The Supreme Court recently found that in the case of a dismissal of an executive due to cost reductions, the main requirement is that the company's reorganisation process must be genuine. Employers are not required to prove that they are in economic difficulty. Rather, it is enough for them to demonstrate that the employee's job will no longer exist due to organisational changes (Sentence 9127/18).
An employer dismissed a manager on the grounds of an unfavourable situation which had led to the elimination of the role in question. The Court of Appel found that the dismissal was unlawful, as the circumstances cited had not affected the company's normal production activity.
According to the Court of Appeal, the employer had failed to show that the organisational changes in question aimed to tackle unfavourable economic circumstances which had decisively affected normal production activities leading to the need for cost reductions. The employer was therefore ordered to pay 18 months' salary as compensation.
The employer challenged the Court of Appeal decision before the Supreme Court.
The Supreme Court referred to recent case law, according to which companies are not required to prove that they are in financial difficulties for a redundancy to be valid for objective reasons. Rather, it is sufficient for companies to show that changes in their production activities and organisation will result in a role no longer existing. These changes may relate to improved managerial or production efficiency or business growth. A business decision that leads to the elimination of a role cannot be challenged in terms of its suitability.
In the case at hand, the Supreme Court found that the company reorganisation had been genuine, as there had been no change to the company's operating procedures, but rather the elimination of a managerial role.
For further information on this topic please contact Andrea Stanchi at Stanchi Studio Legale by telephone (+39 02 546 9522) or email ([email protected]).
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
