Andrew Borg-Cardona
This article examines whether dismissals prompted by artificial intelligence fall within the concept of redundancy under Maltese law. It argues that while AI-driven workforce reductions may formally satisfy the statutory test, they occupy the outer limits of the doctrine. Where the work output requirement persists and only the human element disappears, the analysis queries whether the proscriptive function of the law shifts from elimination of function to substitution of labour – a distinction that may invite stricter scrutiny by the Industrial Tribunal. The note further considers the procedural obligations that attach to such dismissals, the employer’s duty to explore alternatives, and the extent to which EU law and policy reinforce domestic protections in the context of technological displacement.
Introduction
The traditional understanding of redundancy is deceptively simple and blunt: the job disappears, therefore so does the employee. Artificial intelligence disrupts that simplicity in ways that existing legal frameworks were not designed to address.
Where once a production line might close, or undergo enhancements to the machine-driven aspects of production, and render its operatives genuinely surplus to requirements, the modern employer has the opportunity to deploy automated systems capable of performing the same tasks continuously and at lower cost. The result is the same as a machine replacing a human: the output remains. The economic activity is unchanged. What has altered is the identity of the actor performing the work. It’s happened before, but in a post-Orwellian environment, the perception of machine substituting the human is more acute.
This gives rise to a more nuanced question: can redundancy truly exist where the work persists, but the human performing it is replaced by an algorithm?
The issue is not merely theoretical. It goes directly to the validity of dismissals, the entitlements of affected employees, and the legal exposure of employers who characterise such terminations as redundancies without properly interrogating whether that label is sustainable.
Maltese Industrial Tribunal reasoning has consistently favoured substance over form in assessing dismissals. That redundancy by reason of structural change is a valid redundancy (mechanisation taking over jobs) was accepted by the Tribunal.¹
It is open to debate today, however, whether the Tribunal would adopt the same point of view without going deeper into whether the function survives in materially similar form. Of late, Tribunals have shown a willingness to look beyond formal restructuring and examine whether a claimed redundancy is genuine even by taking into account whether “the job still exists”.
AI-driven dismissals, especially if on a large scale, bring that tension into sharp focus.
Legal Framework
Redundancy in Malta is grounded in the Employment and Industrial Relations Act (“EIRA”), which recognises termination as lawful where it is based on a valid reason connected with the employer’s operational requirements.² While the Act does not exhaustively define redundancy, it is understood – consistently with comparative jurisprudence – to arise where the employer’s requirement for employees to carry out work of a particular kind has diminished.
Collective redundancies are governed by the Collective Redundancies (Protection of Employment) Regulations,³ which transpose Council Directive 98/59/EC.⁴ These impose mandatory procedural obligations, including consultation with employee representatives and prior notification to the Director of Employment and Industrial Relations (DIER).
At EU level, the framework is primarily procedural. Directive 98/59/EC regulates the manner in which redundancies are effected rather than defining their substantive validity.⁵ The question whether a redundancy exists remains a matter of national law, albeit one that must be interpreted in conformity with EU principles.
AI and the concept of redundancy
AI-driven redundancies expose a structural tension within the conventional redundancy model. The work continues. The output remains necessary. Only the human input is removed and replaced by automated processes.
On a literal reading of the statutory formulation – namely that the employer’s requirement for employees has diminished – such situations may fall within redundancy. However, this interpretation stretches the concept toward its outer boundary. Redundancy has historically been associated with a reduction in the need for work, not merely a reduction in the need for human labour where the work itself persists.
This distinction is not semantic. It marks the difference between:
- diminution of operational need, and
- technological substitution of labour.
If the latter is accepted uncritically as redundancy, the doctrine risks becoming a vehicle for workforce reduction of a fundamentally different character – one in which human labour is displaced while the underlying activity remains intact or is even expanded.
Genuineness and tribunal scrutiny
Maltese law requires that redundancy be genuine. The Industrial Tribunal is not bound by the employer’s characterisation of the dismissal and will assess the substance of the situation.⁶
Where AI is introduced, the Tribunal is likely to examine:
- whether the role has genuinely ceased to exist;
- whether its constituent functions continue in materially similar form; and
- whether those functions have simply been reallocated to automated systems.
A redundancy driven by operational necessity is legally distinct from one driven purely by efficiency or cost optimisation. While cost considerations may form part of an employer’s rationale, they cannot, without more, justify a redundancy where the underlying work remains substantially unchanged.⁷
The risk is that a purported redundancy may be re-characterised as an unjustified dismissal, with the consequences that follow under Article 36 of the EIRA.⁸
Procedural obligations
Under the Collective Redundancies Regulations, employers must:
- consult employee representatives in good time and with a view to reaching agreement; and
- notify DIER prior to implementing dismissals.⁹
These obligations are mandatory and independently enforceable.
