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June 06, 2023

Italy and U.S.: Employee Termination Laws in the U.S. and Italy: A Comparison

Cristiano Cominotto and Nate Wach

There have always been significant cultural differences between America and Italy, differences that can be seen reflected in their approaches towards the process of hiring and firing employees. These differences could be attributed to various factors, such as labor unions, political ideologies, or economic systems that may have shaped the economic cultures of both countries. A result of these various influences is that the two countries approach the hiring and firing process from very different perspectives, with the America view tilted towards favoring the employer and the Italian view more inclined towards supporting the employee.

Regarding contracts in America, the majority of employment contracts are considered at-will unless stated otherwise within the contract. This means that the employer can fire employees at any time without the need to prove “just cause,” placing all the power in the hands of the employer. Provided the employer avoids any discriminatory or illegal actions during the firing process, they do not have to give any warning to the employee being fired or any justification for termination. All US states practice at-will contracts, but various restrictions can differ within states. The only state that has real material restrictions on at-will clauses is Montana, which only allows at-will clauses to apply for the first six months of employment, after which their contract would transform into a more secure position with stipulated amounts of compensation and notice. In the US, it is typical for employers to give the employee a 90-day probationary period, after which they will either be kept on full time or terminated. Employees also have the ability to quit at any time without giving a warning.

On the other hand, in Italy, the typical employment agreement is an indefinite-term contract, which places considerably much more power in the hands of the employee. The indefinite-term contract and its termination are regulated by Italian law, specifically by the Italian Statute of Workers L 300/1970, D.Lgs. 368/2001, by the CD Jobs Act Legislative Decree 23/2015, and the so-called Dignity Decree D.L. 87/2018 and subsequent modifications. The indefinite-term employment contract is also regulated by collective economic agreements with specific provisions depending on the sector to which the company belongs. The employer is free to insert a maximum probationary period of six months. Once the period has expired, the employee is considered a subordinate worker, meaning the contract can only be terminated for just cause, justified subjective reason, or justified objective reason.

Just cause for termination is when the employee commits a serious offense that merits disciplinary sanctions. In this case, the employer does not have to pay the employee beyond the termination date or even provide a notice period before termination. The employee is entitled to the TFR (Trattamento di Fine Rapporto) and all the end-of-employment benefits, which consist of a calculated payment based on their yearly salary and years under employ. Justified subjective reason for termination applies when the employee commits an offense of lesser gravity than those specified in the just cause provision. In this case, the employer must pay the employee through a notice period in addition to the amounts due as TFR and end-of-employment benefits. Justified objective reason may for termination be used in cases of dismissal for economic reasons or company restructuring. In these cases, the employee is due the notice period pay, TFR payment, and end-of-employment benefits – a stark contrast from the American at-will contracts.

Another large divergence between Italian and America law involves terminations of multiple employees at once. In Italy, if a collective dismissal of more than five employees within a certain period is determined, a mandatory severance procedure must be established with the participation of the territorial labor inspectorate to ensure the rights of workers. In America, when terminating multiple employees, an employer typically must address each employee’s termination individually rather than as a group. Depending on the jurisdiction, US employers may have to provide a certain amount of notice before termination, even if under an at-will contract. They must be careful to avoid discrimination and must be able to prove that all terminations are based on legitimate, non-discriminatory business reasons. They also must provide a clear explanation for the terminations, such as reduction in workforce or restructuring of business. However, if they have over 100 employees, the Federal Worker Adjustment and Retraining Notification Act (WARN) mandates a 60-day notice prior to the mass layoff. This notice must be given to employees, their representatives, and certain government agencies. An employer who fails to comply with these laws would be met with substantial financial penalties brought about by the US District Court. And again, as in all other dismissals, the employer must be able to show the legitimacy of all layoffs to avoid any discriminatory behavior.

In the case of collective bargaining agreements or other group employment contracts, employers must follow the specified procedures outlined in the original contract. In these cases, any notice period or termination compensation can be negotiated freely before the finalization of the contract. In the US, these contracts are far less common than at-will contracts.

In Italy, if a dismissal is declared illegitimate, the law that was in force at the time of hiring applies to the process of compensation. For workers hired after 2015, following recent revisions in the Jobs Act, in the event of an illegitimate dismissal a worker is entitled to compensation ranging from 6 to 36 months of salary depending on the duration of the employment relationship and the severity of the illegitimacy of the dismissal. Furthermore, in cases of discriminatory dismissal, the employer may be obligated to rehire the worker or provide further compensation.

In essence, the key difference between labor laws in the US and Italy is the placement of burden of proof. In Italy, it is the employer's responsibility to prove that the grounds for dismissing the worker existed, while in the US, the burden of proof is generally on the employee. This makes Italian employees safer from illegitimate terminations than Americans, but it also places a much higher burden on the employer that may hinder the efficiency of the termination process. This difference can be seen more clearly in the use of notice periods and payments of compensation required in the event of terminations in the two respective countries. In Italy, all employees are entitled to notice periods and various forms of compensation depending on the reason for termination, while in the US, all at-will employees can be terminated without any notice or compensation.

The US and Italy have fundamentally different labor laws, with the former affording employers greater leeway in terminating workers while the latter providing robust safeguards for employees who face job loss. These distinct systems reflect the cultural contrasts between the two nations, with each approach highlighting the two cultures’ perspectives and values.

Cristiano Cominotto

Lawyer and Journalist

A.L. Assistenza Legale

Milan, Italy

Nate Wach

Intern, A.I. Assistenza Legale

Student, Villanova University

Philadelphia, Pennsylvania

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