1. SOURCES OF EMPLOYMENT LAW
Employment law in Italy is based mainly upon the following sources set out below:
National collective agreements are not statutory sources of law but are private contracts between trade unions and employers’ associations and are not legally binding on all employers. They are only binding on companies, which are members of the relevant employers’ associations. Therefore, if a company is not a member of such an association, it is not obliged to apply the collective agreement. However, the collective agreement will still apply where reference is made to it in the individual employment contract or where the employer spontaneously applies its terms.
The relevant sources are listed above in order of priority.
Some of the most relevant statutes are as follows:
2. PRINCIPAL INSTITUTIONS
The Ministry of Employment (Ministero del Welfare) is the government department, which deals with the majority of the policy behind and the detailed statutory drafting of employment law in Italy. Within the department and its territorial branches there is an inspectorate that applies the rules regarding safety in the workplace, protection for pregnant women, disabled people and in general the application of all the employment laws. This department also has the power to impose sanctions in the case of breach of the employment laws.
The Department of Employment is represented locally by regional and provincial offices that also have a Conciliation Committee before which it is necessary to attempt conciliation prior to starting judicial proceedings. The Committee can also certify if a contract is in keeping with the principles of law, for example, if it is a real self-employment contract. This is a voluntary procedure for the purpose of reducing claims with reference to the labelling of contracts.
The national social security body (Istituto Nazionale della Previdenza Sociale – INPS) deals with the public system for pensions and health, both for employees and self-employed people. INPS also manages the unemployment fund (Cassa Integrazione Guadagni – CIG) that is a special public fund, financed with contributions from both employers and employees, and which guarantees part of the employee’s regular salary during a period of suspension or reduction of the employer’s business, due to economic reasons or a restructuring process. It is awarded after a process of negotiation with the unions and administrative authorisation.
There are currently some Commissioners (Consiglieri di parità) whose aim is to eliminate discrimination against women in the workplace. According to a recent law regarding protection against discrimination in the workplace a new department for equal opportunities has been set up within the government in order to promote equal rights in the workplace and remove any discrimination regarding race and ethnic origin.
Finally, there is a Privacy Independent Authority, which checks that all the regulations regarding data protection are applied. The Privacy Authority also has the power to issue regulations.
3. ROLE OF THE NATIONAL COURTS
Employment rights are enforced through employment tribunals presided over by qualified judges who deal only with employment claims or claims regarding commercial agency and workers (ie self-employed workers who work inside the company co-ordinated by the employer and in a continuous way). Appeals on questions of fact and points of law are heard by the Employment Appeal Court. Challenge on a point of law goes to the Supreme Court (Corte di Cassazione). Civil Courts have no jurisdiction on any employment matters. Any claims regarding members of the Board of a company are handled by Civil Courts
4. EMPLOYMENT STATUS AND CATEGORIES OF WORKER
Definitions of an employee (art 2094) and of a self-employed person (art 2222) are given in the civil code of 1942.
According to art 2094 ‘A [subordinate] employee is an individual who binds himself, against the payment of a salary, to co-operate in the enterprise by performing his intellectual or manual work under the authority and the supervision of the employer’.
According to art 2222: ‘When an individual binds himself to perform a piece of work or render a service for remuneration, primarily by his own effort and without subordination to the principal, the provisions of this chapter apply unless the contract is subject to particular rules in Book IV’.
A peculiar kind of economically dependant worker exists, who remains however self-employed. The law requires that the contract contains one or more specific projects or programmes of work or phases of them, decided by the principal, but autonomously managed by the self-employed person in order to achieve the goal agreed, within the organisation of the principal, (not connected to the time used by the self-employed person to perform the agreed activity.) In the absence of these requirements, the contract will be considered as a contract of employment. Disputes concerning this kind of contract are dealt with by the employment tribunal. The peculiar characteristic of this contract is the fact that the worker can work inside the company’s premises together with other employees.
The duration of the contract is strictly related to the execution of the project. More interestingly, the law introduces protections and rights for workers similar to the ones for employees, such as:
Confidentiality and non-competition obligations.
Different kinds of self-employment contracts, based on co-ordination and continuity, could be excluded from the above limitations where they are entered into with people who are entitled to an old-age pension or with people working for amateur sport associations recognised by CONI.
Employment legislation providing strong protection for employees does not apply to the self-employed (ie protection for unfair dismissals). In addition, companies and self-employed persons pay a lower rate of social security contributions.
The main categories of workers are: Executives (Dirigenti); Middle management (Quadri); White-collar employees (Impiegati); Blue-collar employees (Operai).
