Besides international and EU sources, the employment relationship in Italy is governed by a number of provisions contained in the Italian Constitution (e.g., Article 36 on fair and reasonable remuneration and Article 40 on the right to strike); the Italian Civil Code (ICC); state laws, among which the most important is Law No. 300/70 – the Workers’ Statute; collective agreements operating at sector level, at territorial level and at company level; individual employment agreements; and, subject to certain requirements, custom.
Collective agreements at any level play an essential role. Subject to some exceptions, they are legally applicable to the employment relationship only if an employee and employer are members of the contracting trade union and employers’ organisation or if they have otherwise agreed to be bound by them. However, labour courts tend to refer to the applicable collective agreement when determining employees’ rights, regardless of membership.
Sector-level agreements usually contain provisions covering almost every aspect of the employment relationship in the specific sector, such as the rights of the employee with regard to:
- a minimum content of the hiring letter;
- b duration of probationary periods;
- c holidays, working time and overtime;
- d sick and maternity leave;
- e disciplinary matters;
- f minimum salary and other employment-related benefits;
- g termination and notice period;
- h severance payments; and
- i industrial relations.
They also indicate which specific aspects can be further negotiated at territorial and company level.
Special collective agreements regulate employment relationships with executives.
Collective provisions supplement the law and, subject to certain conditions, can derogate from the law. Terms and conditions of employment agreed in individual employment contracts cannot be less favourable than those set out in applicable collective agreements.
The Italian judicial system consists of a number of different courts. In general terms, criminal justice is administered by criminal courts, while civil courts hear civil cases. Employment disputes are heard by special sections of the civil courts, known as employment tribunals. These have jurisdiction over any dispute related to private and public workers, independent contractors and agents.
Ordinary labour proceedings start with the filing of a complaint by the applicant. The defendant must file a defensive brief no less than 10 days before the hearing. At the first hearing, the judge will attempt to settle the claim by making a formal settlement proposal to the parties. The parties must personally attend the hearing to discuss this settlement proposal and be cross-examined by the judge. If the parties do not accept the proposal, the process continues to the discovery procedure, which usually takes up to four hearings depending on the complexity of the case. The entire process may take between one and two years.
The employment section of the court of appeal hears appeals of employment tribunal decisions and the Supreme Court of Cassation hears further appeals on grounds of questions of jurisdiction, nullity of the previous decisions or nullity of the entire proceedings, lack of motivation of the previous decisions or breach of statutory provisions. In the case of a suspected breach of constitutional provisions, the parties can bring a claim before the Constitutional Court. Questions on the interpretation of laws giving effect to law deriving from the European Union may be referred to the European Court of Justice by any tribunal or court.
The enforcement of employment laws and regulations also lies with a number of government agencies and authorities. In particular, the National Social Security Agency is responsible for the correct payment of social security contributions by employers, and the National Insurance Agency monitors the correct payment of the contributions due by employers. Besides these two national agencies a number of other authorities (the provincial labour office, the local sanitary office, etc.) are responsible for compliance, such as with health and safety legislation, night work and overtime limits.
II YEAR IN REVIEW
The labour market has been significantly modified by the legislature in the past years with a significant number of interventions aimed at facing the economic crisis and at rendering the employment contracts more flexible.
Firstly, by means of Law No. 92 of 28 June 2012, the Italian parliament approved an important labour market reform, the Fornero Reform, mainly aimed at simplifying as much as possible the use of certain employment contracts (e.g., fixed-term, apprenticeship and consultancy agreements), reforming the unemployment benefits regime with the view of inducing unemployed people to re-enter the labour market, and reducing the instance in unfair dismissals of employers being compelled to re-employ the dismissed worker. This latter is achieved by limiting the scope of application of Section 18 of Law No. 300 of 20 May 1970 (the Workers’ Statute).
