Lexology GTDT Market Intelligence provides a unique perspective on evolving legal and regulatory landscapes. This interview is taken from the Labour & Employment volume featuring discussion and analysis of legal developments, the enforcement of restrictive covenants and political debates about employment within key jurisdictions worldwide.
1 What are the most important new developments in your jurisdiction over the past year in employment law?
The employment law environment has been subject to significant changes over the past decade, which have been further intensifying since 2015, with opposing parties alternating as the guide of the country. Focusing on the past year, the main two developments impacting employment law in Italy can be identified as the following.
By order of importance, the protections applicable in case of dismissal to employees hired after March 2015 have been raised. Back in 2015, indeed, the left party, then governing, introduced a peculiar discipline, applicable to open term employees hired effective on or after 7 March 2015, setting a predetermined severance entitlement to those employees unfairly terminated – significantly reducing the cases in which the right to reinstatement provided by pre-existing legislation continued to apply. This severance entitlement (for employees of employers staffed with more than 15 employees) was equal to two months multiplied by each year of seniority in service, from a minimum of four to a maximum of 24 months. According to Legislative Decree No. 87/2018, this range has been increased from a minimum of six to a maximum of 36. Moreover, and simultaneously, the Constitutional Court declared that the law setting this severance is to be considered conflicting with constitutional principles to the extent that it linked the amount of the indemnity to the seniority in service only, without allowing the court ruling on similar cases to take into consideration other aspects that need to be considered when determining the consequences of an unfair dismissal (eg, the degree of unfairness of the dismissal or the behaviour of the parties). As a consequence, effective from September 2018, larger potential liabilities apply in case of dismissals declared unfair in court.
In addition to this, the Legislative Decree No. 87/2018 has amended the discipline applicable to fixed-term employment contracts, introducing a burden of motivation for contracts exceeding 12 months between the same employer and the same employee, applicable also to staff leasing contracts. The same decree has also reduced, from 36 to 24 months, the maximum duration allowed for fixed-term employment contracts entered into between the same parties (also resulting from the sum between multiple contracts entered into from time to time, including other kinds of temporary employment such as staff leasing supplied by staff leasing agencies).
2 What upcoming legislation or regulation do you anticipate will have a significant impact on employment law in your jurisdiction?
While recent years’ reforms have focused on adjusting the discipline and protections applicable to ‘ordinary’ employment relationships, the urge to give a discipline to new kinds of work relationships has come up. Within the digital era, peculiar forms of work relationships have indeed spread. In particular, this applies to workers employed in the gig economy – being a labour market characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs, usually managed through web- or app-based platforms, matching demand and offer of single jobs to be performed in a very short time frame and normally not requiring particular skills (referred to as mini-jobs in certain jurisdictions such as Germany). The most common kind of gig worker is undoubtedly that of food deliverers, usually referred to as ‘riders’, since they perform their duty typically riding a bicycle or a scooter. In this respect, as witnessed by the increasing attention that the legislator is giving to this matter, the time has come to give rise to a full discipline applicable to this kind of relationship. A first attempt has been made with Law Decree No. 101/2019, which became effective on 5 September 2019, having introduced, among others, a law definition of ‘digital workers’ and a series of law requirements (ie, insurance coverage for occupational accidents and diseases, salary structure not to be mainly based on the number of deliveries or tasks done). The creation of a monitoring unit at the Ministry of Labour to verify the effects of the application of the newly implemented law is also foreseen.
3 How has the #MeToo movement impacted the investigation or settlement of harassment or discrimination claims in your jurisdiction?
The #MeToo movement was born in the work environment, namely the movies and entertainment industry. As a result, it did not take much for the principles inspiring this movement to spread within any other work environment. It rapidly increased the sensitivity of employers and employees on the importance of reacting to the reality this scandal represented, with a view to fighting harassment or discrimination at any other workplace. On the one hand, many employers have shown much attention to put in place any action to identify and promote appropriate behaviour at the workplace. Indeed, many major and minor corporations in Italy have implemented internal policies and codes of conduct highlighting common principles to be followed also in this respect.
