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Ban on dismissals owing to redundancy

Angelo Zambelli, Grimaldi Studio Legale

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General overview

In order to keep the employment rate the same as before the spread of the covid-19 pandemic, a prohibition on dismissals relying on either collective or individual redundancy being served applies in Italy.

The term of such ban, which – at first – had been effective for a 60-day period running from 17 March 2020, has been extended from time to time: so far, this is effective until 30 June 2021 for the most of employers, while it applies until 31 October 2021 for the others.

Indeed, over such a term, employers are prevented from either triggering “new” collective redundancy procedures or serving dismissals for individual redundancy, while collective redundancy procedures started after 23 February 2020 which were not ended yet as at 17 March 2020 have been temporarily suspended, as those procedures before the Labour Office which must be triggered in advance by “big” companies to validly serve dismissals for individual redundancy to employees hired before 7 March 2015.

Dismissals served in breach of such prohibition qualify as null and void, thus being the employer (regardless the number of employees with whom it is staffed) ordered to reinstate the relevant employees in their previous position – or, at their own choice, to pay them an indemnity in lieu of reinstatement amounting to 15 months of total compensation – and pay them an indemnity equal to those salaries which would have been accrued as of the dismissal date until the date of actual reinstatement, plus social security charges hereof.

This prohibition is counterbalanced by the so-called “covid-19 emergency furlough”, from which employers are allowed to benefit over the period as of 23 February 2020 until 30 June 2021 (or 31 December 2021, as far as employers meeting certain requirements are concerned; namely, those to which the ban on dismissals applies until 31 October 2021).

Indeed, most employers (namely, the ones with respect to which both the “covid-19 emergency furlough” and the prohibition of dismissals apply until 30 June 2021) are entitled to make recourse to this “extraordinary” social shock absorber for a maximum of overall 67 weeks, thus not incurring additional costs for 52 weeks or, where they have had a reduction in revenues exceeding certain statutory thresholds, for the entire 67-week period.

Otherwise that happens in other countries, employees – during the entire term of such “covid-19 emergency furlough” – are paid an allowance on charge of the Italian National Social Security Authority.

The scope of the prohibition of dismissals for individual redundancy

Individual dismissals not owing to redundancy

As far as the ban on individual dismissals is concerned, since the statutory provisions limit its scope exclusively to dismissals for individual redundancy, employers – also during its term – are permitted to validly serve both dismissals relying on disciplinary reasons (either those with immediate effect or the ones with notice) as well as those owing to the maximum sick term under the applicable national collective bargaining agreement having been exceeded (the so-called “periodo di comporto”).

As falling out the scope of the ban, the Labour Court of Trento (ruling issued on 21 January 2021) has declared the fairness of the dismissal for cause served to an employee who had been absent from work for a 14-day period as quarantined: according to such Court, indeed, the seriousness of the employee’s breach was as such as to ground her dismissal with immediate effect since – when she had decided to go on holidays in a foreign country – she was aware that, once back in Italy, she would have been prevented from going to work over the quarantine term.

Dismissals owing to the relevant employee’s physical unsuitability

Conflicts among scholars have arisen with respect to those dismissals owing to the relevant employee’s physical unsuitability.

Indeed, according to some out of them, these should be permitted to being served as falling out the scope of the prohibition, as identified by the target which the prohibition itself is aimed at achieving.

In other words, as this target is that to avoid those dismissals in which the individual redundancy qualifies as a direct consequence of the temporary closures established by the Italian government to avoid covid-19 infections from spreading or, more in general, of the decrease in the employers’ revenues following to the drop in consumption due to the spread of the pandemic in Italy, individual dismissals owing to the relevant employee’s physical unsuitability would be allowed as relying on a reason other than such ones.

Otherwise, according to other scholars, also dismissals owing to the relevant employee’s physical unsuitability should be prohibited as they are to be included in the “general” category of dismissals for individual redundancy since these, likewise that happens in case of dismissals for individual redundancy owing to economic grounds, may be legitimately served by the employer only where – as at the dismissal date – there are no other positions within the employer’s organizational structure which may be assigned to the relevant employee in order to avoid the termination of the employment relationship.

This second opinion is that concurred by the Labour Court of Ravenna: indeed, according to the ruling issued by such court on 7 January 2021 (which, to our knowledge, is the sole case-law precedent as to this issue), also such kind of dismissals is prevented from being served over the term of the prohibition as the assessment about the existence of vacant positions is adversely impacted since the employer’s organizational structure is deeply changed due to the economic crisis arising from the spread of covid-19 pandemic and would be as such as long as this pandemic is still ongoing.

Employees “protected” by the ban

Moreover, the ban at issue should not apply to such categories of employees whose employment relationship is not governed by the “general” regulations on dismissals which are expressly recalled by the statutory provisions establishing such prohibition: therefore – based on the latter’s literal wording – executive status employees, apprentices (in case of dismissal at the end of the training period), those employees who meet age requirements for retirement, house-workers as well as professional athletes might be legitimately dismissed also during the term of the ban.

