

1. The sub-agent was bound to sell and lease only those properties that appeared on the company's website, or which are registered with the company;
2. The company bound the sub-agent to attend courses, workshops, and other team meetings intended to create a culture of integration and to improve the performance of the sub-agents, to the company's benefit;
3. The company determined the area to which the sub-agent was assigned to work in;
4. When the sub-agency agreement was to terminate, the sub-agent was bound to give a hand-over to whoever would be succeeding her;
5. The sub-agency agreement's annex, termed "Principal responsibility", resembled a job description which was more likely to be found in an employment contract than in a self-employed contract; and
6. The sub-agent reported to the company's sales director.

With respect to sub-article (g), the Tribunal considered that the company endeavoured to recognise and reward the best-performing sub-agents. The Tribunal considered this as confirmation that the activities of a sub-agent are a core element to the company's success: without the works of the sub-agents, the company would not be able to reach its targets, and therefore sub-article (g) was held to be satisfied.

The eight criteria were also analysed in Albert Falzon vs Melita Mobile Ltd [4], another preliminary ruling given by the Industrial Tribunal on the 6th of November 2014. Plaintiff claimed that although he had been engaged as self-employed, providing services of towing and setting-up of a mobile shop trailer, in reality his work met the legal criteria of an employee under the Order. The Tribunal assessed each criterion, and ultimately concluded that plaintiff did not satisfy at least five out of the eight criteria. When analysing sub-articles (f) and (g), the tribunal held that neither criterion was satisfied. The plaintiff did not sell the company's services, but only towed, set-up and maintained the trailer from where such services could be provided. This task was deemed to be accessory to the business and to the core activity thereof, this being the sale of the company's telephony services. Thus, the plaintiff was not integrated in said business, and was not part of its core activity.

Limits to the Order's Application

The Order establishes certain caveats to its applicability. Firstly, the Order does not apply:

1. if other specific laws governing employment or service relationships apply,
2. in the case of rights or obligations under previous contracts for service before this law came into force in January 2012, and
3. in the case of tied insurance intermediaries and authorized insurers under the Insurance Distribution Act.

Moreover, the Director General responsible for Employment and Industrial Relations ('DIER') is empowered to make exceptions. The Order provides that any person in a relationship which would by virtue of the presence of such criteria be automatically considered to be an employment relationship may, before entering into such a relationship, submit a written request to the DIER to exempt such a relationship from being considered to be an employment relationship and the Director may exempt in writing that relationship if it is considered that there are particular grounds relating to that activity to exempt it from this requirement, including that the activity being carried out is an uncommon occurrence or of very short duration. Such exemption shall remain valid unless rescinded by the Director.

This clause thus provides flexibility, allowing certain atypical or short-term work arrangements to be treated as exceptions to the standard employment classification – ensuring that the legislation remains fair and adaptable to certain circumstances.

Conclusion

The 'Employment Status National Standard Order' serves as an essential pillar in safeguarding workers' rights and defining employment status in Malta. By outlining criteria that re-classify self-employment into employment, the law prevents the misuse of the self-employment status to deny workers their rightful protections and benefits. The Order allows the court to identify de facto employment, regardless of contractual labels, providing a structured legal test to reveal the true nature of work relationships. This legislation ultimately strengthens promotes accountability among employers and upholds the principles of equity and transparency in Malta's labour market.

Footnotes

1 Perrine Marie-Louise Eulalie Bourgeais vs Sara Grech Limited, decided by the Industrial Tribunal on the 15^th December 2020.

2  Perrine Marie-Louise Eulalie Bourgeais vs Sara Grech Limited, decided by the Industrial Tribunal on the 15^th December 2020.

3 For a more detailed analysis of this decision, please refer to the following article: The Recharacterisation of Employment – A Reality.

4 Albert Falzon vs Melita Mobile Limited, decided by the Industrial Tribunal (Dr. Charmaine Cristiano Grech) on the 6th November 2014.

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.