ITALY: An Introduction

Legal Discipline of Individual and Collective Dismissals Under the Italian Labour Law

According to the Italian Labour Law, a dismissal represents a unilateral act by which the employer informs the employee – in writing – about its intention to terminate an open-ended employment relationship, detailing the reasons for the dismissal and giving (except when a “just cause” of dismissal occurs) prior notice, the duration of which is determined by the applicable National Collective Bargaining Agreement (NCBA) .

Depending on the reasons on which the employer’s act is grounded, several circumstances and potential risks must be considered before serving a dismissal – the size of the company, the date of employment of the employee concerned, the relevant category and the number of employees to be dismissed, in which case a distinction must be made between individual and collective dismissals.

Individual dismissals 

Within the category of individual dismissals, a further distinction must be made between dismissals of non-executive employees and those of executives. 

Individual dismissal of non-executive employees

Generally speaking, pursuant to Italian law, the dismissal of an employee must be justified by:

• an “objective justified reason”, related to production, work organisation, or the proper functioning of a company;

• a “subjective justified reason”, which occurs in the case of a not-so-serious breach by the employee of their contractual obligations; or

• a “just cause”, which indicates any serious misconduct or breach that undermines the fiduciary relationship and renders the continuation of the employment relationship impossible.

From a procedural standpoint, only disciplinary dismissals must always be preceded by the completion of a preliminary procedure – regulated by Article 7 of the Worker Statute (Law No 300/1910) –by which the employer objects in writing to the employee regarding the misconduct discovered, allowing the latter to provide any justification before the dismissal or any alternative disciplinary measure is taken.

A dismissal for objective justified reasons only requires the initiation of a preliminary procedure if the employer has more than 15 employees and the dismissal concerns an employee hired before 7 March 2015 (the date on which the so-called “Jobs Act Reform” was enforced). This procedure, regulated by Article 7 of Law No 604/1966 and held at the local Labour Office, is aimed at facilitating an agreement between the parties, thereby preventing the dismissal from being challenged in court. Only if the negotiations over the settlement agreement fail, is the employer entitled to notify the dismissal.

Consequences in the case of unfair dismissal vary depending on the hiring date of the dismissed employees (ie, whether this is before or after 7 March 2015) and the number of employees hired by the employer (ie, more or less than 15 employees), as follows.

Employees hired on or after 7 March 2015 – if the dismissal is deemed unfair by the Labour Court, the employer is sentenced to grant the employee an indemnity, discretionally determined by the judge and based mainly on the length of service, the size of the business and the behaviour of the parties, and ranging:

• from six to 36 months’ salary in companies staffed with more than 15 employees; or 

• from three to six months’ salary in companies staffed with 15 employees or less.

Employees hired before 7 March 2015 – in this case, the consequences in case of unfair dismissal vary as follows:

• where the reasons for dismissal are considered unlawful, the employer would be sentenced to –

i) reinstate the employee, who can unilaterally elect to waive reinstatement, earning compensation in lieu equal to 15 monthly instalments;

ii) pay the employee an indemnity equal to the remuneration they would have accrued from the dismissal to the reinstatement (plus social security contributions thereon), not exceeding 12 months; or 

• should the dismissal be found unfair for other reasons, the employer would be sentenced to pay an indemnity over 12 to 24 monthly instalments discretionally determined by the judge and based on the same criteria described above.

Alternatively, with reference to companies staffed with 15 employees or less, in the case of unfair dismissal, employees are entitled to an indemnity ranging from 2.5–6 months’ salary, discretionally determined by the judge.

In any case, if it is ascertained that the dismissal is due to discriminatory, retaliatory or other circumstances expressly provided by law as a reason of nullity, the employer would be sentenced to reinstate the dismissed employee and grant the remuneration accrued from dismissal to reinstatement, or part thereof, in no less than five monthly instalments.

Individual dismissal of executives 

The dismissal of executives is subject to less stringent restrictions on the part of the NCBA than the dismissal of other employees (although the protection against discriminatory, retaliatory and null dismissals remains effective), allowing the implementation of the dismissal of executives for any reason related to the employer’s need to reorganise its production activities and/or its organisation, that does not result in an arbitrary decision by the employer.

In this respect, it is worth highlighting that whenever the dismissal of an executive is based on misconduct, the same prior objection procedure, provided for employees, must be carried out by the employer.

Consequences in the case of the unjustified dismissal of executives are provided by the relevant NCBA, which provides for the payment of an indemnity, the amount of which varies from a minimum of four and a maximum of 24 months’ salary depending on seniority in service. In some NCBAs, the extent of this indemnity is automatically increased, in relation to the age of the dismissed executive, from a minimum of four and a maximum of six additional months’ salary.

Collective dismissals 

The other category of dismissal provided for by Italian law is that of collective dismissals.

Pursuant to Article 24 of Law No 223/1991, a collective dismissal is a dismissal that a company – staffed with more than 15 employees – intends to carry out due to “a reduction or change in activities or work”, involving five or more employees in the same business unit, within a period of 120 days.

A collective dismissal can be lawfully implemented only once an appropriate procedure has been properly fulfilled in accordance with Articles 4 and 24 of Law No 223/1991.

This procedure starts with the employer submitting a written notice to the works councils, if any, or to the local trade unions and the labour authority to inform them of its intention to carry out a collective dismissal.

The procedure will have a maximum duration of 75 days (halved when there are less than ten employees involved) for a joint examination aimed at reaching an agreement with the work councils/trade unions.

Regardless of whether an agreement with the councils/unions has been reached, at the end of the procedure, the employer can dismiss the employees concerned within the term of 120 days from completion of the procedure.

Failing an agreement, the criteria to be applied for the identification of the employees to be dismissed are provided by Article 5, Law No 223/1991 and are family burdens, company seniority and technical, organisational and productive circumstances, to be considered jointly.

The consequences in the case of unlawful collective dismissal are the same as in the case of unlawful individual dismissal, except for those for executives for whom the protections provided by the NCBA would not apply. In the case of unfair collective dismissal, an executive would be awarded with an indemnity ranging from a minimum of 12 up to a maximum of 24 monthly instalments.