Executive Dismissal for Objective Reasons: Narrower Protection than for other Employees
INDEX
Introduction
The regulatory and case-law framework
Objective reasons for executive dismissal
The non-applicability of redeployment (repechage)
Burden of proof
Introduction
The dismissal of an executive is a particular situation within the landscape of Italian employment law. Unlike other employees, executives enjoy limited protection in the event of dismissal for objective reasons.
This article aims to explore this aspect in depth, analyzing the characteristics of executive dismissal and the differences compared to other categories of employees.
The regulatory and case-law framework
The regulation of executive dismissal is based on Article 2118 of the Civil Code, which provides for the possibility for both parties (employer and employee) to terminate the open-ended contract with due notice. However, this provision is supplemented by Law 604/1966, which introduces the concepts of just cause and justified reason for dismissal.
Case law has developed the notion of “justifiability” of executive dismissal, which includes reasons “related to production activity, work organization, and its proper functioning.” These are formally regarded as the justified objective reason provided for by Law 604/1966.
Objective reasons for executive dismissal
Executive dismissal for objective reasons is widely discussed in Italian case law. Under the Italian Civil Code, at Article 2118, an employer may dismiss an employee at any time, provided there are “justified reasons” for doing so. For executives specifically, Law of 20 May 1970, no. 300 (the Workers’ Statute), at Article 18, provides that dismissal is permitted only for “just cause” or “justified reason.”
Case law has identified specific situations that may constitute objective reasons for dismissing an executive, such as cessation of business activity, elimination of the executive’s position, and corporate restructuring or reorganization. These situations fall within the notion of “justified objective reason” under Italian law.
In such cases, dismissal for objective reasons is not subject to judicial review, provided there is a causal link between company needs and the executive’s dismissal. The executive may only verify the existence of this causal link, without being able to challenge the legitimacy of the organizational reasons advanced by the employer.
Under Law 604/1966, the employer is required to communicate the reasons for dismissal to the employee in writing. An executive dismissed for objective reasons may also ask the labor court to assess whether the procedure followed was correct and whether the causal link between company needs and the dismissal actually exists.
Overall, Italian case law and legislation grant the employer broad discretion in managing executive personnel, provided the reasons advanced are genuinely tied to organizational and managerial needs of the company.
However, the executive retains the right to verify compliance with procedures and the actual existence of the grounds for dismissal.
The Non-Applicability of Redeployment (Repechage)
Redeployment (or repechage) is a protection that requires the employer to seek an alternative to dismissal by offering the employee another role equivalent to the one performed. This protection is provided by Article 2103 of the Civil Code and applies to subordinate employees, excluding executives.
For executives, redeployment does not apply, as their employment relationship is founded on trust and entails a high degree of autonomy and responsibility. The employer is therefore not obliged to ascertain whether a suitable alternative position exists before dismissing an executive for objective reasons.
This difference in treatment between executives and other employees has been confirmed by case law, which has found that the redeployment mechanism is incompatible with the nature of the executive employment relationship.
In particular, the Court of Cassation, with judgment no. 5468 of 2018, established that reemployment is not a duty of the employer, but a discretionary faculty, which can be exercised only if the executive accepts the proposal for a new position.
Burden of Proof
If the dismissal is challenged, the burden of proving the lawfulness of the termination lies with the employer, who must demonstrate the existence of objective reasons and the causal link with the executive’s dismissal. This burden is established by Article 2697 of the Civil Code, which states that “whoever seeks to assert a right in court must prove the facts that constitute its basis.”
Nevertheless, prevailing case law has stated that, for executives, it is sufficient to demonstrate the company’s reorganization and the involvement of the executive’s position, without needing to prove the impossibility of redeployment. This simplification of the burden of proof is based on the principle of reasonableness, which requires the judge to assess the circumstances of the specific case and consider the nature and characteristics of the executive employment relationship.
Moreover, case law has recognized that the employer has technical-organizational discretion in determining the methods and criteria for implementing corporate restructuring, provided they are not unreasonable, discriminatory, or arbitrary.
In particular, the Court of Cassation, in judgment no. 18338 of 2019, stated that “the employer’s decision to dismiss the executive is not subject to judicial review unless the nonexistence of the stated objective reason or its unreasonableness is demonstrated.”
Executive dismissal for objective reasons is characterized by less extensive protection than for other employees. Case law has developed a notion of “justifiability” of dismissal that allows the employer greater discretion in carrying out corporate restructurings and reorganizations.