Italian Constitutional Court: The indemnity in a case of unfair dismissal cannot be quantified based only on the employee’s seniority
23 July 2020

Thanks to Leandro Fulvi for collaborating on this article

On June 24, 2020, the Italian Constitutional Court once again stated its position on the Jobs Act (Legislative Decree no. 23/2015), confirming the general principle, established back in 2018, that the determination of a compensation indemnity in the event of unfair dismissal, due to formal and procedural nonfulfillment, cannot be based solely on years of service.

THE FIRST DECISION

As mentioned, in 2018 the Court declared unconstitutional the criteria for determining the amount of the compensation indemnity in cases of unfair dismissal, because the criteria were based solely on the seniority of employees, violating the principles of “reasonableness and equality”; additionally, they were deemed to be in conflict with the concept of “protection of work” as granted by articles 4 and 35 of the Italian Constitution.

In fact, according to the Court this method of calculation was too rigid, as it did not take into account the employee’s overall situation and conflated situations that were deeply different, thus contradicting the principle of equality.

Moreover, such an automatic mechanism would not be able to act as a deterrent to unfair dismissal and would actually make that option advantageous for employers due to the low amount of the indemnities involved.

THE RECENT DECISION

As regards the second decision, a few weeks ago the Constitutional Court extended the general principle of its first decision to cover cases of unfair dismissal due to formal and procedural nonfulfillment (e.g., failure to state reasons or infringement of disciplinary procedures). 

As a result, the rulings of the Constitutional Court are diametrically opposed to the purpose of the Jobs Act: this automatic mechanism was actually intended to make it easy for companies to predetermine the amount of compensation to be paid to an employee in the event of an hypothetical dismissal.

THE CURRENT SCENARIO

According to the rulings of the Constitutional Court, in order to calculate the exact amount of compensation, judges will have to determine the amount in a range between a minimum and a maximum limit set by law (i.e., from 6 to 36 months’ salary), assessing not only the years of service, which remain the starting-point, but also other elements, such as (i) the number of employees at the company, (ii) the size of the economic activity, and (iii) the behavior and conditions of the parties.

As one example, in light of the above the Labor Court of Rome recognized years of service as the starting point and ruled that an unlawfully dismissed employee should receive 12 months’ salary as an indemnity. That was calculated based on 8 months’ salary for years of service and 4 months’ salary based on additional elements, such as the number of employees and the behavior of the parties (Court of Rome, decision no. 2503 of May 19, 2020).

CONCLUSIONS

Notwithstanding the degree of uncertainty created by declaring unconstitutional the criteria introduced by law that were originally aimed at providing an objective and coherent way to calculate the amount of the indemnity due to an employee who has been unfairly dismissed, the decisions of the Italian Labor Courts appear balanced toward both parties, without any disproportionate terms, and also consistent with the decisions issued before the introduction of the above mentioned criteria.

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