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Termination of Employment Contracts in Italy

1. Grounds for Termination (List)

Under Italian law, any termination of employment must be justified. The reasons to terminate an employment contract can be divided in three main categories: (i) Objective justified reasons; (ii) Subjective justified reasons; and (iii) Just cause (“giusta causa”).

2. Collective Dismissals

Under Italian law, a collective dismissal occurs when at least five dismissals are served in the same business unit or in more units within the same district and in the time frame of 120 days, due to reduction, transformation, or closure of business.

According to Law 223/1991, employers with more than 15 employees must follow a specific information and consultation procedure involving the Trade Unions with regard to collective dismissals. The employer must notify, in writing, the competent employment office, the employees’ staff representatives and the respective Trade Unions of the decision to proceed with the collective dismissal. In the absence of the above-mentioned employee representative bodies, notice shall be given to the “comparatively more representative” trade associations.

3. Individual Dismissals

Dismissal must be given in writing and must detail the reasons on which it is based. Indeed, under the system introduced by the Fornero Reform, the grounds of dismissal must be given in the termination letter: failure to do so renders the termination ineffective.

Whenever a dismissal is due to an employee’s conduct, an employer must follow a specific disciplinary procedure, according to which a letter containing the allegations must be delivered to the employee outlining the dismissal facts.

Moreover, whenever a dismissal is based on economic reasons a mandatory pre-emptive consultation phase must be carried out by companies employing 16+ workers, before the dismissal becomes effective.

4. Severance Payment

Italian law provides for the payment of a deferred form of remuneration, otherwise known as the severance payment. Along with other minor statutory termination amounts, the TFR must be paid to employees whenever an employment contract is terminated, irrespective of the cause of termination. The amount of the TFR varies depending on the employee’s salary and length of service.

5. Options for Employee

The employee is entitled to resign from his/her employment contract giving the notice period provided by the collective agreement applied to his/her employment relationship. The employee can resign without reason of for just cause. In the latter case, the employee is entitled to resign with immediate effect while asking for the payment in lieu of notice plus any potential damages derived from the cause.

6. Protection against wrongful termination

Any dismissed employee may bring a legal action if he/she deems that his or her dismissal was not properly justified. The action before the labour court must be preceded by an out-of-court challenge of the dismissal.

Different rules apply to dirigenti, who are never entitled to reinstatement, unless they are dismissed for discriminatory reasons. Should their dismissal be found to be unjustified by a labour court or a special arbitration panel, dirigenti are entitled to additional damages by way of compensation for the damages suffered as a result of the unfair dismissal.

7. Void Dismissal

Notwithstanding the above, in the case of: (i) Dismissal for discriminatory reasons; (ii) Dismissals for illicit grounds; and (iii) Oral dismissals.

For more information on these articles or any other issues involving labour and employment matters in Italy, please contact LABLAW – Studio Legale
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