Executives Can Be Terminated Without Any Reason Being Given as Long as One Is Provided During Litigation, Supreme Court Rules
Avv. Cristiano Cominotto and Dott. Pier Stefano Croce, AL Assistenza Legale, Milano, Italy
A recent decision issued by the Italian Supreme Court1 has shed some light on whether or not an employer shall provide a reason for terminating an executive-level employee at the time of termination and what the consequences are for employers who do not provide any reason at all. In its decision n. 3175/2013 issued in February 2013, the Italian Supreme Court, by conservatively interpreting the provisions of the bargaining agreement for executives in the industrial sector, established the principle that employers are not necessarily required to provide a reason immediately at the time of termination but instead can provide a justified reason for termination in a later phase--such as during the legal proceedings or the arbitration phase.The principle established by the Supreme Court emphasizes once more the difference between executive-level employees and regular employees when it comes to protection against wrongful termination.
- On the one hand, regular employees can automatically obtain between 6 to 12 months of wages as a compensation for wrongful termination if their employer fails to provide a reason in the termination letter, without the need for the court to investigate further whether the employer actually had a justified reason for terminating the employee.
- On the other hand, in cases of executive dismissals where the employer does not provide a reason in the letter of termination, the executive will not automatically be entitled to any compensation. The executive can expect compensation only if, through a judicial or arbitration proceeding where their employer will be required to provide the reasons behind the termination, the authorities judge the dismissal to be unjustified.
In Italy executives, due to their particular role as alter ego of the employer, do not enjoy the same protection against wrongful termination that Italian statutory law provides for regular employees, who receive reinstatement in their place of work and/or damages depending on the gravity of the case.
On the contrary the termination of executives is "at will" with the only limitation being that a termination shall be communicated to the executive in written form and that it shall not be based on discriminatory reasons. Hence, Italian statutory law does not expressly require the employer to provide a reason for the termination of an executive.
Nonetheless, in the silence of statutory law, executives enjoy some additional protection against wrongful termination in the framework of bargaining agreements, especially in the industry and commercial sectors (which cover the largest amount of executives in Italy).
Bargaining agreements for executives in the industry and commercial sectors expressly provide that the employer shall give a reason at the time of termination and that the executive will have the right to commence legal/arbitration proceedings if they think that the reason provided by the employer is unjustified or if the reason for termination was not given at all.
Under the same bargaining agreements, in case of legal proceedings, if the court/arbitration board will eventually deem the reason given by the employer as unjustified, then the employer will be condemned to pay the executive compensation for unjustified termination (a so-called supplementary indemnity) in addition to the regular severance package.
1Italian Supreme Court (Labor section) decision n. 3175, 11th February 2013.