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Employment Law Overview Italy
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07. Termination of Employment Contracts

Grounds for Termination

Italian labour law requires the termination of the employment contract to be justified on specific reasons.

Such reasons may be classified into the following main categories:

  • Just cause: which occurs in case of gross misconduct by the employee which does not allow the continuation of the employment relationship, not even on a provisional basis.
  • Subjective justified reasons: which occurs whenever the employee breaches a contractual obligation, or the employee negligently performs his/her duties, but the behavior is not serious enough to ground a dismissal for just cause.
  • Objective justified reasons: which concern technical, production-related and organizational reasons which have to be proved by the employer. These kinds of reasons are objective, and they concern the activity of the employer. They may be due to technological renewal or to the need of rationalizing a production system or the work organization.

Executives

The reasons that may legitimately ground an executive’s dismissal – considering the role within company’s organization and the strong trust relationship between the executive and the employer – are wider than the ones that could ground the dismissal of other employees’ category.

As a consequence, it could happen that the reasons that could not ground the dismissals of an “ordinary” employees (i.e.: not ranked as executive), could be – on the contrary – considered relevant (and, then, the dismissal lawful) in case of an executive’s dismissal.

In this context, the termination of an executive shall be supported by a valid and legitimate reason which shall not be discriminatory, nor arbitrary, but actual and concretely ascertainable and respecting the principles of fairness and good faith.

Covid-19 emergency

In should be evidenced that within the context of spread of Covid-19 in Italy, it was implemented starting from 17 March 2020 to the end of year 2021 the dismissal ban regarding collective dismissal procedures and dismissals for individual redundancy. Currently, it is no longer in force and the ordinary rules apply.

Collective Dismissals

A collective dismissal occurs when at least 5 dismissals are served by the employer in a business unit or in more business units located in the same province and in a period of 120 days, due to reduction, transformation or ceasing of activity. The Law applies also to executives (“Dirigenti”).

Pursuant to the above-mentioned law, the employer shall notify the (i) company’s work council (i.e. RSA – Trade Unions and the (iii) competent employment office (i.e. Region or Welfare Ministry, depending if the impacted business units are located in only one Region or in more Regions), of the decision to proceed with a collective dismissal. In the absence of any company’s work council, notice shall be given to the ‘comparatively more representative’ Trade Unions.

Such notice must include:

(i)            the reasons backing the redundancy.

(ii)           Technical, organizational and production reasons for which it is not possible to adopt suitable measures to remedy the situation and avoid, in whole or in part, collective redundancies.

(iii)          The number of the employees in force in the Company, their role and the department/office/unit where they are located.

(iv)          The number of the redundant employees, their role and the department/office/unit where they are located.

(v)           The prospected timeframe to implement the collective dismissal plan.

(vi)          The possible measures to address the occupational consequences of the redundancy plan.

(vii)         The calculations for all sorts of economic awards in addition to those provided by the law or by the NCBA.

Within 7 days from the date of receipt of the mentioned notice, the parties meet to jointly discuss the reasons determining the collective dismissal’s decision taken by the company and the adoption of possible alternative measures.

It is not required to reach and sign any agreement.

Either if the Company and the Trade Unions are unable to reach an agreement within the maximum length of the procedure (two steps: 45+30 days= max 75 days), or if they reach an agreement during the procedure, the employer is allowed to terminate the redundant employees by granting them the due notice period, the length of which is determined by the NCBA, considering the contractual level and the concerned employee’s service seniority.

The dismissals may be served within a period of 120 days from the conclusion of the procedure unless the parties have agreed to extend the term.

the selection of the employees to be dismissed should follow the criteria provided by the agreement reached during the procedure or, in the event of a negative outcome, the employer must follow the criteria provided for by Law no. 223 of 23 July 1991, which are: family charges, seniority, and technical, productive or organizational matters, to be applied jointly.

Collective redundancy for shutting down of activities

Effective as of 1 January 2022, a special and additional information and consultation procedure has been provided for employers with an average of at least 250 employees in the year preceding the year in which they intend to close “an office, a factory, a branch, or a functionally autonomous department located in the national territory”, with definitive cessation of the relevant activity, resulting in at least 50 redundancies.

The special procedure must be implemented 90 days before the statutory one.

