Judgment no. 26170 of 25 September 2025, issued by the Italian Supreme Court – Labor Division – falls within a well-established line of case law concerning co-employment (i.e. “codatorialità”) within corporate groups. With this ruling, the Court reiterates the principles for identifying a single employer within multiple formally distinct companies that are nonetheless linked by an economic and functional connection. The decision clarifies that co-employment does not necessarily require evidence of fraudulent corporate fragmentation and may arise even in the context of “genuine” corporate groups.
The core issue lies in determining whether there is such a degree of integration between the companies’ activities and such promiscuous use of the employee’s work that the employment relationship must be attributed to all entities that effectively exercise employer authority, resulting in joint and several liability (i.e. “responsabilità solidale”) for the obligations arising therefrom.
The dispute originated from a claim brought by an employee who was formally hired by one company but worked as a team leader in the call center of another entity within the same group. Following her dismissal as part of a collective redundancy procedure, the employee filed a claim before the Court of Rome, seeking a declaration of unlawful outsourcing of labor or, alternatively, of an unlawful corporate fragmentation. She sought recognition of an open-ended employment relationship with the company that had benefited from her work (the “substantial employer”).
The Court of Rome initially rejected the claim, upholding an objection based on external res judicata, arising from an earlier decision (not appealed) that had declared the collective dismissal unlawful and ordered her reinstatement with the formal employer.
The Court of Appeal of Rome, while amending the reasoning of the first-instance judgment, dismissed the appeal on the merits. The appellate court found that the employee had not demonstrated the necessary conditions for co-employment, such as a unified corporate interest based on fraudulent intent, pervasive interference eliminating corporate autonomy, or promiscuous use of the workforce. The employee then appealed to the Supreme Court.
The Supreme Court held the second ground of appeal to be well-founded, concerning incorrect application of the legal rules governing corporate groups and the identification of a single employer.
Recalling its established case law, the Court reaffirmed that an economic and functional link between companies – for the purposes of identifying a single employer – exists where specific conditions are met:
a) a unified organisational and productive structure;
b) integration between the activities of the various companies and a corresponding common interest;
c) technical, administrative and financial coordination that identifies a single directing entity guiding the companies’ activities towards a common objective;
d) concurrent use of the employee’s work by multiple companies, meaning that work is performed in an undifferentiated and simultaneous manner for the benefit of several entities.
The Court emphasised that recent case law has removed the requirement of proving fraudulent intent: co-employment may arise even in “genuine” and highly integrated corporate groups. Where promiscuous use of the workforce is established, the companies involved may be considered joint employers of the same employee. This entails the application of the framework of complex subjective obligations, with joint and several liability pursuant to Article 1294 of the Italian Civil Code.
The Supreme Court found that the Court of Appeal had incorrectly classified the facts, failing to adequately assess the indices of integration between the companies and the promiscuous use of the employee’s work – both key elements in establishing co-employment. The judgment was therefore quashed and remanded to the Court of Appeal of Rome, in a different composition, for a new assessment consistent with the principles set out by the Supreme Court.
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The comparison between redundant employees can be limited only to employees of a unit or sector, subject to their ability, due to previous employment in other company departments, to perform the jobs of other colleagues – Employees bear the burden proof of showing that the various duties are interchangeable.
The Italian Court of Cassation, in order No 9128 of 31 March 2023, established that, in relation to collective redundancies due to staff reductions, where the restructuring of the company affects a specific production unit or sector, the comparison between redundant workers can be limited only to employees of that unit or sector, subject to their ability, due to previous employment in other company departments, to perform the jobs of other colleagues. Employees bear the burden proof of showing that the various duties are interchangeable.
In this context, the Court of Cassation continues, the burden falls on the employer to prove the circumstances justifying the narrower scope of the decision that was made, in addition to showing that the chosen workers are not interchangeable with the employees assigned to other departments or offices.
The ruling of the Court of Cassation originates from the dismissal of an employee following a collective dismissal procedure, which was held to be lawful at first instance by the Court of Cassino.
Repealing the first instance judgment, the Court of Appeal of Rome accepted the appeal presented by the employee. The Court of Appeal ascertained that, during the aforementioned collective dismissal procedure, the employer company had breached the selection criteria under Article 5, Italian Law No 223/1991 for not having considered, in deciding which employees to be dismissed, the employee’s previous professional experience in other departments not involved in the corporate reorganisation.
Based on the findings of fact and law, the Court of Appeal of Rome, with judgment No 2287 of 28 October 2020, accepted the employee’s complaint. The Court ordered the employer to reinstate the employee and pay compensation equal to the overall actual remuneration from the day of the dismissal until that of reinstatement, for a period not exceeding 12 months.
The employer company filed an appeal against the decision taken by the Court of Appeal of Rome, which the employee resisted with a counter-appeal.
