In its judgement of 25 February 2026, in the names of Keith Farrugia vs. Dragonara Gaming Limited, the Court of Appeal confirmed that a redundancy arising from a genuine restructuring exercise does not amount to unfair dismissal.
The decision upholds a ruling of the Industrial Tribunal and provides welcome clarity on what constitutes genuine redundancy under Maltese law and, just as importantly, what does not.
The plaintiff was employed with the defendant company since 2011. Over the years, he progressed within the company structures, with the last promotion being awarded in May 2023.
In October 2023, new management initiated a group-wide restructuring exercise, which led to the role to which the plaintiff was last promoted being abolished. The plaintiff was offered an alternative role – being the role he occupied prior to the last promotion and which, under the new salary structure, would have carried a higher wage than the post that was being abolished. The plaintiff refused the offer, and the defendant company terminated his employment on grounds of redundancy.
Redundancy: A Measure of Last Resort
The Tribunal, in the first decision, explained how redundancy must be a measure of last resort. The loss of employment can have serious consequences, and employers must therefore approach restructuring responsibly.
However, the Tribunal also recognised the commercial reality of any business. It acknowledged the hardship faced by businesses which are operating in a dynamic environment, shaped by competition, technological advancement, and legislative changes among others. This makes restructuring not only lawful, but at times necessary.
A redundancy is genuine where the employer requires less employees to carry out a certain type of work, or the need for such work has substantially decreased or is expected to decrease.
Indicators of a Genuine Restructuring
In this case, the Tribunal identified several indicators supporting the genuineness of the restructuring:
- new management had taken over (and new management often brings new direction);
- the restructuring formed part of a group-wide exercise;
- the company presented clear justifications for the changes;
- a new salary structure was being introduced; and
- wage increases were being implemented.
Importantly, the Tribunal was satisfied that the introduction of new systems had substantially reduced the operational need for the post being abolished. The restructuring was aimed at improving efficiency – something the law does not prohibit.
Efficiency, after all, is not a dirty word.
Was the Termination Reasonable?
The Tribunal then went on to decide on whether the termination on the basis of redundancy was justified. On this note it held that although redundancy is a sufficient basis to terminate employment, this does not necessarily mean that the termination was just, and the employer was reasonable.
Citing Selwyn’s Law of Employment, the Tribunal highlighted three obligations of a reasonable employer:
- Ascertain whether alternative employment can be offered;
- Consider offering suitable alternative roles, even if they amount to a demotion; and
- Take reasonable steps to absorb the employee elsewhere within the organisation or associated companies.
The defendant company satisfied these criteria.
The company:
- offered the defendant the role he previously occupied;
- met with the plaintiff to discuss the transition including the new salary structure that was planned;
- provided him with the opportunity to ask questions and seek clarification.
The alternative role was dignified, relevant to his expertise and financially favourable under the new structure. Accordingly, the defendant’s decision to refuse the offer was an informed one.
The Tribunal concluded that the defendant company had proceeded in a reasonable manner and did what the typical employer would do in similar circumstances.
The Appeal
The plaintiff appealed, arguing that:
- The Tribunal failed to properly address the genuineness of the redundancy; and
- Maltese law on redundancy had been incorrectly applied.
The Court of Appeal dismissed both arguments.
First it held that appeals from the Industrial Tribunal under Article 82(3) of Cap. 452 of the Laws of Malta are limited strictly to points of law. Disagreement with how the Tribunal assessed the facts does not qualify as a point of law.
Second, although Maltese law does not provide an ad hoc definition of what constitutes redundancy, the Tribunal’s interpretation is still one that is correct and consistent with jurisprudence. The Court also noted that the employee’s role was not given to someone else (as was alleged) but was rather absorbed within other roles in the restructuring process.
The appeal was therefore rejected.
Why this judgement matters
This judgment reinforces that:
- redundancy is legal, as long as it is genuine and connected to a real reduction in operational need;
- employers are entitled to restructure in pursuit of efficiency and competitiveness;
- alternative employment must be genuinely explored and offered where possible; and
- an employer is not accountable for an employee’s rejection to an alternative role.
For employers, the message is clear: restructure carefully, document your rationale, communicate transparently, and explore alternatives. A redundancy done properly will withstand scrutiny.
For employees, the judgment confirms that redundancy is not unlawful simply because it is unwelcome.