The main categories of employment contracts are: • open-ended term contract;
Open-ended contracts
Open-ended contracts are those contracts which run indefinitely until either the employer or the employee withdraws from the contract.
Fixed-term contracts
Fixed-term contracts are those which normally terminate on the expiry of a specific term. A limit can be placed on the length of an employment contract due to technical, productive, organisational or replacement reasons. The term must be provided in writing showing the reasons for the term. A fixed-term contract is forbidden in the following instances: in order to replace employees on strike; in companies where, in the last six months, there has been a collective dismissal affecting a number of employees assigned to the same tasks provided for in the fixed-term employment contract unless differently provided for by the union agreement; in companies where employment contracts have been suspended, or working times reduced, with a right to redundancy fund for employees whose tasks are provided for in the fixed-term employment contract; in case of failure to comply with the health and safety rules.
The duration of a fixed-term employment contract may be postponed only if these conditions apply:
There are specific sanctions for the employer if the employee keeps working after the term.
It is possible to have a fixed term employment contract lasting less than five years with an executive, who can nonetheless withdraw from it after the first three years, by giving due notice. Executives are then expressively excluded from the application of the law, except for the rules regarding non-discrimination and in counting the employees hired by the employer: this means that for this category of employees there are no requirements in order to make the fixed term possible and there will be no need to give reasons in the contract.
Part-time contract
A part time employee works for a period of time less than the normal working week of 40 hours and so he/she is paid and has rights corresponding to the time he/she works.
Temporary agency work and permanent agency work
This is the contract through which a company (agency), authorised by the Ministry of Employment, puts its employees at the disposal of a company, which utilises their services. Agency work is allowed either for a fixed period of time for technical, organisational, productive and replacement reasons or for an indefinite period of time in the instances specified by the law, such as:
Job sharing
A job-sharing contract is a special employment contract in which two employees share the performance of a single and identical job. Each employee is personally and directly liable for the whole work obligation.
Job on call
A job on call contract is an employment contract where the employee is hired to be at the employer’s disposal and to work only if and when the employer calls him/her.
Apprenticeship
Since the reforms of 2003, an apprenticeship can be of three types:
A director (ie a member of a Board of Directors) is not an employee, but he is the necessary body through which the company carries out its business. The director is appointed by the shareholders’ meeting and he can be removed by it at any time subject to the director’s right of damages if the removal occurs without just cause. A director can also be an employee, but in this case he must perform two different jobs and, as an employee, has to maintain a subordinate position in relation to the board of directors. Therefore, a sole director or a managing director with wide powers (ordinary and extraordinary management) can never be an employee.
5. CONTRACT
An employment contract is constituted by the obligation of the employee to work under the direction and organisation of the employer in consideration of a salary. The existence in itself of a formal written contract does not prevent a judge from holding it as an employment contract or as a self-employment contract.
The employment contract is valid and effective even if it is oral. However, certain conditions must be in writing (such as any probationary period or fixed-term clauses, and any non-competition clause) to be valid.
Furthermore, the employer must inform the employee in writing, within 30 days of commencing employment, of the following:
If the employer does not supply this information, the employee can demand before the employment office to receive it within 15 days. If the employer still does not provide these details it can be ordered to pay a fine. The omissions or the mistakes in the information are sanctioned with a fine between €51 and €258.
The law and the collective bargaining agreements – when applicable – provide for some implied contract terms (eg notice period, length of probationary period, sickness leave and working hours). Most of them cannot be deviated from in a way less favourable to the employee. The employment contract can contain further conditions on issues not covered by law and collective bargaining agreements and can also regulate on the same issues covered by law and collective agreements but only with provisions more favourable to the employees.
Furthermore, the Civil Code implies certain terms into the employment contract, which apply even if no reference to them is made within the contract itself. The following employee’s obligations are implied into the employment contract:
6. TERMS AND CONDITIONS
As the employment contract is valid even if oral; no necessary terms are provided by law. If the salary is not determined by the parties, it can be decided by a court, taking into account the terms of the collective agreement.
Generally employment contracts are very short and make reference to collective agreements. If not, the terms, which are typically included in a contract, are:
The maximum working hours per week are 40 (48 including overtime, which are calculated over a reference period of four months). Collective agreements can extend this period to six or 12 months if there are objective, technical or other reasons for doing so, linked to the work organisation (these must be specified in the collective agreement).