Specifically, the company alleged, among other things, the breach and misapplication of Articles 4 and 5 of Italian Law No 223/1991 and the rule on the distribution of the burden of proof under Article 2697 of the Italian Civil Code and Article 115 of the Italian Code of Civil Procedure. The company argued that the Court of Appeal of Rome had erred in upholding the unlawfulness of the dismissal on the grounds that the employer had limited its consideration of the employee’s job to a single business unit, also given the lack of evidence on the employee’s actual duties in other departments.
Nevertheless, the Court of Cassation held the company’s complaints to be unfounded. The Court highlighted how the Court of Appeal of Rome had complied with a principle widely established in case law (Court of Cassation, Employment Division, judgments No 18190/2016 and No 2284/2018) according to which, in the event of collective dismissal that concerns a specific production unit or sector, the comparison of the employees to be made redundant can be limited to the personnel assigned to that unit or sector. This is, however, on condition that the employees of the department to be abolished, due to their career history, are not capable of performing the jobs of colleagues in departments or sectors of the company not involved in the reorganisation.
In terms of proof, the Court of Cassation judges reaffirmed the principle, already expressed in previous Court of Cassation case law (Court of Cassation, Employment Division, judgments No 8474/2005, No 13783/2006, No 33889/2022, No 203/2015, No 19105/2017 and No 15953/2021), according to which the burden proof of proving the interchangeable nature of the various duties is on the employees, while the burden is on the employer to prove
a) the circumstances that justify the narrower business context in which to make the choice of the employees to be dismissed and
b) that the employees did not carry out duties that were interchangeable with those of colleagues from other departments.
The full version of this article can be accessed at Norme e Tributi Plus Law of Il Sole 24 Ore.
On 23 September, Decree Law 144/2022 ( Aiuti-ter (Aid ter) decree) was published on the Official Gazette. The Decree introduced significant changes which benefit workers and established new and different allowances for employees, self-employed workers and other categories. This is additional to the provisions of the Aiuti (Aid) decree (Decree Law 50/2022) and modifies the rules introduced by the Budget Law 2022 on production termination of large companies.
Among the many important changes introduced by the aiuti-ter decree, relocations are the most significant.
Budget Law 2022 (Law no. 234 of December 2021), introduced a new and complex procedure into our legal system, for companies with at least 250 workers. This preserves the employment and production fabric. During business termination or reduction, the employers must initiate a consultation procedure and submit and discuss a plan for limiting the employment and financial fallout, with trade union representatives, the involved regions, Ministry of Labour, Ministry of Economic Development and ANPAL.
With the entry into force of the aiuti-ter decree, the government made some restrictive changes to the budget law procedure. The decree requires the reimbursement of public subsidies, grants, and financial aids or advantages by the beneficiary production plants which terminate or downsize their business.
Decree changes analysis.
The “relocation” procedure timeframes were extended.
The period following the consultation procedure commencement was doubled (from 90 to 180 days). During this period any dismissal notified by the employer is null and void.
The period during which the employer and trade unions, regions, ministries of labour and economic development, and ANPAL must discuss the above plan was quadrupled (from 30 to 120 days).
A provision contained in the original rule was removed. This stated that, if a collective dismissal procedure was initiated following the failure to sign the plan, the ordinary duration of the mandatory consultation would have been reduced from 75 to 30 days. With the aiuti-ter decree, any collective dismissal procedure under Law no. 223/91 must be followed.
The penalty for the increased dismissal tax is raised by 500 per cent if the trade unions do not sign the plan.
The regulation introduced an obligation to repay public subsidies received in the previous ten years by production plants subject to layoffs or downsizing and calculated proportionally to the staff reduction percentage. The provision applies if the staff reduction is more than 40 per cent of personnel employed on average in the last year, nationally or locally, or in the department subject to relocation or closure.
The Court of Cassation with its order no. 1242 of 17 January 2022, ruled on the limitation, to a certain department, of the range of employees to dismiss for a collective procedure, setting out the requirements so that such limitation can be considered lawful.
The event originated from a collective dismissal procedure started by a company for structural purposes following the need for a renewal of the company strategies aimed at remaining competitive on the market. Even if the communication regarding start of the procedure referred exclusively to restructuring needs of the entire company complex, the company limited application of the selection criteria to employees of certain offices.
Faced with an employee’s challenge of the dismissal, the judges of Naples, in the first and second instance, called the dismissal unlawful due to violation of the selection criteria, with consequent sentencing the employer to reinstate the employee and payment in his favour of a medio tempore remuneration matured, with the limit of 12 months in application of art. 18, paragraph 4 of the Workers’ Statute.
Objecting to the Territorial Court ruling, the company appealed to the Court of Cassation alleging, on one side, violation of articles 4 and 5 of Law 223/1991 with reference to the declared unlawfulness of the limit of the range of dismissals to certain units or departments and, on the other hand, the violation of art. 18 of the Workers’ Statute.for having been sentenced to reinstatement of the employee.