The employer is required to give written notice of the intention to proceed with the closure to the company’s work council, as well as to the territorial trade union associations that are comparatively more representative at national level and, at the same time, to the Regions, the Welfare Ministry, the Ministry of Economic Development and the National Agency for Active Employment Policies (ANPAL).

The notice must contain the economic, financial, technical or o organizational reasons for the closure, the number and professional profiles of the personnel employed and the time limit within which the closure is envisaged. Individual dismissals for objective reasons and collective dismissals announced in the absence of notification or before the expiry of the 90-day period are null and void.

Within sixty days from the above-mentioned notice, the employer shall submit to the trade unions and the institutions involve a plan to limit the employment and economic effects resulting from the closure. The plan cannot last more than 12 months. After the plan is submitted by the employer, it is discussed within thirty days with trade unions and institutions.

Before to the conclusion of the discussion of the plan and its possible signature, the employer may not initiate the collective dismissal procedure provided for in Law No 223 of 23 July 1991, nor may it serve individual dismissals for objective reasons.

Excluded from the scope of this special procedure are employers who are in a condition of asset or economic-financial imbalance that makes their crisis or insolvency likely and who can access the negotiated settlement procedure for the resolution of the enterprise crisis pursuant to Decree-Law No. 118 of 24 August 2021, converted, with amendments, by Law No. 147 of 21 October 2021.

Individual Dismissals

Individual dismissals shall be served in writing and specific procedures shall be followed depending on the type of dismissal to be served.

Dismissals grounded on objective justified reasons

In case of dismissal grounded on objective reasons, the employer must communicate in advance its intention to proceed with individual dismissal to the Labour Office of the employee’s workplace copying the same employee and explaining the reasons for the termination. This procedure only applies to the dismissal of employees not holding the executive status who have been hired before 7 March 2015 and are employed by companies having sixty-one or more employees in the whole Italian territory or sixteen or more employees in a single business unit or more business units within the same municipality (“Comune”).

Within seven days from the receipt of the above communication, the Labour Office summons the parties before the Conciliation Office for a meeting in which the parties will attempt to reach an agreement. The procedure will terminate by and not later than twenty days starting from the day in which the Labour Office sent the communication of summoning.

In case the parties reach an agreement, the employee may have access to the unemployment allowance called “Nuova Assicurazione Sociale per l’Impiego” – “NASpI” which can be claimed for up to twenty-four months.

Should not the parties reach an agreement or, in any case, after seven days have elapsed without any summoning communication by the Labour Office, the employer can serve the dismissal.

The served dismissal is effective from the date on which the communication of the intention to serve the dismissal was sent, without prejudice for the employee’s right to notice period.

The length of the notice period is determined by the applicable NCBA, considering the employee’s contractual level and service seniority.

The employer may ask the employee not to work during the notice period, thus terminating the employment relationship with immediate effect, being the employee entitled to receive payment in lieu of notice.

This procedure does not apply to executives, to employees hired as from 7 March 2015, whenever the dismissal is grounded upon the relevant employee’s absences from work owing to illness or injury exceeding the maximum threshold set forth by the applicable NCBA, if the employer is a “small” company (namely, it is staffed with up to sixty employees in Italy and employs up to fifteen employees at each production unit/within each municipality) and/or in case of collective redundancies meeting certain requirements.

Disciplinary dismissals

In case the dismissal is grounded on a just cause or on subjective justified reasons, the employer must follow the specific procedure set forth by Section 7 of the Workers’ Statute. The employer must first provide the employee with a written description of the objectionable behaviour or conduct. The employee has the right to submit his/her justifications within five days or the longer term set forth by the applicable NCBA. The employee has the right to submit written or oral justifications, in the latter case being assisted by a workers’ representative over the relevant meeting. The employer may apply the disciplinary termination if the employee does not submit his/her justifications within the above-mentioned term of five days (or a longer term set out by the applicable NCBA), or just after the receipt of the justification letter.

Pursuant to Law no. 92 of 28 June 2012, the dismissal is effective from the day on which the disciplinary procedure started.

Is Severance Pay Required?

