By the of counsel Michele SacchiEmployment Law Area

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The continuation of an employment relationship with an executive often faces particular performance requirements, otherwise it is not aligned with the company’s objectives: what should be done when there is the need to dismiss an executive?

In such a case, the company employer must act with the utmost caution in order not to incur serious economic consequences.

Inapplicability of the provisions on dismissal for objective justified reason  

First of all, the dismissal of an executive, excluding any disciplinary issues, does not follow the rules protecting the employment relationship of workers, clerks and managers. Therefore, the protections provided by Article 18 of Law No. 604/1966 with reference to objective justified reason do not apply.

An employer wishing to terminate the relationship with one of its executives is therefore not necessarily required to prove the existence of specific reasons related to the organisation of work, the smooth running of the company’s organisation and the production activity.

However, this does not mean that an executive who is no longer part of the company’s plans can be excluded from the workforce for any reason whatsoever: in fact, dismissal is not entirely “free” in this respect either.

The minimum requirement of “justification”

The executive is legitimately dismissed when the requirement of “justification” is at least present: that is, when the dismissal is founded on legally appreciable reasons.

Thus, the dismissal of an executive is legitimate if it can be provided that there is an ongoing conflict with the employer, or when the executive refuses to pursue a certain company policy. Another example is the failure to achieve objectively assessable goals, such as sales volume or maintaining a certain level of turnover. Conversely, the dismissal of an executive is unjustified when it is completely arbitrary, irrational or pretextual.

The concept of justification is thus based on the “enhanced” principle of good faith and the special relationship of trust that is established between the executive and the employer. The employment relationship with an executive, as is well known, goes beyond the fulfilment of contractual obligations and ordinary trust, typical of ordinary employment relationships: the greater strength of the fiduciary bond between the parties is contrasted by the lesser intensity of the reasons underlying the termination.

Unlawful dismissal and its consequences

If, however, this minimum requirement of justification is missing, the dismissal is unlawful: in such a case the dismissed executive is entitled to receive an additional indemnity, as established by the applicable Collective Bargaining. This is an indemnity of a compensatory nature. The measure of this indemnity is set by collective bargaining between a minimum and a maximum correlated to seniority and seniority and, in certain circumstances, goes up to more than 24 months’ salary.

The labour law department of Bacciardi Partners is available to guide the employer along this delicate path, providing the most suitable solution according to time and circumstances, in order to avoid serious economic consequences.