This is Part VII of an eight-part series of newsletters giving an overview of regulatory requirements governing the conduct of mass compulsory redundancies. The series focuses on key EU jurisdictions, providing practical information to Japanese companies operating in those countries.
In this newsletter, we will present an overview of the regulatory regime affecting mass compulsory redundancies in Italy. In Part I we considered the position in the UK; Part II focused on Germany; Part III on France; Part IV on the Netherlands; Part V on Belgium; and Part VI considered the Spanish regime. Each of these briefings provides a quick reference guide to the most important provisions in each jurisdiction to enable Japanese companies to address the most significant timing and cost issues faced in that territory.
In Part VIII, we will outline recent developments in relation to industrial action in the UK, setting out practical guidance to follow both to prevent a strike and to minimise disruption to business once a strike has commenced.
The information contained in this series is necessarily of a general nature. If any of these issues affect your company, please contact us for assistance regarding your particular circumstances.
One might think that the law relating to mass compulsory redundancies ought to be the same in every EU country, given that it derives from a single EU Directive1 setting out in some detail what is required by each member state. In particular, the Directive specifies the following key obligations:
- Where there are "collective redundancies", an employer must consult with the workers’ representatives in good time and with a view to reaching agreement as to the terms or number of compulsory redundancies.
- The consultation must aim to avoid or minimise compulsory redundancies and to mitigate their consequences (for example by redeploying or retraining workers).
- The employer must give the representatives specified information including the reasons for the proposals, the number and category of workers to be made redundant, the proposed timescale and selection criteria and the level of redundancy payments.
- Consultation must take place with a view to reaching agreement as to the proposals so it is very important that no decisions are taken before the process commences.
- A specified period before dismissals are to take effect, the relevant government body must be notified.
However, individual member states are given discretion in a number of key areas, for example:
- how to define "collective redundancies";
- who the "representatives" are;
- whether the representatives can call on the services of experts; and
- what the remedy for breach of the terms of the Directive should be.
The Directive only sets out minimum requirements – individual member states are free to adopt laws more favourable to workers.
When do I have to consult collectively?
When a company with more than 15 employees proposes to dismiss more than five employees within a period of 120 days.
What is the consultation requirement?
You must inform and consult with the union. The number of redundancies specified in the initial communication with the union can be decreased during the consultation period, but it cannot be increased without further consultation with the union.
How long will it take?
The whole consultation procedure takes approximately 90 days.
Within seven days of the initial communication, there will be a joint examination of the proposals between the company and the union. This joint examination should be completed within 45 days of the first meeting. If there is no agreement by this time, the labour office will call a further meeting, and the company and the union should try to reach agreement within a further 30 days.
Can unions, works councils or other representatives veto compulsory redundancy proposals?
No. The consultation period is deemed terminated after the steps set out above have been followed, even if no agreement has been reached.
What is the potential penalty for breach of the consultation requirements?
If the consultation process is not followed, the unions can attempt to obtain a court order preventing the compulsory redundancies.
What external approvals or notifications are required?
None. You must serve notice of dismissal on the relevant employees within 120 days of the end of the consultation procedure.
How do I make the individual compulsory redundancies?
You must give all employees proper notice of termination of their employment.
What severance payments will employees be entitled to?
All employees are entitled to a deferred severance payment equivalent to total annual remuneration for each year of employment divided by 13.5. The deferred severance payments must be paid into the employees' pension funds or set aside in an appropriate reserve. The employees are also entitled to receive 13th and 14th salary instalments: yearly salary in Italy is sometimes paid in 12 instalments, with "bonus" payments in December and June (the 13th and 14th instalments).
Key practical points to keep in mind
1. For those Japanese companies that are contemplating instituting a compulsory redundancy program across multiple EU jurisdictions, the following list of key practical points should be considered as a starting point:
2. Focus on the proposed redundancy timetable as early as possible – is it feasible in each jurisdiction? You may need to delay taking steps in one country until certain other steps have been completed in another. Appoint a single internal person with overall coordination responsibility.
3. Ensure any messages given to employees/employee representatives are consistent across all relevant jurisdictions – trade union or other employee representatives may liaise with colleagues in other countries.
4. Ensure any statements clearly indicate that the proposals will not be finalised until consultation is complete – for example avoid assurances to one country’s representatives that other countries will suffer just as many compulsory redundancies or that one country will be "safe" because any compulsory redundancies will take place elsewhere.
5. Ensure all documents record steps as mere proposals until the full consultation process has been completed – pay particular attention to board minutes, press announcements and written communications with employees and their representatives.
6. Check whether there are additional requirements for consultation and compensation specified in collective bargaining arrangements or pursuant to a European Works Council or other agreement.
7. Prepare a public relations strategy.