Section 2120 of the Italian Civil Code provides for the payment of a deferred form of remuneration, the severance indemnity (Trattamento di Fine RapportoTFR). The TFR must be paid to employees whenever an employment agreement is terminated, regardless of the reason for the termination. The amount of the TFR varies depending on the employee’s salary and length of service. It is equal to about 7.4% of the total amount of salary received during the entire relationship.

In the past, TFR had to be set aside in the employer’s financial statement and annually reassessed according to certain specific criteria set out by Italian law.

From 1 January 2007, every employee (except domestic workers, building workers and most public workers) can choose to destine his/her TFR to a specific pension fund identified by the same employee, or alternatively – depending on the size of the employer – to have it paid to a specific fund managed by the Italian National Social Security Body (“Istituto Nazionale Previdenza Sociale”– “INPS”), which is called “Fondo di Tesoreria”, or to continue to have the same accounted for on the company balance sheet (Law no. 296 of 27 December 2006), as follows.

If employers have fifty or more workers, and their employees expressly choose to have their TFR governed by the ‘old’ rules, their TFR is to be paid into the above Fondo di Tesoreria, which is managed on behalf of the State by INPS.

Otherwise, for those employees in force at employers with less than 50 workers who expressly decide to have their TFR governed by the ‘old’ rules, the TFR accruals continue to be retained by the employer.

If the employee fails to designate a pension fund or to declare to have his/her TFR governed by the ‘old’ rules during the six-month period, TFR is to be paid to: (a) the pension fund provided for by the applicable NCBA; (b) a different pension fund collectively agreed; or (c) a private occupational pension fund.

Along with the TFR, employers must pay terminated employees all salary and unused vacation leaves and permits accrued prior to the date of termination.

Separation Agreements

When an employment relationship is terminated, the parties may agree to enter into a full and final separation agreement providing the waiver by the parties to raise any claim for any right arising from or connected with the employment relationship and its termination

Is a Separation Agreement required or considered best practice?

The parties are not mandatorily required to enter into a separation agreement. However, within the Italian legal system this constitutes a usual practice at the termination of employment relationships, aimed at avoiding any risk of future lawsuits between the parties.

What are the standard provisions of a Separation Agreement?

Separation agreements contemplate the following standard provisions:

  • waiver by the employee of any claim against the employer for any right arising from or connected with the employment relationship and its termination. By way of example, usually the employee waives to all claims relating to different seniority, salary differences and outstanding remuneration of any kind (including bonuses and rights related to and deriving from any incentive plan that the employee participated in or he/she was beneficiary of), withholding taxes, any kind of expenses refund, different calculation of salary items, paid in any form, in relation to legal and contractual institutes. Furthermore, the employee waives any indemnities, as well as any claims for damages including tort and/or non-material damages according to Sections 2043, 2059, 2087, 2103 and 2116, second paragraph, of the Italian Civil Code;
  • acceptance by the employer of the employee’s waivers and waiving by its side of any claim against the employee with exclusion of fraud or misconduct unknown at the time of the agreement;
  • in exchange of the employee’s waivers, the obligation by the employer to pay an incentive to leave and a sum by way of full and final settlement agreement as well as to settle and define any additional claims.

It shall be considered that the separation agreement to be binding between the parties shall be executed before the competent Labour Office or before Trade Unions.

Does the age of the employee make a difference?

The age of the employee may impact on the context of a separation agreement in case the employee is near to retirement age and may constitute an element to take into consideration to negotiate the sum to be paid as an incentive to leave.

In this context, it is worth mentioning also the so-called “isopensione” which is a tool aimed at managing redundancies and facilitating early retirement of the employees near to the retirement age.

It is applicable for the companies employing more than 15 employees and it allows the employee to an anticipation of the retirement up to 7 years in force of an agreement entered between the company and the Trade Unions to which the employee is free to adhere and to be validated by the INPS.

Are there additional provisions to consider?

Usually, a separation agreement contains confidentiality clause and further conditions such as the payment by the employer of the legal fees sustained by the employee or the right by the employee to keep the company’s devices (e.g. phone number, company car).

Remedies for Employee Seeking to Challenge Wrongful Termination

 The sanction for unlawful individual dismissal varies depending on the reasons grounding the dismissal served, employee’s qualification and date of hiring as well as the size of the employer.

