Practice Area Articles
January 16, 2023
Sharon Reilly, Chiara Perrone and Marco Tesoro
Back to International Employment Law
KEY DEVELOPMENTS FOR 2023
One of the most important challenges of 2023 will be for companies to attract and retain talent in an increasingly difficult market, where resignations rates are constantly growing as well as the difficulties in finding skilled personnel. Resignations registered in Italy in the first six months of 2022 show an increase of 31.73% compared to the same period in 2021.
Several reasons and factors contribute to this trend, including in particular the employees’ pursuit for a better balance between private and professional life, the feeling of being undervalued or not aligned with the company values, the need for more flexibility and better salary package.
This represents an important challenge for employers that must take concrete actions to retain their employees and to attract new ones: in this regard, it is important to work on several topics such as retainer incentives, corporate welfare plans, career training and development plans, flexibility and measures to support employees’ parenthood and personal needs.
Gender inequality represents a key issue to tackle in Italy and is part of the “inclusion and cohesion” plan, one of the main targets of the Italian National recovery and resilience plan.
In this regard, the Italian legislator has implemented a new system of mandatory disclosure information for companies with more than 50 employees, obliged to provide a fully detailed report on the workforce structure and describing all the internal policies and procedures in place to ensure an inclusive working environment, gender equality with reference to salary levels, career progress, parenthood management and measures to promote the conciliation between work and private life.
Based on the information and data provided by the abovementioned report, companies may obtain the so-called “gender equality certification”, which will allow them to access to relevant benefits such as social security contributions reductions, higher rates when requesting funds and loans and when applying for tender offers.
Being an important topic at the national and European level, companies operating in Italy are taking all the steps needed to be prepared to file the disclosure report and most importantly to obtain the gender equality certification, not only for the benefits provided by the law but also for their own professional image and reputation, also considering the high level of attention from consumers and society on this topic.
Remote working – in particular, teleworking and smart working – has proven to be an essential tool in addressing the pandemic emergency, preserving both the public health and the economy.
Despite the end of the pandemic outbreak, remote working appears to remain the favourite option for both companies and employees ensuring, on one hand, relevant cost savings and on the other hand allowing more flexibility to the employees.
However, the current energy crisis and related higher energy costs for families will lead to claims for reimbursements or even requests to return to the workplace. In this regard, employers must be prepared to handle such claims, both on an individual and collective level, finding solutions and negotiating agreements that will help both parties.
KEY DEVELOPMENTS FOR 2022
Introduction of gender pay information
In Italy, while 56% of university graduates are women, only 28% of managers are women and they are paid on average up to 20% less than their male counterparts. This issue was compounded by the pandemic which resulted in more women losing their jobs than men. As a result of this, the debate on the gender pay gap has been reignited and there is a groundswell of opinion pushing for a law on equal pay for men and women.
The Bill on equal pay and opportunities in the workplace was introduced by Law no.162 of 5 November 2021. The text includes amendments to the code on equal opportunities between men and women in the workplace, to reduce the “gender pay gap”. Companies (with more than 50 employees) are obliged to publish bi-annual reports on the staff situation and the roles occupied by men and women.
Introduction of the right to disconnect
It is expected that there will be an increased use of the remote working regime (so-called “smart working”) as a result of the pandemic-induced state of emergency, which expired on 31 March 2022. With a view to reducing the potential detriment to employees' health, Italy recently introduced the right of employees working remotely to disconnect from the IT tools used to carry out their work. This provision is in line with the European Parliament Resolution of 21 January 2021 which included recommendations to the Commission on the right to disconnect.
On 7 December 2021, the Italian Government and the Social Partners signed a National Protocol on Agile Working in the Private Sector, aiming to promote collective bargaining, also at company level, regulating the matter, in line with the guidelines of the Protocol and with the Law. Going forward, individual remote working agreements between an employer and employee must be in line with these new legal rights and the National Protocol on Agile Working in the Private Sector. Therefore, employers should amend existing individual agreements and\or update their existing template employment documents and policies, in part to provide for and help regulate the employees’ right to disconnect.
Measures to help prevent business from relocating abroad
Given the recent instances of multinational organisations making redundancies to move production abroad, the Italian Government has been discussing for several months the possibility of introducing a law to combat foreign companies (who are not in economic difficulty) transferring production abroad if they have benefited from public funding in Italy (in the form of tax breaks, social security benefits, furlough schemes, etc.).
With a view to introducing a regulatory measure to counteract the closure of businesses in Italy/relocation abroad, the 2022 Budget Law (Law no. 234 of 30 December 2021) has introduced a procedure to be followed by relevant companies that intend to close their headquarters, plant, branch, office or department in Italy which would result in laying off at least 50 people. The companies caught by these measures are those that that are not in economic difficulty and have at least 250 employees. Businesses thinking about shutting up shop in Italy and moving abroad should therefore give due consideration to this new procedure.
