Luca Failla and Sharon Reilly at LABLAW, L&E Global
Italy is going through significant political, social and legal changes at the moment. As employment lawyers, we are seeing first-hand how these changes impact employers and their Italian workforce. Italy is a work in progress and the end product will hopefully be worthy of the prestigious label “Made in Italy”.
The Jobs Act: making the Italian labour market more flexible
The Jobs Act (the name was taken from Obama’s American Jobs Act 2011) is designed to simplify existing employment law in Italy and to encourage employers to hire new staff.
What changes are being introduced?
Historically, the legislation provided that if the court made a finding of unfair or wrongful dismissal, the sole remedy was reinstatement. Now the goal posts are shifting, and the remedy of reinstatement will practically disappear and be replaced by an award of damages which will be calculated on the basis of length of service.
The remedy of reinstatement will apply only in very specific circumstances, namely:
- unlawful dismissal (where the facts on which the dismissal are based are found to be non-existent)
- discriminatory dismissals
- defective disciplinary dismissals
A very controversial aspect of the reform is that it applies only to new hirings, and will therefore create two tiers of employees and leave companies wide open to claims not only for discrimination, but worse still, unconstitutional action.
The other revolutionary feature of the Act is the introduction of a new type of open-ended contract for new recruits, which will have “gradual” protection directly linked to length of service. Critics of the new law say that this is a mechanism to introduce what is in effect an extended probationary period during which the employer can dismiss employees without giving any reason and only pay minimal damages. Disappointingly, yet again the Italian legislature has failed to seize the nettle and put poor performance as a reason for dismissal on the statute book. This is a real bone of contention, particularly for foreign companies operating in Italy which often have to resort to a more convoluted reason for dismissal, albeit that they have a well-documented case for dismissal for poor performance where this impacts negatively on the business.
What impact will the Act have?
This Act is without doubt innovative - it has been the subject of much discussion throughout the country, which is a sure sign of its importance to Italian businesses. We will have to wait and see to what extent the Act provides momentum in helping to turn around the Italian economy, although the Act will not have an immediate impact as the new provisions on dismissal only apply to employees recruited from 2015. Over time, however, the Act should result in lower dismissal costs, and potentially greater ease in recruiting staff.
All change for Dirigenti (Executives) in the collective redundancy process What rights did Dirigenti have?
In Italy, although Dirigenti (top level managers) are employees, they enjoyed less protection than ordinary employees, including being excluded from the whole collective redundancy process. However, thanks to a decision of the European Court of Justice in February 2014 and ensuing European legislation, Italy has recently passed its own law which gives Dirigenti greater rights.
What are the changes and what do they mean in practice?
Dirigente must be included in:
- the calculation that triggers collective redundancies, i.e. where a company with more than 15 employees dismisses at least five of them within a period of 120 days
- the information and consultation process with the unions, and the application of the legal selection criteria (technical/organisational needs of the company, family dependants and length of service)
This means that companies will need to set up separate negotiations with the Dirigente unions and (so it appears) apply the selection criteria. However, such criteria do not take into account the special characteristics of the Dirigente relationship, in particular the bond of trust and their fiduciary duties.
In addition, if an employer fails to follow the process correctly, Dirigente would be entitled to damages of up to 24 months’ salary, thus effectively extending rights to them which were previously only enjoyed by employees.
Luca Failla, Sharon Reilly