Dismissal null and void

Italian law provides several cases in which the employer is prevented from dismissing employees (executives, too) as the dismissal is deemed null and void:

  • Dismissal grounded on discriminatory reasons.
  • Dismissal served from the beginning of pregnancy up to one year after the child’s birth (except in certain specific cases).
  • Dismissal because of the employee’s request to take parental leave or to take leave to care for a sick child is null and void.
  • Dismissal due to marriage.
  • Other cases of dismissal deemed null and void according to mandatory law provisions.
  • Dismissal grounded on a determining unlawful reason pursuant to section 1345 of the Italian Civil Code.
  • Dismissal served in oral form.

In the above cases, employees (executives, too, and regardless of the date of hiring or the size of the employer as these sanctions also apply with respect to employees hired from 7 March 2015 and to those in force at “small” companies) have the right to be reinstated, and the employer has to pay him/her an indemnity equal to the salary due between the date of the dismissal and the date of the effective reinstatement, with a minimum of five months of salary. As an alternative to reinstatement, the employees have the option to forego the right to be reinstated in lieu of payment of an indemnity equal to fifteen months of salary (indemnity for lost salary shall also be paid in this case).

According to Italian case-law, the same consequences regarding the dismissal grounded on discriminatory reasons also apply in case of dismissal served by the employer exclusively in reprisal or retaliation of the employee’s exercise of his/her legitimate rights concerning the employment relationship.

Dismissals grounded on just cause or subjective justified reasons (disciplinary dismissals)

Employees Hired Before 7 March 2015

  • Company employing less than 15 employees

If the Labour Judge declares the dismissal for disciplinary reasons to be invalid for lack of just cause or subjective justified reason, the company is condemned to re-hire the employee with a new employment contract, or, alternatively, pay him/her an indemnity ranging from a floor of 2.5 to a cap of 6 months of salary, depending on the employee’s length of service as well as on the employer’s size and type of business and the parties’ behaviour before the dismissal and conditions.

  • Company employing more than 15 employees

According to Section 18 of the Workers’ Statute, the employer must reinstate the employee unfairly dismissed should the judge ascertain that the “justified subjective reason” or the “just cause” does not occur because: (i) the objected behaviour is groundless; or (ii) the contested behaviour could have been sanctioned with a conservative measure according to the applicable NCBA or the employer’s disciplinary code.

In this case, the employee has the right to be reinstated (or, at his/her own discretion, to be granted with an indemnity in lieu of reinstatement amounting to 15 months of salary), and the employer has to pay him/her an indemnity equal to the salary due between the date of the dismissal and the date of the effective reinstatement within a maximum cap amounting to 12 months of salary, deducting the salary the employee earned whether employed in a different workplace (the so-called aliunde perceptum) or the salary the employee could have earned if she/he would have found employment using the ordinary diligence (so-called aliunde percipiendum).

Should the judge ascertain that the ‘justified subjective reason’ or the ‘just cause’ does not occur for reasons other than those set out at points (i) and (ii) above, the employee is entitled to the payment of an allowance ranging from a minimum of twelve months of salary to a maximum of twenty-four months of salary.

Employees Hired from 7 March 2015

  • Company employing more than 15 employees

According to the provisions entered into force in 2015, the newly hired employees have the right to be reinstated only in a specific case of disciplinary dismissal (i.e., dismissal for “just cause” and for “justified subjective reason”). Specifically, the reinstatement is available only when it is directly proved that the “material fact” upon which the dismissal was based did not occur. In this case, the reinstatement should be implemented together with an indemnity equal to the lost salary from the date of dismissal until the reinstatement with a cap of 12 months of salary deducting the aliunde perceptum or the aliunde percipiendum. The employee will also have the right to choose the fifteen months’ pay indemnity in lieu of reinstatement.

In all the other cases, the employee will be only entitled to a indemnity, to be established by the Labour Judge within a minimum floor of 6 months of salary and a maximum cap of 36 months of salary, thus taking into account the general criteria provided for by Italian law such as the relevant employee’s company seniority, the size of the employer’s business, the overall number of employees with whom the latter is staffed as well as conditions and behaviours of both the employer and the employee.

  • Company employing less than 15 employees

The sole remedy applicable to the employee would be payment of the indemnity amounting from a floor of 3 months of salary to a cap of 6months of salary.

