Michele
Bignami guides us through the steps required for lawful dismissal under Italian
law, and warns of the financial penalties that may result if the correct
procedures are not followed, especially where a company dismisses a senior
executive
Legal requirements for the legitimate dismissal of a
single employee
The basic
principle is that the termination is valid and lawful only in the following
three cases.
Giusta
causa (cause)
The
employer may dismiss immediately without notice upon the occurrence of an event
that “does not allow the continuation, even on a temporary basis, of the
relationship” (Article 2119 Italian Civil Code).
It is
generally accepted that termination for cause may occur where the employee’s
actions are so serious that they “undermine the very root of the fiduciary
relationship between the parties”. It has been held that there was cause when
the employee committed acts giving rise to criminal liability such as theft or
misuse of assets, violent behaviour, serious damage to the employer’s property,
disclosure of trade secrets or unauthorised information and dishonesty.
How the
court will evaluate the seriousness of the employee’s actions depends partly on
the employee’s status – the higher his status, the higher the level of trust
his employer may expect. The inverse may also be true. Workers who stole
company assets were held not to have been legitimately dismissed because of
their low status within the company and low value of the assets stolen.
For termination
for cause to be lawful the following disciplinary procedure must be followed:
·
A
formal notice to the employee setting out the actions giving rise to the
termination for cause,
·
The
right of the employee to make written submissions.
Giusificato motivo soggettivo
(subjective
justified reason)
The first
part of Art 3 L 15.7.1966 states there
is termination with notice for a subjective justified reason where “there is a
serious breach of contract by the employee”. Literally, there might be little
difference between this and termination for cause.
The current
position – which leaves much to be desired – is that termination for a
subjective justified reason will be used where the employee has committed a
serious breach of contract but not one as serious as in termination for cause.
Since in
such cases the employer must give notice or pay an indemnity in lieu of notice,
often the parties negotiate to treat a termination for cause as one for a
subjective justified reason.
Giustificato motivo oggettivo
(objective
justified reason)
Under the
second part of Art 3 L 15.7.1966, an employer can terminate employment with
notice for an objective justified reason where the termination is based on
“reasons concerning the activity of the business, the organisation of the work
and its regular functioning”.
The old-fashioned,
bureaucratic language of the legislation has been clarified by case law. Here,
the employee’s behaviour is not considered, the focus is on the need to change
the organisation. It is generally accepted that dismissal is legitimate when
the employer has to make the position redundant. This may be due to
cost-cutting, improving efficiency or
the introduction of labour-saving systems.
The
employer must show that:
·
The
need for redundancy was objective and real, directly connected to economic
factors or will allow the employer to save money or that it is the result of
re-organisation in the interests of efficiency.
·
The
redundant employee could not be redeployed because no suitable alternative
position was available. Where there are more than five redundancies for reasons
connected with the organisation of the employer during a six-month period, the
procedure to follow is contained in the regulations governing collective
redundancies.
Legal consequences of an unlawful dismissal
Employers
with up to 15 employees (except in rare cases) are under no obligation to
re-employ a staff member whose employment has been unlawfully terminated. The
usual sanction is the payment of damages equivalent to between two-and-a-half
and six months’ salary.
Employers
of more than 15 people are treated differently. Where a termination is held
unlawful the employee has the right to be re-employed as from the date of the
unlawful termination and to receive salary as if the termination had never
taken place.
In addition
to lost salary, the employee (but not the employer) may convert the right to be
re-employed into a fixed payment equal to 15 months’ salary. The payment of
lost salary will include the whole period during which the employee remained
away from work waiting for the matter to be decided by the courts.
Dirigenti
(senior
executives)
A dirigente
does not usually have the right to be re-employed. However, severe financial
consequences can follow the unlawful dismissal of a dirigente. The collective
bargaining agreements state that if the
termination is unlawful, the employer must pay a “supplementary indemnity
payment”. The minimum is a sum equivalent to payment in lieu of notice, the
maximum is equivalent to 18 months’ salary. An extra sum (equivalent to four to
nine months’ salary) is payable if the dirigente is 49 years old or older.
The common
criteria used to decide the amount payable are:
·
The
extent to which the termination was unfair;
·
The
reasons for termination put forward by the employer. If allegations of criminal
acts or serious breaches of contract are subsequently found to be untrue, this
may lead to maximum damages being awarded;
·
Any
falsity of the allegations under the second point;
·
The
seniority of the dirigente with the employer. Often this is used to penalise
employers who unlawfully dismiss a dirigente who devoted a considerable period
of his professional life to the company.
Procedure for challenging the dismissal of a dirigente
To
challenge the termination, the dirigente may bring his case before an
arbitration court or the Labour Court.
Arbitration
The
employer may refuse to accept the jurisdiction of the arbitration court, so the
case must be taken before the Labour Court. If not, the arbitration procedure
is used. This is normally quicker than the Labour Court, although unpopular
because of the arbitration panel’s tendency to seek half-way solutions that
usually result in considerable pay-outs by the employer.
As an
incentive to accept arbitration, collective bargaining agreements for dirigenti
of commercial enterprises provide that, if the employer refuses arbitration and
the Labour Court finds there has been an unlawful dismissal, the Labour Court
must apply the maximum supplementary indemnity payment. This does not apply to
collective bargaining agreements of dirigenti of industrial enterprises.
Another
reason why arbitration is not always popular is that the panel lacks
jurisdiction to hear matters other than unlawful dismissal. Often the dirigente
may want other ancillary issues adjudicated (eg, re-calculation of salary,
appraisal of fringe benefits, bonus entitlement).
Labour Court
To bring
his case before the Labour Court, the dirigente must file a mandatory
preliminary application before the Settlement Commission of the Labour Office
whereby he formally requires the commission to convince the parties to try to
find an out-of-court settlement with the employer. If no settlement is reached
or the Settlement Commission does not fix a hearing within 60 days, the
dirigente may file a brief before the Labour Court. The court then appoints a
judge who fixes the date of the first hearing.
At this
hearing, the judge seeks to convince the parties to find a settlement. If one
is not reached, the judge hears the parties and then fixes one or more hearings
to hear witnesses. Thereafter he invites the attorneys’ closing submissions. An
average trial takes a year in Milan, but normally, the others courts are slower
– in Naples, an average case lasts between five and seven years.
Other employees
The
procedure is the same as that outlined for dirigenti, although some alternative
arbitration procedures will shortly apply.
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·
Michele
Bignami is senior partner at Calabi, Bignami & Mainardi, an Italian law
firm
·
Clare
Murray is an employment law partner at foxwilliams and editor of hrlaw.co.uk