In 2015, the goal of reaching labour flexibility and promoting stable employment was achieved through another important labour market reform: the Jobs Act Reform, which has been enacted by means of several Legislative Decrees implementing Law No. 183 of 10 December 2014. In particular, this reform has an impact on:
- a individual and collective dismissal rules of open-term employees (by making risks connected to dismissals more assessable since they are basically linked to the employee’s length of service);
- b unemployment benefits;
- c special types of employment contracts (by reorganising the legal framework of fixed-term, part-time, supply and continuous collaboration contracts);
- d employers’ power of variation of employment duties;
- e work–life balance; and
- f labour inspection activities.
Undoubtedly, the Jobs Act Reform represents a very important step, particularly towards the erosion of the idea of having highly protected workers with a job for life.
III SIGNIFICANT CASES
During 2016, the following notable cases have appeared before the courts.
In Decision No. 19557 rendered on 30 September 2016, the Civil Court of Cassation addressed a debated and conflicting issue (previously addressed in 1978 and 1987) concerning the computation of the personnel of an Italian branch of a foreign company for the purpose of application of the reinstatement protection in case of unlawful dismissal (the reinstatement protection may apply, under certain circumstances, if the employer is staffed with more than 15 employees). The Court has clarified that, for the determination of the 15-employee threshold, the judge must take into account the number of employees employed by the branch, without making reference to the personnel of the foreign parent company. The Civil Court of Cassation also clarified, in line with the EU Court of Justice rulings on the matter, that the branch must have:
the appearance of permanency, such as the extension of a parent body, have a management and being materially equipped to negotiate business with third parties so that the third parties, although knowing that there will, if necessary, be a legal link with the parent body (the head office of which is abroad), do not have to deal directly with such parent body, but may transact business at the place of business constituting the extension.2
In Decision No. 25201 of 7 December 2016, the Civil Court of Cassation clarified that the employer is entitled to dismiss an employee for business-related reasons, without being strictly required to prove the need of reducing losses or the occurrence of an economic crisis. According to such Decision, the dismissal can be deemed as lawful when it is grounded on a true and genuine reorganisational process that is simply aimed at improving or simplifying the employer’s business structure, without the judge being entitled to scrutinise the business targets of the reorganisation from an economic standpoint.
In Decision No. 24972 of 6 December 2016, the Civil Court of Cassation, by confirming the principle whereby the change of contractors does not trigger per se the application of the TUPE Directive provisions, has clarified that the transfer of a group of employees, excluding any asset or liability, does not amount to a transfer of business under the TUPE Directive, insofar as such group is not functionally organised and does not have specific know-how.
IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP
i Employment relationships
In principle the parties are free to enter into an employment contract orally. In a dispute, however, the employer has the burden of proving the content of the employment contract; therefore, employment contracts are usually written. Given the extensive use of collective agreements, employment contracts usually consist of a simple hiring letter that refers to and incorporates the applicable collective agreements. In Italy, open-ended employment contracts are to be deemed the most common type of employment contract.
Employers are required by law to provide employees with certain basic information before the job starts, including the names of the parties; place of work; hiring date; level of employment and duties assigned; duration of probationary period, if any; working time; and notice period. These obligations are usually met by the employer inserting this additional information in the hiring letter and handing a copy to the employee. It is common for executives to negotiate and include in the employment contract additional and more specific rights, benefits and obligations, such as restrictive covenants, confidentiality obligations and parachute obligations.
Subject to certain exceptions, changes or amendments to the employment agreement must be mutually agreed between the parties. Certain terms of the agreement, such as probationary periods and non-compete undertakings, must be in writing.
Under certain circumstances, an employer is entitled to unilaterally modify the employment terms and conditions originally agreed with their employees, pursuant to Article 2,103 of the ICC as recently amended by Legislative Decree No. 23 of 4 March 2015 in the framework of the Jobs Act Reform. In very general terms, the employer is now entitled to modify employee duties without implying a change of employment level and category as set forth by the collective bargaining agreement. Moreover, in case of corporate reorganisation that affects the employment status of the concerned employee, the employer is now entitled to assign the latter to one level lower, without a change in salary.