With in-depth reasoning, the Court rejected the appeal submitted by the company, stating that the limitation of the employees to dismiss, to be valid, presumes that the employer, in the communication as per art. 4, paragraph 3, of law 223/1991, indicates both the reasons based on which the dismissals are limited in a certain unit or specific sector, and the reasons for which it does not believe to get around the dismissals with the transfer to nearby production units.
The general rule, according to which the workers to dismiss must be identified in the company complex, does not hinder, per se, limiting the range of the involved workers to a certain sector or department. To this end, the Court explained, it is nonetheless necessary that (i) the technical-production requirements be accurately indicated in the communication to start a collective dismissal procedure and (ii) the employer provides proof of the reasons that justify performing the selection within the confines of a narrower area.
The specification in the communication required by art. 4 and aimed so that (i) trade unions are able to verify that there is an adequate causal nexus in the reasons that determine the surplus of personnel and employees being dismissed and (ii) limitation of the range of workers, the dismissal measure was aimed at, is the result of effective organisational needs and reason for the reduction of personnel, adequately described in the same communication and in relation to which there must be consistent compliance.
Furthermore, the Court of Cassation, explained that in the selection of subjects to involve in a collective dismissal – for the purposes of excluding from the comparison workers with equivalent professional capacity assigned to production units not closed and located in the nation – the circumstance that to keep a worker on the job of the closed office it would be necessary to transfer him to another office with higher costs for the company, has no relevance.
To this end the Court found that article 5 of Law 223/1991 in establishing the parameter for identifying the workers to dismiss, reference is not made to occurrence of additional costs nor territorial location of offices.
Lastly, with reference to the consequences connected with the declared unlawfulness, the Supreme Court, referring to previous case law, reiterated how, in the case in hand, there was not a mere procedural violation related to the incomplete communication required by law. According to the Court in this case there was a substantial violation, represented by application of selection criteria to a range of employees to dismiss unlawfully limited compared to the entire company complex, with consequent application of the protection envisaged by article 18, paragraph 4 of the Workers’ Statute.
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The Supreme Court of Cassation, in its Order no. 17051, published on 16 June 2021, stated that if a dismissal is declared unlawful, the aliunde perceptum resulting from a work compatible with that carried out in favour of the employer ordered to reinstate the employee should not be deducted from the appropriate compensation.
Facts of the case
The case is based on a local court’s ruling, upheld by the Court of Appeal, regarding the legitimacy of a dismissal, a reinstatement order to the employer and compensation payment.
The second instance ruling was overturned by the Court of Cassation concerning the employer’s objection to the aliunde perceptum and referred the case back to the Court of Appeal.
In the Judicial review, the Court of Appeal considered that the documents produced by the employer were insufficient to prove that the employee had worked as an employee of another company after his dismissal.
Following an order to produce suitable documentation under Art. 210 of the Civil Procedure Code, it appeared that the employee had carried out a self-employed activity before his dismissal.
From this assumption, the Court of Appeal deduced that the extra work and the work carried out for the employer were compatible with each other, thus rejecting the employer’s objection regarding the aliunde perceptum.
The employer appealed to the Court of Cassation, complaining that the Court of Appeal’s decision was based on a new circumstance (i.e., carrying out additional work prior to the dismissal) and claiming the violation of the rules on presumptive reasoning.
The Supreme Court of Cassation’s ruling
Leaving aside the purely procedural aspects dealt with by the Court of Cassation, it confirmed the decision of the Court of Appeal concerning the non-deductibility of the aliunde perceptum in this case.
The Supreme Court, citing similar cases, stated: “In terms of individual dismissal, the compensation for employment or self-employment – which the employee receives during the period between their dismissal and the annulment ruling (the intermediate period) – does not involve the corresponding reduction of damages for unlawful dismissal, if that work is compatible with the simultaneous continuation of the work which was suspended following dismissal. In this case, the work was carried out alongside the work which was suspended prior to dismissal.”
In this case, the Court of Cassation did not find any fault with the presumptive reasoning followed by the Court of Appeal in reaching its decision. This is because “in evidence by presumption, under Articles 2727 and 2729 of the Civil Code, it is not necessary for there to be a link of absolute and exclusive causal necessity between the known fact and the unknown fact. It is sufficient that the unknown fact can be unequivocally inferred from the known fact, according to a judgement of probability based on id quod plerumque accidit.”
The Court of Cassation explained that, with adequate and logical reasoning, the local Court pointed out that the self-employed service provided by the employee dated back to when he was already working for the employer who had dismissed him and it was simultaneous.
According to the Court of Cassation, it follows that, since the two activities carried out were compatible, the remuneration for the extra-work should not have been considered for any aliunde perceptum relevant to the compensation aspects of the unlawful dismissal.
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