Employment termination law and legislation in Italy

1. Dismissal of employees

1.1 Reasons for dismissal

An employee may be dismissed:

  1. with just cause: when the employment relationship cannot be continued, even temporarily, either because of a material breach of contract or another reason causing a deterioration of the relationship between the parties; or
  2. for a justified subjective reason: in case of a material breach of the employment contract (less serious than the case of justified cause); or
  3. for a justified objective reason: where the company is either closing, is being restructured, or there is no longer a need for the individual’s position or division. Notice served at the end of a disciplinary procedure (a ‘disciplinary dismissal’) is classified either as a dismissal with just cause or for a justified subjective reason.

1.2 Form

Must be in written form (with the exception of domestic help and employees subject to a probationary period), and signed by the employer’s legal representative. Notice may be served by telegram.

1.3 Notice period

Other than in fixed term contracts, the length of the notice period is set by national collective contracts and varies according to the length of service and the employee’s qualifications. No notice period is needed for dismissal with just cause. In dismissals for a justified objective reason and / or a justified subjective reason, the employer may renounce the notice period and pay the employee compensation in lieu of notice. Notice is not required for dismissals during fixed-term contracts or during probationary periods.

1.4 Involvement of works council

Works council members may not be dismissed within a year of the termination of their appointment. The union need not be notified prior to the dismissal of an employee. The employer must notify the works council (‘Rappresentanze Sindacali Unitarie’ and ‘Rappresentanze Sindacali Aziendali’) of any intention to make collective redundancies.

1.5 Involvement of a union

If there is no relevant works council, the employer must notify the most representative unions of its intention to make collective redundancies.

1.6 Approval of state authorities necessary

Not required.

1.7 Collective redundancies

Collective redundancy is the dismissal by an employer employing more than 15 workers of five or more employees in the same establishment, or at different establishments located in the same province within a period of 120 days. The employer must notify the works council and the Employment Office of its intention to make collective redundancies. Unions may ask for a joint examination in order to reach an agreement; failing this, the employer may notify the affected employees of their dismissal one by one with notice. To initiate redundancy, the employer must inform the employee representatives and the appropriate industry union in writing of its intention. Where there are no local representatives, the company must notify the full-time officials in the relevant union(s). The company must also notify the labour authorities. Within seven days of union representatives being informed, the parties must conduct a joint examination of the reason for the surplus labour and the proposed dismissal, of the possibility of redeployment, and of the use of solidarity contracts or the introduction of flexible working time to forestall dismissals. Should the union not ask for a joint examination, the employer must notify the competent local job office to continue the procedure.

The consequences of unlawful dismissal are different for employee hired before 7 March 2015 and those hired after.

For employees hired before 7 March 2015, the consequence of unlawful collective dismissal when there is a violation of the criteria for the selection of employees to be dismissed is the reinstatement of the employee and the payment of a ‘reinstatement indemnification’ (a maximum of 12 months’ salary).

For other cases of unlawful dismissal, the only consequence is the payment of a ‘reinstatement indemnification’ (set between a minimum of six and a maximum of 24 months’ salary). The dismissal is then effective.

For employee hired after 7 March 2015, reinstatement and payment of a ‘reinstatement indemnification’ (a maximum of 12 months’ salary) can only be ordered following an oral dismissal or a discriminatory dismissal.

In other cases of unlawful dismissal, the employer only has to pay a ‘reinstatement indemnification’ (between a minimum of six and a maximum of 36 months’ salary, depending on the length of service with the employer, the lack of reasons behind the dismissal, and the damages suffered by the employee). The dismissal is then effective.

1.8 Summary dismissals

Only for just cause.

