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Country Spotlight

What to Know About Hiring, Managing Staff in Italy

By Luca Aniasi

italian_1461719020_72186As a result of several reforms over the last 15 years, regulation of the Italian labor market has undergone a substantial overhaul, the latest of which is the Jobs Act. The government, le::

 

  1. A new form of permanent employment contract with increasing protection related to the tenure (contratto a tutele crescenti)
  2.  
  3. Reshaping of temporary contracts
  4. New rules on dismissals with more flexibility
  5. Redesigning of unemployment benefits
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The Jobs Act is a compr

ehensive reform package that includes:

  • Relaxed employment protection legislation on employment contracts by linking the level of protection with tenure
  • A simplified and organic regulation of certain types of contracts and employment relationships, including a more flexible regulation of employees’ duties and tasks, in order to meet temporary and permanent employers’ needs, and the introduction of new rules on distance control of plants and working places
  • A new unemployment benefit scheme with more stringent requirements in order to activate benefits
  • A renewed active labor market policy system, through more effective employment incentives and improved employment services, to enhance demand and labor supply matching
  • A revision of the wage supplement scheme for redundant workers
  • The establishment of a single inspection agency to coordinate activity and avoid multiple controls in the same plant

Additional provisions were adopted in the 2015 Stability Law, which provides a three-year cut in employers’ social contributions (up to €8,060 a year) and removes the costs of the local tax surcharge (IRAP) for newly hired permanent workers.

Main Sources of Employment Law

Basic rules regarding rights and obligations in the employer-employee relationship in Italy can be found in the Constitution, the Civil Code (Codice Civile), which includes a special section on employment matters, and the Workers’ Statute (Statuto dei Lavoratori), (i.e., Law no. 300/1970 as modified by subsequent legislation).

Terms and conditions of employment are also fixed by national collective agreements (NCAs, Contratti collettivi) signed periodically between the trade unions and the employers’ associations of the same industries.

These collective bargaining contracts normally regulate the working conditions and establish the minimum wage and salary scales for each particular sector.

Start of Employment

Employment contracts are governed by the general rules set out in the Civil Code.

Given the existence of a large number of NCAs and their extensive use by the employers, employment agreements in Italy normally consist of simple hiring letters that refer to the items required by the law, including the identity of the parties, place of work, employment start date, trial period (if any), duration of the employment (in case of fixed-term employment) and enrollment, and employees’ duties, and to the provisions contained in the applicable NCAs.

Individual employment contracts also specify the employee’s category as established by the Civil Code under article 2095. There are four categories of employees:

  1. Executives (dirigenti)
  2. Middle managers (quadri)
  3. White collar employees (impiegati)
  4. Blue collar employees (operai)

Despite the fact that national collective agreements normally define general principles that regulate the employment relationship of dirigenti, general and specific conditions are often negotiated through individual agreements.

Quadri are defined as employees who, while not top executives, are continuously engaged in duties that contribute significantly to promoting the company’s growth and achieving its goals. According to a limited number of collective agreements, employers are required to insure quadri against claims for civil liability brought by third parties as a result of negligence in their duties.

At the start of the employment relationship, the employer must inform the employee of the main terms and conditions of his/her contract.

Italian law generally does not prescribe any particular form for employment contracts; they may be communicated orally, although most contracts are written.

That said, law requires some specific provisions as well as specific information concerning the employment relationship to be written (for example: trial period, non-compete clause, fixed-term, if any). Law also requires certain types of contracts to be in writing (for example: part-time contracts).

Employment contracts can be made in any language, provided that both parties are able to fully understand the content of any provision therein.

The age of majority is 18 years old in Italy. The minimum age required for validly entering into an employment relationship is 16 years old with the parents’ consent (15 years old for apprenticeship contracts).

Employment Relationship

Formal Fulfillment
At the establishment of any employment relationship, the employer must notify the competent public employment service (Centro per l’Impiego) at least 24 hours prior to commencement. This notification also fulfills the obligation to notify the relevant social security institutions (i.e., INPS and INAIL).

If provided for by law, an employer also must stipulate insurance policies protect against risks and damage suffered by third parties caused by employees fulfilling their employment duties.

Trial Period
The statutory trial periods are:

  • Three months for employees not assigned to managing functions
  • Six months for all other employees

However, the probation period is commonly set in the relevant NCAs depending on the category of the employee.

During the trial period, either party may freely terminate the working relationship at any time and without any notice, obligation, or payment of the relevant indemnity in lieu of notice.

Wages, Salary
Italian law does not give a statutory definition of “wages” and “salary.”