A very long and important process, mainly aimed at encouraging and simplifying the use of fixed-term contracts, started in 2010 and, with a number of subsequent laws, came to an end with Legislative Decree No. 81 of 15 June 2015 within the framework of the Jobs Act Reform. Currently, for the implementation of a fixed-term agreement it is no longer necessary to have ‘technical, productive, organisational or replacement reasons’ (these were formerly specifically addressed in the employment letter). All fixed-term agreements can be executed without the indication of any cause, for a maximum overall term (including any extension up to a maximum of five times or renewal) of 36 months, unless otherwise provided for by the applicable national collective bargaining agreement.
Fixed-term contracts must not exceed the threshold of 20 per cent of the open-term employees in force as of 1 January of the relevant year of hiring, unless otherwise provided for by the applicable collective bargaining agreements.
The threshold of 20 per cent does not apply, inter alia, with respect to the hiring of employees:
- a for a start-up activity for the duration established by the NCBA; and
- b for replacement or seasonal needs, including the seasonal activities set forth in Presidential Decree No. 1525/1963.
An employee has to challenge the validity of the fixed-term contract by means of a written communication to be sent within 120 days of its expiration and must file the claim with the competent employment tribunal within 180 days after the employee’s challenge.
Should a fixed-term contract be converted into an open-term one, the employer is required to pay damages on top of the reinstatement equal to an overall indemnity ranging between 2.5 and 12 monthly salaries. Should the employer exceed the maximum number of fixed-term employees, the following administrative sanctions apply: 20 per cent of salary for each month of work, which is increased to 50 per cent of salary if the number of workers hired in violation of the statutory threshold is more than one.
ii Probationary periods
Probationary periods are allowed in Italy. The length varies depending on the level of the employee and the applicable collective agreement. During the probationary period each party can withdraw from the contract without notice.
iii Establishing a presence
A foreign company is free to hire employees and engage consultants directly without setting up a subsidiary or branch in Italy. However, if the activities carried out in Italy amount to a permanent establishment (PE) for tax purposes, the setting up of a branch or a subsidiary is required. This usually happens when the services provided in Italy relate to the core business of the foreign company and are not merely preparatory or when the employees, consultants or agents are empowered to execute contracts that directly bind the company. In the latter scenario the foreign company will also be liable for failure to fulfil the relevant obligations under the Italian tax laws and be subject to tax penalties.
A foreign company engaging employees without establishing a local entity must appoint an Italian company representative through a power of attorney, which is usually a payroll adviser.
The setting up of an Italian payroll is required as the foreign company must deduct social security contributions at source and pay these to the Italian social security authorities, whereas the employee is liable to pay income tax to the Italian tax authorities. In addition, notarised and legalised (by apostille) copies of the company’s articles of incorporation, along with a good standing certificate attesting that it is registered with the local register of enterprises, if any, must be provided. These documents must be translated into Italian.
Even if the parties agree to subject the employment agreements to non-Italian law, mandatory Italian laws apply. These include rules relating to, inter alia, the minimum wage, working time, termination of the employment relationship and related compensation, health and safety in the workplace, 13th and 14th month allowances and holidays.
V RESTRICTIVE COVENANTS
Article 2,105 ICC imposes on the employee a duty of loyalty and fidelity during the employment relationship, which includes a non-compete obligation. Non-compete covenants after the termination of the employment relationship are regulated by Article 2, 125 ICC. This provision requires the parties to enter into a written agreement, which can be made either at the time of or after the hire.
Under Article 2,125 ICC the non-compete covenant:
- a cannot be for a term exceeding three years for employees and five years for executives;
- b must indicate the territory in which the covenant applies. This cannot cover an area so wide as to deprive the employee of the opportunity to carry out any further working activity; and
- c must provide for consideration.
