With the recent judgment No. 20284 of 14 July 2023, the Italian Court of Cassation ruled that, even though not specifically provided for in the disciplinary code, breaches by the employee of the fundamental duties underlying the employment relationship are valid grounds for dismissal.
The facts of the case
An employee working as a Level I salesperson was dismissed by the employer company due to his constant failure to meet the production targets periodically set by the company.
The employee challenged the dismissal before the Court, which – by comparing the results achieved by the employee with the targets set by the company schedules – confirmed the unequivocal poor production performance of the worker. Therefore, the Judge hearing the case declared the dismissal to be lawful, classifying it as dismissal for a justified subjective reason.
The worker appealed the ruling before the Rome Court of Appeal, where he argued that the dismissal was unlawful due to the failure to display the disciplinary code in the company.
In this regard, the Court, in upholding the judgment of first instance, held that the failure to display the disciplinary code in the company was irrelevant for the purposes of determining the nature of the dismissal, since the worker was charged with negligent and inexperienced failure to fulfil his obligations under the employment contract, and that the dismissal was based on the worker’s poor production performance resulting from his constant failure to comply with the work schedules previously established.
For the Court, moreover, for the purposes of assessing the seriousness of the misconduct, previous disciplinary records that indicate the worker’s repeated offences must also be taken into account.
The worker therefore challenged the judgment of the Court of Appeal before the Italian Court of Cassation.
The decision of the Italian Court of Cassation
When confronted with the issue, the Italian Court of Cassation confirmed the rulings of the lower courts on the lawfulness of the dismissal.
First of all, the Judges of the Italian Court of Cassation reiterate that the power to terminate the employment contract in the event of significant breach of contractual obligations stems directly from the law (Article 3 of Italian Law No. 604 of 1966) and does not require, in order for it to be lawfully exercised, a detailed provision, in the collective bargaining agreement or in the company disciplinary regulations, of every possible instance of conduct constituting the above requirement. Indeed, it is for the judge to verify, if the lawfulness of the termination is contested, whether the alleged incidents constitute a legal case of non-performance.
For this reason, continues the Court, even if not specifically provided for by the contractual provisions, serious breaches of the fundamental duties associated with the employment relationship constitute grounds for valid notice of withdrawal; in particular, those duties that underpin the existence of the employment relationship, such as the duties imposed by Articles 2104 and 2105 of the Italian Civil Code (obligations of diligence and loyalty) as well as those deriving from company policies.
Therefore, according to the Italian Court of Cassation, with regard to disciplinary sanctions, a distinction must be made between offences relating to the breach of specific rules concerning company organisation and production methods, which can only be recognised insofar as they are expressly provided for, and offences relating to conduct that is manifestly contrary to the duties of workers and the interests of the company, for which specific inclusion in the disciplinary code is not required.
With regard to the disciplinary code, the judges reiterate that it must, in any event, be drafted in such a manner as to make the cases of infringement clear, although by providing an outline and not a detailed description, and to indicate the corresponding penalties, albeit in a general manner and which can be adapted based on the actual and specific non-compliance.
Ultimately, therefore, the aforementioned judgments uphold the lawfulness of the employer’s termination of employment even where the alleged breach of contract does not constitute a case that is expressly set out in the company’s disciplinary code or in the national collective bargaining agreement, but takes place by infringing the duties underlying the employment relationship.
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By order No. 12241 of 9th May, the Labour Division of the Court of Cassation decided on the validity of disciplinary termination of an employee of an IT company who had refused to further study certain operating systems and to update the programmes used by a client. In the case at hand, the judge of the merits had found that the worker had refused to take the training as directed by his immediate supervisor, although the participation in the professional development courses would not have caused him to bear any expenses, use leave days or sacrifice his free time. The passivity and non-cooperation of the employee was also ascertained, in that he had refused to update operating systems at a client’s premises. On these grounds, the Court of Cassation held that the company had lawfully communicated the disciplinary dismissal with prior notice; in the Court’s view, the worker’s behaviour amounted to serious insubordination, as it was in clear contrast with the duty of diligence, to be understood, in the case at hand, as also referred to the professional development required for employee profitability.
Poor performance consists of a failure by an employee to fulfil their principal obligation, i.e. to perform their work, and is, according to the majority legal opinion, a subjective justification for dismissal. Recently, the Court of Cassation, Labour Section, in judgment no. 1584 of 19 January ult., reiterated that, in order to legitimately dismiss an employee for poor performance, the simultaneous existence of two prerequisites is required, the burden of proof of which falls on the employer: (i) on an objective level, there must be an enormous disproportion between the objectives set for the employee and what the employee actually achieves compared to the overall results with reference to an average of activities among the various employees assigned to the same job; (ii) on a subjective level, the attributability of said disproportion to the employee, i.e. to the employee’s negligent conduct that is not attributable to the employer’s organisation of the work. According to the aforementioned judgment, moreover, “poor performance cannot in itself be proved by the employee’s multiple disciplinary records already sanctioned in the past (ed. with cautionary sanctions), because this would constitute an indirect substantial duplication of the effects of conduct already concluded”.
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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