For income tax and social security purposes, any compensation granted to the employee within the scope of the employment relationship, including compensation in kind, is considered wages (this does not include a few limited exceptions, such as expense reimbursements).

There is no statutory minimum wage in Italy. 

Minimum wages for each contractual level are usually set out by sector in the relevant national collective agreements (NCAs).

A minimum wage is being introduced for workers not currently covered by NCAs, although these workers account for less than 3% of the total workforce.

There are no statutory bonuses. NCAs may provide for some such as the collective performance bonus (premi di risultato) or individual performance bonuses.

There are no statutory allowances, although NCAs provide for transportation allowances or indemnities for certain working arrangements such as on-call work.

Under Italian law, compensation is granted in 13 monthly installments. The additional 13th installment (tredicesima) is paid out each year along with the December salary. Some NCAs provide for a 14th monthly installment, normally paid in June.

The NCAs also normally set the payment date and the calculation basis of the contractual items (e.g., notice period, compensation during illness).

Employers frequently grant fringe benefits to certain employees (for example, a company car and mobile phone to top/middle management and sales positions, luncheon vouchers, and internal or external training and education).

Employers are required to fund severance payments for all employees (Trattamento di Fine Rapporto–TFR), amounting to 1/13.5 of the annual overall compensation, payable on termination of employment for any reason.

Executives are not subject to the rules governing working hours. 

Some NCAs provide for a workweek of fewer than 40 hours. Employees must be granted at least one weekly rest day, normally Sunday. 

Exceptional and temporary business activities may need employees to work on weekly rest days or legal holidays. Overtime work is considered to be the hours worked exceeding 40 hours per week and may not exceed eight hours a week and 250 hours a year.

NCAs set specific additional rates to be applied to overtime work and can also replace overpay with additional rest days.

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Holidays, Vacations 

A local saint’s day (variable on the local tradition of each city) is also considered a public holiday for the relevant territory. Public holidays that fall on the weekend do not entitle absence from work on the nearest weekday, but employees are entitled to their normal pay.

Statutory annual vacations amount to four weeks. The employer normally decides when workers can take vacation based on company and production interests and (when possible) employees’ needs. In addition to the statutory minimum, NCAs normally provide for longer periods of paid vacation that  increase with seniority. The law states that employees must take at least two weeks in the same year. Up to two weeks of unused vacation may be postponed, but it must be taken within 18 months after the accrual year. Employees are entitled to pay in lieu of unused vacation upon employment termination.

Sick Leave

Employees are entitled to three days’ paid sick leave, charged to the employer. The social security institute provides replacement pay benefits from the fourth day of illness to the 180th day. Certain NCAs require employers to top up social security benefits to 100% of salary. During sickness, the contract is suspended and employees’ seniority is protected. Employees cannot be dismissed before the end of a minimum period prescribed by the applicable collective agreement. After that period, an employer may terminate the contract.

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Maternity Leave

Pregnant employees are entitled to five months’ maternity leave, from the second month prior to the due date to the third month after birth. The last three months can be extended to seven months in specific cases. Social security provides pay replacement benefits. Any work that might be considered harmful is forbidden during pregnancy. During maternity leave, employment is suspended and seniority is protected.

Other Leaves

Italian law also provides other leaves, such as adoption leave, paternity leave, and parental leave. It also provides short-term leaves such as wedding leave or leave linked to public and jury duties, family circumstances, or education.

Contract Amendments

The parties cannot modify the individual contract terms and conditions unless the relevant amendments provide for a more favorable treatment of the employee. The Jobs Act has amended the provision regarding the change of an employee’s tasks and duties so that unless agreed upon otherwise with employers, employees are entitled to maintain their salary—with the exception of task-related indemnities—even if their tasks are reduced.

Non-Competition Clause

According to Article 2125 of the Civil Code, written non-compete covenants are allowed provided that:

  • Adequate compensation is granted to the employee
  • Duration of the agreement does not exceed three years for normal employees and five years for executives
  • It is circumscribed from a business and territorial standpoint

Italian law does not provide specific criteria with regard to identifying adequate compensation and the scope of activity or territory. Therefore, in case of disputes, the court determines such criteria on a case-by-case basis.

Teleworking (Telecommuting)
The employee must voluntarily agree to teleworking (working from home). Teleworkers are entitled to the same rights as employees performing the same tasks and duties on the company’s premises, including with respect to training and career opportunities. Several NCAs provide the general regulatory framework concerning employees working from home. More specific rules may be agreed upon at the local and/or company level.

