ITALY: An Introduction to Employment

Introduction 

Note to the reader: The challenging situation described below is still largely affected by the COVID-19 pandemic.

On the basis of the preliminary estimate published by the National Institute of Statistics (Istat), the Italian GDP in the third quarter of 2021 marked an increase of +2.6%, after +2.7% in the second quarter. The variation for 2021 was equal to +6.1%. On the supply side, the preliminary estimate shows a strong expansion of the market services sector, recovering after the contraction caused by emergency measures to face the health emergency that continued until spring, as well as a growth in industry. In the average of the third quarter, the index of industrial production showed an economic growth of 1.0%, supported by non-durable consumer goods (+2.2%) and capital goods (+1.6%). In the same period, consumer durables showed a significant reduction (–1.6%), following two quarters of substantial stagnation. In September, the economic change in the general index was at +0.1%. Foreign trade continued to show a positive trend.

In the third quarter, exports of goods grew by a total of 2.8% compared to the previous three months – with increases on both EU and non-EU markets (+3.2% and +2.3% respectively) – and imports by 5.5%. The export dynamic was sustained not only by energy (+7.1%), but also by intermediate and capital goods (3.7% and 3.2% respectively) while exports of non-durable consumer goods showed a modest increase (+0.7%).

In October, confidence surveys provided mixed signals across sectors.

In September, the labour market returned to showing positive signs, with an increase in the number of employed (+0.3% compared to August, equal to +59 thousand) and a decrease in the number of unemployed (–1.2%, equal to –28 thousand) and inactive (–0.3%, –46 thousand). The unemployment rate stood at 9.2% (–0.1 percentage points). The increase in employment is led by the female component, with an increase of 0.5% (+46,000), against +0.1% (+13,000) for men. Compared to January 2021, there is a positive balance of just over 500,000 employed, due exclusively to the recovery of dependent work – up by about 520,000. The employment rate is higher by 1.5 percentage points. The current phase of rising inflation (+1.8% in October) is accompanied by a strong moderation in contractual salaries (+0.6% the average projection for the year 2021 in September).

The overall trend in contractual remuneration in September shows a more pronounced trend for manufacturing (+1.2%) than for private services (+0.8%).

Legislative Changes 

The most significant legislative changes in 2021 relate to prosecution of the ban on dismissals. To address 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 extended until 31 March 2021 and later until 30 June 2021 for companies of the industrial sector and until 31 October 2021 for companies of the trade sector.

Any termination in breach of the ban was considered null and void. It was therefore possible to dismiss only for just cause and/or during the trial period and/or exceeding the maximum sickness leave period and/or for the exemptions provided by the law (i.e. among others: definitive termination of production activity, which however implies 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 etc).

The ban applies until 31 December 2021 only to those employers who have opted for the use of shock absorbers, both ordinary and extraordinary, made available by the Italian Government.

Furthermore, the Italian Government, similarly to other EU countries, has introduced the so called Green Pass: under the extension of the state of emergency until 31 March 2022, in order to access workplaces to carry out any kind of work, it is necessary to have and present on request the green COVID-19 certification.

In the event of entry into the workplace in breach of the green pass obligation, the worker is subject to an administrative sanction imposed by the competent Prefecture for the territory between €600.00 and €1,500.00.

If the green pass expires during work, there are no provisions for disciplinary sanctions nor the administrative sanction imposed by the Prefecture (from €600.00 to €1,500.00) in the event of a breach of the obligation to hold the possession of the green COVID-19 certification. Staying in the workplace is permitted only for the time necessary to complete the work shift.

Trends for 2022 

The government has introduced an amendment to Article 77-bis to the 2022 Budget Bill, with new provisions on the termination of production activities.

More specifically, companies with an average of 250 or more employees in 2021 will only be able to make collective and individual redundancies next year if they have given 'notice' 90 days before the planned termination date (which means that they cannot make redundancies before April). In the absence of communication, dismissals are null and void.

The most significant trend for 2021, which will carry on into 2022 and is clearly connected to the pandemic, was the increase of so-called ’smartworking’. 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 of implementing 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 a start and end date. Such simplified procedures will apply until 31 March 2022, following the extension of the emergency situation.

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 required foreign companies to verify multiple aspects with regards to visa authorisation, tax perspectives and social contribution, as well as 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 offers a range of actions to be implemented to face the post-pandemic situation, specifically:

1) Dismissals for objective reasons, for those companies not benefitting from shock absorbers: 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, reorganisation 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 programs for reskilling.