SUBJECT: new Italian Supreme Court guidelines regarding dismissals for objective justified reasons

Published 26 January 2017 by CDR Legal

With Judgement No. 25201 dated December 7th, 2016, the Italian Court of Cassation has finally set up new guidelines regarding dismissals for objective justified reasons. The topic has been in the past years subject to an intense legal and doctrinal debate, concerning the legitimate nature of the dismissal of an employee for objective justified reason for suppression of the working position even in the absence of a company crisis.  The recent ruling of the Supreme Court stated an important - and according to many people- innovative principle of law, which caused an uproar also in the national press. 

The case involved a company, represented by our firm, which had removed the position of an employee to delete a link in the chain of command, and to ensure a leaner and more efficient management of the company's organization. After a favorable ruling at first instance, on appeal the dismissal was considered illegitimate, lacking, in the opinion of the Court of Appeals Judges, the evidence that the productive reorganization had been pursued by the employer in order to cope with an unfavorable economic situation or, alternatively, to support extraordinary expenses.

Well, starting from a purely textual analysis of the law (art. 3 l. 604/66), the Supreme Court has reversed that position, stating that for the purposes of the legitimacy of the dismissal the existence of adverse economic situations is not required, as well as any extraordinary expenses which it is necessary to suffered, but it is sufficient that the dismissal is determined by reasons concerning the productive activity, the organization of work and the smooth functioning of it, among which it is not possible to exclude those pertaining to an improved operating efficiency or production or also those aimed at an increased corporate profitability.

It follows, therefore, that, in the presentation offered by the Supreme Court, the employer is free to dismiss an employee not only in the event of economic difficulties and in corporate restructuring situations dictated by economic downturns, but even if the termination of the employment contract “is aimed to safeguard the company's competitiveness within the sector in which it performs its business activity", a goal worthy of consideration just as employment protection.

A different interpretation, in the opinion of the judges of the Supreme Cassation Court, would not in fact correspond to the law in question, and is rather based on non-text elements (including the renown doctrinal thesis of extrema ratio, according to which the choice that legitimates the use of dismissal should be "socially appropriate") that do not allow to "fill" the content of art. 3 to the point of making perceptively imposed that the employer can opt for the dismissal only on the condition that he must cope with unfavorable and not contingent crisis situations.

Instead, that last statement, as emphasized by the Supreme Court, would be contrary to art. 41 of the Constitution which protects private economic initiative, that would inevitably result compressed if the decision of the employer to reduce the company's staff was considered legitimate only in the presence of a corporate crisis or unfavorable market conditions, and would not as well be justified even on the basis of Community law, which essentially leaves to national legislators the task to define the criteria for the legitimate nature of individual dismissals.

It is therefore undeniably an important position of the Court which, by this ruling has not however  made a "Copernican Revolution" by creating a new case of dismissal for objective justified reason - the so-called “dismissal for profit" - but has - now firmly – clarified and confirmed that the reasons linked to the productive activity referred to in art. 3 L. 604/66 (which can therefore serve as basis of a dismissal for objective justified reason) may simply result from the need for reorganization or restructuring, even in the absence of a firm's negative trend.

The shifting from a less social to a more liberal application of the dismissals law by the Supreme Court has given grounds to enthusiastic comments in the not media which considered such a judgement as an open door to a better competitiveness of the “System Italy”.

We partially share such a view since we should not fail to remember as it remains firmly in control of the judge any evaluation concerning the effectiveness and the lack of good faith of the reason concretely offered as grounds for dismissal and the necessity of a causal link between the grounds claimed and the effective dismissal of the employee.

Maurizio Ruben