Temporary Layoff

In the event of a temporary crisis, the employer may use the “redundancy fund” (Cassa Integrazione Guadagni, CIG) which is a collective suspension from work of blue and/or white collar employees, allowing the latter to continue receiving up to 80% of the normal wage charged, through a special fund held by the social security institute.

Compulsory Hiring of Disabled Workers

Companies in breach of these obligations are subject to administrative sanctions. In order to encourage compliance, employers can enter into conventions with the competent authorities for the hiring of disabled workers. Companies experiencing financial or business difficulties can apply for a temporary suspension of this obligation. Companies with more than 35 employees that cannot fulfill their quota due to the nature of their business (e.g., dangerous and strenuous work) may be eligible for a partial exemption from this obligation.

Employment of Foreign Workers

EU/EEA and Swiss Nationals
According to the principle of free movement of persons, goods, services, and capital, European Union (EU) and European Economic Area (EEA) nationals can be employed in Italy without any authorization by Italian authorities.

Should an EU national choose to work in Italy for a period in excess of three months, he/she should apply for a so-called “stay card” (carta di soggiorno), which is normally issued by the local State Police office (Questura) upon a simple request. This permit is renewable. Switzerland is not a member of the EU or EEA, but Swiss citizens have the same right of entry, residence, and access to work as nationals of EU countries.

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Non-EU/EEA Nationals—The Quota System
Admission of non-EU foreign workers is subject to a mechanism of quantitative selectivity based on yearly quotas for new entries. They are meant to regulate the admission of third-country nationals and their access to the Italian labor market by combining a purely quantitative selectivity with some elements of qualitative selectivity.

The government determines annual quotas of new inflows through a Prime Minister Decree (Decreto Flussi). The quota decree is published in the Official Journal and starts some days after the implementation phase. The whole implementation process of the quota system is basically made up of three main steps:

  1. Authorization requests presented by employers to the Immigration Single Desk (ISD)
  2. Visa request by prospective migrants in their country of origin
  3. Request and delivery of the stay permit for working purposes 

Authorization Request
Employers have to request authorization to hire a foreign worker living abroad to the ISD. In the application file, the applicant employer is expected to submit a so-called stay contract (Contratto di soggiorno) committing to guarantee adequate lodging for the requested worker and to fund travel costs for his/her repatriation in case of expulsion before the contract expires. In addition, the contract has to include the work contract’s details, which must comply with existing collective contracts for the specific sector/occupation in which the requested worker will be employed. Once both the labor authority (Direzione Territoriale del Lavoro) and local state police office (Questura) have made all of the checks, the authorization (nulla osta) may be delivered to the applicant employer. The whole procedure should take 40 days from the date of application.

Visa Issuance
Once the nulla osta is delivered to the employer, he/she sends it on to the individual foreign worker, who must present him/herself at the Italian diplomatic representation in his/her country of origin and request a visa for working purposes.

The nulla osta will be valid for six months, and during this period the visa may be issued.

Stay Permit Issuance
Within eight days of his/her arrival, the foreign worker must sign the stay contract presented by the employer at the ISD and simultaneously apply for the stay permit (permesso di soggiorno) for working purposes. The Questura will issue the stay permit. The stay permit has the same duration as the employment contract, with a maximum of two years, and is renewable.

Exemptions for Extra-Quotas Entries
The admission of some categories of workers is explicitly exempt from the quota system’s quantitative limits. In particular, specific professional profiles can be admitted without any quantitative cap to regulate their inflow (for example, managers or highly skilled staff members of multinational/foreign companies, university lecturers and professors, translators and interpreters, and professional nurses). Despite the lack of explicit quantitative limitations, the admission of workers in these categories is still subject to the authorization (nulla osta) granted by the territorial ISD, even if admission procedures have been further simplified for specific categories.

Stay permits have a maximum duration of two years, in case of fixed-term contracts, or an unlimited duration in the case of open-ended contracts.

Specific Types of Contracts

Part-Time Contract 
Part-time employment contracts must be in writing and specify the hours of work (e.g., by day, week, month, and year). Pay and other entitlements of part-time employees are normally pro-rated to those applicable to full-timers in the same job entitlement. Ancillary clauses can be added to part-time contracts, allowing employers greater flexibility:

  • Elastic clauses (clausole elastiche) permit an employer to increase working time
  • Flexible clauses (clausole flessibili) permit an employer to vary working hours during the day

Fixed-Term Contract 
Under legislative decree No. 368/2001, companies can hire employees on a fixed-term contract for arrangements limited by time. Fixed-term contracts can last up to 36 months, including any extension. NCAs normally set quantitative limits. Alternatively, the law states that the overall number of fixed-term contracts may not exceed 20% of the workforce hired on permanent basis. Fixed-term contracts cannot be used to replace workers on strike or to replace employees temporarily laid off or involved in collective dismissals over the past few months.

