In a decision dated December 7, 2016, Italy’s Supreme Court – the Corte di Cassazione – confirmed that the dismissal of an individual employee for redundancy can be legally grounded solely on business-related reasons, such as improving the company’s competitiveness, reducing costs, or increasing profits. The decision was based on the constitutional principle of “freedom of private enterprise.”

Despite many significant labour law reforms in Italy in the past couple of years, the definition and rules regarding redundancy dismissals date back to 1966, and have never been changed. This type of dismissal, unlike dismissals for serious misconduct (so-called “just cause” dismissals), is based on “reasons related to productive activity, work organization and its regular functionality.”

The burden of proof in the event of a dispute regarding the validity of a redundancy dismissal will always be on the company.

Although there is no statutory requirement that the company demonstrate that the dismissal was required to avoid a crisis situation or prevent the negative economic health of the company, a stream of Italian case law decisions held that in order for the company to demonstrate the validity of an individual redundancy dismissal it had to prove “the need to tackle unfavourable and not transitional economic trends of the company.” The recent decision of the Supreme Court, as well as a series of other recent decisions, indicate a shift away from this approach by clarifying that while the court will check whether the reasons listed in the dismissal letter are true, it is not permitted to scrutinize the reasonableness or correctness of the economic or business reasons upon which the company grounded the dismissal.

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