Italian employment law has always been employee-friendly, reflecting the principles of the Italian constitution. However, the global economic downturn has forced Italian legislation to enhance flexibility in the job market and attract foreign investment. From 2015, new hirings have "gradual" protection directly linked to length of service. The remedy of reinstatement has practically disappeared except for some very specific cases. Italy is currently experiencing important political, social and legal changes, and employment lawyers are witnessing first-hand how this impacts on businesses and their employees. Italian employment law was overhauled by the "Jobs Act" which made important changes to the entire system of employment contracts.

Issues arising on hiring individuals

Immigration

Italy does not have specific immigration rules regarding the hiring of European Union (EU) citizens as they can move and work in every EU country without limitation.

In contrast, non-EU citizens are subject to immigration control. Visas and different work permits are necessary in the following situations:

  • Hiring non-EU citizens: non-EU citizens cannot work in Italy without a work permit. The Italian Government sets an annual limit (quota) on the number of permits issued. Those wishing to work in Italy must follow a specific immigration procedure, which includes compliance with the limitation of the annual quotas. Provided the annual quotas have not been exceeded, a non-EU citizen must request a work visa, provided they already have an offer to work in Italy
  • Secondments of non-EU citizens: working in Italy under a secondment arrangement is not subject to annual quota limitations and authorisation can be obtained by following a simplified procedure
  • Under Legislative Decree no. 136/2016, the Italian legislator has regulated international secondments in Italy in line with the new European Directive. The aim of this Decree is to identify bogus international secondments by improving cooperation and information at international level and by imposing a duty of transparency and communication on companies

Employment structuring and documentation

In line with a European Directive, the following information concerning the main terms and conditions of employment must be set out in writing in the employment contract, and provided to the employee within 30 days of the commencement of their employment: (1) the parties; (2) the start date and the duration of any trial period; (3) the date of expiry, if the employment is for a fixed term (where these contracts are permitted by law); (4) the salary, method for calculation, frequency of payment, and any particular term or condition relating to the salary and fringe benefits; (5) working hours; (6) annual entitlement to paid holiday; and (7) the employee's duties and the applicable work "category" as set out in the Civil Code.

Generally employment contracts are entered into for an unlimited period. A fixed-term contract is possible for a maximum period of three years and ends automatically without written notice at the end of its term.

Under Legislative Decree no. 81/2015, it is no longer possible to sign new project based contracts. All collaborative relationships characterised by continuous performance of the job by the worker and by the employer organising and coordinating the work, must be considered as subordinate employment relationships.

Employment contracts can provide for a trial (probationary) period. During this period, each party is free to terminate the contract without notice and without payment in lieu of notice. Usually the specific duration of the trial period is set by the applicable collective bargaining agreements.

Issues arising during the employment relationship

Wages, annual leave and working time

Salary is usually paid at the end of the working month, as established in the company policies or by the collective agreements, with the employer deducting all applicable social security contributions and withholding taxes.

The salary paid to employees must be stated in a pay slip (produced by the employer or by a third party on the employer's behalf) which must include the period of service to which the salary relates, the amount and value of any overtime, together with all the elements making up the sum paid as well as all deductions made in accordance with Italian law. Moreover, in addition to the usual 12 monthly payments, Italian law provides for one annual 13th payment, usually one month's pay, to be made at Christmas time. Furthermore, collective agreements or even individual contracts may provide for a 14th payment, usually paid in July.

The maximum length of the working week is established by collective agreement. However, the average weekly working time cannot exceed 48 hours, inclusive of overtime. Average working time must be calculated over a period of four months however, the applicable collective agreement can extend that term for objective, technical or organisational reasons.

The needs of a particular company may, in exceptional circumstances or on an occasional basis, require employees to work beyond their usual working hours. Overtime is regulated by law and by the applicable collective agreement. Article S of Legislative Decree 66/2003 provides that normally the collective agreement governs the conditions for performing overtime work and that, in the absence of any provisions of the collective agreement, overtime is only permitted to a maximum of 250 hours per year, provided both employer and employee agree.

Legislative Decree 66/2003 provides for a minimum of four weeks' holidays per year, but the applicable collective agreement may provide a more generous holiday allowance.

