By judgment No 12132 of 8 May 2023, the Italian Court of Cassation ruled on the subject of dismissal for justified objective reason. The Court specified that in the assessments of the possibility of relocating the employee before proceeding with the dismissal (so-called repêchage obligation), the employer is required to take into consideration not only the positions already vacant at the date of dismissal, but also those that will be ‘available in a period of time very close to the date of the announcement of the dismissal’.
The facts and the judgment on the merits
On 3 May 2011, an employee with the duties of Sales Manager, was dismissed because his position was redundant. The employee brought an application challenging the dismissal before the Court of Busto Arsizio. The employee sought reinstatement and compensation and also requested a determination that his employment relationship was also attributable to another group company.
The application was dismissed at first instance and on appeal.
A first appeal was therefore brought before the Italian Court of Cassation against the judgment of the Court of Appeal of Milan. This appeal concluded with the acceptance of this further appeal and a referral to the same Court of Second Instance, sitting with different judges, to rule on the objections raised on the subject of the repêchage obligation.
In particular, according to the Italian Supreme Court of Cassation, the Court of Appeal had not conducted the necessary investigations regarding the employer’s compliance with its repêchage obligation. The Court of Cassation recalled that the employer, in this regard, had the burden of proving: (i) the lack of available positions where it could feasibly relocate the employee and (ii) the absence of subsequent recruitment. The Italian Court of Cassation also pointed out that the finding of co-employment could be relevant in the context of an overall assessment of compliance with the repêchage obligation.
The proceedings were therefore reinstated before the Court of Appeal of Milan, which established the actual breach of the repêchage obligation and therefore the unlawfulness of the challenged dismissal.
Specifically, according to the Court of Appeal, at the time of dismissal, two employees with Area Manager duties had resigned with notice expiring on 31 May 2011, a period of time shortly after the date of dismissal. Consequently, the employer should have taken that fact into account in its assessments of the employee’s relocation.
According to the Court of Appeal the following points were irrelevant: (i) the two resigning employees were hired a month later by another Group company that previously obtained their services through a service contract and then decided, in June 2011, to internalise the sales activity, no longer using the services provided by the employer company; and that, consequently, (ii) the dismissal was due to a complex company reorganisation to reduce staff numbers, including the two who had resigned who, in fact had never been replaced, to cope with loss of turnover.
The judgment of the Italian Supreme Court
The employee appealed to the Italian Court of Cassation against the decision taken by the Court of Appeal of Venice. The employer company appealed to the Italian Court of Cassation against the decision taken by the Court of Appeal of Milan.
The Italian Court of Cassation declared the appeal inadmissible and upheld in full the judgment issued by the Court of Appeal of Milan when the case was referred to it.
Specifically, with particular reference to the repêchage obligation, the Italian Court of Cassation highlighted how the Court of Appeal of Milan had followed the indications provided at the time of referral and had ascertained that on the date of the employee’s dismissal, 3 May 2011, two employees of the employer company were completing the dismissal notice period that was to end on 31 May 2011. This proved that at the time of dismissal, the employer was aware that two positions that could be filled by the employee would soon become available in the company.
The Court of Appeal then found that the employer company had not yet been informed at the time of the dismissal of the related company’s decision not to continue to use the service contract and to internalise sales, as this information was not provided until 20 June 2011.
The loss of the service contract could therefore in no way be linked to the dismissal.
The Italian Court of Cassation therefore agreed with the finding made by the Court of Appeal of Milan and underlined that ‘the employer, in assessing the possibility of relocating the employee before proceeding with his/her dismissal, must also take into consideration those employee positions that, although still filled, will become available in a period of time very close to the date when notice of the dismissal is given’.
Since the appeal to the Italian Court of Cassation was ultimately seeking only a different interpretation of the facts from that provided by the Court of Appeal, the Court of Cassation therefore concluded that the appeal was inadmissible, and that the applicant should be ordered to pay the costs.