However, the Labour Court of Rome – in breach of the literal wording of the above statutory provisions – has (surprisingly) declared the invalidity of the dismissal served to an executive, thus ordering the employer to reinstate him and pay him that indemnity seen above, upon the legal argument that his dismissal had been served in breach of the statutory prohibition.

Indeed, according to the ruling issued on 26 February 2021 by such court, reference made by statutory provisions setting forth the ban to the “general” regulations governing dismissals is meant to identify those dismissals which fall within its scope (namely, all those arising from an individual redundancy) but not to also identify the categories of employees who are “protected” by the same ban: therefore, any employees are prevented from being dismissed for individual redundancy, whether or not their employment relationship is governed by “general” regulations on dismissals (as executives).

Statutory exceptions from the ban

As per amendments to the statutory provisions effective starting from 15 August 2020, this prohibition does not apply in case of shutdown of the business following the subjection of the employer to the winding-up or to the bankruptcy procedure (where the business is not carried out over the term of the winding-up/bankruptcy procedure, neither on a temporary basis) as well as in the event that a company-level collective agreement providing for the mutual termination of the employment relationship with the payment of an incentive to leave is executed, with respect to those employees who voluntarily adhere to the above collective agreement.

On 11 November 2021, the Labour Court of Mantova has declared the invalidity of the dismissal for individual redundancy served to an employee upon the ground that the shop at which she was employed would have been shut down since the employer did not demonstrate the actual shutdown of such shop as it has not filed with any defences in the relevant proceedings.

It seems that such prohibition breaches even more significantly section 3 of the Italian Constitution providing for the reasonableness criterion.

 

Potential breach of provisions under the Italian Constitution

As the ban on dismissals for both collective and individual redundancy – due to the several extensions of its term from time to time enacted by the Italian government – has been effective for more than one year, several scholars have been led to allege the breach of rights and freedoms under the Italian Constitution and, in particular, section 41 hereof, whereby “private economic enterprise is free”.

However, it seems that such prohibition breaches even more significantly section 3 of the Italian Constitution providing for the reasonableness criterion.

On the one hand, albeit this ban – as seen above – is aimed at keeping the employment rate the same as that in 2019, it is likely that this is not as such as to actually prevent the increase of unemployed workers in Italy (or would even be the reason for an increase in their number).

Indeed, since employers – as long as the prohibition is effective – are prevented from implementing any restructuring plans which may result in redundancies, albeit the current economic scenario would require them all (with very few exceptions) to implement deep reorganization processes of their structures, the risk exists that – once the ban is over – the organisational measures which employers will have to adopt would be significantly more substantial than those they would have implemented in the absence of the prohibition and, therefore, the overall number of employees who will be actually dismissed would be significantly higher than the one of those who would have been dismissed if the same ban was not established.

In addition, despite the prohibition is still effective, the overall number of unemployed workers in Italy has significantly increased in 2020: indeed, 444,000 jobs have been lost during such year and the employment rate is decreased by 1.9% with respect to the previous one.

Reasons for these figures may be identified in the fact that the ban at stake only applies to employees hired under a “regular” open-term contract, so employers have been permitted (and in some ways “obliged”, in order to face the current economic crisis) to make a massive recourse to terminations of the so-called “flexible” contractual patterns (independent contractors agreements, contracts with self-employees, etc.) and not to renew fixed-term employment contracts or extend their term upon its expiry: moreover, this has mainly affected young workers and female employees, namely those categories of workers who had more difficulties in accessing the labour market also before the spread of covid-19 pandemic in Italy.

On the other hand, the breach of the reasonableness criterion seems to arise from the fact that this prohibition represents a “general” ban, which prevents any kinds of dismissal for individual or collective redundancy, regardless those reasons actually grounding each dismissal and, therefore, the existence of an actual link with the current covid-19 pandemic.

Indeed, the (wide) category of dismissals for redundancy includes several cases in which the redundancy does not qualify as a direct consequence of the spread of the covid-19 pandemic in Italy, in which the employer is nonetheless prohibited from serving the dismissal: reference is made, among others, to those collective redundancies procedures which have been retroactively suspended on 17 March 2020, albeit these had been triggered weeks before such date, or individual dismissals for professional unsuitability (for example, termination of the employment relationship of a security guard as his/her firearms licence has been revoked).

Final remarks

Albeit the target which the ban on dismissals for redundancy is aimed at achieving is more than praiseworthy, it seems that this measure is rather inappropriate to reach such target: moreover, social shock absorbers – and, therefore, public funds – have been spread too thinly and freedoms granted by the Italian Constitution have been restricted too widely, this showing a tunnel vision of the labour market by the Italian government.

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