Damages for wrongful dismissal: a worker’s pension cannot be curtailed from the amount (Andrea Di Nino, Summary – Ordine dei Consulenti del Lavoro (Association of Labour Consultants), January 2023)

31 January 2023

With ruling no. 32130 of 31 October 2022, the Supreme Court of Cassation ruled on the assessment of the damages payable to a worker for unlawful dismissal who, following the termination, had access to a retirement pension.

The case involved a Ministry of Cultural Heritage and Activities manager who requested a declaration of unlawfulness of a decree issued by his employer notifying his employment relationship termination effective from 4 September 2009. This assumed that the maximum contribution requirement of 40 years had been accrued under Article 72, paragraph 11 of Decree Law no. 112/2008.

The referring court declared that, based on a Supreme Court legal principle, this ministerial decree (no. 342/2009) was unlawful. The court excluded compensation for personal injury from the quantification of the damage arising from the unlawful termination of the manager’s employment relationship. When assessing the pecuniary damage, the court considered the remuneration lost in the period between 3 September 2009 and 31 October 2010, which was the expiry of the two-year retention period, and the “higher severance pay.” The relevant amounts were quantified by a Court Appointed Consultant.

According to the judge, the performance-related remuneration could not be included, not even as a loss of chance, since there was an absence of an express request, given that it “requires a positive verification of the manager’s achievement of objectives.

However, the sums that the worker received as a retirement pension over the same period had to be deducted from compensation. This is because in the absence of a judicial dictum reinstating the employment relationship that would have made the sums paid by INPS recoverable, the court held that there were undue earnings for the worker, in the absence of the aliunde perceptum (sum earned elsewhere) deduction.

The worker appealed in cassation against the second instance ruling, which the Ministry counter appealed. Among the manager’s various grounds of appeal, one concerned the undue deduction of the amount paid medio tempore as retirement pension from the compensation for damages for unlawful dismissal, made by the Court of Appeal. According to the claimant, only the work remuneration received during the intermediate period (i.e. between dismissal and annulling ruling) can lead to a compensation reduction under the compensatio lucri cum damno principle, while the pension is not attributable to the unlawful dismissal and cannot be deducted even if the effects of the dismissal are frozen as a result of the failure to reinstate the claimant.

This ground of appeal was declared well-founded by the Court of Cassation. Among the grounds of appeal, the court referred to “the established case law which states that pension benefits are not deductible as aliunde perceptum, since only aliunde perceptum) earned through employment with the same working capacity is considered compensatory of the dismissal damage and not any income received.

The Court of Cassation pointed out how the Joint Sections (Court of Cassation Joint Sections ruling no. 12194/02) specified that “the right to a pension derives from meeting legal age and contribution requirements, and is independent of the availability of the insured person who lost their job to work further, nor does it arise as a reason for employment relationship termination (see Court of Cassation 28 April 1995, ruling no.  4747). The financial benefits that the unlawfully dismissed worker receives depend on judicial facts external to the employer’s termination right and are not causally linked to the unlawful dismissal. For this reason, they are not subject to the compensatio lucri cum damno” rule.

The related sums cannot be treated as “a profit compensable with damage”, i.e., an increase in the worker’s assets, since this implies “an obligation of restitution of a corresponding amount.”

This compensation cannot be awarded when “the relationship is subject to specific prohibitions on the combination of pension and salary, because in such cases the subsequent declaration of dismissal illegitimacy invalidates ex tunc the right to retirement and subjects the person concerned to an action to recovery undue payments by the party paying the pension“, i.e. INPS.

The Supreme Court referred to the Joint Sections (Ruling no. 12564/2018) which stated that “when the conduct of the damaging party is merely the occasion for a granting that finds its justification in a corresponding and prior loss, then there is no profit that, alone, can compensate the damage and reduce liability“.

There is a justifying reason that does not allow the survivor’s pension to be counted as a difference from the negative consequences that derive from the wrongful act, since this social security measure “is not paid as compensation for the prejudice suffered by the injured party, but responds to a different causal attributive design, which is the reason of the benefit identifiable in the previous employment relationship, contributions paid and legal provisions. These factors are configured as an independent causal chain“.

The loss of the worker’s interest in re-establishing a de facto relationship by a reinstatement measure and as a result of the two-year retention period being reached, does not preclude its continuation de iure, considering the judicial assessment of the relationship’s unlawful termination. According to the Supreme Court and the compensation liability of the employer who is obliged to pay contributions, this would give rise to the repayment of the sums paid by INPS as pension in the two-year period. The Court of Cassation upheld the worker’s grounds of appeal.

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