We assess the validity and fairness of minimum duration clauses in employment contracts
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The stability clause, also known as a minimum duration clause, is an increasingly common feature in employment contracts, particularly in contexts where the company invests in the employee’s training and growth. But when is it lawful to bind an employee to remain with the company for a specific period –and for how long? What are the real implications of this obligation for both parties?
This article analyzes the legal validity and practical effects of one of the most sensitive provisions in labor law, with a focus on penalty clauses, early termination and the flexibility margins allowed by law.
The stability clause — also referred to as a guaranteed minimum duration provision — is an ancillary agreement that may be included in an employment contract to bind the parties to maintain the relationship for a predetermined period.
In other words, it sets a minimum period during which the contract cannot be terminated, or may be terminated only by one of the parties.
Its primary function is to ensure organizational continuity and protect the employer’s investment, especially when significant resources are allocated for training, onboarding, or strategic benefits. For the employee, the clause usually comes with an economic or professional benefit.
The clause may be included at the start of the employment relationship (as a minimum duration clause), or at a later stage (as a true stability agreement), provided both parties give mutual consent. While not legally required for validity, written form is strongly recommended to ensure clarity and prevent disputes.
Legally, these provisions are widely recognized as valid: they are considered contractual agreements rather than settlements, and constitute permissible derogations from the at-will termination regime under Art. 2118 of the Italian Civil Code.
They are not considered unfair terms under Art. 1341(2) of the Civil Code (see Italian Supreme Court, no. 18376/2009), provided that certain validity criteria are met.
These include:
In practice, the clause may take the form of a bilateral obligation, preventing both employer and employee from terminating the contract before a specific date—thus reinforcing mutual trust and perceived fairness. Alternatively, it may be unilateral, binding only the employee, as in clauses such as:
“The Employee agrees to maintain the employment relationship with the Company from June 2, 2025 until December 31, 2026, expressly waiving the right to terminate before such date, except in cases of just cause or supervening impossibility of performance under Arts. 2119, 1463, and 1464 of the Civil Code.”
Even unilateral clauses are considered valid and enforceable provided they meet the requirements of fairness, balance, and reciprocal consideration.
One of the central issues in stability agreements is the possibility of early termination, which is only permitted in cases of just cause or supervening impossibility of performance.
According to settled case law, just cause arises when a situation or conduct occurs that makes the continuation of the employment relationship — even temporarily — untenable.
Examples include:
If termination occurs without just cause or supervening impossibility, the clause may include a penalty clause under Arts. 1382 and 1384 of the Civil Code, allowing the parties to predetermine the amount of compensation.
However, such penalties must be carefully calibrated to avoid claims of being unfair or excessive.
In some cases, the employer may seek additional damages, provided they prove that the harm suffered exceeds the agreed penalty.
Likewise, if the employer terminates without just cause, the employer may owe the employee compensation, including lost wages.
Importantly, courts retain the power to reduce penalties under Art. 1384 if deemed excessive.
A noteworthy decision on this point is Italian Supreme Court, Labor Section, no. 32680/2022. In that case, a stability clause was signed by a CEO (without board approval) and was heavily unbalanced against the employer. The Court reaffirmed that where a clause is manifestly one-sided and concluded in bad faith or against good faith principles, judicial reduction of the penalty under Art. 1384 is appropriate.
As with all contract terms, the stability clause may be modified, provided mutual consent is given.
It is therefore possible to renegotiate and adjust:
depending on how the employment relationship evolves.
After all, a contract is not meant to reflect an abstract idea of fairness, but rather the freely negotiated interests that the parties deem worthy of legal protection.
In this perspective, a stability clause can certainly strengthen the bond of trust between company and employee — but only if it is drafted with care and proportionality. Its legal enforceability does not depend on form alone, but rather on the balance among its elements: the constraint, duration, content, and mutual obligations.
For this reason, boilerplate clauses should be avoided. Each situation requires a case-by-case analysis of the duration’s reasonableness, the penalty’s fairness, and the adequacy of the consideration.
There is no “one-size-fits-all” clause. The only valid clause is the one that both parties, with full awareness, deem fair and enforceable.
