Italy: The Termination by the Transferee is Legitimate When Based on the Dismissal Previously Served by the Transferor

After the individual transfer of the employment contract, it is legitimate for the new employer to terminate the employee who has already received a dismissal by the transferor that was declared lawfully served in the second instance.

The Supreme Court, with order no. 28406 of 5 November 2024, decided on the case involving an employee dismissed in 2012 for disciplinary reasons, who was reinstated following the ruling of the Court of Lecce in 2018 annulling the dismissal. After the employer appealed this decision, the employment contract was transferred to another company through an individual contract transfer pursuant to Article 1406 of the Italian Civil Code. In 2019, the Court of Appeal, reforming the first instance ruling, declared the dismissal legitimate and, by virtue of this, the new employer communicated the definitive termination of the relationship. In the dispute following this latest communication, the Supreme Court rejected the employee’s appeal, confirming the prior decisions on the lawfulness of the transferee’s actions.

First, both the request to consider the communication invalid and the request to suspend the proceedings – proposed for the first time to the Supreme Court – were deemed inadmissible since “the exception according to which the Court could not recognize the effectiveness of the dismissal before the final judgment is unfounded; given that there is no need for the intervention of the final judgment to attribute resolutive effectiveness to a dismissal recognized as legitimate at the appeal stage since the relevant judgment is immediately enforceable.” The Court emphasizes that, pursuant to Article 111 of the Code of Civil Procedure, “the substitution effect (…) was not precluded by the failure of the transferee company to intervene in the judgment challenging the dismissal” because the successor, the transferee in this case, is legally bound by the effects of the judgments between the original parties which are immediately applicable.

The Court then clarifies that a comprehensive transfer of active and passive legal situations took place, “including the effectiveness of a dismissal already given by the transferor and still under judicial scrutiny.” The missing reference to the dismissal in the transfer agreement is irrelevant because its effectiveness was in any case transferred to the new employer “since, given the breadth of the regulatory provision of Article 1406 of the Civil Code, the substitution of a third party for one of the parties to the relationship assumes general scope (…) without the need for specific or prior identification.” In conclusion, the decision in question, confirming the autonomous and immediate effects of the contract transfer pursuant to Article 1406 of the Civil Code, that include those deriving from a favourable decision obtained by the transferor, assumes particular relevance in terms of legal certainty, favouring greater stability in the circulation of markets and in corporate transactions.

Key Action Points for Human Resources and In-House Counsel

Practical Points

• The case involved an employee who was dismissed for disciplinary reasons and reinstated following the ruling of first instance against the dismissal. Pending the appeal proceedings, the employment contract was transferred to another company. Then, the Court of Appeal declared the dismissal legitimate, and the new employer communicated the definitive termination of the relationship;
• For the Supreme Court the transferee acted legitimately, not only considering that the second instance decision is immediately effective, but also because the broad and general effects of the transfer of contracts imply the full substitution of the transferee in all the relevant transferor’s positions, including those related to a decision in favour of the transferor.