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The Italian Constitutional Court declares the invalidity of the “arithmetic rule” to quantify indemnities against unlawful dismissals

In November 2018, the Italian Constitutional Court has declared the invalidity of the statutory "arithmetic rule" which was to be adopted by the Judge when quantifying the indemnity which certain categories of employees unlawfully dismissed are entitled to1.

The legal framework

Under Italian law, remedies against unlawful individual dismissals2 vary depending on the relevant employees' qualification3 and date of hiring4 as well as the size of the employer's business5.

As far as employees not holding the qualification of executive hired by "big" companies as of 7 March 2015 are concerned, Legislative Decree no. 23/2015 – as it was in force before the Italian Constitutional Court's ruling at issue – set forth that employees unlawfully dismissed, except for very limited cases6, were exclusively entitled to the payment of an indemnity amounting to 2 months of salary per each year of service, within a minimum and a maximum cap equal to – respectively – 6 and 36 months of salary7.

The Italian Constitutional Court's ruling

According to that declared by the Italian Constitutional Court, the above statutory "arithmetic rule" (2 months of salary per each year of service) is in breach of provisions under the Italian Constitution. Namely:

  • the equal treatment principle under article 3 of the Italian Constitution and the associated principles according to which same cases have to be given with the very same treatment while different cases need to receive different treatments. As the indemnity at stake has to be quantified only based on the relevant employee's company seniority, it results in the payment of the very same amount whenever affected employees have accrued the same company seniority, so that there is no room in its quantification for the circumstances actually characterizing each dismissal, such as the size of the employer's business, the overall number of employees in force at the latter or the parties' conditions and behaviours;
  • the reasonableness principle under the same article 3 of the Italian Constitution as, whenever the relevant employee has accrued a short company seniority, the actual amount of the indemnity is rather little and, therefore, it is as such as not to fully compensate damages actually suffered by him/her in connection with his/her dismissal;
  • here again, the reasonableness principle under the above article 3 of the Italian Constitution as, since those liabilities for the employer associated with unlawful dismissals may be quantified in advance and their amount is rather little when affected employees' company seniority is short, these do not actually prevent employers from serving unjustified dismissals.

According to the Italian Constitutional Court, due to reasons outlined above, the "arithmetic rule" at issue is also in breach of articles 4, paragraph 18, and 359 of the Italian Constitution, setting forth – respectively – citizens' right to work and the legal requirement for public bodies to protect its exercise, as well as articles 76 and 117 of the same Italian Constitution10, to the extent these render article 24 of the European Social Charter11 effective and binding within the territory of Italy.

After the ruling of the Italian Constitutional Court…

As the statutory "arithmetic rule" at issue has been declared invalid by the Italian Constitutional Court, this is no longer effective: therefore, the actual amount of indemnities against unlawful dismissals regarding non-executive employees hired as from 7 March 2015 is now established by the Judge within the above caps (6-36 months of salary), thus taking into account general criteria provided for by Italian law, such as the relevant employee's company seniority, the size of the employer's business, the overall number of employees with whom the latter is staffed as well as conditions and behaviours of both the employer and the employee12.


  1. No. 194/2018, issued on 8 November 2018.
  2. Individual dismissals qualify as unlawful whenever they do not rely a just cause (which is a breach by the employee whose seriousness prevents the continuation, even on a temporary basis, of the employment relationship), subjective justified grounds (which are a less serious breach by the employee) or objective justified grounds (which relate to the production, the work organization or its regular operation; namely, individual redundancies) or in the event they are served in breach of the statutory notification procedure set forth under article 7 of Law no. 300/1970 (the so-called "Workers' Statute") and article 7 of Law no. 604/1966.
  3. Employees classified as middle-manager ("quadro"), white-collar or blue-collar are entitled to those protections established by Italian law: namely, depending on their date of hiring and the size of the employer's business, the ones established by article 18 of Law no. 300/1970 (the so-called "Workers' Statute") or articles 3, 4 and 9 of Legislative Decree no. 23/2015 or article 8 of Law no. 604/1966. Otherwise, Italian law does not entitle executive status employees ("dirigenti") to any remedies if their dismissal is found to be unlawful. These are established by national collective bargaining agreements applicable to the employment relationships of such category of employees and are represented by an indemnity whose amount ranges depending on the executive's company seniority.
  4. Remedies to which employees hired before 7 March 2015 are entitled diverge from those which apply to employees engaged as of said date, as follows.
    Middle-managers ("quadri"), white-collars or blue-collars hired before 7 March 2015:
    • reinstatement and payment of an indemnity whose amount does not exceed 12 months of salary whenever the employee's misconduct did not occur or should have entailed a disciplinary sanction other than the employee's dismissal as per the applicable national collective bargaining agreement or the individual redundancy clearly turns out not to have occurred;
    • payment of an indemnity whose amount is in the range between 12 and 24 months of salary whenever the dismissal is deemed unlawful due to reasons other than those above;
    • payment of an indemnity whose amount is in the range between 6 and 12 months of salary in case of breach by the employer of the statutory notification procedure.
  5. Middle-managers ("quadri"), white-collars or blue-collars hired as from 7 March 2015:
    • reinstatement and payment of an indemnity not exceeding 12 months of salary whenever it is directly demonstrated that the misconduct grounding the disciplinary dismissal did not occur;
    • payment of an indemnity whose amount is in the range between 6 and 36 months of salary whenever the dismissal is deemed unlawful due to reasons other than those above;
    • payment of an indemnity equal to 1 month of salary per each year of service, within a minimum and a maximum cap of - respectively - 2 and 12 months of salary, in case of breach by the employer of the statutory notification procedure
  6. Different regulations apply to "big" companies, namely those which employ more than 15 employees within the same business unit/municipality or are staffed with overall 61 or more employees in Italy, and "small" companies, these being the ones which do not meet the above size requirements.
    In particular, employees in force at "big" companies are entitled to those protections outlined under footnote (4) above, while the ones employed by "small" companies are to be granted with an indemnity whose amount - depending on their date of hiring and the seriousness of the breach by the employer - is in the range between 1 and 6 months of salary (this is increased up to 14 months for employees having accrued a rather long company seniority).
  7. Among others, dismissals which are orally served, those relying on discriminatory reasons, the ones served in breach of the relevant statutory notification procedure, disciplinary dismissals whereby the breach by the employee is directly demonstrated not to have taken place, etc.
  8. Both such caps have been recently increased pursuant to Law Decree no. 87/2018, converted into law by Law no. 96/2018: before such Law Decree came into force, they were equal to - respectively - 4 and 24 months of salary.
  9. The above article 4, paragraph 1, of the Italian Constitution sets forth that «the Republic of Italy recognises the right of all citizens to work and promotes those conditions which render this right effective».
  10. According to article 35 of the Italian Constitution, «the Republic of Italy protects work in all its forms and practices (…)».
  11. These provide for that «the exercise of the legislative function may not be delegated to the Government unless principles and criteria have been established and then only for a limited time and for specified purposes» (article 76) and that «legislative powers shall be vested in the State and the Regions in compliance with the Constitution and with the constraints deriving from EU legislation and international obligations» (article 117).
  12. Under article 24 of the European Social Charter, «all workers have the right to protection in cases of termination of employment».
  13. These are set forth by article 18 of Law no. 300/1970 (the so-called "Workers' Statute") and article 8 of Law no. 604/1966.