Employment Law Changes in the Past 12 months
The main change in employment law that has been enacted over the past 12 months has been the amendment to the Employment Act of the Maldives on 22 September 2022. This was the first substantial amendment to the Employment Act of the Maldives in over ten years. The subsequent regulations introduced under the amendment to the Employment Act were published on 9 May 2021. Together these have brought substantive changes to employment legislation in the Maldives, which are summarised below.
Codification of redundancy law
While redundancy has been recognised by Maldivian courts as a justified ground for dismissal since 2011, it was not codified into legislation until the amendments in 2020. This amendment to the Employment Act identified the following.
An employee is entitled to paid medical leave of up to 30 days annually. The employee is allowed to take medical leave for two consecutive days without the requirement to present a medical certificate up to 15 of these entitled paid medical leave days. However, beyond the 15 days, the employer reserves the right to require the employee to present a medical certificate from a registered practitioner prior to granting the paid medical leave.
The new amendment made it compulsory for all tourism-related businesses to charge a service charge of not less than 10%. Service charges are to be collected and distributed equally amongst all employees.
The newly introduced clause on a minimum wage states that the government is allowed to determine the minimum wage for all employees working in the Maldives. A Minimum Wage Advisory Board was established to research and advise the government on the minimum wage based on different industries in the Maldives. The minimum wage for Maldivian employees is to be introduced before the end of 2021. The minimum wage for expatriates working in the Maldives is to be introduced before September 2022.
Prior to the amendment to the Employment Act, certain groups of employees – including senior management, imams, sea and air vessel crews, persons working on emergency situations and on-call duty – are exempt from the entire chapter on rights under the Employment Act. The new amendment to the Employment Act revised the exemption clause limiting the groups of employees to only be exempt from the provisions relating to working hours and overtime payment. The most significant implication of this amendment is that the exempted employees are now able to claim the rights under the Employment Act, particularly the right not to be terminated without cause and the right to file a complaint with the Employment Tribunal.
Record of working hours
The new amendment introduced a statutory obligation to maintain working hour records of all employees and have this information available to the Labour Relations Authority upon request.
Key Employment Cases during the Past 12 Months
The Supreme Court of the Maldives has decided a record number of employment-related cases over the past 12 months. In doing so, the court has set new precedents, reconsidered the interpretation and application of the law, and brought, to an extent, much-needed clarity and consistency. The most significant decisions are as follows.
Factors affecting reinstatement
Reinstatement is the most commonly awarded remedy for unjustified dismissal.
MACL v Jabir Abdul Rahman is the leading authority on reinstatement. In this case the Supreme Court noted that reinstatement is an equitable remedy (similar to specific performance), and gave an indicative list of circumstances that may prevent reinstatement, and list of factors where an order for reinstatement is justifiable.
Circumstances that may inhibit reinstatement are:
The circumstances in which reinstatement is justifiable are:
The Supreme Court has further elaborated that reinstatement is not an appropriate remedy:
Following the decision in MACL v Jabir Abdul Rahman Abdulla, the Supreme Court decided reinstatement is not a suitable remedy in the case of Abdulla Jamiu v State, in which 11 years elapsed between the date of dismissal and the final verdict.
In contrast, in Abdul Muizzu Musthafa v State, the Supreme Court of the Maldives decided that termination was unfair and ordered reinstatement to the same job despite the fact that seven and a half years had passed between the date of termination and the final decision on appeal.
The most common remedy for unfair dismissal is reinstatement. The tribunal’s award for reinstatement is in addition to an award of back pay from the date of dismissal to the date of reinstatement (or, in some instances, from the date of dismissal to the date the tribunal order is made). The award is usually limited to contractual pay and benefits.
In Hussain Nazeef v Civil Service Commission, the Supreme Court decided, breaking new ground, that the employee may claim additional compensation where the actions of the employer caused loss of reputation (stigma), and as a result they were unable to find other employment.
Following Hussain Nazeef v Civil Service Commission, there have been several cases in which the Supreme Court has made a finding that a separate claim for compensatory award may be filed by the parties.
Unjust enrichment and the factors to consider in determining compensation
In Abdul Muizzu Musthafa v State, the Supreme Court decided to reinstate the employee, but refused to limit the amount of compensation to 12 months’ salary and allowance as submitted by the respondent (the State). The court took the view that it may not limit the compensation to a defined duration, or set a cap on the compensation on the basis that the Act has not set such a limit on the amount of compensation.
In this case, the Chief Justice considered the position of law in other democratic countries in deciding the limitation of compensation. The court recognised the importance of statutory intervention in this area of law, making particular reference to the position in English law and Australian law. The factors considered in determining compensation by the justice in this case were to uphold the principles of natural justice while ensuring there is no unjust enrichment.
