Four new legal notices were published in the August Government Gazette which will affect employment laws in Malta. Just a few days later, on 22 August 2018, a ministry representative reportedly declared that the legal notice would be suspended (for more information see "New (now suspended) legal notices").
If enacted, one of the legal notices will introduce amendments to the Temporary Agency Workers Regulations (S.L.452.106).
This article summarises the proposed amendments to the Temporary Agency Workers Regulations and raises some pertinent questions which will hopefully be resolved pending the suspension.
The Temporary Agency Workers Regulations were first enacted in 2010 and sought to transpose the EU Temporary Agency Workers Directive (2008/104/EC) into Maltese law.
The main scope of the EU directive is twofold:
- On the one hand, it seeks to ensure that EU member states do not impose prohibitive restrictions on temporary agency work.
- On the other hand, it seeks to ensure that temporary agency workers have the same basic working and employment conditions applicable to workers that are recruited by a user-undertaking to perform the same job.
The EU directive also introduces a variety of measures to combat the exploitation of agency workers.
Subject to some exceptions, the EU directive and the Maltese regulations apply to 'temporary work agencies' (ie, any person or entity that employs – whether on a full-time or part-time basis or on a fixed or indefinite term – employees or workers (ie, temporary agency workers) with a view of assigning them to third parties (ie, the user-undertaking)). The EU directive and the Maltese regulations allow assigned workers to work temporarily under the supervision and direction of the user-undertaking, while the agency remains recognised as the employer under the law. Once assigned, workers are immediately protected under law, thereby guaranteeing equality between those directly employed by the user-undertaking and temporary agency workers. Further, any restrictions regarding direct employment of the assigned worker with the user-undertaking are removed.
What does the new legal notice change?
To clarify, neither the EU directive nor EU law on temporary agency workers have changed. Instead, the Maltese legislature has opted to alter the Maltese regulations. Why this has occurred without any form of public consultation or explanation is unclear.
The legal notice contemplates three principal changes.
Criteria The amendments appear to broaden the scope of the regulations beyond what was originally intended by the EU Temporary Agency Workers Directive. The very concept of assigned temporary workers has been expanded significantly.
The supervision and direction criterion was (and remains) a prevailing theme throughout the EU directive, including its recitals. The phrase features specifically in four key defined terms used throughout the EU directive:
- 'user-undertaking';
- 'temporary-agency worker';
- 'assignment'; and
- 'temporary-work-agency'.
The EU directive was clearly intended to apply only where an agency (A) assigns a worker to another user-undertaking (B) while remaining the employer throughout the assignment. In such case, B would provide a degree of supervision and direction during the assignment.
The supervision and direction criterion limits the scope of the EU Temporary Agency Workers Directive and thus renders it inapplicable to workers and traders who are genuinely self-employed and offer services to user-undertakings despite not falling under their supervision and direction. Further, the criterion excludes services offered under a typical managed services contract, whereby one entity provides a full service (eg, cleaning, audit or maintenance services) to a client, provided that the supervision and direction of the workers remains with service provider. In short, the EU directive does not cover anyone that:
- carries out business on their own account, through a limited company or otherwise; and
- does not work under the supervision and direction of the relevant user-undertaking.
Although the EU Temporary Agency Workers Directive provides little background on the meaning and use of this criterion (nor is there much guidance from the European Court of Justice), it is nonetheless clear that the European Union wanted to create a sui generis scenario whereby assigned workers not only deliver a service to a client, but more importantly do so subject to a degree of control by the client.
This is key because the general rule (as enshrined in Chapter 452 of the Employment and Industrial Relations Act) is that where a person carries out work under the effective direction and control of another party, the relationship between the two would systematically be deemed an employment relationship, irrespective of how it is described on paper. This principle is also the backbone of the Employment Status National Standard Order (S.L. 452.208).
Therefore, the EU Temporary Agency Workers Directive regulates an exception to that rule as, by virtue of the directive, assigned workers remain employed by the agency, despite being subject to the supervision and direction of the user-undertaking.
Until August 2018 the Maltese regulations consistently reflected the general scope of the EU Temporary Agency Workers Directive, including specific references to the phrase 'supervision and direction' in its key definitions. The regulations applied only where a worker who was employed with A was assigned to B to work under the supervision and direction of B.
However, the amendments have eliminated all references to the supervision and direction criterion and introduced a somewhat novel criterion instead. Going forward, the regulations will apply whenever an agency assigns its employees to temporarily work "at the place of work of a user-undertaking". Some have already described this amendment as a positive change and a more practical definition. But is it really?
The need for and the purpose of such a radical change at the heart of the regulations is questionable. Further, the amendments, as enacted, give way to some pertinent questions which cannot go unnoticed.
The first question is whether the elimination of the supervision and direction criterion now means that every worker employed by a company that is working or providing services "at the place of work" of another user-undertaking must be guaranteed the same employment conditions as the user-undertaking's employees, even if they are not subject to the latter's supervision and direction. At face value, it seems this would be the case. As such, arguably, the amended regulations will apply when, for example, a cleaning company sends staff to clean a client's workplace. In short, this provision will apply to any contract of services where staff are temporarily assigned or seconded, even on an irregular basis, to work at a client's place of work – be it in the context of installation, maintenance or professional services.
The second hurdle is that the term 'place of work' is undefined. It is also undefined in the Employment and Industrial Relations Act (Chapter 452). As such, it is unclear whether 'place of work' means an organisation's registered address or central place of work (ie, its headquarters). It is also unclear what the rule will be if an organisation has multiple places of work or no fixed place of work at all.
