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 behaviour is not serious enough to ground a dismissal for just cause.
- Objective justified reasons: which concern technical, production-related and organisational 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 rationalising a production system or the work organisation.
Executives
The reasons that may legitimately ground an executive’s dismissal – considering the role within company’s organisation 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.
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 on 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:
- the reasons backing the redundancy;
- technical, organisational 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;
- the number of the employees in force in the Company, their role and the department/office/unit where they are located;
- the number of the redundant employees, their role and the department/office/unit where they are located;
- the prospected timeframe to implement the collective dismissal plan;
- the possible measures to address the occupational consequences of the redundancy plan;
- 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 organisational 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 180 days before the statutory one (the time limit has been extended from 90 to 180 days by law no. 175 of 17 November 2022).
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 organisational 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 180-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 Rapporto – TFR). 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
- 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.
In this respect, it shall be evidenced that Legislative Decree no. 149/2022 implementing the so-called “Riforma Cartabia” has extended negotiation procedures to labour disputes. This news constitutes a part of the Italian Civil Procedure Reform that is aimed at enhancing measures of alternative and complementary justice.
In the light of such novelty, new rules will apply for settlements relating to labour disputes.
The reform overcomes the previous system where settlement agreements on employment rights were to be signed at protected venues (competent Labour Office or before Trade Unions): from 28 February 2023, lawyers also can play the role of guarantors of the agreement validity.
Under the new regulation, employer and employee can execute settlement agreements under the “assisted negotiation” procedure on the condition that each party has the assistance of a lawyer. The procedure will start with an invitation to enter into the agreement that set out the negotiation procedure terms.
The agreement indicates the matter of dispute. It also specifies the length of the procedure, provided that it cannot be less than 1 month and longer than 3. Such period can be extended a further 30 days with the agreement of the parties. Failure to respond within 30 days or the refusal to the invitation may be used by the judge to evaluate the conduct of the party for the purposes of determining any legal expenses.
The agreement signed by the parties and the lawyers constitutes an enforceable title and is sent, by either party, to one of the certification commissions. This procedure is neither mandatory nor a precondition to bring suit. An assisted negotiation procedure is indeed optional, and it acts as a means to incentive an out-of-court dispute resolution between the employee and employer.
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[1]
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[2]
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 6 months 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, the 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 12 months 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-month 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 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 1 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 a maximum of 36 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 organisational 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 12 up to 24 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.
Procedural Rules Before the Courts
As outlined above, recently, the Italian Government has reformed the Italian Civil Procedure System. The objectives to pursue have been the same for years: to lighten the excessive load of proceedings and respond to the need of speed and efficiency to ensure an effective judicial protection. As part of the reform, also the labour law procedural system has been affected by some changes.
Indeed, the so-called “Riforma Cartabia” – recently occurred – provides among those changes for the abolition of the dual-track-system to challenge dismissals: the first, governed by Article 1, paragraphs 48 et seq., Law of 28 June 2012, n. 92, for employees hired before 7 March 2015 (“Fornero Procedure”); the second, that is the ordinary labour proceeding, referred to in Sections 409 et seq. of the Italian Civil Procedural Code, for employees hired after 7 March 2015.
The reform – which is in force starting from 28 February 2023 – implies the abrogation of the so-called Fornero-Procedure. This special procedure was introduced under the Law 92/2012 as a new process dedicated to disputes relating to the appeal of dismissals pursuant to Section 18 of Law 300/1970 (i.e., reinstatement of the dismissed employee). The main feature of this special procedure was based on the fact that the first instance judgment was formed by a first “summary” phase, characterised by a quick and swift assessment aimed at ascertaining the possible unlawfulness of the dismissal, followed by a subsequent and possible full cognisance “opposition” phase.
Due to this two-phase feature, one of the most controversial aspects of this procedure concerned the problem of compatibility of the judge in case of the assignment of the two phases of the first instance to the same magistrate. This case was not uncommon in Italy especially in courts with a small number of judges. In this regard, the Italian Supreme Court and the Constitutional Court have both ruled out the incompatibility, considering that the opposition did not constitute a different level of proceedings but merely a prosecution of the same proceeding.
