Logo L&E Global
Italy | Zambelli & Partners

Employment law overview Italy
Opening Up Shop Italy
Italy

Employment law overview Italy

Introduction

The Italian employment law grants to employees relatively high standards of rights, in line with the values and principles enshrined in the Constitutional Chart. Such enhanced protection, indeed, is the core of the dual system characterizing Employment Law which discerns between the categories of subordinate work and self-employment: this bipartition has traditionally demarcated the scope of application of the legal safeguards established in Italian Labour Law to workers employed through an employment agreement, rather than self-employed individuals (even if – currently –  as a result of various legislative interventions – such as Law 22 May 2017, no. 81 – the Italian legal framework is being enriched with provisions aimed at ensuring increasingly effective protection for this peculiar category of workers as well).

As already pointed out, the rights of employees find their raison d’être directly in the Italian Constitution: it is only sufficient to consider the employees’ right to receive, pursuant to Section 36 of the Constitution, a salary “proportionate to the quantity and quality of work and in any case sufficient to ensure for (the worker) and his family a free and dignified existence“, to adequate social security and protection from any kind of risk that can affect employees’ capacity to work (Section 38) rather than the right to strike (Section 40). In addition to the above, it is worth mentioning – moreover – that Section 39 envisages the freedom of trade union association and the right to collective bargaining. In particular, trade unions are considered unincorporated associations that do not need any authorization or any registration to be recognized: they are governed by their by-laws, which do not need to be checked by any authority. This principle was also made effective regarding the workplace through the approval of the Workers’ Statute (Law no. 300 of May 20, 1970).

Title III of the Statute (Sections 19-27) contains a number of measures intended to support trade union activity at the workplace, including the right to establish, at the initiative of workers, company’s trade union representatives (RSA) in every production unit employing more than 15 employees (Section 35 Workers’ Statute). Having said that, the trade unions have always been considered important actors in the context of industrial relations. Indeed, they must necessarily be consulted in the area of relevant business activities (e.g. in case of transfer of a business or in the scope of collective dismissals).

Above all, however, the most guaranteeing protection that has always characterized the Italian Employment Law system is that relating to dismissals. As a matter of a fact, except for few residual hypotheses (e.g. at will dismissal during the probationary period), a termination served by the employer, in order to be considered valid, must always be supported by a justification, a reason. Lacking such grounds, the dismissal so disposed is considered unjustified and, therefore, null and void.

In this respect the reinstatement – introduced into the Italian legal system through Section 18 of Law 300/1970 in all cases of unlawful dismissal (that involved workers employed by entrepreneurs or non-entrepreneurs, who exceeded specific size thresholds: i.e. 15 employees in a single B.U. or 60 employees nationwide considered) – represented the most effective and traditional form of protection granted to the employees. Such measure, specifically, consists in the employer’s obligation to readmit the worker to the same position he/she occupied before the unfair dismissal. Nevertheless, it was argued by some scholars and political figures that such discipline created a sort of inertia within the Italian Labour Market: thus, in order to develop foreign investment, it was starting to be deemed as pressing the necessity to promote greater flexibility in exiting the labor market and thus facilitate layoffs.

As a matter of a fact, in the aftermath of the global economic recession occurred in 2008, labour market flexibility has emerged as a priority among the structural reforms set out by the Italian legislators. Therefore, following a hiatus in the reformation process, the ”Fornero Law” (Law no. 92/2012) clearly manifested the two-fold purpose of, not only, narrowing the labor market segmentation between workers with permanent contracts and those with fixed-term or parasubordinate agreements, but also to undermine the effectiveness of Section 18 of the Worker Statute, reducing therefore workers’ protections in case of dismissals regarded as invalid by the Courts. Notwithstanding the above, the examined law weakened the previous regulation without eliminate it: for a considerable set of hypothesis, as a matter of a fact, the obligation to reinstate the dismissed employee in the event that the termination is considered unfair, has been maintained.