In this case, the Supreme Court found that the employee is entitled to compensation, and he may file a new case in the appropriate court, and gave the following factors to consider in determining compensation:
It is yet to be seen how the court will apply these factors in awarding compensation.
Duty to mitigate loss
In Maldives Airports Company Limited v Ashfag Waheed, the court decided that it is not mandatory to award back pay for the entire duration from the date of dismissal to the date of reinstatement. The court further noted that the general contractual duty to mitigate loss is applicable to an employee who has been unfairly dismissed. Accordingly, in determining "the amount that the tribunal/court considers just and equitable in the circumstances", the court must consider employment/work after dismissal, if any, and the time it usually takes to find alternative employment, and to avoid unjust enrichment.
Discrimination on grounds of nationality
In Nafiu Abdul Rahman & Others v Trans Maldivian Airways (TMA), the Supreme Court decided that payment of a living allowance to expatriate pilots does not amount to discrimination.
In this case, Nafiu Abdul Rahman and other Maldivian pilots who worked at TMA claimed, among other matters, that they are equally qualified, have comparable experience, and did the same job as pilots of TMA, which was not denied. They claimed that the payment of a "living allowance" to expatriate pilots only amounts to discrimination, contrary to the Maldives Constitution and the Employment Act.
The applicable laws are as follows.
In dismissing the claimant’s case, the Supreme Court found that the payment of an accommodation allowance to expatriate pilots was in order to meet the regulatory requirements, rather than based on the "race" or nationality of the Maldivian pilots.
It has to be noted that “salary” or remuneration is defined in the Employment Act as “... payments made to the employee by the employer as wages, other benefits, allowances and other financial benefits relating to the employment, either in cash or other valuable consideration”.
As a consequence of this decision, it is now lawful for employers to pay additional allowances to expatriate employees for their food and accommodation, and thereby effectively pay a higher "salary" to expatriates with same qualification and experience, doing same work as a Maldivian employee. This decision has far-reaching consequences in a country where the expatriate working population is significant as a percentage of the total workforce.
The Parliament enacted special legislation under the Public Health Emergency Act 2020 (the “PHE Act”) to address the wide range of social and economic matters resulting from the COVID-19 pandemic. While the PHE Act was enacted on 22 September 2020, the provision requires the Act to be applied retroactively from the date on which the State of Public Health Emergency was declared in the Maldives in March 2020.
Chapter 2 of the PHE Act 2020 addressed the rules relating to the administration of special leave and any amendment or termination of an employment contract as a result of the economic hardship caused by COVID-19. These are discussed in more detail below.
Special Paid Leave
All employees are entitled to special paid leave, without the requirement to present a medical certificate under specific circumstances where the employee is required to quarantine or where the employee is unable to travel (within the Maldives) due to any action or steps taken by the government of the Maldives. These could include circumstances where an employee is required to self-isolate or quarantine where:
While an employee is not required to present a medical certificate, the law requires an employee to present the written instructions from the relevant government authority prior to claiming special leave.
Amendment to Employment Agreements and Redundancy
The PHE Act allows an employer to amend or terminate an employment agreement where an employer is unable to remunerate its employees at the same level as it had done previously due to a reduction in the employer’s revenue as a result of COVID-19. The PHE Act states that any amendment to the employment agreement – in particular, any amendment to an employee's compensation or leave entitlement – is only effective upon the written consent of the employee.
If any employee is being made redundant due to a worsening of the employer’s financial situation as a result of COVID-19, the employer should uphold procedural fairness prior to making the position redundant. The PHE Act requires the employer to take the following actions.
The PHE Act extended the time period in which a complaint is allowed to be filed with the Employment Tribunal relating to any of the provisions of the PHE Act. An action can be brought against an employer within 90 days of such action or within 30 days of the end of the public health emergency status, whichever is later. It should be noted that the public health emergency status continues at the time of writing this article.
In addition to the legislative changes, the Maldivian government, in an attempt to reduce the pandemic's impact on businesses and employees, introduced an Economic Recovery Plan of MVR2.5 billion. The government introduced working capital loans for tourist resorts, other businesses and freelancers through the Bank of Maldives and the SME Development Finance Corporation, where priority is to be given to resorts and businesses with a higher Maldivian ownership ratio and those that have not dismissed local employees or forced employees to go on unpaid leave.
The deferment of loan repayments and interest payments for a period of six months by the Bank of Maldives and the SME Development Finance Corporation, pursuant to this plan, also indirectly assists employers in keeping up with salary payments to their employees.
