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Unfair dismissal under Italian law: a unique dual-system

A series of legislative decrees entered into force in 2015 (the so called Jobs Act), has consistently modified the employment law discipline in Italy.

Among other novelties, a set of rules on unfair dismissal was introduced, aimed at reducing financial uncertainty arising from dismissals while maintaining a high-level protection of employees' rights.

The impact of the new legislation on unfair dismissal is however limited to employment agreements entered into from 7th March 2015. Earlier agreements are still governed by the older legal discipline (Section 18 of the Italian workers' charter, as amended in 2012).

As a result, Italian law currently provides for a dual-system of measures against unfair dismissal.

Common rules

Before filing a claim for unfair dismissal, an employee must challenge the fairness of the dismissal in writing within 60 days. Such employee must then file the claim before the Court within the following 180 days.

Unfair dismissal for employees hired after 7th March 2015

In case of unfair dismissal, the Court grants the employee a financial compensation according to the length of service (an amount equal to 2 monthly salaries for each year of service, with a minimum of 4 and a maximum of 24 monthly salaries).

In case of formal and procedural violations the compensation is reduced (1 monthly salary for each year of service, with a minimum of 2 and a maximum of 12 monthly salaries).

For employers with 15 or fewer employees in the place of employment or within the same municipality and 60 employees or fewer in Italy, the compensation applicable is halved and, in any case, cannot be higher than 6 monthly salaries.

The foremost feature of the Jobs Act's provisions is a sharp limit to reinstatement, which is possible only if the dismissal is deemed as having a discriminatory nature and when the law expressly provides for the nullity of the dismissal.

This also applies to the event of a dismissal based on the employee not being suitable for the job because of disability, deemed to be unfair.

For employers with more than 15 employees (either in the place of employment or within the same municipality) or with more than 60 employees in Italy, reinstatement is also possible in case of non-existence of the facts on which the dismissal is grounded.

As an alternative to reinstatement, the employee (not the employer) can opt for the payment of an amount equal to 15 monthly salaries as compensation.

In order to reduce disputes, the parties are encouraged to find a settlement agreement through tax exemption measures.

Unfair dismissal for employees hired before 7th March 2015

When the Court finds a dismissal on disciplinary or redundancy grounds or just cause to be unfair, the dismissal remains in place (termination of the employment relationship is confirmed) but compensation is awarded to the claimant (ranging from 12 to 24 monthly salaries).

In the event that the dismissal has grounds but is issued without an explanation of its grounds or in case of procedural violations, the Court will declare the contract terminated at the date of dismissal and order the employer to pay compensation ranging from 6 to 12 monthly salaries.

Only if the fact on which the dismissal is grounded does not exist or the disciplinary provisions applicable to the contract provide for sanctions less severe than dismissal: the consequence is reinstatement and damages equal to full salary from the date of dismissal to the date of reinstatement, capped at 12 monthly salaries (any other income earned or potentially earned by the employee in the relevant time span shall be deducted from the amount awarded). As an alternative to reinstatement, the employee (not the employer) can opt for the payment of 15 monthly salaries as compensation. This also applies to the event of a dismissal based on the employee not being suitable for the job because of disability, deemed to be unfair.

For employers with 15 or fewer employees (either in the place of employment or within the same municipality) and 60 employees or fewer in Italy, the employer must either re-hire the employee unfairly dismissed within three days or pay a compensation equal to an amount ranging from 2.5 to 6 monthly salaries (the choice is up to the employer).

Regardless of the number of employees employed, the Court will order the reinstatement of the employee if a dismissal is deemed as having a discriminatory nature and when the law expressly provides for the nullity of the dismissal.