The Constitutional Court has again ruled on the legitimacy of section 9, para. 1, of Legislative Decree No. 23/2015, which governs the protection granted to employees who have been unlawfully dismissed by companies staffing fewer than sixteen employees. This time, the Italian Court found the provision unconstitutional insofar as it limits the maximum compensatory indemnity to six months’ salary. With judgment No. 118 of 2025, the Italian Constitutional Court ruled on the case of a former employee who had brought judicial action before the labour section of the Court of Livorno, claiming the unlawfulness of her dismissal for cause, stating the non-existence of the alleged misconduct. Consequently, she demanded reinstatement and compensation for damages, other than the payment of social security contributions pursuant to Article 3, paragraph 2, of Legislative Decree No. 23/2015. Alternatively, she claimed that a procedural irregularity under Article 7 of the Workers’ Statute was made to her detriment, thus requesting compensation ranging from two to twelve months’ salary under section 4 of the same decree. The defendant requested the rejection of counterclaims, arguing that the provisions referred to by the former employee were inapplicable due to the company’s size, as it employed fewer than sixteen workers, thus falling under the scope of section 9 of Legislative Decree No. 23/2015. The Court of Livorno found that the employer had failed to comply with the disciplinary procedure under section 7 of the Italian Workers’ Statute and had not fulfilled the burden of proof regarding the legitimacy of the dismissal. It stated the non-existence of the material fact underlying the dismissal for just cause suffered by the former employee. Considering the company’s size, the Court applied compensatory protection under section 3, paragraph 1, of Legislative Decree No. 23/2015, reduced under the mentioned section 9. As well known, such a normative provision prescribes that in cases of unlawful dismissal by an employer with fewer than sixteen employees, the protections under section 3, para. 2 of Legislative Decree no. 23/2015 (i.e., reinstatement, damages, and social security contributions for the period between dismissal and reinstatement), do not apply. It also halves the compensatory protections under sections 3, para. 1, section 4, para. 1, and section 6, para. 1, defining a maximum amount of six months’ salary. It was precisely this provision – in the part halving the indemnity and imposing a six-month cap – that the Court of Livorno challenged as unconstitutional, referring the matter to the Italian Court, arguing that it violates constitutional principles such as equality, freedom, and human dignity, as employees of sub-threshold” enterprises are permanently excluded from reinstatement and subject to a severely limited range of compensatory protection. In its earlier judgment No. 183 of 2022, the Italian Constitutional Court had already reported an issue with the six-month cap. Still, it had refrained from establishing alternative criteria for calculating compensation, to avoid imposing on the national legislative power. The constitutional violation has been identified in the narrow range between the minimum and maximum indemnity (i.e., three to six months), which would fail to meet the need for case-specific adjustment, adequate compensation, and effective deterrence. In 2022, the Court had warned that, had the Italian government remained inactive, it would have intervened directly, should this issue be brought before its judges again. Subsequently, following the referral by the Court of Livorno, the Constitutional Court has now ruled that while the halving of indemnity amounts under section 9 is not unconstitutional per se, the imposition of a six-month cap violates constitutional principles. The Court emphasised that such narrowly defined indemnity constitutes a standardised and lump-sum legal settlement, which is incapable of reflecting the specific circumstances of each case, thus incapable of ensuring the employees’ dignity and equality. In other words, while a “limited” indemnity may be legitimate, being well-established that reinstatement is not the only remedy to the unfair conduct of the employer, its final amount cannot be, in the name of predictability or cost containment for small enterprises, so small to lose any discouraging effect toward the employer’s illicit behaviour. As a result of this ruling, Italian Employment courts will now have broader discretion to determine appropriate compensation in disputes involving the unlawfulness of the dismissal imposed by small enterprises (according to national normative references) on its employees, albeit within the framework of the halved protections under section 9 of Legislative Decree No. 23/2015, which ranges from three (3) to 18 (eighteen) monthly salaries. Lastly, the judges of the Italian Constitutional court ended their decision hoping for a fast act of the Italian government, so that it shortly intervenes on the issue at stake, according to the general principals they just stated in such a judgement and, specifically, taking into account that the number of employees staffed by an employer cannot be the only index of the economic power of said company (and, subsequently, of the sustainability of the costs of the dismissal it imposes). In this sense, the Italian Constitutional Court made a final effort in expressly suggesting some factors that the government (and, in the meantime, the Employment courts construing the provision at issue) may use to better defining those factors that distinguish “small enterprises” from the others, such as the company revenues or its balance sheet total at the termination date.
2026 - Morri Rossetti