The restriction on working hours does not apply to employees whose duration of work cannot be measured or pre-determined, or is determined by the employees themselves, or to:
As far as the rest periods are concerned, employees are entitled to a daily rest period of 11 consecutive hours every 24 hours, as well as a weekly rest period of at least 24 consecutive hours every seven days in addition to the daily rest period (generally, but not exclusively on Sunday).
Employees are entitled to a minimum of four weeks paid annual holiday (excluding the public holidays). This annual leave may not be replaced by payment in lieu, except where the employment contract is terminated.
Collective agreements generally provide for more than four weeks holiday and shorter working time.
7. EMPLOYEE REPRESENTATION
Italian Trade Unions are organised under private law and are structured both vertically and horizontally: the vertical structure organises all employees from the same branch of business, eg banking, industrial, trade sector, etc; a horizontal structure organises all employees and/or vertical structures into geographical areas: national, regional, provincial and sometimes local. Italian trade unions and employers’ associations are not legal entities. Indeed, art 39 of the Italian Constitution provides for the registration of trade unions, and employers’ associations and the subsequent recognition of their legal persona, as a necessary requirement to allow them the power to sign collective agreements, binding on all employees and employers operating within the scope of the bargaining unit. This constitutional provision, however, has remained a dead letter, because the legislation required to implement it was never passed. Therefore collective bargaining agreements are private contracts binding only companies that are members of the relevant employers’ association or on companies (who are not party to the collective agreements) who choose to refer to such agreements in employment contracts.
Article 19 of the Italian Law no 300 of 20 May 1970, (the so-called ‘Workers’ Statute’) states that, on the initiative of the employees, a works council (RSA, Rappresentanza Sindacale Aziendale) can be formed within every work/production unit with more than 15 employees for each of the unions which have signed the collective agreement applied in the unit.
Since 1994 Italian industrial relations have been implementing the National Multi-Industry Agreement (Accordo Interconfederale) of 1 December 1993 concerning the constitution of the RSU (rappresentanze sindacali unitarie), ie plant-level single representative works council. This representative body in many companies has already replaced the RSA provided by art 19 of the Workers’ Statute, becoming the employer’s counterpart at company-level industrial relations. In any case unions must choose whether to form an RSA or an RSU, as they cannot co-exist within the same company.
The law recognises the rights provided for the trade union activity in the RSA and RSU. The Workers’ Statute grants several prerogatives only to plant-level union structures appointed according to art 19.
Italian representatives of the EWC (the European directive 94/45/CE on the establishment of a European works council was implemented in Italy by Decree no 96 of 24 April 2002) or the participants in the information and consultation procedure are appointed according to the following ratio: 1:3 by the national trade union organisations, signing the national collective agreement applied within the company or within the group of companies, and 2:3 by the works councils existing in the company or in the group of companies, among the representatives of the works councils itself, taking into account the composition of the different categories of employees (blue-collar, white-collar and management). If no works councils exist within the company or group of companies, the company’s management together with the parties who signed the national collective agreements applied, define the procedure as well as the criteria and the way to establish an EWC or the participants in the information and consultation procedure.
8. INFORMATION AND CONSULTATION
Article 47 of Law no 428 of 29 December 1990 regulates the information and consultation procedure in the case of a transfer of an undertaking. It states that the transferor and the transferee must give written notice to the employee representatives at least 25 days before the signing of any agreement stipulating the transfer, or before a binding agreement has been reached by the parties, if this binding agreement comes earlier. More specifically, the notification must be sent to the works council and the unions that entered into the collective agreements applicable to the companies affected by the transfer. Where there is no works council, the most highly representative unions, at a national level, of the sectors involved, will take its place.
Information to be disclosed
The notification that both the transferor and transferee have to give in writing to the unions must include the following information:
Consultation
Within seven days from the receipt of the written notification, the unions can request, in writing, a meeting to examine the matter. In this case, the transferor and the transferee are obliged to begin a joint examination with the unions, within seven days from the receipt of this request. After ten days, if the parties do not reach an agreement, the procedure is considered to be completed. Consultation is not required for transfers of shares.
According to Italian law, a collective dismissal occurs when a company employing more than 15 employees, as a result of a reduction in, or transformation of, the business, intends to serve at least five dismissals over a period of 120 days in each production unit, or in a number of production units within the territory of the same province. These provisions apply to all dismissals, which refer to the same reduction or transformation.
The procedure to be followed in case of a collective dismissal is outlined in section 11 below.
