Constitutional Court, judgment no. 118/2025: the 6-month cap for unfair dismissals in small businesses is illegitimate. New scenarios for entrepreneurs and managers

1. THE ISSUE SUBMITTED TO THE COURT

The discipline introduced by Legislative Decree 23/2015 (Jobs Act) provided, for companies with up to 15 employees, a maximum cap of 6 months as indemnity in case of unfair dismissal. This rigid and uniform limit had generated strong criticism in doctrine and jurisprudence, being considered disproportionate and inadequate to guarantee full protection for workers.

2. THE DECISION OF THE CONSULTA

With judgment no. 118 of July 21, 2025 (Pres. Barbera, Rel. Amoroso), the Constitutional Court declared this limit unconstitutional, stating that the judge must be able to modulate the indemnity even in small businesses, within the new range from 6 to 18 months.

The Court considered the provision of the rigid cap to be detrimental to the principles of equality (Art. 3 Const.) and reasonableness, as well as inconsistent with the compensatory function of protection.

3. PRACTICAL IMPLICATIONS

For entrepreneurs and managers, the decision marks a change in perspective:

• potential costs related to dismissals increase significantly;
• the forecast of the risk of conviction must be re-evaluated in budgets and HR policies;
• it will be necessary to develop preventive strategies, including labor law compliance solutions and negotiated exit management.

4. EFFECTS FOR SMALLER COMPANIES

The equalization with large companies entails a substantial uniformity of protection and, for employers of SMEs, the obligation to review the approach to disciplinary and dismissal procedures. Regulatory rigidity is replaced by an elastic system, which increases judicial discretion.

5. SYSTEMIC CONSEQUENCES

The ruling is part of a jurisprudential trend of the Consulta aimed at "constitutionalizing" labor law, emphasizing that workers' rights cannot be unduly compressed in the name of regulatory simplification.

For businesses, this translates into greater exposure to litigation, but also into the possibility of preventing risks through advanced legal advice.

6. OPERATIONAL CONCLUSIONS

For managers, CFOs, and entrepreneurs, judgment no. 118/2025 requires:

1. careful evaluation of hiring and termination policies;
2. increase in labor law risk management measures;
3. greater attention to settlement agreements, which are now more than ever a useful way to limit costs and risks.

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