Labour and employment law in 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 several 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 labour 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 labour 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 hypotheses, 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 introduced 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 favourable 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 a productive unit/office 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.
• Fixed-term contracts exceeding 12 months require a justification.

Legal framework

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 4 March 2015 no. 23), for employees hired with an open-ended contract as of 7 March 2015, there is 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 originally had to be 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 provided that the calculation of the compensation indemnity due to post Jobs Act hirings in cases of unlawful dismissal were 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 25 June 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 organisational 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 24 September 2015, employers are even authorised to have access to the content of company equipment given to their employees to carry out their duties (e.g., smartphones, personal computers, tablets) – provided that such access complies with applicable data protection laws, including GDPR, and that employees have been duly informed of the use of such tools – and said content can be used for the purpose of issuing disciplinary sanctions.

As of 12 March 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 Labour published on 11 January 2016.

On 14 July 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).

Decree Law No. 48 of 4 May 2023, enacted with Law No. 85 of 3 July 2023, the so-called “Labour Decree”, introduced some important innovations related to labour law and social inclusion. The main measures of interest to employers set forth by the “Labour Decree” include:

a) Fixed-term contracts

Without prejudice to the possibility of signing acausal contracts of a duration of less than 12 months, the current discipline extends the range of reasons that may ground the fixed-term contracts lasting at least 12 months but not exceeding 24 months. 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) Simplification of reporting requirements

The Labour Decree also provides for a simplification of the information that the employer is required to provide to the employee at the time of recruitment pursuant to the so-called “Transparency Decree” (Legislative Decree 104/2022), which came into force in August 2022. In particular, Article 26, paragraph 1, of the latter Decree specifies that some of the information obligations (e.g. duration of the probationary period, training, duration of holidays and any paid leave) may henceforth be understood as being fulfilled simply by indicating the regulatory references or by referring to the collective agreement applied, including company agreements. For further details on the discipline regulating such a type of agreement, please refer to par. III “Employment Contracts”, sub. par. 1. “Minimum Requirements”.

Also Decree Law No. 60 of 7 May 2024 (the “Cohesion Decree”), enacted with Law No. 95 of 4 July 2024, introduced other relevant measures and mainly:

c) Youth and women employment incentives

From 1 September 2024 and until 30 April 2026, non-managerial staff under 35 (never employed on a permanent basis) hired with a permanent employment contract (apprenticeship excluded) is exempted from employers’ social security contribution (excluding INAIL premiums and contributions) for a maximum period of 24 months:

• 100% exemption for hires made until 31 December 2025,
• 70% exemption for hires made from 1 January 2026 until 30 April 2026,
  up to a maximum amount of Euro 500 per month for each worker.

The exemption – for a maximum period of 24 months – of 100% from the payment of employers’ social security contributions up to a maximum limit of Euro 650 on a monthly basis (excluding INAIL premiums and contributions), is applied also for female employees, hired on a permanent basis (apprenticeship excluded):

• from 1 September 2024 until 31 December 2025, who falls into the following categories: (i) women of any age, without a regular paid job for at least 6 months, resident in certain regions of the Southern Italy (Abruzzo, Molise, Campania, Basilicata, Sicily, Puglia, Calabria, Sardinia); (ii) women of any age without a regular paid job for at least 24 months, wherever they reside; (iii) women who have been unemployed for at least 6 months, regardless of their residence, working in professions and sectors with high employment disparity rate;
• for hires after 31 December 2025, the geographic scope is extended to include also Marche and Umbria.

The Law on Financial Statement 2025 (Law no. 207 of 30 December 2024) established, for the years 2025, 2026 and 2027, that the non-taxable threshold for employee fringe benefits is set at Euro 2,000 for employees with dependent children and 1,000 for all employed workers (threshold raised from Euro 258 envisaged by the “ordinary” tax legislation for employees without children).

Finally, among the recent innovations in Italian Employment and Labour Law it is also important to mention the following regulatory measures:

• the Law 30 December 2021, no. 234, which, as already pointed out, 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 introduces 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 to recognise priority to certain categories of employees. In particular, priority should be given to:
  • 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 5 February 1992;
  • for caregivers, pursuant to Section 1, Paragraph 255 of Law No. 205 of 27 December 2017.

The worker or employee requesting to take advantage of smart-working cannot be sanctioned, demoted, dismissed, transferred, or subjected to any other organisational 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 the expected date of childbirth to 5 months after it, both in case of birth and perinatal death of the child.

• Law Decree 31 October 2025, no. 159, which strengthens the occupational health and safety system, introducing mandatory worker ID cards for high-risk sectors, tighter points-based licenses, enhanced supervision of contractors and subcontractors, new periodic training for Workers’ Safety Representatives (RLS) even in companies with fewer than 15 employees, and the counting of health surveillance as working hours;
• Law 12 September 2025, no. 132, which implements the EU Artificial Intelligence Act in Italy, establishing rules for AI use in employment, including recruitment, performance evaluation, task allocation, and monitoring, with obligations for employers to ensure transparency, non-discrimination, human oversight, and compliance with privacy and labour laws, as well as special attention to AI in gig work platforms.

With regards to other significant 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 1 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 prevailing 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.

Regarding the recent developments in case law on the Jobs Act (Legislative Decree no. 23 of 4 March 2015), the following Constitutional Court rulings are particularly relevant:

• Constitutional Court, judgment no. 7/2024, confirmed the constitutionality of Articles 3, paragraph 1, and 10 of Legislative Decree no. 23/2015, ruling that the differential treatment between employees hired before and after 7 March 2015 in collective dismissals does not violate the equality principle. The Court held that the indemnity protection currently afforded to an unlawfully dismissed employee, as a result of a staff reduction procedure, is adequate.
• Constitutional Court, judgment no. 22/2024, declared unconstitutional Article 2, paragraph 1, of Legislative Decree no. 23/2015 to the extent it limited reinstatement protection only to cases of dismissal “expressly provided by law,” removing the word “expressly”. The Court clarified that reinstatement must apply whenever a dismissal is null, regardless of whether the voidness is expressly provided by law.
• Constitutional Court, judgment no. 44/2024, confirmed the application of the Jobs Act regime to employees of small companies once they exceed the threshold of 15 employees, even if hired before 7 March 2015. This ensures consistent protections while promoting growth of small companies.
• Constitutional Court, judgments no. 128 and 129/2024, clarified:
  1. reinstatement applies also in cases of dismissal for justified objective reasons where the material facts invoked by the employer are proven not to exist, ensuring equal treatment and reasonableness;
  2. reinstatement applies when the dismissed conduct, though disciplinarily relevant, is punishable under the collective bargaining agreement only with a conservative sanction, meaning the conduct is fundamentally insufficient to justify dismissal.
• Constitutional Court, judgment no. 118/2025, declared Article 9, paragraph 1, of Legislative Decree no. 23/2015 unconstitutional insofar as it imposed a maximum cap of six months’ indemnity for “sub-threshold” employers. The Court found that such a limited range (3-6 months) prevented adequate compensation and effective deterrence, undermining the purpose of indemnity and allowing standardized settlements that fail to reflect the complexity of individual cases.

Among the recent interventions of the Italian Constitutional Court, it is worth noting judgment no. 156/2025, which clarified that Article 19 of Law no. 300/1970 allows the establishment of company-level trade union representatives (RSAs) not only within unions that signed (or participated in the bargaining of ) collective agreements, but also within unions that are comparatively the most representative at national level.