Moreover, there was a consistent number of disputes relating to the scope of application of this special right, since the provision provided for the possibility to claim for issues “relating to the qualification of the employment relationship” and which “are based on identical constitutive facts”, leaving however, the doubts about which were the questions that could be proposed with this right and which were excluded.
Already in 2015, with Legislative Decree 23/2015 the Italian legislator excluded the application of Fornero-Procedure in case of dismissals of employees hired after 7 March 2015, therefore, it is not surprising that the Government decided to eliminate such procedure that disdains the objectives of efficiency and rapidity that the legislator of 2012 had intended to pursue, had ultimately the only effect of further aggravating an already overloaded procedural system.
In addition, it is worth evidencing that Riforma Cartabia has introduced the new Article no. 441-bis of the Italian Civil Procedure Code. This article provides for a preferential lane for disputes having as object the dismissals’ challenge, which indeed are treated with priority over other disputes pending before the court, even when issues relating to the classification of the relationship must be resolved. Moreover, Article 441-bis states the possibility for the Court to reduce the time limit for the proceedings by up to half depending on the case’s circumstances.
[1] 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”).
[2] 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
For a long time in Italy, the specific legislation on whistleblowing only covered civil servants (Law no. 190 of 6 November 2012) and, following the Legislative Decree (no. 72 of 12 May 2015), employees in banks and financial institutions.
Then Law no. 179 of 30 November 2017 has entered into force regulating whistleblowing obligations and protections of employees adopting the organisational model (set out by Legislative Decree no. 231 of 8 June 2001), i.e., the model that should be adopted to be exempted from administrative/criminal liability. These models are tailored to the company in light of the specific risks arising from its activities, aimed at preventing the commission of criminal offences provided for under Legislative Decree no. 231 of 8 June 2001.
These include, for example, crimes against the public administration; IT crimes; crimes of fraud in trade; corporate crimes; crimes of insider trading and market manipulation; crimes of manslaughter and serious or very serious bodily injury, committed in breach of accident-prevention and occupational health and safety rules, receiving, laundering and using stolen money, goods or utilities; crimes in infringement of copyright; and the crime of inducement not to make statements or to make false statements to a judicial authority, or environmental crimes.
According to the said law, employees of companies adopting an organisational model must:
- identify specific channels to allow employees to report potential misconduct within the workplace and to guarantee the confidentiality concerning the identity of the whistle-blower; and
- provide specific sanctions concerning fraud or gross negligence against any individuals who breach the above-mentioned protection measures; this also applies to any whistle-blower who reports false information with intent or gross negligence.
The employee can report any retaliation or discrimination to the National Labour Inspectorate (this can also be carried out through a union representative), and any dismissal, change of duties or any other measure adopted by the employer towards the whistle-blower for discriminatory reasons will be null and void.
There is a degree of tension between (i) employees’ right to give information and express their opinions on the employer’s business (a variation of the principle of freedom of expression, provided to all citizens under section 21 of the Italian Constitution) and (ii) their duties to preserve their employer’s confidential information and not to infringe the employer’s ‘personality rights’ (e.g., not to undermine its reputation) and duty of loyalty to their employer. However, the courts do not consider that the employees’ obligation of confidentiality or loyalty extends to protecting the employer’s unlawful acts.
Recently an EU regulation on whistleblowing has been adopted, and this entails the need to modify Italian law provisions governing such a matter.
In fact, the European Parliament and the Council adopted the EU Directive no. 1937/2019 on the ‘protection of persons who report breaches of Union law’ which provides that Member States should adopt internal law regulations whereby employers of the private sector which are staffed with fifty or more employees, regardless of the sector in which they operate, must establish internal channels and procedures for reporting and following up on reports.