The government also introduced a special allowance to employees who were made redundant or placed on unpaid leave. This was the first time the Maldives had introduced an unemployment benefit in the Maldives. The government had initially given the benefit to unemployed individuals for a period of three months from April 2020. Individuals who claimed the benefit and those who lost their employment due to COVID-19 were allowed to register on the Job Centre Portal introduced by the Maldivian government. The period of three months was further extended at the government’s discretion.
No distinction is made between blue-collar and white-collar employees.
The legislation governing employment in the Maldives is the Employment Act 2/2008, which was enacted in 2008. This legislation applies to all employees in the Maldives regardless of gender, nationality or industry. The only group of individuals that are exempt from the Employment Act are the Maldives Police Service and Maldives National Defence Form employees, which has its own employment legislation to govern the employer and employee relationship. There are specific regulations relating to the employment of expatriates in the Maldives, which mostly govern the administrative aspects of expatriate employment in the Maldives; for example, administration of work permits, issuance of work visas and collecting fees relating to work permits.
There are three types of employment agreements:
Definite agreements are for a period not exceeding two years and automatically terminate upon expiry. If, however, the term of the definite agreement can be renewed or extended beyond two years, the agreement will be deemed an indefinite agreement. Agreements that exceed two years are permanent or indefinite agreements.
There is a statutory requirement to enter into an employment agreement and for it to be in writing. The employee must be provided a signed copy of the agreement and it shall include:
Employees should also be provided a written job description stating the duties and scope of employment.
The terms of employment are commonly provided by the employer; however, minimum statutory rights are established to ensure the fundamental rights of employees are upheld irrespective of whether such rights are included in the employment agreement.
The working hours of an employee cannot exceed 48 hours a week (excluding overtime). The employee shall not be required to work more than six consecutive days a week without having 24 consecutive hours of rest. However, an employee working at a tourist resort, on a tourist vessel, or in an uninhabited island designated for industrial projects may be allowed to work more than six consecutive days a week subject to accumulation of such employee’s rest days. Such employees may also be allowed to work an additional two hours each day but must be paid at the rate of overtime pay in accordance with the Employment Act.
Although there are no statutory maximum working hours per day, an employee is entitled to the following breaks each working day:
It is possible for an employer to contract these breaks to be excluded from the maximum working hours under the Employment Act.
Overtime is governed by the Employment Act in the Maldives. If an employee works in excess of 48 hours per week, the employer is generally required to pay 1.25 times an employee’s hourly wage as overtime. The employer shall pay 1.5 times the employee’s hourly wage if the overtime falls on a public holiday. It is also a statutory requirement that employees shall not be required to work overtime unless agreed in the employment agreement.
An employee required to work normal hours on a public holiday shall be paid at least an amount equivalent to half of the minimum wages earned on a normal day of work in addition to any overtime entitlement.
The Employment Act specifies certain groups of individuals to be exempt from the Employment Act sections relating to working hours, overtime payment and public holiday pay. These groups include the following:
Flexible arrangements and part-time contracts are not specifically regulated in the Maldives. However, if the employer and employee were to negotiate any terms that are more favourable than the minimum guaranteed terms, these terms would be upheld under the principles of freedom of contract.
The Employment Act allows the relevant government minister to set the minimum wage applicable to the employees. The relevant government minister is to establish a Minimum Wage Advisory Board that would advise the minister based on the following employment sectors:
The Employment Act requires the minimum wage to be set for all Maldivian employees by no later than 31 December 2021 and for expatriate employees in the Maldives no later than 22 September 2022.
In the Maldives, there is no requirement to make a 13th-month salary payment.
The only statutory additional compensation guaranteed for all local employees is the Ramadan bonus of MVR3,000, which is to be paid by employers before the beginning of Ramadan. The payment of this bonus to foreign Muslim employees is at the discretion of the employer.
Employment law does not prohibit the employer and employee from agreeing to terms that are more favourable than the minimum rights under the Employment Act. As such, any bonus entitlements are generally dependent on the term of the employment agreement, in which there may be guaranteed bonuses and discretionary bonuses.
An employee is entitled to 30 days of unpaid annual leave upon completion of one year of employment. Annual leave shall be taken no later than within 12 months from the expiry of the year in which the leave was acquired as it cannot be accumulated. Additionally, annual leave shall not include sick leave, public holidays, maternity leave, or notice period prior to termination of employment. Any annual leave entitlement for which the employee has not been paid by the employer shall be paid to the employee prior to the termination of employment.
