On July 21, the Italian Constitutional Court declared unconstitutional the cap of six months’ compensation in the event of unlawful dismissal by small businesses with up to 15 employees.
Until the ruling, the law provided that for employers with no more than 15 employees at a single production unit, the amount of compensation “may in no case exceed six months’ salary” (Article 9, paragraph 1, of Legislative Decree No. 23/2015).
We remind you that our updated guide on Italian and international dismissal regulations is available, featuring comparative and operational insights.
The Court's Ruling
According to the Constitutional Court, the fixed compensation range (from a minimum of 3 to a maximum of 6 months' salary), “rigid and insurmountable, regardless of the seriousness of the defect in the dismissal,” is overly restrictive. This prevented judges from granting dismissed employees a personalized, adequate, and proportionate compensation.
Furthermore, the six-month ceiling failed to fulfill the deterrent function that compensation is meant to serve with respect to employers.
Consequences for Employers
It is worth recalling that, for companies with more than 15 employees, the applicable range of compensation in the case of unlawful dismissal is between 6 and 36 months' salary.
As modified by the Constitutional Court, Article 9 now provides that compensation for small businesses is halved compared to what applies to larger employers.
As a result, the compensation range has now become significantly broader (and more burdensome for employers), extending from a minimum of 3 to a maximum of 18 months’ salary.
The decision is highly questionable on many levels which cannot be adequately addressed here.
Dismissal thus definitively becomes a random contest and a fleeting matter: the question is to what extent the legislator's powers are censurable and obliterable, degraded to mere faculties. It's not yet a “crime” for the legislator to innovate in the area of "dismissals," but let's call it a "(mental) vice."
What Companies Should Do
The legal framework governing dismissals in Italy is increasingly complex and rigid. As the Constitutional Court itself has emphasized, a comprehensive legislative intervention is urgently needed to reorganize the entire matter.
The Court, in fact, expressed the hope that the legislator will intervene as soon as possible in this matter, so that the regulation is not tied solely to the number of employees, as this is not the only indicator of a company's financial strength. Given that, it cannot be ruled out that in the near future, labor judges may consider the company's balance sheet or turnover when determining the amount of compensation.
In the meantime, companies — especially foreign ones with small branches in Italy — should first and foremost ensure that their HR personnel and corporate managers are always kept up to date on the new regulatory landscape and potential sanction risks. At the same time, they should reassess how they manage dismissals, consulting with legal advisors to adopt procedures that are compliant with the current legislation.
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