These channels and procedures shall, among others, include:
- channels for receiving the reports which are designed, set up and operated in a secure manner that ensures the confidentiality of the identity of the reporting person and any third party mentioned in the report and prevents access thereto by non-authorised staff members;
- an acknowledgement of receipt of the report to the reporting person within seven days of that receipt;
- the designation of an impartial person or department competent for following up on the reports, which may be the same person or department as the one receiving the reports, assigned with the task to provide feedback to the reporting person;
- a reasonable timeframe to provide feedback to the reporting person about the follow-up to the report, not exceeding three months from the acknowledgement of receipt.
Member States shall bring into force 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 laws, regulations and administrative provisions necessary to comply with the obligation to establish internal reporting channels).
In this respect, the Italian Parliament has adopted Law no. 53 of 22 April 2021, having as subject matter ‘Principles and guiding criteria for the implementation of Directive (EU) 2019/1937 on the protection of persons who report breaches of Union law’, which provides that, in exercising the delegated power to implement Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019, the Government must observe the following specific principles and guiding criteria:
- amend, in accordance with the rules of Directive (EU) 2019/1937, the existing legislation on the protection of whistle-blowers of violations of which they have become aware in the context of a public or private employment context and of the persons referred to in Article 4(4) of that Directive;
- ensure coordination with the provisions in force, guaranteeing a high level of protection and safeguarding of the persons referred to in subparagraph (a), carrying out the necessary repeals and adopting the appropriate transitional provisions;
- exercise the option provided for in Article 25(1) of Directive (EU) 2019/1937, which allows for the introduction or maintenance of the provisions that are more favourable to the rights of the reporting persons and those indicated by the Directive, in order to ensure, in any case, the highest level of protection and safeguard of such subjects.
The long-awaited Legislative Decree implementing Directive (EU) 2019/1937 on the protection of persons reporting infringements of Union law, including in the private sector, has finally been issued on 10 March 2023.
The recent Decree no. 24 of 10 March 2023 –– is big news for several reasons.
First of all, it is intended to be the regulatory point of reference both for the public and private sectors. Secondly, its scope covers a wide area of violations of national and European law that are such as to harm the public interest or the integrity of the public administration or private entity.
The most important profile to highlight, however, is the fact that the adoption of whistleblowing procedures has now become mandatory for certain companies (while before, in the private sector, it was optional, except for certain ‘big’ publicly listed companies).
Then, in the Decree, there are also specific sanctions.
Regarding the whistleblowing procedure, the new Decree provides for a more detailed discipline. In particular, in relation to reporting channels, it is required that each public or private entity adopts an internal reporting channel, the management of which, subject to compliance with legal requirements, may also be outsourced. The use of an external reporting channel, established at the moment by the National Authority of anti-corruption (ANAC), is also possible, but only residually compared to the use of the internal reporting channel. Public disclosure cases are also considered, albeit the protection for the reporting person in this case is subject to strict constraints.
For what concerns the protection for the whistle-blower, it is extended by granting it not only to whistle-blowers in the strict sense but also to so-called facilitators (i.e., persons who assist a whistle-blower in the reporting process, operating within the same working environment and whose assistance is to be kept confidential) and other persons – better specified in the Decree – close for various reasons to the whistle-blower himself.
From an objective standpoint, extensive protection is provided for the whistle-blower against retaliation, expressly listing some cases that fall under it (i.e., dismissal, suspension or equivalent measures; downgrading or non-promotion; change of duties, change of place of work, reduction of salary, change of working hours, etc.).
In the event of disputes concerning retaliation against the whistle-blower, a legal presumption in favour of the whistle-blower is set out.
Even in the case of a claim for damages made by the whistle-blower, the damage is presumed to be a consequence of the whistleblowing.
It shall be evidenced that the new obligations set forth by the described discipline will enter in force starting from 15 July 2023 and for companies of the private sector employing less than 250 employees the discipline will enter in force starting from 17 December 2023.
In this respect, on 16 June 2023 the ANAC issued a detailed Guideline with the aim to provide practical instructions for employers in order to be compliant with the new whistleblowing regulation.
