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Global employment briefing: Italy, May 2015

  • Italy


    Significant changes to dismissals for just cause and objective reasons

    On 20 February 2014 a Decree was passed by the Italian Council of Ministers and is now in force: it contains provisions on open-ended employment contracts and is particularly focused on dismissal for just cause and justified reasons, together with formal and procedural defects. 

    Where dismissal for just cause or justified reasons is determined to be unfair, the judge declares the employment relationship terminated at the date of dismissal. The concepts of justified reasons and just cause, introduced by art. 3 of law no. 604 of 1966 and law no. 2119 of the Italian Civil Code, remain unaltered. However the number of cases of reinstatement for unfair dismissal are drastically reduced in favor of compensation.
    In the majority of cases the Decree in question states the employer’s obligation to pay compensation (not subject to social security contribution) amounting to two months’ gross salary for each year in service, comprising a minimum of four months and a maximum of twenty-four months’ salary.

    As a result, the judge’s discretion is severely limited, since the only parameter of reference is the length of service. Hence the purpose was to make the cost of unfair dismissal certain, circumventing the judge’s discretion, while reducing costs and amounts of compensation in the event of short length of service.

    Exclusively in cases of dismissal for a just cause and justified reason, where the nonexistence of grounds of the material fact alleged against the employee (in relation to whom the disproportion of the dismissal is not considered), is proven at trial, the judge declares the dismissal null and void and orders the employer to reinstate the employee and pay compensation for damages in the maximum amount of twelve months’ salary, plus social security contributions.

    The same Decree introduced also significant changes concerning dismissal for objective reasons.

    If the dismissal for objective reasons is unfair, the judge declares the employment relationship terminated at the date of dismissal and orders the employer to pay compensation, not subject to social security contributions, equal to two months’ gross salary for each year of service, in any event, in an amount not less than four and not exceeding twenty-four months’ salary. The new measure excludes the possibility of reinstatement following termination for objective reasons and excludes also the judge’s discretion to set the amount of compensation, that cannot be calculated according to the aforementioned parameters, but it is exclusively predetermined on the basis of the length of service of the dismissed employee. The Decree in question groups the regulations on collective dismissal together with individual dismissal for objective reasons. Hence, according to the new rules and regulations, in the case of dismissal of employees contracted after the coming into force of the Decree, in  case of breach of the procedure of information and consultation of the Trade Unions, or in the case of breach of the selection criteria, only the compensation described above, i.e. a minimum of four to a maximum of twenty-four months’ gross salary, shall apply.