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Supreme Court decision on annulment for fraud of settlement agreements

  • Italy
  • Employment law

26-09-2017

By way of judgment no. 8260 of 30 March 2017, the Supreme Court delivered a decision on the subject of annulment for fraud of settlement agreements executed before the Unions or the Local Labor Offices between the employer and his employees.

The case in question concerned the validity of a settlement agreement, executed before the Unions at the end of a procedure of collective dismissal, whereby one of the involved employees formally accepted the termination of his employment relationship, with the belief that his job position was redundant. After the conclusion of the said agreement, however, the employer hired another employee to replace the plaintiff thus performing the same duties and job position. Consequently, the former employee challenged the validity of the agreement before the Labor Court, asking for its annulment, claiming that his consent had been obtained with fraud, since he had not been informed that his job position was not actually redundant.

With the abovementioned judgment, the Supreme Court stated the principle whereby the behavior of the employer, which does not inform the counterpart of the circumstances which are relevant to him, could be considered as fraud, thus making the settlement agreement invalid.

The indiscriminate application of such principle could lead to the conclusion that any settlement agreement, in order to be valid, should be preceded by a complete, detailed and documented information to the employee, regarding all the circumstances related to the conclusion of the agreement. The rule in discussion is partially mitigated by the clarification that the reticence which determines the annulment of the settlement agreement shall be part of an overall conduct preordained to realize the deception and shall be assessed in relation to the circumstances of the concrete case. Thus, it is up to the Courts to apply such principle in a cautious manner, in order to avoid that in the future the silence of the employer could be methodically used to subvert the content of a settlement agreement.

Marcello Floris, Executive Partner (International)

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