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.
Other related insights:
On 23 February 2023 Vittorio De Luca took part in the third edition of the Welfare & HR Summit of Il Sole 24 Ore for an in-depth discussion on the anti-offshoring regulation.
To verify the existence of just cause or justified subjective reason for dismissal, the fact that a contractual breach similar to that contested against the dismissed employee, committed by another employee, and assessed differently by the employer is irrelevant. This was the Court of Cassation’s opinion, labour section, order no. 88 of 3 January 2023.
The case examined by the order, originates from a dismissal for just cause of a manager responsible for the risk and credit management department. The manager was charged by the company with failing to apply new credit management rules and disregarding company directives requiring him to wait for the new CEO’s authorisation and organising a meeting of the credit committee without convening the CEO.
The Court of Milan declared the manager’s disciplinary dismissal unlawful and ordered the company to pay him the indemnity in lieu of notice and 15 months’ salary as additional indemnity, plus ancillary expenses.
Partially reforming the first instance ruling, the Court of Appeal of Milan, held that the charges made by the company against the manager in the disciplinary notice were proven and justified the dismissal (although not for “just cause”), since such conduct was considered “inappropriate for his managerial role and could justify the employer’s decision, (which was neither arbitrary nor vexatious), to terminate the relationship, taking into account the manager’s significant strategic tasks.”
While confirming the indemnity in lieu of notice, since the contested facts could not constitute a just cause for dismissal, the local Court ordered the manager to return the additional indemnity.
The manager appealed to the Court of Cassation against the Milan Court of Appeal’s ruling. Among several grounds of appeal, he complained that the Court of Appeal failed to assess the fact that the charges were attributable to the responsibility of others whose conduct was not contested. Considering these facts would have led the Court to believe the dismissal was arbitrary and unlawful.
In explaining the appeal’s groundlessness, the Court of Cassation referred to the legal principle according to which “if a breach of duty by the dismissed employee irreparably compromised the fiduciary relationship, as a rule, a similar breach, committed by another employee, and assessed differently by the employer is irrelevant for just cause or justified reason for dismissal assessment purposes. This fact cannot be subject to review in a court of law if it is free from obvious logical defects (See Court of Cassation ruling no. 14251/2015, no. 10640/2017). This means that the employer exercising disciplinary discretion on differentiated positions cannot be qualified as discriminatory if it is related to specific factual elements.”
In its order no.88 of 3 January 2023, the Supreme Court of Cassation explained the delicate
separation between just cause and justifiability in manager dismissals. The Supreme Court held that for the justifiability of the manager’s dismissal to exist, it is sufficient to prove two of the six disciplinary charges originally contested against the manager. The absence of just cause for dismissal, and the existence of justifiability, entails the manager’s right to receive the indemnity in lieu of notice but not the additional indemnity.
Justifiability and just cause: comparing notions
The employer’s termination of a manager employment relationship differs from other employment relationships, as it falls within the scope of free recidivism. The reason for this is found in the peculiarity of the manager’s role which is close to the employer position and, therefore, the entrepreneur of which the managers are a de facto alter ego. This creates a strong and unique trust bond between employer and manager. The legislator decided not to limit the entrepreneurial choice to terminate the
managerial employment relationship. Collective regulation was added to this regulatory framework
and outlined the notion of “justifiability” for manager dismissals. Case law emphasised that justifiability derives from negotiation and must be interpreted according to the general rules of contractual hermeneutics, including the general principles of good faith and fairness, under Art. 1175 1375 of the Italian Civil Code. Justifiability is distinguished from dismissal reasons under the law, since this is integrated whenever the termination is not arbitrary or vexatious and lacking in appreciable justification (ex multis Court of Cassation ruling no. 23894 of 2/10/2018). In this decision, the distinction between justifiability and just cause for dismissal is relevant. Only the latter legitimises the
summary dismissal, without the employer having to give notice. Art. 2119 of the Italian Civil Code
which governs just cause for termination, provides for the right to terminate the contract before the
expiry, if the contract is fixed term, or without notice if open-ended, “if there is a reason that does not permit the continuation of the relationship, even temporarily”.
Case law on manager dismissals specified that “just cause, which exempts the employer from the obligation to give notice or pay an indemnity in lieu, does not coincide with justifiability. This exempts the employer from the obligation to pay the additional indemnity under collective bargaining, since just cause consists of a fact which, when assessed practically, injures the fiduciary relationship that prevents its continuation, even temporarily” (Cassation Court ruling no. 6110 of 17/3/2014. On this issue see:
Court of Cassation ruling no. 34736 of 30/12/2019; Court of Cassation ruling no. 5671 of 10 April 2012). According to established case law, justifiability is independent and unrelated to the concepts of just cause or justified reason for dismissal; consequently, facts or conduct not constituting just cause or justified reason for dismissal in employment relations may justify the manager’s dismissal, since greater powers presuppose a greater trust and a wider scope of events capable of damaging it (Court of Cassation ruling no. 6950/2019). For dismissal justifiability purposes, any reason may be relevant, provided that it is legally appreciable, capable of upsetting the bond of trust with the employer and capable of excluding dismissal arbitrariness, considering the range of powers granted to the manager – (Court of Cassation ruling no. 27971/2018). Based on the special position held by the manager, the bond of trust could be damaged by inadequacy compared to the company’s expectations, or a significant deviation from the employer’s general directives, or non-work-related conduct affecting the company’s reputation due to the position held by the manager (Court of Cassation ruling no. 2205/2016).
Continue reading the full version published in Modulo 24 Contenzioso Lavoro (Form24 Labour Litigation) of Il Sole 24 Ore.