Employees are entitled to 30 days of medical leave during each year of employment. Employees who are unwell for two consecutive days or less are entitled to take medical leave without the need to provide a medical certificate for 15 out of the 30 days of medical leave. The employer may require the employee to present a medical certificate from a registered practitioner prior to approving any additional medical leave upon utilising the 15 days' medical leave without a medical certificate.
All female employees are entitled to 60 days’ maternity leave based on a medical certificate specifying the estimated date of giving birth issued by a licensed medical practitioner. All government employees are entitled to six months' paid maternity leave. Employees on maternity leave will be entitled to full salary and benefits, and the leave period cannot be deemed a discontinuance of work that affects the employee’s rights and benefits. An additional leave of 28 days must be granted to an employee who submits a licensed medical practitioner’s certificate confirming the employee’s inability to return to work due to ill health. The employer has the discretion to pay during this additional 28-day leave period.
A male employee is entitled to three days of paid leave on the occasion of the birth of his child.
Break to Attend to a Child
An employee is entitled to two daily breaks of 30 minutes each to attend to the needs of a child once the employee returns to work after the completion of maternity leave. This leave is applicable until the child turns one.
Leave for Parents
Once the maternity leave period expires, the mother or father of a newborn child may take unpaid leave for a maximum of one year.
Family Responsibility Leave
Employees are entitled to ten days of paid leave annually to attend to important family obligations.
An employee is entitled to five days of paid leave on the occasion of the circumcision of a child.
Employment officials have a statutory obligation to maintain the confidentiality of information obtained in the course of carrying out their duties, relating to business secrets, productivity and the like of commercial ventures during the currency of their employment and after dismissal. Clauses may be included in the employment agreement to prevent the disclosure of confidential information during and after employment but, as a general note, there is no statutory provision relating to confidentiality requirements of the employer and employee.
Employee liability is subject to the term of employment agreement agreed between the parties.
Any clause in an employment agreement that purports to restrain or prohibit the conduct of an employee’s trade or profession is enforceable as long as the restraint is reasonable. It is, however, noted that what constitutes a reasonable period for such restraint has not been defined.
Non-solicitation clauses may be included in the employment agreement by an employer but it is unclear to what extent such a clause would be enforceable in the Maldives as it is untested.
The Maldives has not enacted any specific data protection legislation in respect of employment matters. As per the Employment Act, employment agencies shall not request or keep on record any information of a personal nature relating to a prospective employee except information that is essential to ensure that the person has the competence to discharge the employment sought. Such information shall be disclosed by the agency only to employers that have expressed interest in employing a person with certain abilities.
All foreign employees in the Maldives are required to hold a work permit prior to commencing work in the Maldives. The Expatriate Employment Regulation enacted under the Employment Act regulates the employment of expatriates in the Maldives. The Expatriate Employment Regulation sets out the administrative rules required to employ a foreigner in the Maldives, including the rules relating to the issuance of an employment quota and an application for work permit approvals. The Expatriate Employment Regulation identifies certain areas of employment where expatriates are not allowed to be employed in the Maldives, including the following:
The employer and the person providing accommodation to the foreign worker must register with the Expat Online System. Subsequently, a Maldivian representative can be appointed by the employer and registered as a representative in the Expat Online System. The employer must then issue a letter of appointment to the foreign worker in order to obtain the employment approval. The employer will also need to obtain a quota, for which MVR2,000 is charged for every quota issued. Once a quota is granted, the employment approval will be granted, and this is required prior to arrival of the foreign worker in the Maldives. Upon arrival, the employee would be issued an annual work permit, which is renewable at the end of each year. The employer would be required to pay a monthly work permit fee.
There is no legal recognition of unions, though the Employment Act does not prohibit the formation of unions in the Maldives.
There are no recognised employee representative bodies in the Maldives.
There are non-government organisations registered as associations that represent the interests of selected groups of employees; for example, the Tourism Employees Association of Maldives and the Maldives Association of Human Resources Professionals.
Collective bargaining agreements are untested in the Maldives.
An employer must show reasonable cause to justify an employee’s termination. Motivation is not ordinarily required but may become relevant if an employee claims that an employer has discriminated against them or acted in bad faith.
Regardless of the grounds for dismissal, the employer must establish substantive and procedural fairness. This is the case for termination with and without notice, including where an employee’s actions constitute gross misconduct.
Collective redundancies are not subject to distinct rules. The Employment Act requires the employer to demonstrate that the redundancies are due to a situation of redundancy and that the procedural fairness required to establish justified dismissal should be upheld. The Employment Regulation enacted under the Employment Act provides further guidelines as to the steps that should be upheld prior to terminating an employee on grounds of redundancy, including the following.