Executives

If an executive employed under an open-ended employment contract is dismissed for “just cause”, and the Labour Judge ascertains that such just cause does not occur, he/she is entitled to the notice period. If the dismissal is also judged to be unfair, the executive is entitled to a supplementary indemnity payment provided by the applicable NCBA. In this respect, for instance, thethe NCBA for Executives of Companies of the Industrial Sector, which is one of the NCBA mainly applied in Italy to executives, provides that the mentioned supplementary indemnity is ranging between 4 up to 24 months equal to the amount of notice, depending on the service’s seniority of the individual. On the other hand, the NCBA for Executives of Companies of the Trade Sector, another NCBA applied a lot, provides that the mentioned supplementary indemnity is ranging between 4 up to 18 months equal to the amount of notice, depending on the service’s seniority of the individual. Such indemnity could be further increased for executives over 50 years old with more than 12 years’ service.

Breach of Procedural Rules

As a residual measure, should not the dismissal be in compliance with procedural requirements or lacking formal requirements, the employee is entitled to a payment of an allowance, which varies depending on the size of the employer and the date of hiring.

Employees hired before 7 March

  • Company employing less than 15 employees

The company is condemned to re-hire the employee with a new employment contract, or, alternatively, pay him/her an indemnity ranging from a floor of 2.5 to a cap of 6 months of salary (that might be increased up to 10 months of salary for an employee with ten years of service and up to 14months of salary for employees with 20 or more years of service).

  • Company employing more than 15 employees

The indemnity ranges from a minimum of 6 months of salary to a maximum of 12 months of salary.

Employees hired from 7 March

  • Company employing less than 15 employees

The indemnity is from a floor of 1 month to a cap of 6 months of salary.

  • Company employing more than 15 employees

The indemnity is from a floor of 2 to a cap of 12 months of salary for employees.

Dismissals grounded on objective justified reasons

Employees Hired Before 7 March 2015

  • Company employing less than 15 employees

In case of lack of objective justified reason, the company is condemned to re-hire employee with a new employment contract, or, alternatively, pay him/her an indemnity ranging from 2.5 to 6 months of salary, depending on the employee’s length of service as well as on the employer’s size and type of business and the parties’ behaviour before the dismissal and conditions.

  • Company employing more than 15 employees

According to section 18 of the Workers’ Statute, in the event the fact on which the termination was based is ‘groundless’, the employee has the right to be reinstated (or, at his/her own discretion, to be granted with an indemnity in lieu of reinstatement amounting to 15 months of salary) and to the payment of an indemnity for the remuneration lost, within a twelve-month cap. In all the other cases, the employee is entitled to a payment of an allowance ranging from a minimum of 12months of salary to a maximum of 24 months of salary.

It is worth underlining that the employee is entitled to reinstatement and the monetary compensation for the remunerations lost (with a 12 months cap) also in case the employer serves the individual dismissal: (i) in violation of the sickness leave during which the employee is entitled to keep her/his job (so-called periodo di comporto) or (ii) unlawfully grounding the dismissal for objective reasons on the employee’s physical unsuitability for working.

It shall be evidenced that before the recent Constitutional Court ruling of 19 May 2022, the right of the employee to be reinstated occurred only when the fact on which the termination was based was ‘manifestly groundless’. Following such ruling the context of application of the remedy of reinstatement has been significantly increased.

Moreover, before the Constitutional Court ruling of 1st April 2021 the remedy of reinstatement in such cases was provided as discretionary for the Labour Judge, not automatically applied: after such a ruling now the Labour Judge must reinstate the employee in case of groundless dismissal.

Employees Hired from 7 March 2015

  • Company employing more than 15 employees

The employee does not have any right to be reinstated, being entitled only to monetary compensation in the range between 6 and 36 months of salary.

In the event the employer serves the individual dismissal unlawfully based on the employee’s physical unsuitability for working, the employee will be entitled to reinstatement and the payment of all remuneration lost during the period from dismissal until reinstatement, subject to a minimum of five months of salary.

Legislative Decree no. 23 of 4 March 2015 does not specify the sanction for the dismissal served in violation of the sickness leave during which the employee is entitled to keep her/his job (so-called periodo di comporto). As this kind of dismissal is directly related to the health protection guaranteed by the Italian Constitution (Section 32), according to certain authors, the employee should maintain the right to reinstatement. On the contrary, other authors argue that the absence of any provision on this issue implies that the only remedy available to the employee would be the payment of the monetary compensation in the range between six and thirty-six months of salary seen above.