The final phase of this reform process coincides with the so-called Jobs Act, which has allowed greater flexibility to the employers by providing them with different measures, including the (i) “progressive” protection against unfair dismissals and the (ii) opportunity, upon certain terms, to demote the employees, contributing to bringing Italian Employment Law provisions more into alignment with international benchmarks and flexicurity principles. In particular, the provisions included within the Jobs Act do not provide for the obligation of employees’ reinstatement in case of invalid termination (unless it involves orally communicated or discrimination-based layoffs). Instead, when an invalid termination occurs, the employers are obligated to compensate their workers only with an indemnification (from 6 up to 36 months salary due to the Labour Judge’s discretion based on several factors). These new rules, however, apply only to new permanent hires as of March 7, 2015, while the existing old type of permanent contracts remains protected by the retention of existing rights.

However, despite all these reforms it is possible to detect some degree of resistance on part of the case law to adapt to such changes, always persisting interpretations aimed at limiting the impact of these new reforms and attempting to give again importance and centrality to the reinstatement protection.

Key Points

  • For every industrial sector, a National Collective Bargaining Agreement (hereafter, also referred to as “NCBA”) regulates the employment relationship.
  • Italian employment laws and the several provisions contained within the NCBAs may only be amended by employers in a way that is more favorable to their workers.
  • Companies with more than 15 employees are covered under the scope of application of the Workers’ Statute.
  • Reinstatement is any longer the exclusive recourse in cases of unjustified dismissal.
  • The collective dismissal procedure must be triggered if at least 5 dismissals for economic reasons are issued by a given company with more than 15 employees within a time frame of 120 days. Moreover, in this respect, Law 30 December 2021, no. 234, introduced a more complex procedure of prior information and consultation, both at the trade union and political/ministerial level, aimed at “ensuring the preservation of the employment and production fabric” in the event of closure and permanent cessation of production activities entailing at least 50 terminations in the national territory for employers who in the previous year employed an average of at least 250 workers.
  • Executives must be considered in the calculation that causes the collective dismissal to be triggered.
  • The need to provide reasons in order to enter into a fixed-term contract has been reintroduced for such contracts provided they exceed a 12 months duration.

Italian employment law comes from different sources: (i) International Treaties, European sources; (ii) the Constitution, the domestic law, the Italian Civil Code; (iii) collective bargaining agreements and individual employment agreements; (iv) policies and practices.

Courts’ decisions in Italy are not considered a source of law since Courts are supposed to apply existing legislation. However, the application and the interpretation of the legislation clearly imply a margin of discretion by the Courts. Thus, case law precedents play an important role in shaping Italian Employment Law.

New Developments

As a result of the Jobs Act (Legislative Decree of March 4, 2015 no. 23), for employees hired with an open-ended contract as of March 7, 2015, there is now a different set of remedies in case of unjustified dismissal: in most cases, the remedy consists in compensation for damages, (reinstatement has become the exception as opposed to the rule) which is calculated on the basis of the dismissed employee’s length of service within the company. To this extent, it is worth mentioning that such mechanism related to length of service came to an end following the rulings 8 November 2018, n. 194, and 16 July 2020, n. 150, of the Constitutional Court, which declared the constitutional illegitimacy of Sections 3 and 4 of the Legislative Decree no. 23/2015 where they provide that the calculation of the compensation indemnity due to post Jobs Act hires in cases of unlawful dismissal is anchored to the mere length of service accrued by the worker as the calculation criterion would be excessively “rigid and automatic, linked only to the element of length of service.”

After June 25, 2015, an employer is entitled to unilaterally change the duties and tasks assigned to an employee by giving him/her those corresponding to a lower work level (please note that the employee remains in the same work category perceiving the same salary), if the following requirements are met:

  • there have been organizational modifications within the company, which affects the position of the employee concerned;
  • the NCBA envisages such possibility;
  •  a specific agreement has been signed before the Public Employment Offices.

Moreover, as of September 24, 2015, employers are even authorized to have access to the content of company equipment given to their employees to carry out their duties (e.g., smartphones, personal computers, tablets), and said content can be used for the purpose of issuing disciplinary sanctions.

