In the third of our international monthly series of articles by guest lawyers, Sharon Reilly of LABLAW, looks at Italy’s unfair dismissal protections.
International Series #3 – The Italian Job: Unfair dismissal protections from an Italian perspective
Italian employees enjoy a reasonably high level of protection compared to some of their European counterparts. Employers cannot dismiss at will: the circumstances in which an employee can be dismissed are clearly defined by law, as are the corresponding remedies for unfair dismissal. It should be borne in mind that for the purposes of this article we are talking about companies with more than 15 employees in a single work unit or more than 60 employees nationally.
In Italy there are three recognised grounds for dismissal:
- just cause: gross misconduct that strikes at the heart of the fiduciary nature of the relationship and calls for immediate termination of the employment.
- justifiable subjective reason: where the employee has breached his/her contractual or legal obligations.
- justifiable objective reason: where the employer considers it necessary to reorganize the company in order to make it more productive and in doing so abolishes the position, and has no equivalent job to offer the worker.
Notice and Severance
In the first case, the dismissal is served with immediate effect, without notice, whereas in the second and third cases notice is required, or payment in lieu thereof. It is important to note that regardless of the grounds of dismissal and whether or not the dismissal is found to be fair, the employee is entitled by law to the following payments:
- Severance pay: TFR (trattamento di fine rapporto). This is a sum accrued in the company’s balance sheet, that has been deducted from the employee’s pay packet (a type of enforced saving and a throw-back to the time of Mussolini), which amount is equal to the sum of each annual salary, divided by 13.5%, and is index-linked.
- Pro rata amount of the additional 13th & 14th monthly payments of salary, if any, that the employee received during employment.
- Payment in lieu of unused holidays and leave.
Historically the sole remedy for unfair dismissal was reinstatement plus damages equal to full pay from the date of dismissal to the date of reinstatement (minus any income earned during that period, arising from alternative employment).
The long awaited and much discussed employment law reforms came into force on 18th July 2012 (the so-called “Fornero Reform“) and as a result reinstatement is no longer the one and only remedy. Damages have become the more usual remedy, ranging from between 12 and 24 months’ salary and in some particular cases between 6 and 12 months. Reinstatement has not altogether disappeared though, but is reserved for the more serious cases: i) where the dismissal is found to be discriminatory or ii) where the reason given for the dismissal is shown not to have existed. In the former the level of damages is equal to full pay as described above, whereas in the latter the damages are limited to 12 months’ salary.
The employee can always waive the right to be reinstated in return for 15 months’ salary; as was the case pre-reform.
There are specific categories of protected employees such as: pregnant women, the disabled, new mothers and union representatives.
In the case of unfair dismissal by a company with less than 15 employees, the sole remedy is payment of damages between 2.5 and 6 months’ salary, up to a maximum of 10 months in some particular cases (except as regards discrimination, where reinstatement is still the remedy).
A word of advice for companies doing business in Italy: find trusted advisers offering legal and business solutions which steer you safely through the labyrinth of Italian employment regulations.
For more information on employment law issues in Italy, Sharon Reilly can be contacted at email@example.com. You can also visit the LABLAW website www.lablaw.com