The employer is free to choose whether to pay such consideration during or at the end of the employment relationship. If paid during employment, the consideration usually amounts to 15 to 25 per cent of the monthly salary; it is paid in addition to the monthly salary and is subject to social security contributions. If paid after employment, the consideration usually amounts to 30 to 40 per cent of the last annual salary multiplied by the years of non-competition and it is not subject to social security deductions. Opting in after the termination of the employment relationship contained in the covenant is usually deemed null by the courts.
i Working time
Italian law provides for a 40-hour standard working work. Sector-wide collective agreements may modify the standard working time and also provide for a working time limit to be calculated as an average over a period not exceeding one year. This allows employers to exceed the standard working time in certain periods of the year and to reduce it through an offset in other periods, without the excess being considered overtime. In any case, the average working time cannot exceed 48 hours (including overtime) for each seven-day period and a daily rest of at least 11 consecutive hours must be guaranteed to the employee.
Night work cannot exceed eight hours every 24 hours. Sector-wide collective agreements are free to extend the reference period of 24 hours provided that the average time worked does not exceed one-third of the total time over the extended reference period.
Any work performed in excess of 40 hours per week constitutes overtime. In the case of multiple shifts, any work that exceeds the planned daily working time is overtime.
Overtime is usually compensated by an increased rate of pay, ranging from 15 per cent to 50 per cent depending upon the collective agreement and the timing of the overtime (e.g., day or night overtime). However, collective agreements are free to compensate overtime with additional leave.
When overtime is regulated by sector-wide collective agreements, working time and overtime cannot exceed 48 hours per week. In the absence of collective regulation, the law provides for a limit of 250 hours per year and requires the consent of the employee to work overtime. Unless otherwise provided for by collective provisions, overtime is not subject to limits in the case of exceptional technical-production needs, force majeure and particular events to be previously notified. Overtime regulations do not apply to executives, employees performing managerial duties, family workers, employees performing sporadic duties (e.g., doormen or concierges), homeworkers and teleworkers.
VII FOREIGN WORKERS
In Italy, employers may directly recruit employees, including foreign nationals, provided that the recruiting procedures followed are not discriminatory against potential employees. EU nationals with a valid passport, or other equivalent document, may enter Italy without a visa and stay up to 90 days. These nationals do not need a work permit to perform work in Italy and can be recruited directly by the employer.
A number of additional requirements apply if the prospective employee is a non-EU national. The employer must apply to the Immigration Office at the Prefecture (the Immigration Office) for a work permit. Other than managers and highly specialised workers, the issue of a work permit is conditional upon the Immigration Office being satisfied that the vacancy cannot be properly filled by any other EU or non-EU nationals already residing in Italy and enrolled with the Labour Office and that the hiring does not exceed the immigration threshold set every year by the Ministry. Once the work permit is obtained, it is forwarded to the Italian consulate abroad for the employee to apply for a work visa. Within eight days from his or her entry into Italy, the employee must sign the residence contract and apply to obtain a residence permit. The permit has a duration of two years in the case of open-ended employment relationships and can be renewed if the employment contract is still pending at the expiry date of the residence permit.
The employer is free to apply either Italian law or a foreign law to regulate the employment relationship. If, however, the employer chooses the foreign law, mandatory Italian law will apply anyway (see Section IV, supra). Also, the employer must deduct taxes and social security contributions at source and pay the same to the Italian tax and social security authorities.
Besides direct recruitment, foreign workers may also work temporarily for an Italian employer under a secondment agreement. EU nationals are not required to comply with any visa requirements. Non-EU nationals must obtain a visa, which is not, however, subject to the immigration thresholds. The seconding company is liable to deduct taxes and social security contributions at source and pay the same to the Italian tax and social security authorities, unless otherwise provided by international, EU or bilateral agreements.
Also, by means of the Legislative Decree No. 108 of 28 June 2012 implementing the Directive 2009/50/CE, non-EU nationals who are highly qualified may obtain a visa that is not subject to the immigration thresholds (the EU Blue Card).