As of March 12, 2016, resignations, mutual terminations and their related revocations must be submitted electronically by any employee, on the government website platform, according to a specific procedure established by the Decree of the Minister of Labor published on January 11, 2016. To this extent, in Italy a heated debate about privacy and remote data monitoring is currently taking place, also in view of the new legislation and awaiting guidelines from the competent authority, including the one at the European level.

In this regard, it is worth mentioning that, according to the recent case law, it is not illegal for an employer to create a fake Facebook profile to discover employees’ negligence. According to the Court’s ruling, in this regard, the employer’s behavior was deemed to be legitimate and valid because, while always bearing in mind the dignity and freedom of every worker, employee-monitoring is considered lawful if the goal is not to evaluate the work performance but, as a way of a mere example, to avoid the risk of damage occurred to company property.

On July 14, 2018, the so-called “Dignity Decree” (Law Decree no. 87 of 12 July 2018) was issued, introducing very important innovations on several employment law matters such as fixed-term contracts, supply of work and penalties in the event of illegitimate dismissal as provided by the so-called Jobs Act (for open-ended contracts stipulated as of 7 March 2015).

Such new provisions highlight the Government purpose of fighting the issue of unstable employment.

Please find below a concise overview of the most significant reforms concerning employment contracts, with specific reference to issues, which have mostly attracted the public attention, because of their significant impact on business organizations.

A. Fixed-term contracts.

Pursuant to the amendments effectuated by the examined Law Decree, a term of no more than 12 months may be applied to employment contracts executed for a definite duration. For further details on the discipline regulating such type of agreement, please refer to par. III “Employment Contracts”, sub. par. 2. “Fixed-term/Open-ended Contracts”

B. Supply of work.

Law Decree no. 87 of 12 July 2018 has set out a new limit to the utilization of leased workers. Due to the amendments introduced, current Section 31 of Legislative Decree no. 81 of 15 June 2015 states that, unless it is otherwise provided in the NCBA applied by the user, and save the provisions of Section 23 of the same Decree, the whole amount of workers with fixed-term contract and with staff leasing fixed-term contract cannot overcome the threshold of 30% of the employees hired by the company with an open-ended contract as of 1 January of the year of contract stipulation. It is excluded from the above, the amount of staff leasing of workers (i) referred to in Section 8, paragraph 2, of Law no. 223 of 23 July 1991; (ii) unemployed subjects who have been receiving non-agricultural unemployment or social security benefits for at least six months; (iii) disadvantaged or very disadvantaged workers pursuant to numbers (4) and (99) of Section 2 of EU Regulation no. 651/2014 of the Commission, of 17 June 2014, as identified by decree of the Ministry of Labour and Social Policies. The new provisions pertaining to the maximum terms of duration (12 months or 24 months only in cases of the so-called “conditions”), extensions and renewals, have also been transposed to fixed-term contracts stipulated between the leasing agencies and their employees. Please note that Decree’s conversion law (Law 9 August 2018, no. 96) has expressly clarified that the abovementioned “conditions” apply only to user companies: to this extent, according to first interpretations of the law provision, employment agencies shall indicate in their fixed-term contracts the “conditions” adopted and communicated by the user company. Failure to comply with this obligation entails the conversion of the fixed-term contract into an open-ended one, which will come to be held by the employment agency, as the “formal employer” of the supplied employee.

Additional penalties have been introduced concerning the new regulated figure of “fraudulent supply of work”: when supply of work is carried out with the only specific purpose to avoid the application of mandatory law or NCBA provisions, the employment agency and the user company shall be punished with a fine equal to Euros 20, for each employee involved for each day of labour supplied.

In the event of each renewal of fixed-term contracts – also stipulated in the context of staff-leasing agreement – the additional contribution to be corresponded by the employer equal to 1.4%, introduced by the so-called Fornero Law (Law of 28 June 2012 no. 92), is increased by 0.5%.

