With its order no. 27934 of 13 October 2021, The Court of Cassation ruled that the employer’s waiver of the resigning employee’s notice period removes any obligation to pay them the relevant payment in lieu of notice. This is because the resigning party has no legal interest in continuing the employment relationship.
Facts of the case
In this case, a resigning executive obtained a court order for payment of the allowance in lieu of notice, a decision that was upheld on appeal, based on the company’s waiver of the resignation notice period did not relieve it from the obligation to payment in lieu of notice.
Objecting to the court’s ruling, the losing Company appealed to the Cassation Court.
The Supreme Court of Cassation’s ruling
The Court of Cassation, explained the financial function of the notice which consists in mitigating the prejudicial consequences of the contract termination for the party suffering the termination.
The Court of Cassation stated that the notice has the following functions:
- When there is a dismissal, it guarantees the employee the continuity of remuneration for a period to enable them to find new employment.
- When there is a resignation, it allows the employer the time necessary to replace the resigning employee.
The Court of Cassation analysed the issue of the notice waiver by the party affected by the termination and the legal consequences of such waiver, which vary depending on whether it is given real or mandatory effect.
Referring to previous case law, the Court of Cassation, confirmed the mandatory effect of the notice, from which the withdrawing party is free to choose between continuing the relationship during the notice period and the payment in lieu of notice.
Based on that reconstruction, according to the Court of Cassation, the non-withdrawing party has a freely waivable claim. The non-withdrawing party owes nothing to the other party due to its waiver on this basis. The latter has no legally qualified interest in continuing the employment relationship until the end of the notice period.
On these grounds, the Court of Cassation upheld the Company’s appeal, revoking the payment order issued in favour of the resigning executive.
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It should be noted that the Court of Cassation’s decision is applicable only with reference to the legal rules on notice and not when the collective bargaining agreement (i.e., Commercial NCLA) requires the employer to pay the resigning employee the payment in lieu of notice, even if there is a notice waiver.
Other related insights:
- Waiver of notice period after dismissal does not exclude contribution obligations
- DID YOU KNOW THAT… starting 10 September, income deriving from remuneration plans based on financial instruments does not count for the purposes of employee severance indemnities, contractual institutions and the calculation of the indemnity in lieu of notice for executives of the Tertiary National Collective Labour Contract?