Italian Court of Cassation: transfer of an illegitimate business branch, previous damages only with formal notice

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.

Other related insights:

 The Court of Cassation rules on business branch transfers

Contract term ineffectiveness if there is a company transfer