Another subsidiary law, the Information to Employees Regulations (S.L.452.83), recognises that an employer may have a registered place of business but no fixed place of work. In such cases, workers must be informed that they will be employed "at various places together with the registered place of business". Can an assignment for the purposes of the regulations be deemed to occur when a user-undertaking has no fixed place of work? What if a worker is assigned to a user-undertaking but is not required to carry out work at its place of work?
Clearly there is a degree of uncertainty emanating from this change.
What is certain is that the regulations will continue to apply to any scenarios that were previously deemed to fall under the scope of the regulations (ie, where there is a degree of supervision and direction by the user-undertaking).
Definition of 'pay' The second amendment in the notice clarifies that assigned workers' right to equal pay during the assignment period includes any pay-related terms stipulated in collective agreements applicable at the user-undertaking.
One of the primary objectives of the EU Temporary Agency Workers Directive and Maltese regulations has always been to ensure that temporary agency workers assigned to a user-undertaking are entitled – for the duration of the assignment – to at least the basic working and employment conditions that would apply had they been recruited directly by the user-undertaking to perform the same job. This right is regulated by Regulation 4(1), which clearly states that such basic conditions would be those applicable "by virtue of the Act, or any regulations issued thereunder or under any other legislation or by virtue of any applicable collective agreement".
However, Regulation 4(2) then defines the phrase 'basic working and employment conditions'. This included reference to 'pay', which is defined by Regulation 4(3) to mean:
remuneration or earnings payable to the worker by his employer, that is, the basic wage, any statutory cost of living increase payable under the Act or under any other law, any statutory bonuses and allowances payable under the Act or under any other law, the payment for overtime work at the applicable rate, payment in respect of public holidays, payment in respect of annual leave, payment in respect of maternity leave and any applicable shift allowances.
Therefore, the definition of 'pay' in Regulation 4(3) includes no reference to collective agreements. The legislature must have recognised a need to insert a clarification in the law (likely resulting from an undisclosed dispute which the Department of Industrial and Employment Relations was asked to address).
While clarification of the law is welcome, this insertion is arguably unnecessary, not only because Regulation 4(1) already includes reference to collective agreements, but also because Article 5 of the Employment And Industrial Relations Act (Chapter 452, Laws of Malta) states that if a user-undertaking is bound by a collective agreement, then the basic terms and conditions of employment applicable at that user-undertaking must automatically be considered to be those stipulated in the collective agreement. This is a non-negotiable provision.
Removal of equal pay rule exception The final amendment to the regulations is one which eliminates an important exemption that exists in the law. This change is likely to affect many temporary work agencies that have been exploiting this exemption as a matter of practice.
For background, the Temporary Agency Workers Directive allows member states a degree of discretion to introduce exemptions from the obligations imposed by the directive when temporary agency workers are employed by the agency under an indefinite (permanent) contract and paid between assignments. The recitals to the directive suggest that such exemptions are encouraged in view of the special protection that indefinite contracts give to workers.
Malta is one of the few EU member states that have applied such exemptions (incidentally, in terms of the EU Temporary Agency Workers Directive, this should have been done after consulting social partners). This means that agencies could either:
- employ temporary agency workers under indefinite contracts and pay them between assignments; or
- employ temporary agency workers under temporary contracts and not pay them between assignments.
If workers were employed on indefinite contracts and paid between assignments, the agency was not bound to guarantee equal pay (ie, the same pay that would have applied had the worker been directly employed by the user-undertaking) for the duration of the assignment.
At face value, this is a reasonable exemption based on the argument that the employee is guaranteed pay between assignments. There is a fair trade-off as the agency undertakes an obligation to pay workers even when they are not being compensated by the user-undertaking.
That said, there may be situations where assigned workers would arguably lose out on fair and equitable compensation during assignments, especially where workers have an indefinite contract with the agency, but their pay is far less than that which would have been paid by the user-undertaking. It is likely that the government must have come across such scenarios and that these were seen to contrast with the principle of equal pay for work of equal value – a concept enshrined in Maltese law for decades and emphasised again by the current administration.
Whatever the reason for the changes, the legal notice abolishes this exemption with no transitory period to allow changes to be softly introduced.
This may have significant implications for agencies that have been operating under the assumption that they need not match a user-undertaking's pay – something which may cause budgetary problems for companies that have already committed to prices in contracts or tender submissions. If the wages that user-undertakings are bound (by law or collective agreement) to pay are greater than that paid by the agency, the agency must increase its pay for the duration of the assignment. The least the legislature could do is allow for a transition period.
The regulations, as amended, also provide that the equal pay rule will apply only after the first four weeks of an assignment, whatever the duration of the assignment. In other words, during the first four weeks, no equality is required.
Of course, prior to the amendments, this four-week proviso applied only where the worker was not paid between assignments. With the amendments, this will also apply when a worker is paid between assignments.
In addition, the regulations now state that when a temporary agency worker is replaced during the first four weeks by another temporary worker, they must receive equal treatment regarding pay from the first day of the assignment. Prior to the amendments, the wording of the regulations were slightly different, allowing for an interpretation that the four weeks would start afresh if the agency worker was replaced during the first four weeks.
Finally, the amended regulations add a new proviso which states that "if the replacement [of a temporary agency worker] takes place within a six month period, such period shall be deemed to be a continuous assignment".
This is an odd proviso and the implications of the term 'continuous assignment' are unclear. The legislature's intent in this regard is ambiguous, as the regulations make no other reference to this term. The question thus becomes what is gained or lost by having – or not having – a continuous assignment?
As the legislature failed to contemplate any transitory periods, employers must comply with the new regulations immediately. The fact that there may already be quotations supplied, public tenders offered or even contracts signed is, unfortunately, no excuse.
For further information on this topic please contact Paul Gonzi at Fenech & Fenech Advocates by telephone (+356 2124 1232) or email ([email protected]). The Fenech & Fenech website can be accessed at www.fenechlaw.com.
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