In Judgment No. 174/2026, the Italian Constitutional Court has addressed the legal framework governing unlawful dismissals in small businesses, declaring Article 8 of Law No. 604/1966 partially unconstitutional and eliminating an unequal treatment of employees.

The provision in question establishes that, in the event of dismissal without just cause or a justified reason, the employer must either reinstate the employee within three days or, alternatively, pay compensation ranging from 2.5 to 6 months of the employee’s last overall actual remuneration.

However, the same provision allowed such compensation to be increased to up to 10 months for employees with more than ten years of service and up to 14 months for those with more than twenty years of service, subject to the condition that the employer had more than fifteen employees.

This very limitation was the subject of the Constitutional Court’s intervention. According to the Court, it is unreasonable for employees with the same length of service who have been unlawfully dismissed to receive different levels of financial protection solely on the basis of the size of the business for which they work.

The Court held that such differentiation is inconsistent with the principle of equality, as well as with the constitutional principles of protection of employment and workers’ dignity.

Although the size of a business may constitute a relevant factor in regulating employment relationships, it cannot result in an unjustified reduction of the safeguards afforded to employees.

Another key aspect of the ruling concerns the actual purpose of the compensation.

According to the Court, the financial protection provided in cases of unlawful dismissal must not be merely symbolic or excessively limited, but must be adequate and proportionate to the specific circumstances of the case.

Indeed, compensation must fulfil both a compensatory function, ensuring that the employee receives redress for the harm suffered, and a deterrent function, discouraging employers from resorting to dismissals that do not meet the statutory requirements.

As a result of this ruling, employees of businesses with no more than fifteen employees may also benefit from the increased compensation provided for under Article 8 of Law No. 604/1966, up to 10 or 14 months’ remuneration, depending on their length of service.

The specific amount of compensation will remain subject to the court’s assessment, based on the circumstances of each individual case.

With this decision, the Constitutional Court strengthens the protection afforded against unlawful dismissals, reaffirming that the size of a business cannot lead to an unjustified reduction in the financial safeguards granted to employees.

The Law Firm remains available to provide any further information or clarification.