Court rules on termination of employment for objective reasons

Facts
Decision
Comment


The Supreme Court recently issued a decision in a case regarding termination of employment for objective reasons. The employee had been dismissed in 2005 on the grounds of the discontinuation of her job as part of a cost and employee reduction process.(1)

Facts

In January 2002 the employer had undertaken a plan – supported by a union agreement – that involved the selection of 130 employees for redundancy due to economic problems. Those employees (including the appellant) would be transferred to a new company.

The trial court and the court of appeal upheld the 2005 dismissal on the grounds of the organisational factors indicated in the 2002 union agreement.

Consistent with previous case law, the Supreme Court decision underlined the substantial prerequisites for early termination for economic reasons – namely, the existence of production and organisational factors (Article 3 of Law 604/1966). The evaluation of these factors must be based on facts that were present at the time of the dismissal. Further, the dismissal must be grounded on facts from that time and not on incidents that occurred previously.

Decision

In applying this principle, the Supreme Court amended the court of appeal decision and stated that the dismissal had taken place in 2005 as the employee had transferred to the new company pursuant to the 2002 union agreement – three and a half years after the employer's economic problems, which had resulted in a reduction of its workforce – and should have been evaluated with regard to circumstances at the time of the dismissal (August 2005), not the 2002 crisis.

Therefore, the trial court should have considered the circumstances presumed by the union agreement to be non-influential and the employer's conduct should have been evaluated as an individual termination for objective reasons. As a result, the dismissal was deemed to be invalid.

Further, the Supreme Court cited the applicable principles for individual termination for objective reasons and underlined the best existing case law on the subject.

The courts restrict the ability to terminate employment for objective reasons on the basis of economic, technical, organisational or productive grounds. Valid technical, organisational or productive grounds for terminating employment contracts occur when there is a need to discontinue an individual job or department in order to address negative and long-term economic conditions. Therefore, the burden of proof rests with the employer, which must demonstrate the alleged objective reasons and prove that they are appropriate to the company's specific circumstances.

Comment

The Supreme Court stated that dismissal was the employer's last resort. This presumes that alternatives to dismissal had been envisaged. The employer must also prove that it has offered the targeted employee an alternative job with similar duties and at similar level, or a subordinate role in which he or she can be profitably re-employed.

Further, the Supreme Court stated that this latter obligation must be evaluated with reference to the various companies in a group (ie, the uniqueness of their organisational and productive structures, the crossover between different business activities and the distinctiveness of management).

The early termination of employment must not be based on a generic decrease in economic activity, but rather on the inevitable discontinuation of a job or department on the basis of economic, technical, organisational or production reasons.

For further information on this topic please contact Andrea Stanchi or Annamaria Pedroni at Stanchi Studio Legale by telephone (+39 02 546 9522) or email (a.stanchi@stanchilaw.it or a.pedroni@stanchilaw.it).

Endnote

(1) June 24, 13116/2015.