KEY DEVELOPMENTS FOR 2021
Key legislative changes to support businesses
2020 was overshadowed by the COVID-19 pandemic and the emergency legislation passed as a result of it. A number of Laws have been enacted to support businesses forced to temporarily shut down operations, some of which are also expected to have an impact on 2021.
Decree Law no. 137 of 28 October 2020 (the so-called "Decreto Ristori")
This Law has effectively extended into 2021 with the following emergency measures already in place:
a) Extension of the ban on dismissals
The ban on individual and collective "economic" dismissals provided by Law Decree no. 18 of 17 March 2020, converted into law on 24 April 2020, (the so called "Cura Italia") was extended until 31 January 2021, with the suspension of any ongoing redundancy procedures (see "Preview of Finance Bill 2021" below).
The ban on dismissals does not apply to:
- Companies that have ceased operations and are in the process of liquidation;
- Companies declared bankrupt;
- Companies that have entered into a company level collective agreement with the trade unions, providing for an incentive package in return for termination of the employment relationship, limited to the employees who adhere to such an agreement; or
- Employees already employed under a service contract, dismissed and re-hired following the change of contractor.
b) Extension of furlough for COVID-19 pandemic
Companies using this extended period of furlough are charged with an additional contribution calculated on the full salary contractually due to the furloughed employees, according to the reduction in turnover in the first semester of 2020 compared with the same period of 2019:
- Additional contribution equal to nine percent if the reduction in turnover is lower than 20%;
- Additional contribution equal to 18% if there has been no reduction in turnover.
No additional contribution is due for: i) companies that set up after 1 January 2019, ii) companies that suffered a reduction in turnover equal to 20% or more, and iii) the sectors subject to the new restrictions introduced in the Prime Ministerial Decree of 24 October 2020.
c) Social security contributions exemption
For companies not using up the above-mentioned additional six weeks of furlough, there is an exemption from social security contributions (excluding INAIL premiums and contributions) for a maximum of four weeks, which was to be used before 31 January 2021, limited to the working hours covered by the furlough scheme in June 2020.
Decree Law no. 34 of May 19, 2020
Fixed-term contracts: can be renewed or extended, including temporary employment contracts, without having to indicate the reasons (this obligation had been introduced by the so-called "Dignity Decree") until 31 December 2020 (see "Preview of Finance Bill 2021" below) on the condition that this can only be done once and for a maximum of 12 months (without prejudice to the maximum limit of 24 months).
Preview of Finance Bill 2021
The new finance bill is expected to:
Extend the ban on individual and collective "economic" dismissals, with the exceptions mentioned above, until 31 March 2021;
Increase furlough for the COVID-19 pandemic for a further 12 weeks; and
Extend until 31 March 2021 the possibility of renewing or extending, for a maximum period of 12 months and only once, fixed-term employment contracts, also as an exception to the provisions of the Dignity decree and therefore without having to indicate the reasons.
Case law developments regarding collective redundancies
Constitutional Court, Ruling no. 254 filed on 26 November 2020
The Constitutional Court has declared the inadmissibility of the questions raised by the Court of Appeal of Naples as to the constitutionality of the provisions in the so-called Jobs Act regarding collective redundancies implemented in violation of the selection criteria (to establish which employee to dismiss). The Constitutional Court deemed, on one hand, that the reasons given by the referring judge as to the relevance of the questions raised were insufficient and, on the other, that the type of corrective intervention asked of the Constitutional Court was unclear.
KEY DEVELOPMENTS FOR 2020
Key legislative changes to boost rights of delivery riders
A new Law (Legislative Decree no. 101 of 3 September 2019, implemented by Law no. 128 dated 2 November 2019) has been recently implemented and introduces significant measures and legal protections for so-called delivery 'riders', as follows:
- written form ad probationem for individual contracts with riders;
- riders' minimum pay established by national collective bargaining agreements. In the absence of this, riders cannot be paid on the basis of deliveries made; instead, they must have a minimum hourly wage that takes into account the minimum wage fixed by national collective agreements in similar sectors;
- riders are entitled to a supplementary indemnity that cannot be less than 10% of their regular wage for work carried out at night, during public holidays or under adverse weather conditions; and
- mandatory insurance coverage against accidents at work and illness.
In addition, the protections that subordinate employees enjoy with regards to the way their services are performed shall also apply to self-employed workers who provide services continuously and predominantly on a personal basis.
Recent case law developments
There have been two recent, significant decisions that should be borne in mind by employers in 2020, summarised as follows:
The Court of Cassation confirms employment protections enjoyed by delivery riders 'hetero-organised', subject to supervision and given orders
The Court of Cassation rejected the appeal brought by a well-known food delivery company against five so-called "riders" and upheld the decision of the Turin Court of Appeal of 4 February 2019.