The employer is required to provide the employee with notice prior to the termination of employment, excluding in a situation where an employee action amounts to fraud or gross misconduct. The notice period for termination for cause other than redundancy is as stated below:
The notice required to be given in the circumstances where an employee is made redundant is different from the notice required for termination for reasons relating to the conduct or capacity of the employer. Prior to redundancy, the employer is required to provide the following notices depending on the duration of service:
Employers must give notice in writing. Employers may also make a payment in lieu of notice, which must amount to the employee’s wages and other benefits that they would have received during a notice period. External authorisation is not required.
Dismissal without notice is defined as meaning termination of an employment agreement without notice as otherwise required by law or the agreement. This includes giving a shorter period of notice than would otherwise be required.
An employer may summarily dismiss an employee where their work is deemed unacceptable, and the employee’s continued employment is deemed, on reasonable grounds, to be unworkable. Specifically, an employer must show:
No particular formalities must be observed, but employers must act with procedural and substantive fairness.
Termination agreements are enforceable to the extent that they do not infringe the minimum statutory rights of the employee.
The legality of termination agreements has not been tested in the courts.
There is no specific protection against dismissal for particular categories of employee.
The concept of wrongful dismissal is not recognised as a distinct concept under Maldivian law, but instances of wrongful dismissal are covered under the umbrella term of "unjustified dismissal".
In a claim for unjustified dismissal, the employee must establish that they were an employee and have been dismissed. The onus is now on the employer to establish the grounds for dismissal, and that those reasons are fair and justifiable.
An employee has a statutory right not to be unfairly dismissed. As per the applicable law of the Maldives, the employer must demonstrate procedural fairness and substantive fairness. The acceptable reasons for justifiable terminations are circumstances relating to capacity and/or conduct of the employee, or economic and organisational reasons of the employer’s business.
Employees must submit any claims for wrongful dismissal to the Employment Tribunal within three months of the date of their dismissal. Claims can be made on the ground that the employee was dismissed without cause regardless of whether notice was given.
A claim cannot be brought by an employee dismissed during probation.
Consequences of Unjustified Dismissal
The statutory remedies for unjustified dismissal are reinstatement, re-engagement and/or compensation.
Compensation will be determined on the basis of what is "reasonable and just" detriment suffered by the employee, and the employee’s own contributions.
Employers must not discriminate among employees on grounds of race, colour, social standing, religion, political beliefs or affiliation with any political party, sex, marital status, family obligations, age or disability. The prohibition on discrimination amongst employees carrying out equal work in the granting of employment, determination of remuneration, increase in remuneration, provision of training, determination of conditions and manner of employment, dismissal from employment or the resolution of other employment-related matters is provided in the Employment Act.
The burden of proof is on the employer to show that there is no discrimination, or that any discrimination is based on a justifiable inherent requirement of the specific job.
However, claims may not be brought for preferential hiring of Maldivians over those of different nationalities.
Claims for Anti-discrimination
Employees may file a claim in the Employment Tribunal on the grounds that the rights conferred to them under the basic principles in the Employment Act have been affected.
Damages and Relief
The Tribunal has the power to issue orders such as:
The Employment Tribunal (established by the Employment Act in 2008) and, to some extent, the Labour Relations Authority are specialised forums for the resolution of employment matters.
It is possible to bring class action claims. An employer or the employee may be self-represented, or represented by a representative, or by an attorney.
Arbitration is not possible for the resolution of an employment dispute.
As per the Employment Tribunal Regulation 2015, the costs (including attorney’s fees) associated with a case (for the claimant and respondent) are not awarded regardless of the outcome. However, a party may be able to claim legal fees and costs (incurred reasonably) at the appellate court level if the employment agreement expressly provides for it.
1. Redundancies and Remedies for Unjustified Dismissal – Developments in the Past Year in the Maldives
The past year has seen significant developments in employment law in the Maldives. In particular, developments in the area of redundancy and the remedies for unfair dismissal. This has partly been driven by the need to update what was perceived as outdated legislation, particularly given the continued impact of the COVID-19 pandemic and the appointment of a new Supreme Court bench. Unlike the previous bench, the newly appointed Supreme Court justices relied more on Constitutional provisions to consider the following:
These instruments were considered to interpret rights under the Constitution. They were used as gateways to consider relevant precedents from advanced jurisdictions. These considerations, together with the amendments to the employment-related laws, form the fundamental basis for substantial developments in employment law over the past year.
One ought not to understate the increasing effects of the COVID-19 pandemic in the Maldives, which has greatly influenced developments in employment law. The Maldives, much like the rest of the world, has been trying to keep heads above the water through waves of COVID-19 infections and variants over the past year.