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With judgment No 6902 of 8 March 2023 (which follows two further similar rulings: judgments No 5788 and No 5796, both dated 24 February 2023, of the Italian Court of Cassation), the Italian Supreme Court of Cassation ruled that the transferred employee, who sees the employment relationship with the transferor judicially restored, is not entitled to remuneration for the period between the date of transfer of the business branch and that of the publication of the judicial provision declaring the illegitimacy of the aforementioned transfer and can obtain compensation for the damage suffered due to the unjustified refusal of the transferor employer to receive his/her service only starting from the moment in which formal notice was provided to the transferor employer.
The facts of the case and the proceedings in first and second instances
Following the transfer of a business branch – subsequently declared unlawful in the context of separate proceedings – a transferred employee summoned the transferor company before the Court, seeking for the latter to be ordered to pay the damages consisting of the difference between what the employee transferred would have received if the transfer had not been implemented and how much, however, he received from the transferee.
As part of the proceedings, it was ascertained that the transferor company’s formal notice by the transferred employee occurred only after the judgment which had declared, with effect ex tunc, the illegality of the transfer.
The Court of Appeal upheld the employee’s request, ascertaining the right of the transferred employee to compensation for the damage suffered as a result of the invalid transfer, for the period from the date of the transfer and until the formal notice.
The ruling of the Italian Supreme Court
The transferor Company appealed to the Italian Court of Cassation against the judgment rendered by the Italian Territorial Court, challenging the contested judgment for having recognized amounts by way of compensation for damages also for the period prior to the formal offer of work by the transferred employee.
The Italian Court of Cassation – overturning the decision of the Court of Appeal – noted that, in the time span between the transfer to the transferee’s employment and the judicial assessment of the illegitimacy of the transfer, the lack of work performance in favour of the transferor excludes the right to receive remuneration from the transferor.
According to the Judges of the Court of Cassation, for this period, the transferor can only be held liable for compensation for any damages commensurate with the lost wages.
All of this, however, on condition that the transferred employee has previously taken steps to give formal notice to the employer, remaining available to perform his services or by enjoining the employer to receive the service.
And in fact – continues the Court – only from the moment in which the employee has taken steps to give formal notice to the transferor employer, the same will be able to obtain, pursuant to Article 1217 of the Italian Civil Code, compensation for the damage suffered due to the unjustified refusal of the employer to receive it, deducting any aliunde perceptum.
On these assumptions, the Italian Supreme Court therefore upheld the appeal filed by the transferor company, declaring that no compensation for damages was due to the employee for the period between the transfer and the formal notice of the transferor company.
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The Court of Cassation rules on business branch transfers
Contract term ineffectiveness if there is a company transfer
Our partner Alberto De Luca participated in the 31st Annual Meeting and Conference of the Inter-Pacific Bar Association (IPBA). Alberto took part in the panel discussion entitled: ”Lawyer, I want to fire an employee in another country for poor performance. How do I do this and what are the risks?”
The discussion dealt with an Employment law survey report, involving almost 30 countries from around the world, and which focused on alternative dispute resolution (ADR) for employment disputes and on the employment process.
During his talk, Alberto addressed guiding clients through redundancies and employment dispute resolution around the world, considering the options, processes, and potential legal risks associated with a regional or global workforce, giving specific attention to:
With the recent order No 1584 of 19 January 2023, the Italian Court of Cassation addressed dismissal for ‘poor performance’, stating that conduct that had previously been the subject of separate disciplinary proceedings cannot be used as a basis for dismissal on the grounds of poor performance.
Poor performance consists in a breach by the employee of his or her main obligation, which is to perform work, and is therefore a lawful subjective ground for dismissal. Case law has, over the years, identified specific and determined limits within which dismissal for poor performance can be said to be lawful.
A railway company employee challenged their dismissal which was on the basis of ‘the worker’s poor or insufficient performance fulfilling the duties of their grade’.
The Court of Bologna, in accepting the worker’s appeal under Article 1, paragraph 51, Italian Law No 92/2012, against the order of the same Court, declared the dismissal unlawful, and applied the so-called ‘mitigated’ reinstatement protection under Article 18, paragraph 4, Italian Law No 300/1970.
Similarly, the Court of Appeal of Bologna also declared the dismissal unlawful, fully confirming the Court’s ruling and ordering the company to pay the worker the additional costs of the proceedings.
