ITALY: An Introduction

The Employment Relationship in Italy

Classification of sources of law at the national level

The employment relationship in Italy is regulated by a multitude of laws. At the national level, sources of law contributing to the formation of labour law can be divided into:

• national and regional legislative law provisions; and
• collective and individual contractual provisions.

Law provisions

Regarding the first source of law, basic rules on rights and obligations in the employer-employee relationship can be found in the Constitution; the Italian Civil Code (Codice Civile), which includes a special section on employment matters; and the Workers’ Statute (Statuto dei Lavoratori – Law No 300/1970, as modified by subsequent legislation). The latter law is a fundamental labour law designed to create a balanced and fair working environment in Italy, also providing for protection for workers in case of unfair dismissal. It covers various aspects, including workers’ privacy, trade union rights, workplace safety and anti-discrimination measures. The statute aims to ensure that workers’ rights are respected, and that employers fulfil their legal obligations. The statute has been periodically updated to adapt to changing conditions, but its core principles remain the same, ensuring continued protection of workers’ rights and promoting fair treatment in the workplace.

Collective provisions (national collective bargaining agreements)

Though they are not compulsory, national collective bargaining agreements (NCBAs) are generally applied by employers to govern the employment relationships with their employees. Indeed, though they are not compulsory by law, according to the most recent data, about 98% of employees in the private sector are covered by a national collective labour agreement. However, the application of an NCBA by a company does not necessarily indicate that the company is unionised.

The widespread adoption of NCBAs stems from Italy's historical tradition and legal framework, which position these agreements as essential tools for regulating the labour market. Their success lies in the comprehensive rules they establish, tailored to specific industries and covering areas such as holidays, notice periods, illness, misconduct and minimum salaries.

NCBAs are negotiated by sectoral unions based on the production activity of companies (industrial unions, commercial unions, etc). The general criteria identified by case law for determining the most representative trade union confederations are:

• large size of the union;
• a significant territorial presence, being spread throughout the national territory and not confined to a specific geographical area; and
• participation in trade union negotiations and the conclusion of NCBAs.

NCBAs have two functions.

• Regulatory function: NCBAs establish the minimum standards for individual employment relationships, encompassing aspects such as minimum salary, duties, leaves of absence, disciplinary procedures and termination of employment. Importantly, they also ensure that individual employment contracts cannot contain provisions that are less favourable to workers than those outlined in the collective agreement.
• Mandatory function: NCBAs create binding rights and obligations for the parties involved in the agreement. For instance, an NCBA might impose a duty on the employer to provide some information concerning workforce and business trends to trade unions.

Establishment of the employment relationship in Italy: preliminary fulfilment

In most instances, the employment relationship is initiated through direct recruitment. Once established, the employer is obligated to provide the employee with comprehensive information about the employment relationship before he/she commences his/her duties. Moreover, the employer must electronically submit this information to the local employment office the day before the employment relationship begins.

Italian employers, regardless of whether they are foreign or domestic, must also adhere to various periodic obligations, primarily related to social security contributions and tax filings. These obligations may apply even if the employment relationship is not governed by Italian law, provided the work is performed within Italy.

Prior to and immediately after hiring personnel, any foreign employer must complete several steps, including:

• obtaining a tax code for both the company and its legal representative;
• registering with the relevant Italian labour authorities, namely the Italian Workers' Compensation Authority (Istituto nazionale per l'assicurazione contro gli infortuni sul Lavoro; INAIL), theNational Institute for Social Security (Istituto nazionale della previdenza sociale; INPS) and the local employment office;
• implementing a compliant monthly payroll system in line with both Italian law and the chosen NCBA; and
• submitting all necessary social security and tax declarations, usually with the assistance of a payroll provider.

Failure to comply with these registration and reporting requirements in a timely manner can result in severe penalties, including a substantial fine for undeclared work. From a corporate tax perspective, hiring employees in Italy could trigger the creation of a permanent establishment. It is therefore advisable to consult with a corporate tax expert to mitigate any associated risks.

Management of the employment relationship in Italy

Types of employment contracts

The most commonly used employment contracts in Italy are outlined below.

• Fixed-term contracts: The parties agree on the duration of the contract, after which the relationship is terminated without the need to give notice. In principle, should the employment relationship last for more than one year, a fixed-term contract, to be valid, requires a reason for the term specified.
• Part-time contracts: Part-time work can be defined as work performed for fewer than the normal number of working hours, as laid down by law or a collective agreement, in relation to a daily, weekly, monthly or annual period.
• Open-ended contracts: An open-ended employment contract does not have a predetermined end date. Such employment relationships continue indefinitely until terminated by either the employer or the employee, providing job stability for employees.

Duties and classification

Duties are the set of tasks and specific activities that the employee must carry out. The employee’s duties are defined in the employment contract. The classification, on the other hand, designates the professional status of the worker, including worker type and professional level. The employer is obliged to inform the employee, at the time of recruitment, of the category and duties assigned to him/her in relation to the tasks for which he/she has been recruited.

Employee categories are determined based on Article 2095 of the Civil Code and on NCBAs. Employees are divided into the following four professional categories (from lowest to highest rank).

• Blue-collar employees (operai): This category is fully defined in NCBAs, and the most important requirement for these workers is “manual skills”.
• White-collar employees (impiegati): This category includes persons who are responsible for planning and organising professional activities, excluding manual activities.
• Middle management (quadri): This category is made up of intermediate officials, positioned between managers and white-collar employees. They may be identified based on their exercise of management and supervisory responsibilities over other employees, although these responsibilities are less extensive compared to those of managers.
• Executives (dirigenti): The category of executives includes those employees who occupy a position in the company that requires a high degree of professionalism, autonomy and decision-making power to promote, co-ordinate and manage the achievement of the company’s objectives. At present, there is no legal definition of a manager, and the criteria for belonging to this category are therefore determined via collective bargaining, taking into account the duties actually performed and not the formal appointment by the employer.

Per NCBA provisions, each white-collar and blue-collar employee is assigned a specific contractual level based on their duties and degree of expertise. In contrast, executives are subject to distinct provisions under the NCBAs for executives, which differ from those applicable to employees in other professional categories. Key distinctions include the regulation of holidays and paid leave, sickness and injury benefits, notice periods and protections against dismissal.