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Employment law

i Termination provisions

Executives can be dismissed for cause by their employers without any advance notice. An executive's dismissal may be deemed for cause in cases of particularly serious misconduct (i.e., violations of the employment contract or non-employment-related behaviours that result in a material breach of an executive's duties) that irreparably undermines an executive's fiduciary relationship with his or her employer.

Unless the termination is for cause, executives are entitled to be notified in advance of the termination or to an indemnity in lieu of advance notice. In these cases, the termination has to be justified (i.e., based on objective reasons relating to the employer's economic, organisational and production-related needs or for certain subjective reasons relating to an executive's performance or conduct). Executives are entitled to damages (but generally not to their reinstatement) if they are found to be terminated without such justification or without cause.

ii Severance payments

Italian executives are entitled to a statutory severance payment, which is due to all employees upon termination of their employment relationship, regardless of the reason for termination.

In addition to the statutory severance payment, Italian companies sometimes provide their top executives with additional severance payouts (e.g., golden parachutes), generally in cases of termination without cause (e.g., in cases of a good leaver termination). Such additional severance payouts are subject to the limitations provided for listed companies and banks (see Sections VII.ii and VIII).

iii Non-competition covenants and non-solicitation agreements

Pursuant to Article 2125 of the Civil Code (CC), non-competition covenants applicable to executives must, inter alia, provide a specific remuneration, only cover specific fields of activities and a well-specified geographical area, and not last longer than five years.

Non-solicitation agreements are usually included in top executives' agreements (or the settlement agreements following an executive's termination) and are generally enforceable under Italian rules.

iv Clawback provisions

Clawback provisions would be enforceable if agreed upon at the time of an award's grant or included in an award's terms and conditions. The clawback provisions' enforceability would be uncertain, however, if they were applied to existing arrangements.