Supreme Court: Indication of selection criteria is fundamental to the lawfulness of collective dismissals

With decision No. 9800 of March 25, 2022, the Italian Supreme Court ruled that if the communication referred to in Art. 4, par. 9, Law No. 223/1991 does not correctly indicate the modality for applying the criteria for choosing workers subject to a collective dismissal procedure, the dismissal procedure is unlawful and, consequently, the dismissals are considered null.

Collective dismissals at a glance

Under Italian law, a collective dismissal is defined as a dismissal by a company staffed by more than 15 employees, resulting in “a reduction or change in activities or work” and involving at least five employees in the same production unit or in different production units within the same province (including executives) within a time period of 120 days.

In order to implement a collective dismissal process lawfully, the employer is required to comply with the collective dismissal procedure established by Law 223/1991, which contains obligations to inform and consult any pre-existing internal work council representing employees. If there are no internal trade union representatives, the local sections of the national trade unions that executed the national collective bargaining agreement applied by the company should be involved.

The employer shall notify them in advance of certain specific information, such as the reasons for laying off employees; the technical, organizational, or productive reasons preventing adoption of measures other than dismissal; the number, positions, and professional profiles of the laid-off employees, as well as of the whole workforce; the timetable for the plan; any measures planned to manage the consequences of the dismissals; and so on.

Within seven days of receipt of such notice, the work councils and/or trade unions may ask the employer to engage in joint examination of the layoff plan. When that process has been completed, regardless of whether an agreement has been reached or not, the employer can proceed with the dismissals.

However, the employer is not entitled to select employees to be dismissed at its discretion upon conclusion of the procedure. Indeed, Italian law provides certain mandatory selection criteria to be jointly applied by the employer unless alternative criteria (e.g., voluntary termination upon receipt of a financial incentive to leave) have been agreed upon with unions:

  1. length of service at the company (last in first out);
  2. family responsibilities;
  3. technical, production, and organizational needs.

Pursuant to Art. 4, par. 9, Law 223/1991, when communicating the dismissal, the employer must specify the modalities used to apply these selection criteria.

The decision of the Court of Appeals

According to the Court of Appeals (in overturning the lower court’s decision), the collective dismissal in question was affected by a mere formal violation consisting of the failure to indicate—in the notice to employees required under Law No. 223 of 1991, Art. 4, paragraph 9—the concrete scores attributed to each employee and the factual data relating to family responsibilities, the abstract scores provided in relation to each criterion, and the data relating to length of service of each employee and of the employees to be dismissed. As a consequence, the court declared the employment relationships terminated but ordered the company to pay each employee compensation equal to 12 months’ salary (protection provided by Article 18, par. 7 of the Workers’ Statute).

Six employees filed an appeal seeking to overturn the decision.

The Supreme Court decision

According to the Supreme Court, the fact that the notice pursuant to Art. 4, par. 9, Law No. 223/91 failed to specify how the criteria for choosing the employees to be dismissed were applied is not to be considered a mere formal procedural irregularity but constitutes an effective violation of the selection criteria.

Indeed, due to the employer’s failure, employees are unable to understand why they were dismissed instead of other colleagues, which in turn makes it difficult for them to exercise their right to challenge the dismissal.

The court held that in the face of said unlawfulness, the only choice was to annul the collective dismissal and consequently order the employer, pursuant to Art. 18, paragraph 4 of the Workers’ Statute, to reinstate the employees in their same positions and to pay compensation not to exceed 12 months’ salary.

This is because the notice referred to in Law No. 223 of 1991, Art. 4, paragraph 9, requires the methods with which the criteria for choosing the employees to be dismissed have been applied to be indicated “in a timely manner.” This is designed to allow the employees concerned, the trade unions, and the relevant administrative bodies to ascertain whether the action was correct and in compliance with the agreements reached. The notice in question also must state the reasons for termination—this is so that an employer may not ex post in court postulate application of methods that differ from those provided in the aforementioned communication.

To this end, therefore, and to allow the necessary control (both at the time and later), both the criteria and the factual assumptions on the basis of which the criteria were applied must be included in the communication.

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