The most recent rulings of the territorial Labour Courts have stated that the remedy to be granted to employees in such cases is the reinstatement since the dismissal is considered null.

  • Company employing less than 15 employees

For employers with up to 15 employees, the law provides that the employee is entitled to the indemnity equal to 1 month’s salary of the last reference salary for the calculation of the severance pay for each year of service with a minimum of 3 months’ salary and up to a maximum of 6 months’ salary (Article 9 of Legislative Decree No. 23/2015). Even though no specific decision by the Constitutional Court has been issued on article 9, it has to be considered that also in this case the ruling of the Constitutional Court, which declared the constitutional illegitimacy of an increasing indemnity based only on the worker’s length of service declared for the indemnity provided in case of unfair dismissal for companies with more than 15 employees, is applicable also for small size companies.

Executives

Whenever an executive’s dismissal is deemed unfair by the Labour Court (as described above), the employer is ordered to pay him/her an indemnity (the so-called indennità supplementare) established by the applicable NCBA, ranging from a minimum to a maximum number of months of salary (as described above). In addition, an increase in the number of months of salary payable to the relevant executive unfairly dismissed may be set forth by the applicable NCBA, depending on the executive’s age as at the dismissal date.

Breach of Procedural Rules

If the applicable notification procedure is breached or the notice of dismissal does not duly specify reasons grounding the termination, employees are entitled to those protections outlined under above for the breach of procedural rules concerning disciplinary dismissals.

Collective dismissals

Employees Hired Before 7 March 2015

Law no. 223 of 23 July 1991 provides that if the employer does not comply with all the steps set forth for the procedure for collective dismissals, the employer shall pay the employee an indemnity ranging between a minimum of 12 months of salary to a maximum of 24 months of salary.

If selection criteria are violated, the provisions set forth in section 18, paragraph 4 of the Workers’ Statute (Law no. 300 of 20 May 1970) shall apply, and the employer shall (i) reinstate the employee unfairly dismissed (or, at his/her own discretion, to grant him/her with an indemnity in lieu of reinstatement amounting to fifteen months of salary); and (ii) pay him/her an indemnity equal to the salary due between the date of the dismissal and the date of the effective reinstatement, with a maximum of twelve months of salary deducting the aliunde perceptum or the aliunde percipiendum.

Employees Hired from 7 March 2015

Similarly to the dismissal for ‘economic reason’, the employees unlawfully dismissed in the framework of a collective layoff shall also be entitled only to the above-mentioned indemnity ranging from a minimum of 6 to 36 thirty-six months of salary. The right to reinstatement being limited to the dismissal communicated orally.

Specifically, the indemnity will be the only remedy also in the event the employer does not comply with the criteria governing the selection of the employees to be made redundant (as anticipated, under Italian law, the selection of the employees to be dismissed in a collective layoff should follow the criteria provided for by the agreement reached during the consultation procedure with unions or, in the event of a negative outcome, the employer must follow the criteria provided for by Law no. 223 of 23 July 1991: family charges, seniority, and technical, productive or organizational matters).

Executives

Regarding the executives, Law no. 161 of 30 October 2014 has introduced specific sanctions for unlawful dismissal in case of collective redundancy involving them. In particular, in the event the dismissal of the executive is in breach of either the procedure or the selection criteria the employer shall pay him/her an indemnity ranging from twelve up to twenty-four monthly salaries, unless the applicable NCBA provides different provisions on the amount of said indemnity: at the moment none of the most relevant executives’ NCBA has provided anything on this issue.

  • If the employer has up to 60 employees in the whole Italian territory or up to 15 in a single business unit or more business units within the same municipality (“Comune”).
  • If the employer has more than 60 employees in the whole Italian territory or more than to 15 in a single business unit or more business units within the same municipality (“Comune”).

Whistleblower Laws

On 14 December 2017 entered into force the Whistleblower Protection Law (Law no. 179/2017), making Italy closer to the anti-corruption legislation in force across Europe; it strengthens pre-existing whistleblower protections for public-sector and bank/financial sector’s employees, extending those protections to the private sector.

