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In a very recent decision, the Italian Constitutional Court has declared that the legislative remedies available in the event of unfair dismissal by “small companies” are unlawful, as they conflict with basic Constitutional principles (Decision No. 118/2025).

In a nutshell, because of Decision No. 118/2025, the remedies in the event of unfair dismissal served by small companies will now become more onerous than previously.

1.What is the scope of Decision No. 118/2025 and why it is sensitive for non – Italian companies.

This Decision regards mainly Small Companies, whose occupational levels are the following:

1. no more than 15 employees within the same municipality and, in any case;

2. no more than 60 employees overall.

The matter is sensitive because non-Italian companies (especially those in the trade sector) often carry on their business in Italy through this standard structure: a foreign parent company which controls an independent legal entity incorporated under Italian Law as a Small Company (i.e. those companies within the scope of Decision No. 118/2025).

2. The framework prior to decision No. 118/2025.

Generally, in the event of dismissal, the following payments are established under Italian Law:

1. always,

the severance payment (known as TFR), as well as the end-of-service allowances (such as the indemnity in lieu of unused holidays);

2. in any event other than “cause” (i.e. an event attributable to the employee which prevents the continuation of employment, with immediate effect),

the notice period or the indemnity in lieu thereof, whose length is established by the applicable National Collective Bargaining Agreement;

3. only if a Court holds the dismissal unfair,

a specific remedy selected by the Court among a (very wide) range of remedies (whose correct identification depends, inter alia, on the size of the company and/or the hiring date of the concerned employee)¹.

The issues relate to the remedies under point c).

Very roughly, prior to Decision No. 118/2025, the remedies applicable to Small Companies were the following:

• an indemnity, awarded at the Court’s discretion, ranging from a minimum of 2.5 months’ salary to a maximum of 6 months’ salary (in the event of hiring date prior to March 7, 2015, so called “Old Hired Employees”); or

• an indemnity awarded at the Court’s discretion, ranging from a minimum of 3 months’ salary to a maximum of 6 months’ salary (in the event of hiring date on or after March 7, 2015, so called “New Hired Employes”).

3. Failures highlighted by Decision No. 118/2025.

Technically, Decision No. 118/2025 regards only New Hired Employees (and not, also, Old Hired Employees).

According to Decision No. 118/2005, the maximum amount that may be awarded to New Hired Employees (e.g., as pointed out under 3 above, a maximum of 6 months’ salary) conflicts with principles protected by Italian Constitution basically because of, inter alia, the size of the amount and the fixed nature of the amount.

In relation to the «size», the Court holds that the amount is too low to dissuade employers from serving unfair dismissals.

In relation to the «fixed nature», the Court holds that the remedy does not allow the Court to adapt the indemnity to the specific circumstances of a given case.

4. Red flags after Decision No. 118/2025.

With reference to the remedies in the event of unfair dismissal served by Small Companies after Decision No. 118/2025, please consider the following:

• according to the first comments by Authors (which highlight the framework of the wording of the Law after Decision No. 118/2025), the maximum amount of the indemnity could increase up to 18 months’ salary (which is three times the previous cap of 6 months’ salary);

• it cannot be excluded that such assumption (which is immediately applicable to New Hired Employees) could be extended by the Courts also to Old Hired Employees.

5. Further hard remedies applicable to Small Companies (regardless of Decision No. 118/2025).

To complete the picture, please consider these further hard remedies, which are applicable to Small Companies notwithstanding the effects of Decision No. 118/2025.

1. Sole employer

The dismissed employee of a Small Company often attempts to demonstrate that the occupational levels of the employer are higher than those under 2 above, considering the employer (not as a mere stand alone entity in Italy, but) as substantially part of a foreign parent entity/group of legal entities.

This scenario could be pursued if and to the extent that the following features are demonstrated in court: e.g. that the concerned legal entities (the Italian one and the foreign one) are essentially a single entity from an organizational and production perspective; that the workforce performs duties for the different entities in the group indistinctly; that there is a sole technical and administrative coordination among entities which identifies a sole leading entity pursuing a common strategy;

If this scenario occurs, then the concerned employee could claim either:

• reinstatement (see point 6B. below; or
• an indemnity, determined at the discretion of the Court, ranging from a minimum of 6 months’ gross salary (or, in the event of Old Hired Employees, 12 months’ gross salary) and a maximum of 36 months’ gross salary (or, in the event of Old Hired Employees, 24 months’ gross salary).

2. Reinstatement

This remedy for unfair dismissal is basically grounded on the following entitlements (a + b):

1. an order to reinstate in the company the dismissed employee, who, in lieu, can opt for an indemnity equal to 15 months’ salary, with immediate termination of employment (this option can be activated only by the employee);

plus

2. the back payment of all salary due, together with the social security contributions, from the dismissal date to the reinstatement date.

Lastly, please consider that a dismissal is null and void (with the application of the above-mentioned hard remedy) if it is found to be grounded on:

• a discriminatory factor such as gender or political beliefs;
• paternity – or maternity-related events;
• sexual orientation;
• disability.

1^ Even in the case of a Small Companies, if the Court considers the dismissal null and void, reinstatement may be ordered.

AUTHOR

Chiara D’Angelo is an associate at Lexellent, the Italian member of Ellint, and based in Milan. She is a graduate of the University of Siena and a member of the Milan Bar Association. She provides assistance, both in and out of court, in employment law matters, with particular reference to personnel management, employment and self-employment relationships and individual dismissals. She is also involved in research and updating activities for the publication of juridical articles and articles of general interest.