In the context of AI-driven restructuring, consultation must be meaningful. It requires the employer to explain:
- the rationale for automation;
- the selection of affected employees; and
- the alternatives considered, including redeployment and retraining.
Consultation conducted after the decision is effectively finalised risks being treated as a mere formality and therefore non-compliant. This is consistent with the interpretation of Directive 98/59/EC by the Court of Justice, which emphasises the effectiveness of consultation as a substantive safeguard.¹⁰
Selection and alternatives
Employers must apply objective and non-discriminatory selection criteria and must consider whether affected employees can be retained through redeployment or retraining.¹¹
AI does not necessarily eliminate all human involvement. Many automated systems require:
- supervision;
- quality assurance;
- exception handling; and
- system training or calibration.
Accordingly, the employer must demonstrate – on the evidence – that such alternatives were genuinely explored and found to be unviable. A failure to document this exercise may be taken as evidence that it was not properly undertaken.
Unfair dismissal
Under Article 36 of the EIRA, a dismissal must be based on a valid reason and carried out in accordance with a fair procedure.¹² These requirements are cumulative.
A dismissal presented as redundancy will fail the validity test where the redundancy is not genuine. Even where a substantive justification exists, procedural defects – such as inadequate consultation or failure to consider alternatives – may independently render the dismissal unfair.
EU Law and policy context
Directive 98/59/EC establishes a procedural baseline for collective redundancies but leaves substantive definitions to national law.¹³
However, broader EU instruments, including the European Pillar of Social Rights, articulate policy commitments to:
- fair working conditions;
- protection against unjustified dismissal; and
- support for workers affected by labour market transitions, including technological change.¹⁴
While not directly enforceable in the same manner as directives, these instruments exert interpretative influence. Where domestic law admits of more than one reading, an EU-conforming approach may favour stricter scrutiny of dismissals arising from technological substitution.
Transfer of business
The impact of the acquired rights protection regimen also bears some consideration. The law, prompted by EU-level regulation, tends towards protection of workers whose job has been “moved on”. In this case, one is looking at moving the job to ChatGPT or Claude or Perplexity (this one is invented) but there’s something to be said for this aspect also having an impact.
Conclusion
AI-driven redundancies may occupy contested legal ground. While they may satisfy the literal wording of the statutory test, they challenge the conceptual foundations of redundancy by decoupling the disappearance of work from the dismissal of workers.
They therefore attract heightened scrutiny. The Tribunal is likely to examine not only whether the employer’s need for employees has diminished, but also whether the underlying work has in fact disappeared or has merely been reassigned to automated systems.
Employers contemplating AI-driven workforce reductions must engage seriously with both the substantive and procedural dimensions of redundancy. These are not formalities to be addressed retrospectively, but conditions that determine whether the redundancy label is legally available.
The trajectory of the law is already discernible: dismissals that substitute human labour with algorithmic processing, without a genuine diminution in the work itself, will be treated with caution. Those who treat this terrain as settled rather than contested do so at their peril.
Andrew Borg-Cardona is a lawyer, graduated in 1980, with a particular interest in employment law.
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Footnotes
- See generally the approach of the Industrial Tribunal favouring substance over form in dismissal cases under Chapter 452 of the Laws of Malta. (See also GWU v De La Rue 1998 per Debono C et)
- Employment and Industrial Relations Act, Chapter 452 of the Laws of Malta, Article 36.
- Subsidiary Legislation 452.80, Collective Redundancies (Protection of Employment) Regulations.
- Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies.
- Ibid., particularly Articles 2–3.
- EIRA, Article 36; see also consistent Tribunal practice assessing the real reason for dismissal.
- Compare UK jurisprudence for persuasive guidance: Murray v Foyle Meats Ltd [1999] ICR 827 (HL), confirming that redundancy may arise where the employer’s need for employees diminishes, though not determinative in Maltese law.
- EIRA, Article 36(2).
- Subsidiary Legislation 452.80, Regulations 4–5.
- Case C-188/03 Junk v Kühnel [2005] ECR I-885, emphasising the timing and effectiveness of consultation.
- Derived from general principles of fair dismissal under EIRA and Tribunal practice.
- EIRA, Article 36.
- Directive 98/59/EC, cited above.
- European Pillar of Social Rights (2017), Principles 5 and 7.
