Employment law reform in Italy

Categories: Employment Law
Typology: Articles

The new rules on individual and collective dismissal in the context of permanent employment contracts

General

In December 2014, Parliament passed the so-called “Jobs Act” (Law n° 183 of December 10, 2014). The Jobs Act defines measures to be taken, sets out inspiring principles, enactment guidelines and confers on the Government the mandate for implementing such measures through legislative decrees.

The first two Jobs Act implementing regulations were published in the Official Gazette on March 6, 2015: “Welfare Measures in the Event of Involuntary Unemployment and Re-employment Agreements Decree” (Legislative Decree n° 22 of March 4, 2015); and  “Permanent Employment Contracts with Increasing Levels of Protection Decree” (Legislative Decree n° 23 of March 4, 2015).

The new regime introduced by the Jobs Act, in particular by Legislative Decree no. 23/2015, is aimed at reducing the circumstances for reinstatement and, in the case of unfair dismissal, making more certain and ascertainable any  consequences resulting the same. This legislation has thereby introduced into the Italian labour system the undetermined/open-ended time employment contract with ever-increasing protection being accorded on the basis of  seniority (the “Increasing Protection Contract”).

1. Scope of application

The new rules provided by Legislative Decree n° 23 of March 4, 2015 only apply to those employees qualified as “operai” (blue collar), “impiegati” (white collar) and “quadri” (middle management) who have been hired on an open term basis after the date of the coming into force of the Decree, i.e. March 7, 2015. Managers (“dirigenti”) are excluded and for them the old rules continue to apply.

Legislative Decree No 23/2015 has been applied since 7 March 2015 both in cases involving newly hired employees and those involving the transformation of former temporary or  apprenticeship contracts.

Moreover, the decree provides that the dismissal of employees who are already in post on 7th March 2015 will be subject to the new rules if the employer’s workforce exceeds the legal threshold set out under Article 18 paragraphs 8 and 9 of Law no. 300/1970 (i.e., more than 15 employees in the business unit or in the same municipality, or more than 60 in the entire company or more than 5 in an agricultural enterprise) as a consequence of any new employee hiring (Article 1 Legislative Decree n° 23/2015).

Employees under permanent contracts prior to the above Decree will continue to have their employment relationship governed by the previous rules: Article 18 Law 300/1970 as modified by Law 92/2012  and Article 8 Law 604/1966, as modified by Article 2 of Law 108/1990, depending on the dimension of the enterprise. There will therefore be a dual system in place, also in terms of collective dismissals.

2. The discriminatory, null, and verbal dismissal

Article 2 Paragraph 1 of the Legislative Decree No 23/2015 limits the application of reinstatement to really exceptional cases. In particular, the so-called “strong reinstatement” applies in the following cases: discriminatory dismissal (based on trade-union association, political belief, religion, race, language or sex, disability, age or sexual orientation or personal beliefs according to Article 15 Law No 300/1970); dismissal which is null and void in the other cases expressly provided for by law (e.g. ordered to recently married employees, during pregnancy or for unlawful purposes); verbal dismissal.

In these cases the Judge - despite the dimension of the company as per Article 18 paragraphs 8 and 9 of Law no. 300/1970 - orders the employer, whether or not an entrepreneur, to reinstate the worker and condemns the employer to pay the employee an indemnity equal to the salary accrued in the period from the date of dismissal and the date of reinstatement and in any case not lower than 5-month salary as calculated for leaving indemnity (TFR) purposes[1], less the so-called aliunde perceptum (any sum which may have been received by the worker in the performance of other activities) and social security contributions on the same amount (Article 2 paragraphs 1,2 of the Legislative Decree n. 23/2015). Reinstatement may be replaced by an additional indemnity equal to 15 month salary but only at the employee’s choice, according to Article 2 paragraphs 3 of the Legislative Decree n. 23/2015.

The above mentioned system of protection is also extended to dismissal ordered as a result of the physical unsuitability of the worker pursuant to Arts 4 and 10 of Law No 68/1999 (Articles 2 paragraph 4 of Legislative Decree n. 23/2015).

3. Dismissal for justified reasons and for just cause

In case of unfair dismissal (i.e. without just cause[2], subjective[3] justified reasons or objective[4] justified reasons) the Judge will declare the contract terminated at the date of dismissal and order the employer to pay an indemnity (definite in its amount and based on the employee’s seniority) equivalent to 2 months’ salary - as calculated for leaving indemnity (TFR) purposes - for each year of service, subject to a minimum of 4 and a maximum of 24 months (Article 3 paragraph 1 of the Decree 23/2015)[5].

Article 3 paragraph 2 of the Decree 23/2015 states that reinstatement will be applicable for dismissal for just cause and for subjective reasons, where it has been judicially proven that “the complained material fact is inexistent”, without any consideration as to the proportionality of the dismissal[6].

In such a case the judge annuls the dismissal, orders the reinstatement of the employee and the payment of damages equal to the full salary due from the date of dismissal to the date of reinstatement capped at 12 months’ salary.

The compensation shall take into account any sum which may have been received by the worker in the performance of other activities (aliunde perceptum) and the amount of money the worker may have earned by actively seeking another occupation following dismissal according to Article 4, paragraph 1/c, Legislative Decree No 181/2000 (aliunde percipiendum).

The employer shall be ordered the payment of social security contributions from the date of dismissal and the date of reinstatement, without any sanctions deriving from social security contribution omissions. Reinstatement may be replaced by an additional indemnity equal to 15 months’ salary at the employee’s choice.

