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ITALY: An Introduction to Employment

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Note to the reader: The challenging situation described below is clearly largely affected by the COVID-19 pandemic outbreak and therefore shall not be considered as a structural issue of the Italian market. According to the latest statistics published by the National Institute of Statistics (Istat) on 2 February 2021, in the fourth quarter of 2020 the Italian gross domestic product (GDP) is estimated to have decreased by 2% compared to the previous quarter and by 6.6% in trend terms. Looking at the main industry groupings, the index for intermediate goods showed a marked vibrancy in the fourth quarter (+2.5% compared to the third quarter) balanced by the negative trends in energy and consumer goods (–4.0% and –3.3% respectively). The reduction in the pace of production was confirmed by the trend in the expansion diffusion index among sectors, which in November and December showed a further decrease. However, the current phase in the industrial sector seems to be linked to the improvement in the international context, as shown by the data on orders and production. Between September and November 2020, industrial orders increased compared to the previous quarter (+5.1%), driven by the foreign component (+7.0%) and to a lesser extent by the domestic component (+3.8%). In November 2020, exports of goods showed an increase compared to both the previous month (+4.0%) and to the same period in 2019 (+1.1%). Overall, the increase in foreign sales affected flows to both EU and non-EU countries.

In December 2020, the labour market recorded widespread negative signals with a cyclical drop in employment (–0.4%, –101,000), an increase in the unemployment rate (+1.5 percentage points, +34,000) interrupting the recovery phase of the previous months. Despite the decline, the level of employment in the October–December 2020 quarter was 0.2% higher than in the previous quarter (July–September 2020), an increase of 53,000. On average in 2020, the hourly wage index increased by 0.6% per year compared to the previous year. The monthly index of contractual remuneration also recorded a trend increase of 0.6% compared to December 2019, although it was unchanged compared to November; in particular, the increase reached 0.8% for employees in industry, 0.7% for those in private services and was zero for public administration.

Legislative Changes 

The most significant legislative changes in 2020 relate to the ban on dismissals. In response to the COVID-19 pandemic, the Cura Italia Decree (Law Decree 18/2020) introduced a ban on individual terminations for economic reasons and on collective dismissals. The ban, which entered into force on 17 March 2020, was extended until 31 December 2020 and then further extend until 31 March 2021. The ban may be extended further. Any termination in breach of the ban is considered null and void. It is therefore possible to dismiss only for just cause and/or during the trial period and/or exceeding the maximum sickness leave period. The only exemptions to the dismissal ban include:

- definitive termination of the production activity, which implies however, the liquidation of the company itself without the possibility – not even partially – of continuing production;
- mutual termination of the employment relationship with the employee in cases where the company’s collective agreement provides an incentive to leave. The employee, in this case, has the freedom to decide whether or not to accept the employer’s proposal. If the proposal meets with a positive outcome on both sides, the employee has the possibility of obtaining unemployment benefits;
- if the definitive termination of the company is ordered and there is no possibility to carry out a temporary exercise, it is possible to dismiss the employees for bankruptcy of the company itself.

Further to this, back in 2014 the so called Jobs Act (Law 183/2014) was introduced including 8 law decrees reforming various aspects of labour law, including employment contract and its termination. Thanks to the Jobs Act (Law no. 23/2015), for employees hired under an open-ended contract after 7 March 2015, the so-called "employment contract with growing protections”, there is now a different set of remedies in place in the event of an employee's success in an unfair dismissal claim.

In the majority of cases the remedy is damages, which is calculated on the basis of the dismissed employee’s length of service with the company. Reinstatement has now become the exception rather than the rule as it was previously.

Trends for 2021 

The most significant trend for 2021 – clearly connected to the pandemic outbreak – was the increase of so-called ’smartworking’: pursuant to legislative provision, smartworking is a flexible way of carrying out the employment relationship outside the company premises and was introduced by Law 81/2017. Following the pandemic outbreak, most companies in Italy have implemented smartworking, as required by the Italian Government with the various decrees released starting from January 2020. The formalities to implement smartworking have been simplified as much as possible: currently companies are required to send to the Labour Office a list of the employees who are ’smartworking’, with start and end date. Such simplified procedures will apply until 30 April 2021.

Following the above, many Italian employees working abroad have asked their employer to go back to Italy and to perform their duties remotely (holiday house/family house etc). Such requests have obliged foreign companies to verify multiple aspects with regard to visa authorization, tax perspective and social contribution further to the possible implications on data privacy.

Italian Employment Law: How to face the post-pandemic?

The main question that all Italian employers have right now is: “How to face the post-pandemic?”

Italian employment law provides a range of actions to be implemented to face the post-pandemic situation and more specifically:

1) Dismissals for objective reasons, once the ban has expired: for up to 4 individuals the dismissals may be managed as individual dismissals; starting from 5 dismissals (within 120 days) they shall be treated as collective dismissals.

2) Extraordinary Wage Fund: for company crisis, reorganization or solidarity agreement.

3) Outsourcing/transfer of undertakings.

4) Collective transfers.

5) Agreement with the Trade Unions to modify job duties/reduce remunerations/change terms and conditions of employment, also by derogating to Law and National Collective Bargaining Agreement.

6) Agreement with Trade Unions to harmonize and regulate a more efficient resort to self-employment agreements.

7) Implementation of a net of enterprises to maximize synergies.

8) Training programmes for reskilling.