9. EQUAL OPPORTUNITIES
The principle of discrimination is defined under Italian law as any direct or indirect discrimination related to race, ethnic origin, religion, personal ideals, handicap, age or sexual preferences (Legislative Decree no 215 of 9 July 2003, implementing the Race Discrimination Directive). The anti-discrimination principle is applied in both the public and private sector, particularly with regard to:
It is also unlawful to refuse to employ a prospective employee on the grounds that he/she either is or is not a member of a trade union. It is also automatically unfair to dismiss an employee on union grounds. Employees are also protected against victimisation on union grounds during the course of their employment. Any act of discrimination on union grounds is null.
9.2 Rights available to parents
Female employees are not permitted to work for two months before and three months after childbirth. This compulsory period of maternity leave can be varied to one month before and four months after childbirth, if a medical certificate is produced. During the entire pregnancy, and until seven months after childbirth, the employee must not be allocated tasks that might endanger her health.
If the mother does not take maternity leave (due to death, infirmity, or exclusive custody of the father), male employees are entitled to three months’ paternity leave after childbirth.
During maternity or paternity leave, the parent receives an allowance from the National Social Security Contributions body (Istituto Nazionale per la Previdenza Sociale – INPS) amounting to 80 per cent of his/her salary.
After maternity or paternity leave, the parent is entitled to come back to the same job, in the same production unit.
Parents are entitled to take parental leave, for a period of up to six months at a time (with an overall limit of ten months), until the child is eight years old. Single parents are entitled to ten months’ leave. The parent receives an allowance amounting to 30 per cent of her salary during parental leave, for an overall maximum of six months, until the child is three years old.
10. DISCIPLINE AND TERMINATION
10.1 Rules/procedures for disciplining an employee
Employers cannot apply any disciplinary measure without first informing employees, in writing, of the basis for the complaint, and hearing what they have to say in their defence. Employees have the right to be assisted by a representative of the union to which they belong and they have five days to present a defence
10.2 What disciplinary action may be taken?
The source of the employer’s disciplinary powers is to be found in art 2106 of the Civil Code, which states that an employer can apply disciplinary sanctions in accordance with the gravity of the violation. Every disciplinary sanction imposed by the employer must observe the procedure provided for in art 7 of the Workers’ Statute.
The first paragraph of art 7 states that the disciplinary code relating to sanctions, to the offences for which each of these sanctions may be applied and to the procedures for appealing against them must be made known to the employees by being displayed in a place where it can be read by them.
The disciplinary sanctions can be: • oral or written reprimand;
10.3 Termination
There are two ways in which an employment contract can be terminated by the employer:
An employee can resign by giving notice, the length of which is determined by the collective agreement – if applicable – or by the law. If the employee does not give any notice, he has to pay an indemnity in lieu of it.
Unlike dismissal, resignation does not require any justification or reason, other than in the case of resignation for just cause. Like dismissal, the employee is entitled to terminate the employment contract without giving any notice or before the term of the contract has expired, in the case of just cause or rather when the employer breaches the fundamental terms and obligations of the contract.
If the dismissal is caused by a failure by the employee to observe his legal duties or contractual obligations, a special procedure is necessary in order to serve this dismissal (so called disciplinary dismissal – see above).
A dismissal must always be made in writing.
The employer has to pay TFR – Trattamento di fine rapporto (severance pay) in all cases of termination (including resignation), even if there is a just cause: this is equal to the sum of each annual salary divided by 13.5, accrued for any single year (eg, with a two-year contract with a salary of €100,000 for the first year and of €110,000 for the second year, including bonuses and any other remuneration, the TFR will be €7,400 for the first year and €8,448 for the second year, making a total of €15,548). These amounts are index-linked annually.
If there are no more than 60 employees in the whole of Italy and less than 16 in a single work unit, the employer has a choice between re-engaging (entering into a new contract) and paying an indemnity (between two and a half and six months salary).
In all other cases, an employee can obtain reinstatement and a payment of damages, which covers the period between the unfair dismissal and the reinstatement ruling, with a minimum of five months’ salary. In this case the employee can choose, after the reinstatement ruling, to accept a sum of money equal to 15 months salary plus the indemnity for damages instead of the reinstatement itself.
If there is no just cause for the dismissal, an employee has the right to receive a notice period the length of which is provided for by the collective agreement – if applicable – or by the law, taking into account length of service and qualifications. Normally notice for resignation is shorter than for dismissal.
10.4 Special rules for protected categories
Disabled
The dismissal of disabled employees for economic reasons or within the context of a collective dismissal is not valid if at the moment of termination of the contract the employer has a number of disabled employees lower than the number stated by the law.
In case of termination of the employment contract, the employer has to inform the competent offices within ten days in order to substitute the employee dismissed with another disabled employee.
