Italian Constitutional Court rules that six month indemnity cap for unlawful dismissals in small businesses is unconstitutional

At a glance

• The Italian Constitutional Court has declared unconstitutional the six month cap on compensation for unfair dismissal in small businesses (no more than 15 employees).
• The judgment concerns Article 9(1) Legislative Decree 23 / 2015 (Jobs Act), which limited compensation to between 3 and 6 months’ salary.
• Judges will now be able to award compensation in a broader range of between 6 and 18 months’ salary.

On 21 July 2025, the Italian Constitutional Court published judgment No. 118 / 2025, declaring unconstitutional the maximum limit of six months for compensation in cases of unfair dismissal in small businesses (those with no more than 15 employees, as per Article 18 Law No. 300 / 1970).

The decision invalidates Article 9(1) Jobs Act, which imposed a six month salary cap on compensation in these cases. According to the court, a fixed and non-negotiable upper limit, regardless of the seriousness of the breach, unduly restricts the judge’s ability to provide appropriate redress and undermines the deterrent effect of the compensation.

The court noted that the narrow range of compensation—previously between 3 and 6 months—precluded any meaningful personalisation of damages based on the specific circumstances of the dismissal. It also stated that this rigid cap was incompatible with the principles of adequacy and proportionality.

As a result of the ruling, while the general rule of halving compensation compared to larger companies remains in place, judges will now be able to award between 3 and 18 months’ salary in damages, giving them greater discretion to tailor awards based on individual case factors.

The ruling echoes previous concerns raised by the court in its 2022 judgment No. 183, in which it had already questioned the constitutionality of the fixed ceiling and called for legislative intervention.

In its latest decision, the court reiterated the need for statutory reform and referred to both domestic and EU-level standards, highlighting that the number of employees alone cannot be the sole measure of an enterprise’s economic strength or its ability to bear the cost of wrongful dismissal.