1.9 Consequences if requirements are not met

Employers with more than 15 employees

The reform implemented by Law 92 / 2012 and Legislative Decree 23 / 2015 amended by Law 96 / 2018 have introduced different systems for the protection of workers, which are applicable dependent upon the type of dismissal imposed and the reason for its unlawfulness:

Disciplinary dismissal

  • Unlawful because the act does not exist or is one of the acts for which the national collective bargaining agreement or disciplinary codes provide a conservative sanction:
    • reinstatement of the employee and payment of a ‘reinstatement indemnification’ (a maximum of 12 months’ salary). For employees hired after 7 March 2015 such sanctions are applicable only if the material fact behind the dismissal does not exist.
  • Unlawful in all other cases:
    • no reinstatement, but only payment of a ‘reinstatement indemnification’ (set at between a minimum of 12 and a maximum of 24 months’ salary). The dismissal is then effective. For employees hired after 7 March 2015, there is no reinstatement, but only payment of a ‘reinstatement indemnification’ (set between a minimum of six and a maximum of 36 months’ salary, depending on the length of service with the employer, the lack of reasons behind the dismissal, and the damages suffered by the employee). The dismissal is then effective.
  • Unlawful because of the lack of required motivation or failure of the disciplinary procedure:
    • no reinstatement, but only payment of a ‘reinstatement indemnification’ (set between a minimum of six and a maximum of 12 months’ salary). The dismissal is then effective. For employees hired after 7 March 2015, there is no reinstatement, but only payment of a ‘reinstatement indemnification’ (set between a minimum of two and a maximum of 12 months’ salary, depending on the length of service with the employer). The dismissal is then effective.

Dismissal for a justified objective reason

  • Unlawful (i) because of a lack of justification consisting of the physical or mental unfitness of the employee; or (ii) because it is ascertained that the dismissal was ordered before the retention period of the job had passed; or (iii) because the productive or organisational fact used as the basis for the dismissal does not exist:
    • reinstatement of the employee and payment of ‘reinstatement indemnification’ (a maximum of 12 months’ salary).
  • Unlawful for any other reason: no reinstatement, only payment of a ‘reinstatement indemnification’ (set at between a minimum of six and a maximum of 12 months’ salary). The dismissal is then effective.
  • Unlawful because the dismissal has actually been ordered for discriminatory or disciplinary reasons:
    • reinstatement of the employee (also if a manager) and payment of a ‘reinstatement indemnification’ (of at least five months’ salary). Alternatively, the employee may opt to receive an indemnification equal to 15 months’ salary (‘alternative indemnification’).
  • Unlawful because of a lack of the required justification or, if dictated by economic reasons, without having first complied with the required conciliation procedure:
    • no reinstatement, merely payment of a ‘reinstatement indemnification’ (set at between a minimum of six and a maximum of 12 months’ salary). The dismissal is then effective.

Employees hired after 7 March 2015 are not reinstated, but instead paid a ‘reinstatement indemnification’ (set between a minimum of six and a maximum of 36 months’ salary, depending on the length of service with the employer, the lack of reasons behind the dismissal, and the damages suffered by the employee). The dismissal is then effective.

Employers with 15 or fewer employees

Re-employment of the employee or payment of an indemnification of between two-and-a-half and six months’ salary (indemnification can be increased to up to 12 months’ salary in the case of an employee with long service).

For employees hired after 7 March 2015, re-employment or payment of an indemnification between one and six months’ salary, depending on the length of service with the employer, the lack of reasons grounding the dismissal, and the damages suffered by the employee.

Regardless of the number of employees, in case of a discriminatory dismissal or oral dismissal

Reinstatement of the employee (including a manager) and payment of a ‘reinstatement indemnification’ (of at least five months’ salary).

Alternatively, the employee may opt to receive an indemnification equal to 15 months’ salary (‘alternative indemnification’).

1.10 Severance pay

In any termination of an employment contract, the employee is entitled to a severance payment (‘trattamento di fine rapporto’). This is a deferred salary payment calculated as a percentage of the annual salary (including any amounts paid by the employer as fringe benefits and other special indemnifications).

The amount of the severance payment therefore increases yearly: when the employment terminates (whether on a voluntarily or due to dismissal), the employee has the right to receive the total relevant amount.

The employee is also entitled to an indemnity for unused holiday time, compensation in lieu of notice, and other accrued and pro rata payments.