The new dismissals for reasons of redundancy do not need to be preceded by the mandatory mediation procedure to be held before the public labour offices, which was also introduced by Law 92/2012 (Article 7 Law No 604/1966), when  the employer’s workforce exceeds the legal threshold set out under Art. 18 paragraphs 8 and 9 of Law no. 300/1970 (Article 3, paragraph 3 of said Decree 23/2015).

4. Formal and procedural lack

In the event that the dismissal was issued without an explanation of its grounds (as provided by article 2 paragraph 2 of Law 604/1966) or in violation of the procedure (as provided by Article 7 Law No 300/1970[7]), the court will declare the contract to be deemed as terminated at the date of dismissal and order the employer to pay compensation (not subject to social security contributions) equal to 1 months’ salary for each year of service, with a minimum limit of 2 months’ salary and a maximum cap of 12 months’ salary (Article 4 Legislative Decree No. 23/2015).

5. Revocation of dismissal

According to Article 5 of the Decree No. 23/2015, where a dismissal is revoked within 15 days of notice by the employee of his/her intention to challenge the same, the employment will be resumed as if the dismissal had never taken place. The employee will be entitled to the salary covering the period between the dismissal and the revocation, without application of the remedies provided for by the above mentioned Decree.

6. The offer of conciliation

According to Article 6 of the Decree No. 23/2015, the employer has the opportunity to offer, within 60 days from the day on which the dismissal is served (for any reasons), a settlement compensation to the employee equal to 1 monthly salary per each year of service, with a minimum of 2  and a maximum of 18 months. The settlement compensation is exempted from income tax and social security contributions and shall be immediately paid to the employee by cashier’s check within one of the so-called protected offices, set out under Article 2113 civil code and Article 76 Legislative Decree No 276/2003. The acceptance of the offer entails the termination of the employment relationship and the waiver of whatsoever claim related to the dismissal. Additional compensation paid as part of the settlement deal will be subject to the ordinary tax treatment.

7. Seniority in case of contracting of services

According to Article 7 of  Decree No. 23/2015,  for the purposes of determining the amount of indemnity or the sum due when there has been a succession of companies operating within the scope of the same contract, the seniority of the worker who has continued to work for the companies succeeding to the contract, is calculated by taking into due account the periods that such worker has worked in the other companies that have operated within the scope of the said same contract.

8. Calculation and amount of the indemnities for the fraction of the year

The indemnities for the fraction of the year are adjusted on a pro-rata basis and the fraction of the month equal or more to fifteen days are calculated as entire month (Article 8 of the Decree No. 23/2015).

9. Small companies and organisation of tendency

If the employer has 15 employees or fewer in the place of employment and 60 or less employees in the whole of Italy (according to the above mentioned Article 18, paragraphs 8 and 9 of Law No 300/1970), Article 9 of the Decree No. 23/2015 states that the remedy of reinstatement applicable in the case of inexistence of the grounds above does not apply.

Furthermore, only half of the amount of the above-mentioned indemnity applies and shall, in any case, not exceed 6 months of wage.

The new rules also apply to “organisation of tendency” which perform political, trade-unions, cultural, religious activities. It should be noted that there is no explicit exclusion against public administration (Article 9 Legislative Decree n° 23/2015).

10. Collective dismissals

According to Article 10 of Decree 23/2015, in case of collective dismissals[8], if the dismissal was not communicated in writing, the employee will have the right to demand reinstatement; whereas non-compliance with other procedural requirements (provided by Article 4 paragraph 12 Law 223/1991) or mistakes in the application of the selection criteria (Article 5 paragraph 1 Law 223/1991) will trigger liability on the part of the employer as specified above (indemnity equal to 2 months’ salary for each year of service, with a minimum of 4 months and a maximum of 24 months), as per Article 3 paragraph 1 of the Decree 23/2015.

11. Applicable proceedings

The Court claims regarding dismissals regulated by the new Decree do not follow the special Court proceedings which were introduced by Article 1, paragraphs 48-68 Law No 92/2012 but are subject to the ordinary rules of labour and civil law proceedings.

(Altalex, 13 March 2017. Article by Carlo Bruni)

_____________

[1] i.e. 1 month’s salary = 1/13.5 of annual salary, including all regular items.

[2] A cause which does not permit continuation, even if only temporarily, of the employment relationship (Article 2119 of the civil code)

[3] It consists of a relatively serious non-performance of the obligations arising from a contract of employment (Article 3 Law No 604/1966).

[4] Reasons concerning productive activity, work organization and its regular functioning according to Article 3 Law No 604/1966.

[5] Reinstatement will be completely excluded for dismissals based on justified objective reasons, also if objective reason/s indicated in the dismissal letter be clearly inexistent.

[6] New rules imply that any judiciary assessment concerning the disproportion between the complained-of fact and the dismissal, when applied as a disciplinary measure, is precluded.

[7] Article 7 of Law n. 300/ 1970 introduced  protective limits on the exercise of the employer’s disciplinary power, fixing some procedural requirements. The disciplinary dismissal can be determined by a just cause (according to Article 2119 c.c.) or by  subjective good reasons (as per Article 3 of Law N° 604/1966).

[8] Law n. 223/1991, which applies solely to companies having more than 15 employees, states that collective dismissal is characterized – inter alia - by the following traits: 1) it must result from reduction or reorganization of the activity or work of the company; 2) it must affect at least five workers; 3) it has to be completed within 120 days, in each productive branch or in more than one productive branch within the same province.

 

Share on: Share this article on Facebook Share this article on Linkedin Share this article on Twitter Share this article on GooglePlus