Finally, it must be noted that new European regulations (Directive 2014/67/EC concerning the secondment of employees in the EU) have been enacted to ensure more control and better protection for posted employees. In Italy, the Directive has been implemented by the Legislative Decree No. 136 of 17 July 2016 providing for new obligations in terms of advance communication, and imposes material sanctions in the event of breach, as well as new measures aimed at preventing unlawful secondment of employees. The Decree applies to any Member State’s company seconding one or more employees to another company – even belonging to the same group – or to another business unit, as well as to temporary agency workers hired by temporary work agencies established in a Member State and seconding their employees to a user company with its registered office or a business unit in Italy.
VIII GLOBAL POLICIES
Article 2,104 ICC permits employers to implement internal discipline rules. Implementation requires no prior consultation with or approval from trade unions, works councils, employees’ representatives or any government authority (it may, however, be advisable where a works council exists to discuss the envisaged implementation of the code of conduct so as not to harm working relations). Also, there is no need to obtain the employees’ signatures to evidence their acceptance of the code.
The employer’s power to unilaterally impose rules of conduct is subject to a number of limitations provided by the Constitution (such as the principle of equality and non-discrimination and the right of defence), the laws and collective agreements.
If there is a breach of the code of conduct, the employer may apply disciplinary sanctions provided that they comply with Article 7 of the Workers’ Statute. To lawfully discipline an employee, the employer must take the following steps. First, the employer must give adequate notice of the disciplinary rules by displaying them in a place accessible to all employees. Second, the grounds for the disciplinary action must be clearly stated; any sanction that is more serious than a verbal reprimand can only be made at least five working days after a written warning has been given to the employee. Third, disciplinary sanctions (suspension with or without pay, dismissal, etc.) must be proportionate.
As such, a code of conduct, as well as any global policies, should be posted within the employer’s premises and an Italian translation should be provided so employees are aware of and understand the code. Since the Workers’ Statute expressly requires the display of the code of conduct, any other form of distribution of the document (such as via the company intranet) may be deemed insufficient by an employment tribunal if the employee challenges the sanctions.
There is no legal obligation whereby employment documents must be translated into Italian or the employee’s native language. However, it is recommended for employers to make employees sign employment documents in both Italian and their native language. Also, it is advisable to include in these documents a clause indicating which language shall prevail in case of discrepancies in interpretation.
In general terms, it is advisable to provide a translation of all employment documents that mention specific obligations for employees or employers (e.g., employment contracts, stock options and incentive plans, restrictive covenants, general policies). Exceptions should be evaluated on a case-by-case basis, when the employer is satisfied that the employee is able to fully understand the terms and conditions of employment even though they are provided in a foreign language (e.g., bilingual employees, top executives).
Failing to translate employment documents into an employee’s native language may result in the unenforceability of the provisions contained therein. It may also expose the employer to possible claims for damages (especially when incentive and bonus plans are concerned), unless the employer satisfies the court that the employee was fully aware of the terms and conditions regulating his or her employment relationship.
X EMPLOYEE REPRESENTATION
In Italy the establishment of works councils is regulated by certain provisions of the Constitution, the Workers’ Statute and the Interconfederal Agreements dated 23 July and 20 December 1993 (the Interconfederal Agreements). As a result of this system, it is now possible to have two main forms of workers’ representation in the workplace: business union representation (RSA) and unitary union representation (RSU).
According to Article 19 of the Workers’ Statute, RSAs may be appointed in industrial and commercial businesses that have more than 15 employees in the same unit or in the same municipality. Before the recent judgment of the Constitutional Court (Decision No. 231 of 3–23 July 2013), only the unions that executed a collective agreement applicable in the workplace were entitled to be qualified as an RSA. After such judgment, this entitlement has been extended to those RSAs that, although they failed to sign up to the collective agreement applied by the employer, actively participated in the negotiations of the same agreement.
