The Malta Employment Status National Standard Order 2012

1.     Employment Status National Standard Order

The Employment Status National Standard Order,[1] hereafter the ‘Regulations’, which became effective as of 31^st January 2012, establish rules for the conversion of a self-employment relationship between two parties to one of employment, automatically and potentially irretrievably.  The Regulations list eight scenarios in which one party provides services on a self-employment basis to another party as being eligible for reclassification as employment.  If the scenarios cumulatively exist, the automatic re-categorisation and designation of the relationship as one of employment is triggered, no questions asked.

2.     When is self-employment re-designated as employment? 

The provision of services on a self-employment arrangement would be re-characterised as employment automatically and immediately if at least five of the following grounds are satisfied:-

1. he 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. he 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. he performs the work using equipment, tools or materials provided by the person for whom the service is provided;
4. he is subject to a working time schedule or minimum work periods established by the person for whom the service is provided;
5. he cannot sub-contract his work to other individuals to substitute himself when carrying out work;
6. he is integrated in the  structure of the production process, the work organisation or the company’s or other organization’s hierarchy;
7. the person’s activity is a core element in the organization and pursuit of the objectives of the person for whom the service is provided; and
8. he 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.

3.     Can the re-designation be avoided?

By imposing this automatic conversion of self-employment to employment, the Regulations seem to have inadvertently stripped a party wishing to retain self-employed status from being able to do so.  The Regulations do provide for the affected person to make a request in writing to the Director Responsible for Employment and Industrial Relations for an exemption from the automatic re-categorisation of his engagement.[2]  However the request rests in the absolute discretion of the Director.[3]

The Regulations also demand that self-employed persons affected by these provisions act without delay.  A person who prior to the entry into force of the Regulations has been providing his services on a self-employment basis which is caught by the re-classification provisions should apply for an exemption within 6 weeks from the entry into force of the Regulation or lose the right altogether.[4]

4.     The features of the employment relationship imposed by law

An employment relationship imposed by the Regulations have the following features:-

1. employment shall be on a whole time basis,
2. employment shall last for an indefinite term of duration,[5]
3. the party in whose favour the service was being performed shall become the employer,
4. as with all employment relationships in Malta, the provisions of the EIRA and subsidiary legislation and Orders shall apply,[6]
5. the number of hours of work shall be equal to that of a comparable whole-time employee of the employer, or, in the absence of a comparable whole-time employee, on the basis of the hours specified in the applicable sectoral or Wage Council Wage Regulation Order, or, in the absence of an applicable Order, on a forty-hour normal working week, unless agreed otherwise in writing,[7]
6.  
7. the employer should provide the employee with wages similar to those paid to a comparable employee or, in the event of no such comparable employee, to the same remuneration he used to receive in return for services rendered on a self-employed basis as wages.[8]

5.     The effective date of employment

Employment shall be deemed to have commenced on the date of the initial continuous provision of services.[9]  Any notice due in case of an eventual redundancy shall consequently be computed from this date.[10]

The pending period of probation (if any) is determined according to whether services has been carried out prior to the entry into force of the Regulations or not.

5.1. Services performed before the entry into force of the Regulations

In this case the Regulations impose another presumption and the probationary period imposed in terms of EIRA shall be deemed to have lapsed.[11]  The Regulations do permit that an employer may ‘prove otherwise’, unfortunately no indication of what this entails is offered.

5.2. Services performed on or after the entering into force of the Regulations

In this case the probationary period shall be considered to have commenced on the date of engagement of the party to provide services.[12]  The period of probation still standing is calculated from this date.

6.     Employers’ duties on the re-designation of self-employment to employment

An employer should provide the new employee with a letter of engagement or a signed statement giving a minimum amount of information to explain the terms of the employment to the employee.  

The letter of engagement or signed statement should be provided within:-

1. 8 weeks from the deemed commencement of employment, or
2. 2 weeks from the refusal of the Director to provide an exemption from the provisions of the Regulations.[13]

These documents are not exclusive to employment arising under the terms of the Regulations.  All employees are obliged to provide their employees within 8 working days of engagement a letter of engagement or similar documentation in terms of the Information to Employees Regulations.[14]  In every case, the minimum information to be contained in the documents are specified in the latter regulations.[15]

[1] Employment Status National Standard Order, S.L. 452.108 hereafter the ‘Regulations’.

[2] Para. 3(2), the Regulations.

[3] Ibid.

[4] Proviso Para. 3(2), the Regulations.

[5] Para. 4(1), the Regulations.

[6] Para. 3(1), the Regulations.

[7] Para. 4(5), the Regulations.

[8] Para. 5(a), the Regulations.

[9] Para. 4(2), the Regulations.

[10] Para. 4(2), the Regulations.

[11] Para. 4(3), the Regulations.

[12] Para. 4(4), the Regulations.

[13] Para. 7(1)(a-b), the Regulations.

[14] Subsidiary Legislation 452.83.

[15] Para. 4, Information to Employees Regulations, SL 452.83.