This law especially sets out certain mandatory requirements on whistleblowing for those companies operating in the private sector which have adopted (or choose to adopt) a Compliance Program pursuant to Legislative Decree 8 June 2001, no. 231.

For sake of clarity, the adoption of a Compliance Program is not mandatory for companies (except for certain “big” publicly listed companies) but represents a strategic choice: in fact, having an effective Compliance Program in place can exclude corporate liability for crimes (such as corruption) committed by relevant people (i.e. members of the top management and high level managers, including any persons subjected to the management or supervision of the top management) in the interest of the companies themselves.

However, regardless the opportunity to implement such specific Compliance Program, it is interesting to point out that Italian companies may be interested in adopting an internal procedure in order to facilitate the whistleblowing process and to guarantee a strong protection to employees who report unlawful behaviors of which they became aware of during their work activities.

In fact, the Whistleblower Protection Law rules the manners of reporting any misconduct to the employer with the aim at protecting the identity of the whistleblower as well as applying sanctions for any retaliation or discrimination occurred to the whistleblower.

In particular, Section 2 of the said Law states that the employer has to: (i) identify specific channels (at least, one of those should be an alternative channel by electronic methods) to allow employees to report potential misconducts within the workplace as well as (ii) to ensure the confidentiality of the whistleblower identity.

In relation to this latter point, it is important to highlight that the whistleblowing procedure has to provide for specific sanctions in the event of breach of such confidentiality protection.

Furthermore, another important aspect is the non-retaliation of those employees who raise in good-faith the suspicion of illegal behaviours.

In this regard, any discriminatory measure adopted against the whistleblower (i.e. dismissal, demotion, but also any other change that can be deemed detrimental or discriminatory towards the whistleblower) is considered null and void.

The peculiarity of such safeguard is that the employee can report (also through a union representative) any retaliation or discrimination suffered to the National Labour Institute and, most important, the employer must prove that discriminatory measures are motivated by reasons beyond the employee’s reporting.

The Whistleblower Protection Law also rules that, in the event of false allegations, specific sanctions should be provided for those individuals who report, with intent or gross negligence, untrue allegations.

This provision seems consistent with the fact that the employee must report only specific and concrete circumstances related to any infringement, grounded on precise and consistent facts.

Another interesting provision regards the exception provided by Section 3 of the Whistleblower Protection Law in relation to confidentiality restriction: the prevention or the avoidance of any infringements allows the whistleblower to reveal or disclose information covered by confidentiality obligation pursuant to the criminal and civil code.

In addition, whistleblowing schemes must be implemented in compliance with EU data protection rules since in the vast majority of cases whistleblowing relies on the processing of personal data (i.e. on the collection, registration, storage, disclosure and destruction of data related to an identified or identifiable person); therefore, the processing of personal data for whistleblowing purposes must be always carried out with a prior information to employees, providing the elements set forth in Italian Data Protection Code (DPC, Legislative Decree No 196 of 30 June 2003), as amended by Legislative Decree no. 101/2018 in order to have Italian provisions being compliant with those under the EU Regulation no. 679/2016 of the European Parliament and of the Council on the “protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing directive 95/46/EC (general data protection regulation)”.

Considering the above, all the mandatory requirements introduced by the Whistleblower Protection Law inevitably require ensuring a higher level of internal compliance in order to make any whistleblowing procedure effective and enforceable.

Lastly, it is worth-mentioning that an EU regulation on whistleblowing is expected to be shortly adopted and this may entail the need to modify Italian law provisions governing such a matter: in fact, the European Commission – on April 23, 2018 – has approved a “Proposal for a Directive of the European Parliament and of the Council on the protection of persons reporting on breaches of union law”.

According to the EU Directive no. 1937/2019 of the European Parliament and of the Council on the “protection of persons who report breaches of Union law”, Member States should adopt internal law regulations whereby employers of the private sector which are staffed with 50 or more employees, regardless the sector in which they operate, must establish internal channels and procedures for reporting and following up on reports.

Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this EU Directive by 17 December 2021 (by way of derogation, as regards legal entities in the private sector with 50 to 249 workers, Member States shall by 17 December 2023 bring into force the laws, regulations and administrative provisions necessary to comply with the obligation to establish internal reporting channels).

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