The Maldives’ economy is predominantly dependent upon the tourism industry. This together with the construction industry are the two largest employers in the Maldives and forms approximately a third of the employed population. The COVID-19 pandemic reached the Maldivian shores in early 2020. This prompted the government of the Maldives to declare a State of Medical Emergency in March 2020. One of the first steps taken was to close the borders for tourists, bringing the largest industry in the Maldives to a standstill. This had a ripple effect on the Maldivian economy and much like the rest of the world, Maldivian employers were forced to consider alternative arrangements for their employees or consider wide-scale redundancies. The newly elected Parliament and government, which had included as part of its election manifesto promises of updating employment law, were no longer able to delay the impending revisions to employment law; in particular, the codification of redundancy as a justified cause for dismissal. This chapter will consider two notable trends and developments in employment law in the Maldives, which are:
1.1 Codification of redundancy
The first time the Maldives produced legislation regarding an employer’s right to dismiss employees for economic and/or operational reasons was passed through two separate pieces of legislation, both enacted on the same day – the 6th Amendment to the Employment Act and the Public Health Emergency Act.
The Public Health Emergency Act states that an employer may terminate an employee due to the economic hardship faced by the employer as a result of COVID-19. The amendment to the Employment Act also codified an employer’s right to terminate an employee due to economic and/or operational reasons of the employer in general, without the restriction of economic hardship resulting from COVID-19. The amendment to the Employment Act provides much-needed clarity to an area of law that was previously guided through rules as established by the courts. There is, however, some unfortunate and, one might consider, unintentional beguiling of the position through the Public Health Emergency Act. There seems to be an unclear nexus between redundancies for economic reasons under the Employment Act and redundancies under the Public Health Emergency Act, which can also be due to COVID-19-related economic reasons. Given that the Employment Act does not carve out COVID-19-related redundancies, it is yet to be ascertained whether there will be any distinction drawn by the courts as to termination under each of these pieces of legislation or whether they would be treated as complementary to one another. This is crucial, as the test under the Public Health Emergency Act is set at a higher threshold than the test under the Employment Act.
1.1.1 Situation of redundancy
The 6th amendment to the Employment Act identified three situations of redundancy where an employer may lawfully terminate an employee. In order, therefore, to establish substantive fairness prior to dismissal of an employee, it is important to ascertain whether a situation of redundancy is due to a situation considered in the Employment Act. Subsidiary legislation under the Employment Act (following the amendment to the Employment Act in September 2020) was passed on 9 May 2021 (the “Employment Regulation”). The Employment Regulation has further defined these situations of redundancies and provided guidelines for interpreting each of these circumstances, as follows.
220.127.116.11 A service or business of the employer is discontinued
Where an employer’s service or business is discontinued, an employee could be made redundant if their employment is:
A service or business would not be considered as one that had been “discontinued” if an employer resumes the services/business or rehires for the same position within 12 months from the date of a termination.
18.104.22.168 Restructure of the employer’s operations
In order for a position removed from the organisational structure to be deemed redundant under a restructuring, that position, or the function carried out by the position, shall not be reintroduced for a minimum of 12 months. The emphasis is on the actual function of the position as opposed to the mere title, as due consideration would be given to the duties and responsibilities of the position, if any claim of unfair dismissal is raised.
22.214.171.124 A position is removed from the organisation due to worsening of an employer’s financial situation
This arises when an employer is faced with a reduction in revenue for a period of no less than six months or when the employer predicts that its revenue would be negatively affected for a period no less than six months into the future. It is the responsibility of the employer to demonstrate the worsening of the employer’s financial position in accordance with this requirement.
The Public Health Emergency Act adds an additional requirement in relation to COVID-19-related effects on revenue. Under the Public Health Emergency Act, an employer must additionally demonstrate that the employer’s revenue was now insufficient to renumerate employees at the same level that they were prior to the deteriorated financial situation caused by COVID-19.
1.1.2 Good faith
The amendment to the Employment Act also introduced the statutory obligation to demonstrate good faith in an employer’s decision to dismiss an employee on grounds of redundancy. While the courts have previously acknowledged the importance of good faith to demonstrate procedural fairness, this was the first time the obligation was codified under the employment legislation. There are opportunities for this statutory obligation to be extended to cover not only dismissals for redundancy, but other forms of dismissals. This introduction has vast potential and could be an interesting area of growth in the future.
1.1.3 Procedural fairness
The Employment Regulation requires the employer to communicate the following details to all employees prior to dismissal of an employee on grounds of redundancy. This requirement is a direct codification of the rules as set out by the courts in the previous judgments on redundancy.
