Manager does not take up his duties: penalty clause in letter of appointment is valid

In its recent judgment of 21 March 2023, the Court of Forlì confirmed the lawfulness of a penalty clause in a letter of employment if the worker does not take up employment on the start date agreed upon by the parties, even when the employment is subject to a probationary period.

The facts of the case

A company entered into a letter of employment with a manager subject to a six-month probationary period. The letter of employment contained the following clause: ‘If you do not take up actual service on the scheduled date of 15 October 2020, on your own initiative and/or for any reason attributable to you, you will be required to pay our Company, by way of a penalty, a sum corresponding to the indemnity in lieu of notice provided for in the event of dismissal under the applicable Collective Bargaining Agreement. Payment to our company must be made no later than 10 days after the occurrence of the breach of the agreed date of service. In this event, this contract shall be considered definitively and automatically terminated.’

Approximately one month before the scheduled starting date, the manager informed the Company of his intention not to take up his employment.

The Company applied for an injunction before the Court of Forlì, which granted the application and issued an injunction for the amount of the penalty agreed upon by the parties.

The manager lodged an objection against the injunction on the following grounds:

1. the manager’s communication that he did not wish to take up the employment should be classified as a withdrawal notice of the contract of employment and the relevant withdrawal was to be regarded as free of any consequences, since the contract provided for a probationary period, during which the regime of free withdrawal under Article 2096 of the Italian Civil Code applied;
2. the manager had given sufficient notice of his decision to avoid actual prejudice to the company. The absence of damage on the part of the company should have resulted, according to the manager’s defence representatives, in the absence of the right to payment of the penalty or, in the alternative, in its equitable reduction under Article 1384 of the Italian Civil Code.

The judgment of the Court of Forlì

The Employment Judge of Forlì, in rejecting the manager’s opposition, upheld the injunction issued.

The Court based its reasoning on the difference between entering into the contract and the commencement of the relationship, identifying the latter as relevant to be able to invoke the special regime of free withdrawal provided for the probationary period.

In fact the provisions of Article 2096 of the Italian Civil Code only come into effect with the actual taking up of employment and on condition that the parties have consented to the probation period, which, in the present case, had not occurred due to the manager’s refusal. This refusal could therefore not be classified as a withdrawal during the probation period but as a breach of the obligation to start work on the agreed date.

On the basis of these considerations, the Judge therefore held that the objection of incompatibility of the penalty with the agreed probationary period provision was unfounded. The two provisions, in fact, ‘have different subject matters and objectives and, in the present case, are intended to protect two different moments of the employment relationship’.

The Judge then held that the timeliness of the manager’s communication of his reconsideration was irrelevant because it was ‘invoked by a contractual party who is in any event in breach of contract and who is bound as such to compensate the damage attributable to him’.

Finally, with reference to the quantification of the penalty, the Court also disregarded the request for equitable reduction under Article 1384 of the Italian Civil Code, which had been advanced in the alternative by the manager. The Court pointed out that the penalty was not excessive either at the time of the agreement or at the date of the breach, the company having demonstrated that it had incurred significant costs to cope with the organisational impact caused by the vacancy in a strategic role (Administrative Director).

Other related insights:

Termination during the probationary period is null during dismissal prohibition if based on a need to reduce costs

Termination of the probation period: cases of lawfulness