Speaking of these principles and legal consequences in case of infringement, it is worth mentioning that sex discrimination and harassment not only entail prosecution against the individual who has procured that, but whenever occurring at the workplace (or elsewhere related to the workplace) it would become material within the frame of a work relationship, entailing a direct and even personal liability for the employer and its legal representative. In particular, under Italian law (as in almost any other common or civil law jurisdictions) employers are held to protect and preserve their employees’ health and safety at the workplace. In case of harm suffered to an employee’s health (either physical or psychological), the employer would be held liable not only for when the employer has caused the conduct entailing, but also when they have not put in place any measure to avoid the third parties having access to the work environment that did it. In this respect, best practice encountered in our day-to-day experience consist of the adoption of internal policies and codes of conduct, whistleblowing policies and the implementation of internal policies and codes pursuant to legislation concerning the liability of corporations in case of criminal responsibility of their representatives or deputies, set forth by Legislative Decree No. 231/2001.
4 What are the key factors for companies to consider regarding the enforcement of restrictive covenants against departing employees?
Restrictive covenants within the frame of employment relationships are subject to stringent restrictions for their validity. As a consequence, whenever an employee breaches the restrictions undertaken, enforcement may become problematic in case the restriction covenant has not been drafted, let us say, ‘by the book’. The lack of even a single one of these requirements may result in the impossibility to have them enforced in case of infringement by the employee of the obligations undertaken. Among others (eg, confidentiality, non-solicitation) the post-termination non-competition agreement, being such that, according to which, the employee is bound not to compete with the employer for a certain period of time after termination, is one of the most delicate – not only for the interest it is aimed at covering, but also for the detailed discipline contained in the Italian Civil Code. For example, according to the Code, a specific compensation needs to be provided and must be adequate according to the scope of the non-compete burden set. Territory, duration and subject matter of the non-competition combined need not to be too wide to prevent the employee from performing any working activity compatible with his or her skills and profile. Also, maximum duration (ie, three years for non-executives and five for executives) must be complied with precisely and expressly (ie, cross-reference to the code would not apply and terms exceeding the maximum duration allowed would not apply at all). Failure to comply with these principles would resolve in the invalidity of the covenant and, what risks to be highly undesirable when it comes to top management or key employees, unenforceable.
Coming to best practice hints, it is worth highlighting that enforceability of non-competition clauses can be made extremely more effective by providing liquidated damages in case of infringement. Under Italian law, no punitive damages exist (which is different from many common law jurisdictions) and compensation for damages is strictly linked to the proof (to be given by the plaintiff) of the damage suffered and its economic value. In this respect, it is worth mentioning that the Italian Civil Code expressly provides that liquidated damages can be reduced by the court when not aligned with the worth of the infringement attributed to the employee. As a consequence, in order to provide an effective remedy vis-à-vis the employee, liquidated damages amount and criteria of quantification need always to be well-balanced within the frame of the covenant stipulated. Failing to do so may result in the concrete risk that the relevant penalty is considered unfair in case of court litigation, with the court being allowed to reduce it.
5 In which industry sectors has employment law been a hot topic recently? Why?
An employment law hot topic nowadays is, again, seen in gig economy. The global economy is, indeed, growing fast and, with it, digitalisation not only of work processes but even of workplaces is quickly spreading. This is exactly the perspective from which the gig economy phenomenon and the significant number of gig digital workers coming along needs to be analysed. As said, the introduction of full discipline is on its way. However, this will be a landing point started with a technical debate, held also in court rooms.
More intensively in 2018, Italian courts have ruled on the classification of the work relationship with gig workers more than once. One of the most resounding cases has been that of six food delivery riders who claimed, before the Court of Turin, to be reclassified as subordinate employees, despite their relationship being formalised under the self-employment scheme. The Labour Court of Turin dismissed the case, denying that the relationships in question could be considered as ordinary employment under Italian law. This was based on one main strong argument: they were not held to do the job proposed by the company, but could choose to accept or refuse it without incurring in any consequences other than not being remunerated. The decision has been brought before the Court of Appeal, which, partially overruling the first instance decision, stated that the workers in question could not be considered as ordinary subordinate employees but still need to benefit from equivalent economic benefits applicable to ordinary employment. The Court of Appeal outlined that this decision was based on the fact that, even though many aspects of gig workers’ relationship may lead to their classification as autonomous self-employees, the employer still has a significant role in organising the work and assigning duties, so that subordinate employment–relationship regime could still apply.