126.96.36.199 Reason for redundancy
The regulation requires the employer to identify the actual situation that is the cause of redundancy in accordance with the law.
188.8.131.52 Steps to avoid redundancy
If the employer has taken steps to avoid redundancy, the employer is required to communicate this to the employee. It is notable that while the amendment to the Employment Act does not create a statutory obligation for the employer to take steps to avoid redundancy, the Employment Regulation identifies the following as steps that should be taken to avoid redundancies:
184.108.40.206 Selection criteria
One of the fundamental principles of employment is non-discrimination and therefore it is important for the employer to demonstrate that the employee or group of employees that are being dismissed on grounds of redundancy were not targeted for termination. In considering the criteria, the Employment Regulation requires employers to at least consider the following:
The Employment Act guarantees employment security by prohibiting the termination of employees without cause. The amendments to the Employment Act and the Public Health Emergency Act have both recognised redundancy as a justified cause for termination of employment. The Act still requires the employer to specify the justification and to provide details of why the employee was selected prior to termination on grounds of redundancy.
1.1.4 Termination notice
In addition to providing employment protection, in all instances except for termination for gross misconduct (which could be done summarily), an employer is required to provide an employee with notice prior to termination of employment. In the past, courts have required minimum notice periods, as per the Employment Act, to be provided to an employee prior to redundancy. The notice period varied from two weeks’ notice to two months’ notice depending on the duration of employment.
When the COVID-19 pandemic caused widespread redundancies, there was a general acceptance within the economy that the previously enforced notice periods were insufficient in context. As a result, the amendment to the Employment Act extended the minimum period of notice prior to redundancy, as follows:
It is notable that the minimum period of notice was legislated under the amendment to the Employment Act as opposed to the Public Health Emergency Act. This is relevant because, unlike the amendment to the Employment Act, the Public Health Emergency Act was enacted in September 2020 to apply retroactively from the date on which the Public Health Emergency was declared in March 2020. Therefore, when the redundancy notice period came into effect in September 2020 under the amendment to the Employment Act, the vast majority of employers had already implemented their redundancy plans and therefore it is unclear how many actually benefited from the increased notice period under the amendment to the Employment Act. Nevertheless, it is an important legislative amendment that provides more clarity and holds employers accountable, as well as providing a degree of employment security and protection to employees.
While there have not been any significant decisions that have interpreted the new pieces of legislation, it has generally been accepted that the legislation is more of a codification of existing rules in general, while providing more specific timelines and notice periods that are more compliant with the current employment and social environment in the Maldives.
1.2 Remedies for unfair dismissal
The principal remedies for unfair dismissal are stated in the Employment Act of the Maldives. The statutory remedies are:
The Employment Act directs the Employment Tribunal (a specialised first-instance dispute resolution forum created under the Employment Act) to first consider the remedy of reinstatement or re-engagement. Consequently, the most commonly awarded remedy is reinstatement and the dismissal to be struck out from the employee’s record. The effect was that employers were ordered to reinstate an employee and provide back pay for that duration, which in some cases was up to eight or ten years from the time of employment termination. The Act does not prohibit the parties from agreeing (in the employment agreement) on additional remedies or remedies that are more favourable to the employee.
Over the past year the Supreme Court has considered the practicality and the extent to which previously established rules regarding remedies for unjustified dismissal uphold the principles of natural justice. The Supreme Court’s findings and rulings relating to remedies for unjustified dismissal are discussed below.
An order for reinstatement requires the employer to give back the employee their employment on the same terms and conditions and without the loss of continuity of employment.
220.127.116.11 Factors affecting reinstatement
MACL v Jabir Abdul Rahman is the leading authority on reinstatement. In this case, the Supreme Court noted that reinstatement is an equitable remedy (similar to specific performance), and gave an indicative list of circumstances that may prevent reinstatement, and a list of factors according to which an order for reinstatement is justifiable.
Circumstances that may inhibit reinstatement are:
Circumstances where reinstatement is justifiable are:
The Supreme Court further elaborated that reinstatement is not an appropriate remedy if:
Following the decision in MACL v Jabir Abdul Rahman Abdulla, the Supreme Court decided reinstatement is not a suitable remedy in the case of Abdulla Jamiu v State, where 11 years elapsed between the date of dismissal and the final verdict.
In contrast, in Abdul Muizzu Musthafa v State, the Supreme Court of the Maldives decided that termination was unfair and ordered reinstatement to the same job despite the fact that seven and half years had passed between the date of termination and the final decision on appeal.
