Unlawful Dismissals in Small Enterprises: The Constitutional Court Strikes Down the Six-Month Cap

This ruling marks a further dismantling of the legislative framework introduced by the Jobs Act, particularly the special regime applicable to employment relationships within so-called “small enterprises”, representing – by allowing for potentially tripled compensation compared to the previous cap – a significant evolution in the system of sanctions for unlawful dismissals, including those to which the protection provided for by Law No. 604/1966 would apply, i.e. employees hired before 7 March 2015.

The question of constitutional legitimacy was raised by the Court of Livorno, in proceedings concerning compensation for an unjustified dismissal of an employee hired by a small enterprise after 7 March 2015. The referring Judge challenged the constitutional compatibility of a rigid maximum cap of six months’ salary for companies with fewer than fifteen employees, deeming it unreasonable and discriminatory compared to the treatment reserved for employees in larger firms, for whom compensation can reach up to thirty-six months’ salary.

According to the referring Judge, this provision not only introduces a disparity that is difficult to justify under the principles of equality and reasonableness (Article 3 of the Constitution), but also results in merely symbolic and standardized protection, often lump-sum nature and detached from a genuine assessment of the actual harm suffered.

In declaring the unconstitutionality of the contested provision, the Court held that, although the legislator has discretion in choosing the applicable protection model – compensatory rather than reinstatement – it must still comply with the principles of effectiveness, adequacy, and reasonableness.

A fixed and insurmountable maximum cap, even in cases of clearly unlawful dismissals, prevents Judges from adjusting the compensation to the specifics of the individual case, contrary to what was already stated in judgment no. 194 of 2018. The Court reiterated that the damage resulting from an unjustified dismissal cannot be quantified in a rigid and uniform manner but instead requires an assessment that reflects “the particularities of the individual case and thus the wide range of variables directly involving the employee,” including length of service, conduct of the parties, and the employment context.

On the other hand, the mechanism of halving the compensation for small enterprises was not, however, declared unconstitutional.

Thus, only the fixed six-month cap was struck down, on the grounds that the narrow range between the minimum and maximum amounts – from three to six months – “undermines the need to tailor the compensation to the specifics of each individual case, from the standpoint of providing adequate redress and effective deterrence.”

The immediate consequence of the declaration of unconstitutionality is the invalidation of the relevant portion of the provision, which can no longer be applied, even in ongoing cases. As a result, for employment relationships governed by Legislative Decree No. 23/2015 (i.e., those established after 7 March 2015) and involving employers not subject to the dimensional threshold of Article 18 of the Workers’ Statute, judges will be free to determine compensation without being bound by the six-month cap, although the halved range (minimum 3 months and maximum 18 months) compared to the ordinary regime for larger companies will still apply.

This opens up a significant space for judicial discretion within the minimum and maximum limits established by the general framework, allowing for substantially higher awards than those previously granted in similar cases.

Nevertheless, the Constitutional Court emphasized the need for legislative intervention to comprehensively reform the system of protections in cases of unlawful dismissal, moving beyond an outdated model that distinguishes between enterprises solely based on size. In this regard, the Court encouraged the adoption of additional criteria beyond the number of employees – such as turnover or financial statements – already recognized under European law.

This judgment forms part of a broader re-evaluation of the entire Jobs Act framework and contributes to strengthening the protections granted to employees, including in the small business sector. 

However, the question remains open regarding the legal regime applicable to employment relationships established before 7 March 2015, which are still governed by Article 8 of Law No. 604/1966, a provision that adopts a mechanism very similar to the one just declared unconstitutional. The lack of a clear stance on this point may result in inconsistencies and misalignments, which could become the subject of future judicial initiatives or – as the Court itself hopes – legislative action.