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The applicable guarantees in the event of unlawful dismissal in the light of the judgment of the Constitutional Court (Il Commerci@lista, Lavoro e Previdenza January/February 2019, Vittorio De Luca – Stefania Raviele)

The grounds of judgment no. 194/2018 – lodged on 9 November – were published in the Official Gazette no. 45 last 14 November 2018. In this judgment, the Constitutional Court ruled that Article 3 (1), Legislative Decree no. 23 of 4 March 2015, is constitutionally illegitimate, limitedly to the words “in the amount equal to two monthly pays of the last salary used for the calculation of the severance indemnity pay for each year of employment.”

The issue of constitutionality had been raised by Order of 26 July 2017, Court of Rome, III Labour Division, within the context of a dispute started by a woman who had been hired on 11 May 2015 and dismissed 7 months later on grounds of organizational rearrangement, with a brief explanation. Within the aforementioned proceedings, the Company was tried in its absence; at the time of its decision, the Court of Rome remarked that had the petitioner been hired before the entry into force of Legislative Decree 23/2015, she would have qualified for the guarantees under Article 18, Law no. 300/1970, “in the event of lack of objective cause (defined as a lack of justification, clear inexistence of the fact at the basis of the dismissal), which cross-references paragraphs 4 and 5, depending on the severity of the fault” or the guarantee under paragraph 6 “in the event of lack of ground”. The provisions applicable to the case at hand required instead the payment of a compensatory allowance determined only based on the seniority of the worker.

The Court therefore raised the issue of the constitutional legitimacy of Article 1 (7), c) of Law no. 183 of 10 December 2014, and of Articles 2, 3 and 4 of Legislative Decree no. 23 of 4 March 2015, in regard to Articles 3, 4 (1), 35 (1), 76 and 117 (1), of the Constitution – the last two articles in relation to Article 30 of the Charter of Fundamental Rights of the European Union (CFR), the Termination of Employment Convention, 1982 (no. 158) adopted by the International Labor Organization (ILO), and Article 24 of the European Social Charter. Having declared that many other grounds of opposition were inadmissible, and having reviewed previous case-law on the calculation of damage caused by unlawful dismissal, the Constitutional Court remarked, in brief, that the main novelty of the so-called “progressive entitlement employment contract”, i.e., the determination of the indemnity due in the event of unlawful termination of employment only on the basis of seniority, should be considered unconstitutional, as it is opposed to the principles of equality and reasonableness.

More in detail, according to the Constitutional Court, the mechanism for quantifying the compensation due under Italian Legislative Decree 23/2015, even in the wording amended by the Dignity Decree, provides for a “rigid indemnity, since it is not graduated according to any parameters other than length of service, and makes it the same for all workers. The indemnity thus takes on the characteristics of a standardised, lump-sum payment… to compensate the worker’s loss deriving from his/her unjustified dismissal from an open-term job”. In this respect, therefore, this piece of law clashes with the principle of equality, in that it originates an unjustified standardization of different situations, as it sets forth “a homogeneous compensatory reimbursement, irrespective of the peculiarities and diversity of the facts concerned with the termination of employment by the employers, thus disregarding the need to personalize the damage suffered by the worker.”

Furthermore, according to the Court, the indemnification criterion introduced by the Jobs Act, including its formulation modified by the Dignity Decree, stands in contrast to the principle of reasonableness, as a two-month indemnity is not enough to guarantee “adequate remedy of the concrete damage suffered” by the dismissed worker, nor can it be considered adequate to dissuade an employer determined to “unlawfully dismiss a worker.” In the opinion of the Constitutional Court, the calculation of the amount of damages due to unlawfully dismissed workers must, therefore, without prejudice to the limits provided for by law, also take account of other criteria, such as those “which can be systematically inferred from the evolution of the limitational rules on dismissals (number of employees, size of the business, conduct and conditions of the parties).

The effect of the judgment at hand was that of completely demeaning the innovative step of the progressive entitlement employment contract introduced by the Renzi government. As an effect of the declared unconstitutionality, the discretion of the judges now has ample room also in relation to the dismissal of workers hired after 7 March 2015 and shall be exercised – as maintained by the Court – “in observance of the limitations” – which, as an effect of the Dignity Decree today are equal to a minimum of 6 monthly pays and maximum of 36 monthly pays – “keeping into account not only seniority, but also the other criteria.”

Even though this is not a so-called “additive” judgment, it is certainly undeniable that the criteria indicated by the Constitutional Court will be the same as those at the basis of the lower-court decisions in quantifying damage.

Therefore, at present, apart from the cases of invalid termination of employment, the discretion of the judges will be the essential element in the calculation of damage payable to the workers in the event of unlawful dismissal, the only difference being that the hiring of a worker after the entry into force of the Jobs Act can even result – in certain cases – in damage equal to 36 monthly pays of the last salary used to calculate the severance indemnity pay; i.e., more than the 24 monthly pays of the last total salary due to a worker hired before 7 March 2015, who qualifies for application of Article 18 of Law no. 300/1970. For the employers who fulfil the size requirement referred to in Article 18 (8), Law no. 300/1970, the risk related to legal proceedings in the event of dismissal, in fact, varies on the basis of, first of all, the date of hiring of the employee and the infringement ascertained in the course of proceedings, and, secondly, of the discretion of the appointed judge.

Therefore, for example, in the event of unlawful dismissal due to clear inexistence of objective cause for dismissal, for the workers hired before 7 March 2015 – and therefore subjected to the provisions of Article 18, Law no. 300/1970 – the so-called mitigated real guarantees set forth in Article 18 (4), Law no. 300/1970, shall apply. The same type of infringement established in relation to a worker hired after 7 March 2015 will result instead in the payment of an indemnity in the range of minimum 6 and maximum 36 monthly pays, with no room for judgments ruling the mandatory reinstatement of the worker.

On the contrary, the provisions referred to in Legislative Decree no. 23/2015 may be more favourable if the Court establishes that there is a lack of justified objective reason. In this case, in fact, the calculation of damage would be determined at the discretion of the Court seized, however, within very different limitations. In case of workers subjected to Article 18, Law no. 300/1970, damage would be determined in the range of minimum 12 and maximum 24 monthly pays of the total salary based on: (i) the seniority of the worker; (ii) the number of employees; (iii) the size of the economic activity; (iv) behaviour and (v) conditions of the parties. In the event of workers subjected to Legislative Decree no. 23/2015, the damage would be determined – based on the same criteria – in the range of minimum 6 and maximum 36 monthly pays of the last salary used to calculate the severance indemnity pay.

Moreover, it should be remarked that the Constitutional Court solely ruled on the consequences of Article 3 (1), Legislative Decree no. 23/2015, without ruling on the same provision contained in Article 4, Legislative Decree no. 32/2015, which sets forth, in regard to the indemnity due in the event of formal inconsistencies of dismissal: “… one monthly pay… for each year of employment, equal to at least 2 and at the most 12 monthly pays.” Even though this provision has not been accused of being constitutionally illegitimate, it is logical to believe that in a court of law it will be constitutionally construed with ample room for the discretionary power of the judges in the calculation of damage even in the presence of formal inconsistencies.

It is finally blatantly clear that the judgment at hand, consistently with the modification of the Jobs Act introduced by the Dignity Decree, sensibly alters the scenario of the risk related to legal proceedings linked to the unlawful termination of employment, given that, as a matter of fact, the guarantees afforded by Legislative Decree no. 23/2015 can no longer be considered more “convenient – strictly from the employers’ standpoint – than those afforded by Article 18, Law no. 300/1970, as amended by Law no. 92/2012.