Trade unions

Unions are free to regulate their internal activities as they deem appropriate. Legally, collective agreements only bind individuals who are actually members of the union that is a signatory to the agreement. Like all private law contracts, only the signatories are bound and, therefore, only those employers and workers who have specifically given a mandate to an employers' association or a union to represent them may benefit from the collective agreement concluded on their behalf Although this is the legal rule, in practice, once a collective agreement is concluded, even non-union members typically accept its terms.

Social insurance

Both employers and employees are required to pay social security contributions. Receipt of pension benefits is contingent on payment of the social security required to be paid by law. For employees, pensions are either linked to the amount of contributions paid as a percentage of the employee's overall salary during their entire working life, or to their age.

Issues arising on termination of the employment relationship

Business transfers

Article 2112 of the Italian Civil Code provides employees with a high degree of protection in the context of the transfer of an undertaking. These protections include, for example: (1) the automatic transfer of employees along with their employment contracts to the transferee; and (2) joint liability on the part of the transferor and the transferee for all outstanding benefits accrued to employees at the time of the transfer (unless the transferor is released from its obligations by the employees).

Terminating employment

Under Italian law, any termination of employment must be justified. Justifiable reasons for terminating an employment contract can be divided into three main categories (1) objective justified reasons - these relate to job losses caused by the employer's economic situation for reasons relating to production, work organisation, or proper functioning; (2) subjective justified reasons - these occur when the employee commits any breach of their contractual obligations or is guilty of negligence in the performance of their duties, but the behaviour is not so serious as to constitute a dismissal for just cause; or (3) just cause - this indicates any serious misconduct or breach that renders the continuation of the employment impossible, including theft, riot, serious insubordination, and any other behaviour that seriously undermines the fiduciary relationship with the employer.

Notice of dismissal must be in writing and must detail the reasons on which it is based. Indeed, under the system introduced by the Fornero Reform, the grounds of dismissal must be given in the termination letter: failure to do so renders the termination invalid.

For the first time in our legal system, in a recent Court Ruling (25201/2016), the Court of Cassation stated that it was possible to fairly dismiss an employee due to economic reasons and in order to increase profitability. In fact, article 41 of Italian Constitution states that an entrepreneur is free (and it is lawful) to take decisions in order to make his Company more efficient and profitable, without interference from a judge.

Italian law provides for the payment of a deferred form of remuneration, otherwise known as a severance payment ("Trattamento di Fine Rapporto" (TFR)). Along with other minor statutory termination payments, the TFR must be paid to employees whenever an employment contract is terminated, irrespective of the cause of termination. The amount of the TFR varies depending on the employee's salary and length of service.

Any dismissed employee may bring legal action if they consider that their dismissal was not properly justified. The action before the labour court must be preceded by an out-of-court appeal against the dismissal (within 60 days of the dismissal).

Historically, the sole remedy for unfair or wrongful dismissal was reinstatement. However, for employees hired after 7 March 2015, under Legislative Decree no. 23/2015, the remedy of reinstatement has practically disappeared and has been replaced by an award of damages, calculated on the basis of the employee's length of service. For those employees, the remedy of reinstatement will apply only in very limited circumstances, namely:

Dismissals which are null and void because they were for discriminatory or retaliatory reasons, during maternity leave, because of marriage, or other reasons specifically provided by law

Dismissals which were not given in writing

Dismissals on the grounds of justified subjective reasons or just cause where the facts on which the dismissals are based are found to be non-existent, regardless of any evaluation of their seriousness

The employee is entitled to resign giving the notice set out in the collective agreement as applicable to their particular employment. An employee may resign without notice for just cause, and will be entitled to payment in lieu of notice plus damages for consequential loss.

In 2016, a new electronic procedure was introduced for effecting resignations and terminations of employment relationships by mutual consent: the employee must file the resignation or mutual termination online on the National Institute of Social Security Contributions website. The form must be submitted to the employer and to the competent Local Labour Office ("Direzione Territoriale del Lavoro") and can be revoked within 7 days.

Published in collaboration with L&E Global an alliance of employers’ counsel worldwide

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