The first instances Judges come to the conclusion that the dismissal in question was based exclusively on previous disciplinary charges against the worker, which had already been subject to sanctions by measures other than dismissal. The Judges noted that the employer company had not evidenced, on an objective level, the employee’s below-average performance and, on a subjective level, the agent’s fault, caused by inexperience, incapacity and negligence.
Finally, they pointed out that breach of the ne bis in idem principle, with the earlier exercise of disciplinary powers, resulted in the non-existence of the alleged fact underlying the dismissal.
The Company, therefore, appealed the judgment of the Court of Appeal before the Italian Court of Cassation.
When examining the matter, the Court of Cassation confirmed the rulings of the lower judges regarding the unlawfulness of the dismissal.
First of all, the Cassation Court Judges reiterated a well-established principle of jurisprudence on the subject of poor performance where the case arises, on an objective level, due to performance below the required standard and, on a subjective level, due to the fault of the worker.
For this reason, continued the Court, poor performance cannot be proved by several previous disciplinary actions against the worker which have already been sanctioned in the past, because this would constitute an indirect substantial duplication of the effects of conduct that has already been exhausted.
According to the Judges of the Italian Court of Cassation, therefore, the employer is not allowed to exercise disciplinary power twice based on the same facts under a different assessment or legal interpretation, as – in the opinion of the Italian Court of Cassation –done by the railway company. The employer, in fact, based the dismissal exclusively on previous disciplinary charges used to evaluate the overall application of the exemption from duty provided for by Article 27, paragraph 1, letter d), of the implementing regulation, Italian Royal Decree No 148/1931 governing the employment relationships of road and tram drivers.
According to the Italian Court of Cassation, therefore, it is certainly possible to include in poor performance multiple incidents, provided that they do not consist of multiple prior disciplinary incidents of employees already sanctioned – without dismissal – in the past.
Finally, the Italian Court of Cassation also confirmed the decision of the Court of Appeal regarding the protection regime applied once the unlawfulness of the dismissal had been ascertained. In particular, the Judges clarified that if the action is no longer punishable, it is equivalent to a fact devoid of illegality and as such attributable to the provision of Italian Law No 300/1970, Article 18, paragraph 4, as amended by Italian Law No 92/2012 (i.e. the ‘mitigated’ reinstatement protection).
In conclusion, therefore, once the employer has exercised its sanctioning power in respect of disciplinary conduct, not only does the power lapse in the hands of its holder, so that the employer can no longer exercise it for the same conduct, but at the same time, the action constituting a disciplinary issue can no longer be sanctioned, losing its unlawful nature due to the exhaustion of the sanctioning power.
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With Order of 23 January 2023, No 1965, the Italian Court of Cassation stated that, for the purposes of applying the collective dismissal procedure referred to in Italian Law 223/1991, the size requirement of at least 15 employees must refer to the company as a whole and not to the single production unit.
In the case examined by the order in question, the worker had been fired for a justified objective reason. The Court of Catania had declared the dismissal unlawful since it was ordered without observing the procedure for collective dismissals referred to in Italian Law 223/1991.
The Court of Appeal of Catania confirmed the decision of the judge of first instance and, therefore, the reinstatement of the employee.
The judges of the Italian Court of Cassation, in confirming the lawfulness of the worker’s dismissal, pointed out that the size requirement in the collective dismissal procedure must be assessed with reference to the company as a whole and not to individual territorial business units.
According to the Italian Court of Cassation, from a literal interpretation of Article 24 of Italian Law 223/1991, under Article 12 of the Italian general provisions on the law, the legislator’s intention emerges from the fact that the term ‘undertaking’ is not to be confused with the concept of ‘production unit’ referred to in Article 18 of Italian Law 300/70.
This conclusion can also be reached on the basis of the rationale for the provisions on collective dismissal the purpose of which is both to protect the worker as an individual but also to eliminate or reduce the social impact of the measure imposed on all workers.
Therefore, given the diversity of the interests protected, Italian Law 223/1991 cannot in any way be superimposed on Article 18 of the Italian Workers’ Charter which, for the purposes of offering real protection, requires the assessment of the size requirement in the production unit of the dismissed employee.
In the light of the principles set out above, the Court rejected the company’s appeal, confirming the unlawfulness of the dismissal and, consequently, the employee’s right to reinstatement.
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