All questions

Discontinuing employment

i Dismissal

Subject to limited exceptions, employees may only be dismissed with cause. This may consist of a just cause or of justified reasons for dismissal. Just cause arises if serious misconduct occurs, affecting the feasibility of the continuation of the employment relationship. When dismissed for just cause, the employee is not entitled to any notice period but retains the right to obtain other termination indemnities (i.e., compensation for termination, which is payable upon termination regardless of the reason of the termination; the pro rata amounts of the 13th and 14th month allowance; unused holiday and leave).

Justified reason arises if there is a serious breach by the employee of his or her contractual obligations (subjective justified reasons), such as failure to comply with the employer's instructions, repeated unjustified absence from work or, in the event of reorganisation (objective justified reasons), abolition of a job position arising out of a reorganisation (Article 2118 ICC). When dismissed for a justified reason, the employee is entitled to notice provided for in the applicable collective agreements or a payment in lieu in addition to the other termination indemnities. The employer must also consider redeployment before dismissal for a justified reason is implemented.

The Jobs Act Reform introduced a complex system in terms of legal consequences arising from unfair dismissal. This system has been modified following the implementation of the 2018 Reform. In particular, the consequences for the employer are different, depending on whether there are more than 15 employees per production unit (or more than 60 employees as a whole) and whether the dismissed employee was hired before, on or after 7 March 2015.

ii Dismissals based on discriminatory reasons or in breach of other mandatory provisions

Regardless of the hiring date and the number of employees, if the dismissal is based on discriminatory reasons, or is carried out in violation of certain mandatory provisions of law (e.g., the rules on parenthood) or is not implemented in writing, the employers shall be subject to reinstatement of the employee and payment of damages equal to the salary accrued from dismissal until reinstatement (a minimum of five months' salary).

iii Disciplinary dismissals

Regardless of the hiring date and provided that the employer is staffed with more than 15 employees, if the court ascertains that the disciplinary dismissal was based on conduct that did not actually occur, the employer shall be obliged to reinstate the employee and pay damages of up to 12 months' salary. With regard to employees hired before 7 March 2015, the aforesaid reinstatement protection also applies if the same conduct should have been sanctioned with a less serious penalty under the applicable collective agreement.

In any other cases where disciplinary dismissals are deemed unlawful (e.g., the judge determines that the employee's misconduct did not justify his or her dismissal), the employee is entitled to compensatory protection and no reinstatement is applicable. Compensatory damages vary depending upon the hiring date.

As mentioned in Section IV.i, under the Jobs Act Reform, with particular regard to employees hired on or after 7 March 2015, damages were linked to the employee's length of service – namely, two months' salary for each year of service (a minimum of four months' up to a maximum of 24 months' salary). However, under the 2018 Reform, the indemnity for unlawful dismissal ranges from a minimum of six months' salary to a maximum of 36 months' salary. Following Decision No. 194, rendered on 25 September 2018 by the Constitutional Court, in case of unfair dismissal, the indemnity shall be determined by equity, taking into account, in addition to the employee's length of service, the size of the company and the general behaviour and conditions of the parties. For employees hired before 7 March 2015, the compensatory damages range between 12 and 24 months' salary, and are assessed on the basis of judges' discretionary criteria.

iv Economic dismissals

In case of dismissal based on an economic reason, and provided that the employer is staffed with more than 15 employees, should the alleged economic reason be declared as clearly non-existent and if the employee was hired before 7 March 2015, the employer can be subject to reinstatement and payment of damages up to 12 months' salary. Otherwise, in the event that the court does not intend to apply the aforesaid sanctions, or the lack of the organisational or business reason is not straightforward, the employee will be entitled to damages only, ranging between 12 and 24 months' salary.

With respect to employees hired on or after 7 March 2015, no reinstatement protection applies and the employer can be subject to pay compensation in compliance with the criteria set forth by the 2018 Reform (see subsection iii).

If the employer employs 15 or fewer employees, the dismissed employee (for economic or disciplinary reasons) is not entitled to reinstatement, but is entitled to the payment of damages ranging between three and six months' salary.

In any case, employees cannot be dismissed while pregnant or for one year after giving birth. The same protection is afforded to the father in the event of the mother's death or disability or if he has been granted legal custody of the child. This protection is not afforded if the company is wound up.

The employee must challenge the dismissal within 60 days of the date of receipt of the written communication of termination and to file a claim with the competent employment tribunal within the following 180 days. For individual dismissals, an employer need not notify unions, nor is the submission of a social plan required.

Special rules apply to executives. While they are also not entitled to reinstatement in case of dismissal without cause, they are entitled to claim damages in addition to the notice period and termination indemnities, which varies depending on the length of service and the grounds for dismissal.

v Redundancies

Pursuant to Law No. 223/1991, if a dismissal plan concerns (1) at least five redundancies within 120 days, or (2) companies staffed with more than 15 employees, the employer must give prior notice to all relevant trade unions indicating the reasons for the proposed redundancies, the number of and description of the employees to be affected, and the date on which the envisaged dismissals will be effected. The unions may call for consultation with the employer within seven days from receipt of the notice to request a detailed explanation of the need for redundancies and to discuss possible alternative solutions.

If within 45 days of receipt of the notice an agreement with the unions is not reached, the local, regional or central labour office, as the case may be, will mediate for a further period of up to 30 days. These negotiations will consider:

  1. the positions to be made redundant;
  2. the possible relocation of employees to other business units;
  3. the possible redeployment of employees;
  4. the possibility of entering into a government-funded job saving scheme;
  5. the provision of an enhanced severance payment to mitigate the effect; and
  6. an application for other redundancy funds ('social shock absorbers').

Often, the enhanced severance payment referred to in point (e) is offered in exchange for the execution of a settlement agreement providing for the employees' waiver of any claims.

Law No. 223/1991 provides for mandatory selection criteria to be followed in choosing the employees to be made redundant (upon completion of the unions consultation procedure). Pursuant to Law No. 223/1991, the employer must consider, inter alia, the length of service (in the same company) of the concerned employees, their family responsibilities, and any other technical, production and organisational needs.

After the enactment of Law No. 161 of 30 October 2014, the rules provided for by Law No. 223/1991 also apply to executives whose contracts are terminated within a collective dismissal process, who therefore must be selected in accordance with the aforesaid social selection criteria. Also, it follows that the executives to be dismissed must be included in the five-redundancies threshold.