The Interconfederal Agreements regulate the establishment of an RSU. The election of an RSU is not mandatory. Where there are more than 15 employees in the same workplace, the employees may elect an RSU to represent their interests. The initiative for the election must be taken by the main trade unions (CGIL, CISL and UIL), the trade unions that signed the applicable collective agreement or other trade unions meeting certain requirements.
All employees (excluding executives) who are employed on the day of the election and who have successfully completed their probationary period are entitled to vote. The election is valid if a majority of employees entitled to vote cast their votes. The number of members of an RSU varies depending upon the size of the business.
One-third of the members of an RSU are appointed from among the candidates presented by the trade unions that signed the applicable collective agreement, while two-thirds are elected from among the candidates presented by the other trade unions. RSU representatives may hold office for three-year terms and may be re-elected.
Italian law does not provide for periodical meetings to be held with the works council. However, the Workers’ Statute provides for a number of duties the employer has to comply with. Among others, the Workers’ Statute prohibits the employer from discriminating against any employee for reason of trade union membership and trade union activities; it also provides that the transfer of internal trade union representatives is subject to the prior consent of the relevant national trade unions they belong to and that the representatives have a right to paid and unpaid time off to carry out trade union activities.
The law and collective agreements also give works councils the right to be informed and to be consulted on certain events regarding the business organisation (such as mass lay-offs, or resorting to the special public wage-guarantee fund). Following the implementation of EC Directive 14/2002, collective agreements also provide for the ongoing obligation of the employer to inform and consult with works councils over specific matters.
XI DATA PROTECTION
Employers must comply with the obligations on data processing included in Legislative Decree No. 196/2003 (the Privacy Code). One of the controller’s duties is the notification to the Data Protection Ombudsman. The controller is required to notify the Ombudsman of the processing only in certain cases, outlined in the Privacy Code, in which the processing of data, owing to the methods of processing or the nature of the data, could seriously jeopardise the rights of the data subjects (e.g., the processing concerns genetic or biometric data). The notification has to be made only once and must be repeated only if there are changes to the information contained in the first notification.
While the notification to the Ombudsman is due only in some cases, the delivery – orally or in writing – of the information notice to the data subject (applicant, employee, etc.) is always necessary. The notice must include:
- a the purpose and the method of processing;
- b the consequences deriving from the refusal to provide data;
- c the mandatory or voluntary nature of the supply of data;
- d the entities that may access the data; and
- e the data subject’s rights.
In addition, the processing of personal data requires, generally, the consent of the data subject. The consent is valid only if given freely and specifically and evidenced in writing. On the other hand, consent is not required, inter alia, when the data is retrieved from public registers, lists, documents accessible to the public or when the data is necessary for the performance of the contract or of an obligation provided by the law.
Sensitive data may be processed with the written consent and authorisation of the Ombudsman. With specific regard to the authorisation itself, the Ombudsman has issued some general authorisations for the processing of sensitive and judicial data by specific categories of controllers (including authorisations for employers).
The Privacy Code grants to the employee the right to access his or her personal data. This must be easy and free. The employer is required to adopt adequate security measures, namely, security measures that, based on technical progress, prove to be adequate to avoid any risk of destruction, loss or unauthorised access of the data and minimum security measures, namely, security measures outlined by the Privacy Code and by its technical specifications, which must be implemented by all the controllers. Transfers to non-EU countries are subject to some conditions, including:
- a the consent of the data subject;
- b the necessity of the transfer for the execution of an agreement to which the data subject is a party; and
- c the necessity of the transfer in order to judicially challenge, exercise or defend a right.
The transfer of data to third countries is, however, always allowed in the presence of a previous authorisation by the Ombudsman (e.g., contractual clauses, binding corporate rules) or in the presence of an EU decision (e.g., Swiss and Canadian authorisations, American companies adhering to the Safe Harbor principles). In such cases, no further action except the information notice and the notification (if required) is required.
