Employees’ Rights in Case of a Transfer of Undertaking
The rules governing the transfer of business are set forth in Section 2112 of the Italian Civil Code which has been integrated by Section 47 of Law no. 428 of 29 December 1990. Moreover, the Legislative Decree no. 276 of 10 September 2003 (Section 32) amended Section 2112 of the Italian Civil Code specifying that the rules on the transfer of business also apply where a transfer involves a separate and self-contained undertaking.
The Italian law on transfer of undertaking is intended to give workers occupational stability and preserve their acquired rights.
A change of employer due to the transfer of the business does not give the employer the right to terminate or worsen the employment relationship.
Pursuant to Section 2112, par. 4 of the Italian Civil Code, an employee whose working conditions undergo a substantial change in the three months following the business transfer may resign for just cause (and thus entitled to payment of indemnity in lieu of notice).
Requirements for Predecessor and Successor Parties
The Italian law consents to the subjective changing of the employer but in presence of determined conditions in defence of the workers’ rights. As a matter of a fact, it should be noted that Section 2112 of the Italian Civil Code provides a joint and several liability of both the transferor and transferee to warrant workers’ credits fulfilment at the time of the transfer, and that the buying company shall apply the terms and conditions set forth in the NCBA applied by the transferring company, provided that more favourable terms and conditions are not substituted. In addition, in the case of business transfer within companies with more than 15 employees, Section 47 of Law No. 428/1990 obliges both the seller and the buyer to implement a Union procedure prior to of the transfer.
The transferor and the transferee must provide the employees’ representative bodies (i.e., staff representatives – so called RSA or RSU, if any, and the relevant trade unions which executed the NCBA applicable to the transferor and the transferee) with a written notice of the transfer: in the event that there are no employees’ representative bodies, such notice shall be delivered to the ‘comparatively more representative’ trade unions.
The written notice of the transfer must be served at least twenty-five days before completion or in any case within the reaching of a foregoing binding agreement between the parties.
In the absence of any definition of a ‘binding agreement’, the Italian Ministry of Labour and Social Policies has emphasized that it does not include any preliminary business transfer agreement or any corporate documents of the two companies (such as shareholders’ meeting resolutions or a MoU or a LoI) and so only the ‘final’ or ‘stable’ covenants to include an unamendable and immutable intent of the parties eligible to produce translational effects.
The notice to the employees’ representative bodies must include:
- the expected or actual date of the transfer;
- the reasons for the transfer;
- the economic, legal and social consequences of the transfer on the involved employees;
- any measures, if provided, that the transferee will adopt towards the employees after the transfer.
Within seven days of receiving the notice, the staff representatives and/or the trade unions may demand joint consultation with the parties (transferor and transferee) involved in the transfer.
In this case, the transferor and the transferee shall begin consultations with the employee representatives within the following seven days.
Deficiency of an agreement between trade unions and transferor-transferee does not invalidate the transfer, and the consultation is considered accomplished after ten days.
Any breach of the duty to provide information and the duty to engage in joint consultation is deemed an anti-union behaviour according to Section 28 of Law no. 300 of 20 May 1970.
As a consequence, the transferor and the transferee may be sued before the competent Labour Court by the trade unions.
Nevertheless, according to the most recent case law any eventual infringement of the information and consultation procedure does not affect the validity of the purchased agreement signed by the transferor and the transferee.
In the event of a business transfer, the collective agreements applied by the transferee take the place of those enforced by the transferor. Anyhow, such replacement shall be carried out only for collective agreements of the same level.
If no collective agreement is applied by the transferee, the collective agreement applied by the transferor continues to apply to the transferee until it expires.
It is worth mentioning that on July 15, 2022, the Code of Corporate Crisis and Insolvency (CCII), set forth in Legislative Decree No. 14 of January 12, 2019, entered into full implementation, amending substantially the regulation in the event of a state of crisis or bankruptcy of the transferor. The modification of these debated regulatory provisions has been issued with the aim to coordinate the new insolvency legislation with the applicable labour law regulations and also to confirm by law the principles already expressed by existing Court decisions in order to overcome the uncertainties, also lexical, resolved only with judicial interpretation. To this extent, please note that Section 47, paragraph 4 bis, of Law no. 428 of 29 December 1990 provides that Section 2112 of the Italian Civil Code applies with the limitations provided in the agreement reached with the trade unions should the transferor be in a financial crisis or involved in insolvency proceedings less serious than those set out at paragraph 5.
Section 47, paragraph 5, of Law no. 428 of 29 December 1990 provides that Section 2112 of the Italian Civil Code does not apply in the event of a state of crisis or bankruptcy of the transferor. In these cases, if the employers and trade unions reach an agreement for transferring a part or even all the employees involved, the workers do not keep the protections provided by Section 2112 of the Italian Civil Code, unless differently provided by the said agreement.