Employee scam victim found to be unfairly dismissed

In a decision delivered on 8 June 2021, in the names AB vs Arkadia Marketing Limited, the Industrial Tribunal decided that an employee was unfairly dismissed when his employment was terminated for transferring funds based on instructions given in a spoof email.

The facts of the case were as follows: Mr AB, the plaintiff was employed as a financial controller with the defendant company, Arkadia Marketing Limited (the “Company”). The plaintiff had been employed on a fixed-term contract for a period of three years which commenced on 6 July 2015. The plaintiff claimed that he had not been given a handover and that there were no formal procedures in place. However, in practice, the plaintiff claimed there was a dual approval practice when it came to electronic payments. Shortly after a positive appraisal for his performance throughout the probationary period, the plaintiff received a phishing email from whom he believed to be the general manager of the Company. Pursuant to this email, the plaintiff was being requested to transfer an urgent payment of €45,000 within the day.  The plaintiff requested his colleagues to prepare the payment, which was approved by another colleague and himself.  The plaintiff claimed that his colleagues had seen the email allegedly sent by the general manager.

Two days after the transfer was made, the plaintiff received an email, pursuant to which he was informed the payment had not been received.  At that point, the plaintiff carried out the necessary checks and determined that the funds had been successfully transferred and that the general manager would receive the payment within a day or two.  Since the general manager was not in Malta at the time, the plaintiff called him to give him an update on the transfer. The plaintiff stated that when he called the general manager he was surprised and informed the plaintiff that he had not requested any payments to be made. Upon becoming aware that the request for payment was fraudulent, the plaintiff immediately reported it to the bank and requested its cancellation. He also filed a report with the police.

At that point, the plaintiff had also offered to cover the loss from his monthly salary if the bank was unsuccessful in recouping the payment. However, the defendant Company did not suffer any losses since the bank managed to cancel the transaction in a timely manner. On 25 August 2016, the plaintiff was terminated from his employment for authorising the indicated transfer of funds, which transfer had in fact been requested through a scam email. The Company stated that the plaintiff held a senior role within the Company structures and that his actions were to be considered grossly negligent and careless. The Company insisted that if it had not been for the bank which stopped the transfer, the Company would have been defrauded a substantial amount of money. With respect to the disciplinary proceedings, the Company noted that although the Company did not have a formal disciplinary procedure, the procedures were agreed upon with the plaintiff.

In considering whether the dismissal was unfair, the Industrial Tribunal noted that the plaintiff was working under pressure and that once he found out that he had been scammed, he had promptly taken all the necessary steps to remedy the situation. The Industrial Tribunal also noted that the Company had failed to implement any precautionary measures despite being made aware of the ‘sophisticated techniques’ being used in phishing emails. Therefore, notwithstanding the Company’s knowledge of such scams and the risks arising from them, the Company had not implemented adequate safeguards and consequently, the plaintiff fell victim of a scam. Moreover, the Industrial Tribunal also partially attributed fault to the plaintiff for having failed to perform adequate due diligence to confirm whether the email was fraudulent. In view of all this, the Industrial Tribunal decided that the plaintiff had been unfairly dismissed and went on to award the plaintiff compensation for the unfair dismissal.

It must be pointed out that, with respect to fixed-term contracts, the Employment and Industrial Relations Act (Chapter 452 of the Laws of Malta) specifically provides where a fixed-term contract of employment is terminated by the employer without good and sufficient cause before the term set out in the contract, the employer is to pay the employee a sum equivalent to one-half of the remaining wages. Although the Industrial Tribunal decided that the dismissal was an unfair one, and in spite of the provisions set out in the Employment and Industrial Relations Act (Chapter 452 of the Laws of Malta) on the sum to be awarded when a fixed-term contract is terminated before the term set out in the contract, the Industrial Tribunal awarded two-thirds of the compensation that had been requested by the plaintiff in order to reflect the plaintiff’s oversight in this case.  This decision has not been appealed.