Finally, further restrictions concern background checks. From both a privacy and a labour standpoint the investigations may only be carried out provided that:
- a the purposes of the investigation are previously identified and are legitimate;
- b the relevant information is not excessive in relation to its purpose; and
- c the data to be collected is strictly related to the functions and responsibilities connected to the employment relationship.
The investigations must be preceded by an adequate information notice to the applicant or employee illustrating some details of the data processing and in some cases requesting express consent. Judicial data (e.g., criminal record checks) may be collected only if there are laws or regulations authorising its processing.
XII DISCONTINUING EMPLOYMENT
Subject to limited exceptions, employees may only be dismissed with cause. This may consist of a just cause or of justified reasons for dismissal. Just cause arises if serious misconduct occurs, affecting the feasibility of the continuation of the employment relationship. When dismissed for just cause, the employee is not entitled to any notice period but retains the right to obtain other termination indemnities (i.e., compensation for termination, which is payable upon termination regardless of the reason of the termination, the prorated amounts of the 13th and 14th month allowance, unused holiday and leave).
Justified reason arises if there is a serious breach by the employee of his or her contractual obligations (subjective justified reasons) such as failure to comply with the employer’s instructions, repeated unjustified absence from work or, in the event of reorganisation (objective justified reasons), abolition of a job position arising out of a reorganisation (Article 2118 ICC). When dismissed for a justified reason, the employee is entitled to notice provided for in the applicable collective agreements or a payment in lieu in addition to the other termination indemnities. The employer must also consider redeployment before dismissal for a justified reason is implemented.
The Jobs Act Reform (Legislative Decree No. 23 of 4 March 2015) introduced a complex system in terms of legal consequences arising from unfair dismissal. In particular, the consequences for the employer would be different, depending on whether there are more or less than 15 employees per production unit (or more than 60 employees as a whole) and whether the dismissed employee has been hired before, on or after 7 March 2015.
ii Dismissals based on discriminatory reasons or in breach of other mandatory provisions
Regardless of the hiring date and employees’ threshold, if the dismissal is based on discriminatory reasons, or is carried out in violation of certain mandatory provisions of law (for example, the rules on parenthood) or is not implemented in writing, the employers shall be subject to reinstatement of the employee and payment of damages equal to the salary accrued from dismissal until reinstatement (a minimum of five months’ salary).
iii Disciplinary dismissals
Regardless of the hiring date and provided that the employer is staffed with more than 15 employees, if the court ascertains that the disciplinary dismissal was based on conduct that did not actually occur, the employer shall be obliged to reinstate the employee and pay damages up to 12 months’ salary. With regard to employees hired before 7 March 2015, the aforesaid reinstatement protection also applies if the same conduct should have been sanctioned with a less serious sanction under the applicable collective agreement.
In any other cases where disciplinary dismissals are deemed unlawful (e.g., the judge determines that the dismissal is disproportioned to the employees’ misconduct), the employee is merely entitled to compensatory protection and no reinstatement is applicable.
Compensatory damages are different depending upon the hiring date.
With particular regard to employees hired on or after 7 March 2015, the damages are linked to the employee’s length of service, in other words two months’ salary for each year of service (a minimum of four up to a maximum of 24 months’ salary), whereas with regard to employees hired before such date, the compensatory damages range between 12 and 24 months’ salary and are assessed on the basis of judges’ discretionary criteria.
iv Economic dismissals
In case of dismissals based on economic reasons, and provided that the employer is staffed with more than 15 employees, should the alleged economic reason be declared as clearly non-existent and the employee be hired before 7 March 2015, the employer can be subject to reinstatement and payment of damages up to 12 months’ salary. Otherwise, in the event that the court does not intend to apply the aforesaid sanctions, or the lack of the organisational or business reason is not straightforward, the employee will be entitled to damages only, ranging between 12 and 24 months’ salary.
With respect to employees hired on or after 7 March 2015, no reinstatement protection applies and the employer can be subject to pay compensation equal to two months’ salary for each year of service (a minimum of four and a maximum of 24 months’ salary).