The Court of Cassation agreed with the analysis conducted by the Court of Appeal, according to which the rider's activity in the initial phase of the engagement is autonomous, because the individual chooses whether or not to work at a given time, but is controlled by the company in the operational phase of the relationship. In the case in question, delivery was to be made within 30 minutes of collection under payment of penalty, and there was an obligation on the rider to go to a given point at the beginning of the shift, to follow the delivery instructions and to confirm the execution of the individual deliveries accepted. The riders are ultimately 'hetero-organised' and subordinate to the company in terms of supervision and orders and as such, enjoy protections typically afforded to employees.
Application of the Jobs Act (Legislative Decree 23/2015) to the conversion of a fixed-term contract by Court order
The Court of Cassation ruled that the new employee protections regime introduced under the Jobs Act (i.e., the so-called 'increasing protections contract') does not apply to fixed-term contracts entered into before the Law came into force on 7 March 2015, which were subsequently converted into open-ended contracts by Court Order due to the nullity of the fixed term.
The misappropriation by an employee of company computer data (files) is considered embezzlement
The Court of Cassation expressed its opinion on the crime of embezzlement pursuant to Article 646 of the Italian Criminal Code in a case concerning theft of computer data.
By a ruling of April 10, 2020, the Supreme Court confirmed that an employee who copies computer data stored in a ccompany personal computer entrusted to him/her for work purposes and then deletes it before returning the personal computer newly "formatted" is guilty of embezzlement pursuant to Article 646 of the Criminal Code.
The case in question arose from the resignation of an employee who returned a company notebook that had been given to him for work purposes with the hard disk completely re-formatted, without any of the computer data originally stored in it. The Judges rejected the worker's defence that computer data could not be misappropriated as it could not be defined as "moveable things”. Instead, the Supreme Court held that the files do represent a "moveable thing", which can be transferred from one place to another, even without physical human intervention. As a result, the Supreme Court held that “the removal of data from a company PC and the return of the computer formatted constitutes embezzlement".
Supreme Court decision on dismissals based on justified objective reasons
The Court of Cassation reiterated its recent decision that, for the purposes of assessing the legitimacy of an individual dismissal on the grounds of a justified objective reason, the poor economic performance of the company does not constitute a factual assumption that the employer must prove.
Instead, the employer must prove, and the judge must ascertain, the existence of an actual reorganisation, which may be determined by a more efficient management or an increase in profitability of the company, and that such reorganisation has led to the abolition of the position held by the dismissed employee. The judicial review is limited exclusively to ascertaining the legitimacy of the dismissal decision and cannot be extended to examining the merits of the technical, organisational and production assessments that have been conducted by the company. This is an important clarification on the law and is a welcome relief for employers who may be contemplating restructuring their business operations in Italy.
Introduction of financial incentives for businesses
The following incentives have been introduced for employers in Italy under the Finance Bill 2020:
- reduction in social security contributions for the recruitment of new open-ended staff under the age of 35;
- 50% bonus for companies hiring staff in 2019-2020 under the age of 35, provided they have never been employed under a permanent contract. The bonus comprises savings on social security contributions up to an amount of €3,000 per employee per year, for a total duration of 36 months;
- 100% bonus for companies hiring staff in the Southern Regions: it applies to staff under the age of 35 and those aged over 35 who have been unemployed for at least 6 months. The bonus amounts to €8,060 for the first year and subsequently decreases to 50% for the 2nd and 3rd years;
- funding of €50million to finance the employment and training of young apprentices alternating between school and work; and
- a bonus for companies hiring 'young talent' (e.g., graduates with full marks and PhD graduates) under an open-ended contract, by reducing social security contributions for the first 12 months, up to €8,000 per employee.
KEY DEVELOPMENTS FOR 2019
The "Dignity Decree" is converted into law
The Dignity Decree 2018 introduced significant changes to Italian employment law (Law Decree 87/2018, converted into law through Law no. 96 of 9 August 2018), namely:
- stricter rules for fixed-term contracts and temporary agency workers:
- i) shorter maximum duration (now 24 months - used to be 36 months);
- ii) for fixed-term contract of more than 12 months, a specific reason has to be given; and
- iii) temporary agency contracts are now subject to percentage limits;
- the deadline to challenge a fixed-term contract out-of-court has been extended from 120 to 180 days;
- higher damages for unlawful dismissal for employees hired after 7 March 2015: damages now range from between 6 and 36 months’ salary (used to be 4 to 24 months);
- additional social security contributions for each renewal of fixed-term contracts (also for agency workers) increased by 0.5%; and
- limits on relocation, and sanctions for companies that have received State funding and then move their business, or part of it, to a country outside the EU. Furthermore, companies that have received such funding and subsequently reduce their workforce by more than 10%, have to pay the funds back.