C. Penalties for illegitimate dismissal.

The Dignity Decree has moreover increased the amount of the indemnity against unlawful dismissals delivered to employees hired after March 7, 2015. Under the scope of application of these new provisions, the compensation due to dismissed employees will range between an amount of minimum 6 and a maximum of 36 months’ salary, bearing into account the length of service (while, previously the Jobs Act provided that the amount of this indemnity ranged between a minimum of 4 and a maximum of 24 months’ salary). Such amounts are then reduced by half (with a maximum limit of 6 months) for dismissals falling into the scope of application of the so-called “mandatory protection”, which is applicable to companies with a workforce up to 15 employees.

D. Youth employment incentives.

According to Law 9 August 2018, no. 96, employers are granted with a social security contribution reduction of 50%, in case of hiring under 35 employees through open-ended employment agreements. Such reduction is applied monthly, for a maximum duration of 36 months, and the maximum amount of the reduction is equal to 3000 Euros on an annual basis.

Finally, among the most recent innovations in Italian Employment and Labour Law it is important to highlight:

  • the Law 30 December 2021, no. 234, which, as point out immediately before, has set out a more complex procedure in the event of closure and permanent cessation of production activities entailing at least 50 terminations, for employers who in the previous year employed an average of at least 250 workers;
  • the Law Decree 27 June 2022, no. 104, which has implemented new provisions on the management of the employment relationships, for instance, by providing mandatory information to be inserted in the employment contract as detailed in par. III “Employment Contracts” sub. par. 1 “Minimum Requirements”;
  • Legislative Decree 30 June 2022, no. 105, which provides provisions to improve work-life balance for parents and caregivers in order to achieve the sharing of care responsibilities between men and women and gender equality in work and family life. Unless otherwise specified, its provisions also apply to public administration employees. Moreover, according to the examined Decree, public and private employers who enter into agreements for smart-working performance are required, in any case, to recognize priorities. The first requests for working from home to be granted must therefore be:
  • for those with children up to 12 years of age and, without any age limit, in the case of children with disabilities, pursuant to Section 3, paragraph 3, of Law No. 104 of February 5, 1992;
  • for caregivers, pursuant to Section 1, Paragraph 255 of Law No. 205 of December 27, 2017.

The worker or employee requesting to take advantage of smart-working, then cannot be sanctioned, demoted, dismissed, transferred or subjected to any other organizational measure having direct or indirect negative effects on working conditions: any measure taken in violation of this rule is to be considered retaliatory or having a discriminatory nature and, therefore, void. Finally, with this Legislative Decree, a new type of paternity leave enters into the Italian legal system in full force. It is a mandatory leave, lasting 10 working days from childbirth and independent of the mother’s leave. It is usable by the working father in the time frame from 2 months before to 5 months after childbirth, both in case of birth and perinatal death of the child.

As regards the recent changes on case law, it should be noted that as a result of (i) Constitutional Court’s ruling 19 May 2022, no. 125, and (ii) the new Supreme Court’s case law interpretation of Section 18, paragraph 4 of the Worker Statute (ex multis, Supreme Court 11 April 2022, no. 11665; Supreme Court 2 May 2022, no. 13774; Supreme Court 28 June 2022, no. 20780), there is an increased risk that the employer may be condemned to reinstatement in case of unlawful dismissal of employees hired before 7 March 2015 and therefore excluded from the scope of validity of the Jobs Act.

Indeed, on one hand, following the Constitutional Court’s judgment 19 May 2022, no. 125, reinstatement (which is no longer optional by virtue of the Constitutional Court’s judgment 1st April 2021, no. 59) is applicable in all cases where there is no objective justification for termination (and not only in case of manifest lack thereof). On the other hand, according to the new interpretation of the Supreme Court in the event of unlawful disciplinary dismissal (ex multis, Supreme Court 11 April 2022, no. 11665; Supreme Court 2 May 2022, no. 13774; Supreme Court 28 June 2022, no. 20780), reinstatement is applicable not only in the case of conduct not specifically set forth by the NCBA as punishable by a conservative sanction, but also in the case where the judge considers it to be traceable to a general rule of the NCBA which always provides for the imposition of a conservative sanction.

Any questions

Ask our member firm Zambelli & Partners in Italy