On the other hand, where the employer employs 15 or less employees, the dismissed employee (for economic or disciplinary reasons) is not entitled to reinstatement, but only to the payment of damages ranging between two and six months’ salary.
In any case, employees cannot be dismissed while pregnant or for one year after giving birth. The same protection is afforded to the father in the event of the mother’s death or disability or if he has been granted legal custody of the child. This protection is not afforded if the company is wound up.
The employee must challenge the dismissal within 60 days of the date of receipt of the written communication of termination and to file a claim with the competent employment tribunal within the following 180 days. For individual dismissals, an employer need not notify unions, nor is the submission of a social plan required.
Special rules apply to executives. While they are also not entitled to reinstatement in case of dismissal without cause, they are entitled to claim damages in addition to the notice period and termination indemnities, which varies depending on the length of service and the grounds for dismissal.
Pursuant to Law No. 223/1991, if a dismissal plan concerns: (1) at least five redundancies within 120 days; or (2) companies staffed with more than 15 employees, the employer must give prior notice to all relevant trade unions indicating the reasons for the proposed redundancies, the number of and description of the employees to be affected and the date on which the envisaged dismissals will be implemented. The unions may call for consultation with the employer within seven days from receipt of the notice to request a detailed explanation of the need for redundancies and to discuss possible alternative solutions.
If within 45 days of receipt of the notice an agreement with the unions is not reached, the local, regional or central labour office, as the case may be, will mediate for a further period of up to 30 days. These negotiations will consider:
- a the positions to be made redundant;
- b the possible relocation of employees to other business units;
- c the possible redeployment of employees;
- d the possibility of entering into a government-funded job saving scheme;
- e the provision of an enhanced severance payment to mitigate the effect; and
- f an application for ‘social shock absorbers’.
Often, the enhanced severance payment referred to in (e) is offered in exchange for the execution of a settlement agreement providing for the employees’ waiver of any claims.
Law No. 223/1991 provides for mandatory selection criteria to be followed in choosing the employees to be made redundant (upon completion of the unions consultation procedure). Pursuant to Law No. 223/1991, the employer has to consider, inter alia: length of service (in the same company) of the concerned employees, their family responsibilities and any other technical, production and organisational needs.
After the recent enactment of Law No. 161 of 30 October 2014, the rules provided for by Law No. 223/1991 apply also to executives terminated within a collective dismissal process who therefore must be selected in accordance with the aforesaid social selection criteria. Also, it follows that the executive(s) to be dismissed must be counted for the purpose of determination of the five redundancies threshold.
XIII TRANSFER OF BUSINESS
Article 2112 of the ICC provides that in the case of a transfer of business the employment relationship continues with the transferee and the employees maintain the same terms of employment by operation of law. The transferor and the transferee are jointly and severally liable with respect to all the employee’s vested rights at the time of the transfer, unless the transferor has been discharged by the concerned employees according to a special waiver procedure. The transfer of business does not in itself represent a justified reason for dismissal. Employees that have suffered a material change due to the transfer may resign for cause within three months from the date of transfer and are entitled to payment of an indemnity equal to the amount they would have received in the event of a dismissal without notice.
This protection applies in any case in which the transfer of business entails a change of employer, including the case of transfer of a going concern and merger. Special rules apply in the case of a bankruptcy, insolvency or winding-up of the company transferring the business.
Subject to certain requirements, the transfer of business is conditional on a previous information and consultation procedure to be complied with by the transferor and transferee with the relevant trade unions. The employee has to challenge the validity of the transfer within 60 days from the date of the transfer and file the claim with the competent employment tribunal within the subsequent 180 days.
The economic crisis in Italy has been managed thanks to the enactment of all the above-mentioned legal measures aimed, inter alia, at attracting foreign investments. After a five-year period of reforms, it is now possible to assert that at long last the Italian labour market has a clear and complete legal framework to the benefit of investors and practitioners deputed to sustain entrepreneurs in the creation of a business model more suited to different productive situations.