As a result, the Court of Appeal of Turin established that the individuals had the right to claim certain remuneration and legal treatment (such as paid holidays, sick leave and the ‘13th month salary’ at year end), as provided for by the National Collective Bargaining Agreement of the Delivery and Logistics Sector. On the other side, the Court of Appeal of Turin considered the discipline envisaged in case of unfair dismissal to not be applicable to the riders, given that the riders are not considered ordinary subordinate employees. In other words, what kind of discipline may be applied in case of termination of the relationship with riders still remains unclear but will hopefully be clarified soon by upcoming legislative intervention, which is the outcome of the intense debate on this hot topic taking place in the past several years.
6 What are the key political debates about employment currently playing out in your jurisdiction? What effects are they having?
Employment law has become central to the debates of how to stimulate economic growth, being in particular a hot topic when it comes to attracting or generating investments. Among the key aspects impacting the capability of a country and its entrepreneurial environment to attract investments, whether foreign or domestic, is the cost of labour. The cost of labour depends, of course, on how expensive a country is in terms of the cost of leaving, but also depends on the spread between the company cost of a salary, its gross amount and the net ending up in the employees’ pockets (called ‘Tax Wedge’ in Italy). Generally speaking, the higher the labour cost, the less a market will be attractive. In this sense, the political debate is now focused, as it has been in the past several years, on researching any measures which may help to reduce the tax wedge. In this direction, a recently introduced law discipline is on the tax and social security contribution treatment reserved to certain kinds of goods directly awarded to the employees within the frame of ‘welfare plans’. According to this discipline, certain goods or services granted to the employees by the employer according to welfare plans are totally exempt from social security contribution (for the part due both by the employer and the employee) and withholding income taxation. Welfare plans, to achieve exemption from income taxation and social security contribution, need to comply with certain limits and formal requirements (eg, maximum remuneration value allowed to benefit from the tax and social security exemption and not any service or good can be exempt; for example, urban mobility or railway season tickets can, whereas generic vouchers cannot).
The Inside Track What are the particular skills that clients are looking for in an effective labour and employment lawyer?
Technology and digitalisation are rapidly reaching the top of the selection criteria for clients seeking ‘new’ lawyers. Our firm has been a pioneer in the past decade in designing and implementing its own knowledge management platform, which is now based on the newest technology available, and is further being augmented with new versions (3.0 is almost up and running and 4.0 is already an aim).
What are the key considerations for clients and their lawyers when handling employment disputes?
Clients must be well aware, when defendants (the most common situation for corporations dealing with employment law), of the maximum potential liability; what is the maximum goal achievable, but also what is reasonably achievable. Also, clients must be well aware of the procedure to be followed; when they are supposed to react as well as when they are not. Clients should also be put by their lawyers in a position to consider an employment dispute from a strategic point of view (eg, when bringing it on or trying to settle it, when it is appropriate to appeal a decision and when it is not).
What are the most interesting and challenging cases you have dealt with in the past year?
On trade union matters, we have one case where we have been hired to engage in negotiation with trade unions to implement a trade union agreement within the pharma industry, to derogate the very recent discipline set forth by Legislative Decree No. 87/2018 on fixed-term contracts and setting very severe restrictions to fixed term employment contracts. This has been one of the very first agreements of this kind reached in Italy. On restructurings, we have assisted a leading multinational company within the metal mechanic industry, dealing with the legal and union issues deriving from the announcement and implementation of a restructuring involving the centralisation of all managerial finance and administration functions in the headquarters in northern Europe. On M&A transactions, we have been involved in one of the largest cross-border transactions ever, in the business process outsourcing customer care and customer support industry involving Italy, Spain, Portugal and Latin America.