Maternity
Employers are prohibited from dismissing female employees during pregnancy and until the child is one year old. Dismissal of the mother during this period is null and void unless it was served for:
Works councils
The dismissal of a representative of the works council on union grounds is null. In addition, in the case of a claim for wrongful dismissal, judges can reinstate the members of the RSA/RSU in their jobs, even in the course of the proceedings (before the final decision) if they consider that there is not enough evidence to justify the reasons for the dismissal.
A fixed-term contract can be terminated before the deadline only if a just cause exists (a cause that does not allow the continuation of the employment even on a provisional basis). Otherwise, if a party withdraws without just cause, they are obliged to pay damages for breach of contract, equal to the salary from the date of withdrawal to the end of the contract.
During the probationary period each party can terminate the contract without notice or indemnity in lieu of it. A probationary period cannot last more than six months.
11. COLLECTIVE DISMISSALS
11.1 Definition
Implementing the European directive of 17 February 1975, Law no 223 of 23 July 1991 has greatly modified the rules on collective dismissals in Italy. According to Italian law, a collective dismissal occurs when a company employing more than 15 employees, as a result of a reduction in or transformation of the company’s business, intends to serve at least five dismissals, over a period of 120 days, in each production unit, or in a number of production units within the same province. These provisions apply to all the dismissals, which refer to the same reduction or transformation.
11.2 Procedure
Internal procedure
The company has to send a letter to the works council as well as to the unions. In the absence of works councils within the company, the communication will be sent only to the unions, which are part of the most representative confederations on a national level (CGIL, CISL, UIL). The communication itself will also be sent to the employment office. The content of the letter is provided by the law and consists (limited to the most important points) of the reasons for the company’s decision, the number of dismissals, the measures adopted by the company to reduce the impact of the dismissals.
Within seven days from the date of receipt of the aforementioned communication, at the request of the unions, a meeting between the parties is organised, the aim being to examine the causes which have contributed to the determination of redundancy and to try to find an alternative solution to reduce the number of people involved.
The above procedure is completed within 45 days from the date of receiving the above letter, regardless of whether an agreement between the parties has been reached or not.
External procedure
Where an agreement has not been reached, the Employment Office will summon the parties for another examination, which lasts 30 days, formulating proposals for reaching an agreement. If after the expiry of the above period agreement has not been reached, the Company can serve the dismissals, with the appropriate notice period, which varies according to employees’ qualifications and length of service.
Simultaneously, the list of employees dismissed with the name, place of residence, job description, age, family circumstances, as well as details of the methods used to apply the selection criteria, must be communicated in writing to the employment office.
Thus, essentially, the dismissals may only be carried out at the end of the procedure and therefore after 75 days from its commencement.
The time frames mentioned above (45 and 30 days) are reduced to half in the event the number of employees being less than ten.
In the case of not complying with the applicable procedure the dismissal is null and the employee can claim for reinstatement before the court.
11.4 Employees’ rights in the event of collective dismissals
Employees must be dismissed according to the procedure and selection criteria fixed by the law or by the agreement reached with the unions, if any.
Indeed, if an agreement with the unions is reached during the first or the second phase of the procedure, the agreement itself provides for the selection criteria to be applied to identify the employees to be dismissed (of course in the case of a reduction in the workforce and not in the case of closure of the company).
Otherwise, if an agreement is not reached, the following combination of selection criteria stated by the law will apply: (1) dependents of employees; (2) length of service; (3) technical-production and organisational requirements of the company.
The circumstances which may qualify as a collective dismissal are ‘the reduction or transformation of the business’ or the ‘closing down of the business’. Another scenario for which special regulations are provided – which is not technically speaking a collective dismissal but is treated as redundancy – is the lay-off on CIGS (Cassa Integrazione Guadagni Straordinaria) – Wages Guarantee Fund. This kind of redundancy takes place if, while the CIGS programme is in place, the company decides that it will be unable to reinstate all the employees who have been laid off and it cannot resort to any alternative measures. In this case the consequences would be the same as those of a collective dismissal, but the numerical limit above would not be required.
12. FORTHCOMING LEGISLATION
New legislation is coming into force regarding taxation of income derived from stock options exercised after 4 July 2006, limiting the situations in which income from stock options can benefit from a more favourable tax rate. Furthermore new legislation is expected to be passed concerning pensions and TFR (severance pay).
13. USEFUL REFERENCES
Ministry of Employment
www.welfare.gov
National Social Security Body
www.inps.it
The official text of all Acts
www.gazzettaufficiale.it
Italian Employment Lawyers Association
www.giuslav.it
