Overview of dismissal procedure in Italy

The economical crisis brought by Covid-19 is putting big attention on the topic of employee dismissal.
Generally speaking, foreign investors consider that the Italian regulation is not favorable to the company’s side when it’s time to deal with the dismissal of employees.
However, the situation has changed positively from 2012 with the first important reform (so-called Riforma Fornero) and it is further improved in 2014 with the entrance in force of the so-called Job Act.
With this article, we would like to give an overview of the main aspects related to the dismissal cases due to justified objective reasons (not related to employee behavior), such as possible consequences after the Covid-19 crisis.

1. Overview

The Italian Law grants the possibility to the companies to dismiss employees for justified objective reason (giustificato motivo oggettivo in Italian, so called g.mo.), both for individual and for collective cases.
First of all let’s see what is the meaning of justified objective reason: the legal basis is contained in article 3 of Law 604 of 1966 and it states that dismissal can occur for reasons inherent to the business activity, work organization, and its regular functioning.

The most important cases of justified objective reason are:

A) Crisis of the company due to economic situation The company must be able to demonstrate the actual existence of the crisis. For example, a reduction of the income and a reduction of the purchase orders, if it can be demonstrated through documents, are suitable reasons for “g.m.o” dismissing. The consequence of the crisis must be the need for the company to cancel the position that the worker has.

B) The termination of the activity (company closure)
This hypothesis is considered one of the situations in which the dismissal for justified objective reason is legitimate and it has always been confirmed by the Italian Supreme Court (Corte di Cassazione, the highest judicial body in Italy).
In case of company closure, the employer has in fact no choice but to dismiss all workers.

C) Loss of the tasks to which the worker is assigned
The dismissal due to an organizational rearrangement that involves a redistribution of the employee’s tasks is considered legitimate. The employer can dismiss for a reorganization that increases the efficiency and productivity of the company, even if the company is not in crisis, as long as the redistribution of the tasks is the cause of the dismissal.

Important: duty to consider the so-called “repêchage” (this is a French word that we use in Italian labor law).
This term refers to the obligation of the employer to check, before dismissing, whether the worker can be used to perform different tasks at the same level or even at a lower level of his actual tasks. It is essential to make this analysis.
In fact, in the event of a lawsuit, the judge always checks whether the employer has made this attempt.
If the employer can prove that the worker could not be used in a different position, the dismissal will be legitimate.
So, repêchage is a fundamental element to see if the dismissal is fully legitimate or not.

In conclusion, we can generally summarize that dismissal for a justified objective reason, to be fully legitimate, must fall within the cases A, B, C listed above, and pass the verification of the repêchage duty.

2. General procedure

We have to examine two cases: (1) Individual dismissal
(2) Collective dismissal

(1) Individual dismissal
It occurs in all the cases where the collective procedure does not apply, therefore when less than 5 workers are dismissed within 120 days.
How the dismissal is communicated to the employee?

– Company must send to the local labor authority of the place where the employee works a communication containing the intention to proceed with the dismissal and its reasons. Then, a meeting with the company and the employee will be done to try to find an agreement on the dismissal.

– The procedure can be concluded with an agreement between the parties that avoid the termination of the employment relationship or which provides for a consensual termination.

– If an agreement is not reached, the employer can then proceed with the written communication of the dismissal.

(2) Collective dismissal
It occurs when the company that has more than 15 employees intends to dismiss 5 or more workers within 120 days, as a consequence of reduction or transformation of the activity or when it intends to close the activity.
The number of five employees to be dismissed can be the first intention of the company, then it can dismiss fewer people but it must follow in any case the collective procedure.
The collective procedure involves the participation of the union. The union will see if the reasons provided by the company are legally valid.
This procedure is more complicated than individual dismissal but it could be the best option if a company wants strongly to reduce the number of employees or even close the activity.
In this way, the company faces a unique procedure to dismiss a high number of employees at the same time.
It is very important to check the following requirements to decide the employees to dismiss:
– Family situation: easier to dismiss a person without a family than who has family
– Seniority: easier to dismiss a younger worker
– Business needs: it is important to pay attention to these criteria. The company must be able to demonstrate that a certain position is no longer useful due to the crisis and subsequent reorganization.

These criteria must apply to all workers in the company. Not just those from a specific department.

Dismissal is a delicate theme and each case has specific procedures according to the dismissal nature. Thus, in case the company has to face this issue we highly recommend consulting suitable professionals to make appropriate steps.