An order for re-engagement requires the employer to give the employee a job comparable to their job, or any other reasonable job, on terms and conditions stated in the tribunal order, or on terms and conditions agreeable to the employee and the employee. The commencement date of such re-engagement is the date stated in the order.
1.2.3 Back pay
Previously, in cases where the tribunal ordered reinstatement or re-engagement, the tribunal ordered the employer to pay the salary and allowances from the date of dismissal to the date of reinstatement/re-engagement. In some cases, the tribunal orders back pay from the date of dismissal to the date the tribunal order is made. It is not entirely clear as to the basis or the criteria based on which the tribunal orders the payment of salary and compensation up to the date of reinstatement in some cases and up to the date of the tribunal order in other cases. The award is usually limited to contractual pay and benefits.
The Supreme Court justices have, in some cases, identified this inconsistency and recognised that the result may, at times, be considered as unjustified enrichment. This may be a consideration the courts have taken in limiting the back pay to the time of the tribunal order as opposed to the date of reinstatement in certain cases.
The Employment Act defines a compensation award as "such amount as the tribunal considers just and equitable in the circumstances". The tribunal must consider the employee's loss caused by the employer's action and the contributory factors, if any, of the employee. The award is usually limited to contractual pay and benefits.
18.104.22.168 Compensatory award
From the enactment of the Employment Act and the establishment of the Employment Tribunal in 2008 until the recent Supreme Court decision in Hussain Nazeef v Civil Service Commission, the award consisted of back pay from the date of dismissal to the date of reinstatement, or up to the date of the award.
In Hussain Nazeef v Civil Service Commission, the Supreme Court decided, breaking new ground, that the employee may claim additional compensation where the actions of the employer caused loss of reputation (stigma), and as a result they were unable to find other employment.
The aim of the compensatory award is to compensate the employee for any loss of employment earnings and other direct losses as a result of the employer’s actions.
There have been several cases where the Supreme Court has suggested that a separate claim for compensatory award may be filed by the parties. This may be an interesting new change and we may in the future see more claims being submitted with more emphasis on the compensatory damages resulting from an unjustified dismissal.
22.214.171.124 Factors to consider in determining compensation
In Abdul Muizzu Musthafa v State, as discussed above, the Supreme Court decided to reinstate the employee, but refused to limit the amount of compensation to 12 months’ salary and allowance as submitted by the respondent (the State). The court took the view that it may not limit the compensation to a defined duration, or set a cap on the compensation on the basis that the Employment Act has not set such a limit on the amount of compensation.
In this case, the Chief Justice considered the position of law in other democratic countries in deciding the limitation of compensation. The court recognised the importance of statutory intervention in this area of law, making particular reference to the position in English law and Australian law. The factors considered in determining compensation by the justice in this case were to uphold principles of natural justice while ensuring there is no unjust enrichment.
Further, in this case, the Supreme Court found that the employee is entitled to compensation, and he may file a new case in the appropriate court, and gave the following factors to consider in determining compensation:
1.2.5 Duty to mitigate loss
In Maldives Airports Company Limited v Ashfag Waheed, the court decided that it is not mandatory to award back pay for the entire time from the date of dismissal to the date of reinstatement. The court further noted that the general contractual duty to mitigate loss is applicable to an employee who has been unfairly dismissed. Accordingly, in determining "the amount that the tribunal/court considers just and equitable in the circumstances", the court must consider employment/work after dismissal, if any, and the time it usually takes to find alternative employment, and to avoid unjust enrichment.
1.3 Concluding comments
Increasingly, the working population has become socially, economically and politically more influential, especially those working in the private sector and tourism industry.
Employment law reforms as a result became key presidential and parliamentarian pledges in their election manifestos – in particular, the promise of the introduction of a minimum wage in the Maldives. The pandemic and the subsequent waves of COVID-19 have meant that a significant part of the previous year has been focused on damage control and the amendment of Maldivian laws to adapt to this changing economic and social environment. The new bench of the Supreme Court has invested significant effort to clarify and redefine some of the fundamental principles relating to remedies granted for unjustified dismissal. While we wait to see how the lower courts would apply these new rules in deciding the employment disputes, these guidelines are certainly welcome to provide clarity to both employers and employees.
The past year has also seen the Maldives adapting to the pandemic-related “new normal”. Successful country-wide immunisation programmes and steps taken both privately and through government regulations to minimise the spread of COVID-19 will hopefully bring a level of stability to the employment market in the Maldives. As the country adapts to this “new normal”, perhaps over the next year, we will see new developments in other areas of employment law. The focus may once again be diverted away from redundancy and COVID-19-related matters to other areas of employment law, such as the much-anticipated introduction of a minimum wage in the Maldives.