1.11 Non-competition clauses

A post-contractual non-competition clause is valid if it has been agreed between the parties and:

  1. it is in writing; and
  2. the restriction imposed on the employee refers to a specific object, within a specific area and for a limited period (maximum of three years); and
  3. an indemnity is paid to the employee while the clause is in force. The indemnity may be paid during, at the end of, or after termination of the employment contract.

1.12 Miscellaneous

Due to the Covid–19 medical emergency, employers in Italy are currently prohibited from dismissing an employee for economic reasons, unless the appropriate social safety programmes have been completely exhausted by the employer.

It is prohibited to dismiss certain categories of employees considered particularly vulnerable. note that the ban on dismissal remains in place for up to one year after an employee's marriage, pregnancy, sickness, injury, military service, trade union appointment, public appointment, participation in a strike, etc.

Dismissal for an economic reason – conciliation procedure

To dismiss an employee for an economic reason, an employer with more than 15 employees must first make a statement to the local labour inspectorate (ITL) responsible for the area where the employee works. The statement must also be forwarded to the worker.

Within seven days of receiving the statement, the ITL will summon the employer and employee before the provincial commission of conciliation. The procedure must be completed within 20 days following the hearing, unless both parties declare their intention to extend it. If the mandatory conciliation attempt is unsuccessful or the labour inspectorate does not call the parties within the Seven-day deadline mentioned above, the employer may communicate the dismissal to the employee, but always observing the period of notice.

2. Dismissal of managing directors

2.1 Reasons for dismissal

At a limited liability company by shares (i.e. ‘Società per azioni’), or a limited liability company by quotas (i.e. ‘Società a responsabilità limitata’) where a managing director is appointed for a fixed period, a shareholders’ meeting may revoke the appointment of a managing director where there is just cause.

According to case law, this is generally the case where there has been a breach of legal or statutory obligations, or where the managing director has breached duties of loyalty, fairness, diligence and honesty. At a limited liability company by quotas where a managing director is appointed for an open-ended period, a quota holders’ meeting may revoke the appointment of the managing director without just cause at any time, even though the managing director will then be entitled to damages unless proper notice is given.

2.2 Form

In the case of a liability company by shares, where the managing director does not have an employment contract, the managing director's appointment may be revoked by resolution at an ordinary shareholders’ meeting. The resolution must be signed by the chairman and secretary, and any required notice must be given.

2.3 Notice period

According to the Italian Civil Code, the company must give the managing director adequate notice of the revocation. If the annulment is with just cause, no notice is required. At a limited liability company by quotas where a managing director has been appointed for an open-ended period, the company may revoke his appointment at any time without just cause, but the company must give proper notice.

2.4 Involvement of works council

No involvement.

2.5 Involvement of a union

No involvement.

2.6 Approval of state authorities necessary

Not required.

2.7 Collective redundancies

Not applicable.

2.8 Summary dismissals

Not applicable.

2.9 Consequences if requirements are not met

If the appointment of the managing director is revoked without just cause, the revocation is valid, but the managing director is entitled to damages.

A decision to revoke the appointment of the managing director is invalid if it is made for a fraudulent purpose.

2.10 Severance pay

The managing director is only entitled to receive payment for the activities he has carried out, and reimbursement for any expenses incurred in relation to his office prior to revocation of his appointment as managing director.

2.11 Non-competition clauses

A post-contractual non-competition clause is valid on the conditions that:

  1. it is set out in writing with the consent of both parties; and
  2. the restriction imposed refers to a specific object, within a specific area, and for a limited period (maximum five years); and an indemnity is paid by the company while the clause is enforced.

2.12 Miscellaneous

According to the Italian Civil Code, if there is well-founded suspicion that the managing director has committed serious irregularities in the course of his management causing damage to the company, the court may annul the appointment of the managing director:

  1. in case of a limited liability company by shares, upon request of shareholders representing one-fifth of the company capital;
  2. in case of a limited liability company by quotas, upon request of every quota holder.