Employment Protection in Italy: The Extension of the Prohibition of Dismissal Period

The Italian National Institute of Statistics (ISTAT), in a recent report published in April, brought about a worrying picture of the employment figures in Italy, with particular reference to the health crisis, revealing a dramatic loss of 945,000 units (in terms of those employed) in comparison between February 2021 and February 2020.

In order to tackle such a phenomenon and prevent the worsening of the employment crisis linked to the pandemic and related restrictions on the conduct of business activities, the Italian government intervened as early as March 2020 in a twofold directive, namely (1) declaring the illegitimacy of exercising the faculty of unilateral termination of employment contracts (dismissal) for objective justified reasons; (2) allowing recourse to the so-called Cassa integrazione guadagni (Wages Guarantee Fund), in order to guarantee the replacement (or integration) of remuneration with an indemnity paid by the Istituto Nazionale della Previdenza Sociale (INPS – National Institute for Social Security).

This prohibition has been regulated differently due to the various measures that have been adopted since March 2020, and most recently reformed by the “Aid Decree” (Decree Law no. 73/2021), published in the Official Gazette on May 25th, 2021.

The innovative character of the aforesaid Decree provides the distinction between companies that will no longer need to resort to the Covid-19 Wages Guarantee Fund, which will not be subject to the prohibition of dismissal as of July 1^st, 2021, and those that will continue to resort to the instrument of the Wages Guarantee Fund after July 1^st, committing not to lay off employees until December 31^st, 2021.

In any case, this prohibition only concerns situations of objective justification, by which we may refer to objective situations concerning the company as opposed to the employee, and with the express exclusion of objective situations of definitive termination of the business activity; such as company liquidation, provided that there won’t be continuation of the business activity (even in part) or the conclusion of a company collective agreement with the representative trade unions which may provide incentives for the termination of the relationship or bankruptcy.

Alongside the exclusion of subjective justified reasons (and justified cause), an employer may still impose dismissals for disciplinary reasons, as well as for other subjective reasons that allows for the termination of employment by the relevant laws &  regulations, such as, for example, exceeding the maximum period of respite (i.e., the period of time during which the employee is entitled to keep his job, despite the performance of the service being suspended for reasons inherent to his person, (e.g. illness). In addition, the dismissal of an employee during the probationary period is allowed without stating reasons.

It is shall be of note that dismissals in violation of the prohibition imposed by the Covid-19 regulations are null and void and entail the reinstatement of the employee in the company concerned and condemnation, for the employer, to pay compensation for damages suffered for the period following the dismissal and up to reinstatement as well as the payment of social security contributions for the entire period between dismissal and reinstatement

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