Workers delivering goods ordered via app are self-employed workers
According to a recent decision of the Court of Milan, a delivery boy who can choose if, when and how much to work, is in fact a self-employed worker. Even though he is provided with the Company’s App, the Court decided that the worker was not subject to the managerial, organizational and disciplinary powers of the “employer”, which is an essential requirement to show the subordinate nature of the employment.
Proposed financial incentives for businesses
- In 2019 corporate income tax will be reduced from 24% to 15%;
- funding of €500 million to finance the reduction in social security contributions for new open-ended hiring of people under the age of 35 in the South of Italy (Abruzzo, Molise, Campania, Basilicata, Sicily, Apulia, Calabria and Sardinia);
- funding of €9 billion to introduce the so-called “reddito di cittadinanza” (i.e. citizens’ basic income) and “pensione di cittadinanza” (i.e. guaranteed minimum retirement income);
- funding of €50 million to finance the employment and training of apprentices alternating between school and work; and
- a new bonus for Companies hiring “young talent” (e.g. graduates with top marks and PhD graduates) under an open-ended contract, by reducing social security contributions for the first 12 months, up to €8.000 per employee.
KEY DEVELOPMENTS FOR 2018
Anticipated Developments from Elections
It is difficult to forecast the future labour and employment trends given the upcoming election. One topic expected to be high on the agenda is a more labour focused approach.
Finance Bill 2018 – Employment Provisions
The Italian government has announced the country’s financial measures for 2018. There are a number of employment provisions, including:
- a reduction in social security contributions by up to 50% for 3 years for new permanent employees under 35;
- pension reform to increase the number of employees that can access the pension fund ;
- €1.7 billion grant to renew public employee contracts;
- a 6 months bonus for working mothers, for each child when calculating entitlement to qualify for early retirement (max 24 months); and
- the introduction of a “hiring cheque” paid to the employment agency who secures a job offer for a dismissed employee who is at the time receiving state unemployment benefit.
Regularisation and Protection of “Platform Workers”
“Platform workers”, are workers offering services on social media platforms (e.g. apps) and websites for one or more customers. In respect of platform workers, Bill no. 2934 provides for:
- the creation of so-called “Umbrella companies” offering the platform workers an employment relationship, advising them during the negotiations and providing services related to social security and pension contributions; and
- minimum wage.
KEY DEVELOPMENTS FOR 2017
Government investment into state pension
The State Balance Sheet Bill 2017 provides a state-funded investment of EUR 7 billion over three years for the pension system, introducing and raising the 14th monthly instalment and providing an opportunity to retire earlier.
Government proposals to reduce taxation, increase productivity and encourage public sector employment
There are measures in the pipeline to reduce tax and social security contributions, introduce productivity bonuses, and invest EUR 1.9 billion for public sector employment.
Consideration of extension of employer-friendly reduction on social security costs
It is currently under discussion whether to extend the social security contribution bonus for new hires made in 2017.
KEY DEVELOPMENTS FOR 2016
Changes to social security contributions
As of January 2016, employers are entitled to a reduction of 40% of the social security contributions for new employees if the following conditions are met:
- The new employee is hired on an open-ended employment contract;
- The new employee is hired between January 2016 and December 2016;
- The new employee was not hired elsewhere on a permanent contract in the six months prior to the new hiring.
Although the amount of the exemption was reduced compared to 2015, it still represents an incentive for employers who can save up to €3,250 per year per employee.
Further the conventional salary for Italian employees working abroad is now to be taken into consideration for the payment of social security contributions.
Key employment documents to be filed electronically
As of 12 March 2016, resignations, mutual terminations and their revocations shall be filed through data transmission by the employees on the government website.
This new procedure is intended to avoid bogus resignations, be undertaken by the employees at the beginning of the employment and utilized by the employers at their own discretion.
Various legislative changes
- New specific criteria to be applied in calculating the bonus granted to employees based on company results, for which a reduced rate of taxation (10% for amounts not exceeding EUR 2,000) will apply. Similar criteria and reduced tax rates will apply in relation to employees’ participation in company profits.
- New rules came into force which provide for more favourable part-time employment contracts for employees close to retirement.
- An agreement was signed by the major unions in Italy resulting in the so-called “social clause” in service contracts signed in the call centre industry with the result that employees will continue working for the same client for a six month period where there is a change in the contracting party.
- New obligations on companies to provide certain documents in relation to international secondments in Italy, with a view to identifying bogus international secondments.
- In September, the government made several changes to the Jobs Act, amending provisions related to the use of vouchers, mandatory hiring of disabled employees and solidarity contracts.