On-Call Jobs
On-call job contracts (lavoro a chiamata o intermittente) under legislative decree No. 276/2003 provide that an employee declares his/her availability to work over a certain period of time, during which he/she can be called in–even for a few days only–with short-term notice. The individual contract may provide that the employee is bound to work if called by the employer. In this case, in addition to the normal remuneration paid for the working activity currently carried out, the employee is eligible for an additional 20% of the wage set by the NCAs. This contract must be drafted in writing.

Apprenticeship 
Apprenticeship (apprendistato, legislative decree No. 276/2003) is an open-ended contract for vocational training. The employer can hire apprentices within certain quantitative thresholds depending on the number of employees hired and is required to ensure that the apprentice acquires professional skills and qualifications.

Temporary Agency Contracts 
Temporary contracts (contratto di somministarzione di lavoro) on a fixed-term or open ended basis can only be agreed upon with qualified employment agencies. Workers must benefit from the same legal and economic conditions available to employees of the contracting company. Employers may not use staff supply contracts to replace workers on strike or to replace employees temporarily laid off or involved in collective dismissals in the previous few months. 

The overall number of temporary contracts may not exceed 20% of the workforce hired on a permanent basis unless collective bargaining set a different threshold.

End of Employment

General Principles 
Dismissal requires written notice, and individual dismissals of employees are subject to certain restrictions. Open-ended contracts can be terminated without any compensation or additional sanction when there is just cause (giusta causa) or objective or subjective justified grounds (giustificato motivo). Just cause means a very serious breach (e.g., theft, serious insubordination) or any other behavior that seriously undermines the trust relationship between employee and employer. 

Justified grounds means either:

  • Subjective justified grounds, consisting of a less serious breach by the employee (e.g., failure to follow important instructions, willful misconduct, repeated unjustified absences from work)
  • Objective justified grounds, consisting of an objective reason related to the employer’s need to reorganize its production activities or workforce setting

Termination of Fixed-Term Contracts
If one of the parties terminates the contract before its expiration date and without just cause, the other party may be awarded proper compensation. In the event of early termination by the employer, compensation would customarily amount to that which the employee would have accrued up to the contract expiration date.

Resignations
Resignations generally do not need to take any specific form; however, most collective agreements require that they be in writing. According to certain NCAs, in case of resignation, the length of the notice period may be shorter than in the case of dismissal.

Notice and Termination Payments
Upon termination of the employment relationship, employees are entitled to:

  • The payment of deferred wages (TFR)
  • The payment of some minor termination indemnities (payment in lieu of unused holidays and leave, accrued pro-rata 13th and 14th monthly installment, and so on)
  • A notice period of termination, the duration of which varies according to the employees’ seniority and professional level and as established by national collective agreements

The payments under the first two points are always due in the case of dismissal, while the notice period (or the relevant indemnity in lieu of notice) would not be due in the case of dismissal for just cause.

With respect to the third point, it is worth noting that the employer is entitled to exempt the employee from working during the notice period. In such cases, the employee would be entitled to receive the corresponding indemnity in lieu of notice, which would be equal to the normal salary (plus social security contributions) that would have been due during the notice period.

Unfair Dismissals
The Jobs Act has introduced a new regime for individual and collective unfair dismissals, significantly reducing the instances of reinstatement and establishing a transparent framework for possible disputes. The new provisions apply to:

  • Employees hired on an open-ended basis from 7th March 2015
  • Employees hired before 7th March 2015 on a fixed-term basis whose contracts were converted into an open-ended contract after 7th March 2015
  • Apprentices hired before 7th March 2015 whose contracts were converted into open-ended contracts after 7th March 2015

Dismissals Before Enforcement of Jobs Act
Should a court deem the dismissal unfair, the employer would be required to take either of the following two actions:

  1. If the reasons for the dismissal are considered totally unlawful, reinstatement and payment of compensation equal to a maximum of 12 months for the non-worked period (plus social security contributions). The employee may waive the right to reinstatement, opting to receive additional compensation equal to 15 months’ wages
  2. If the reasons for the dismissal are considered concrete but insufficient to justify the dismissal, payment to the dismissed employee of an indemnity ranging from 12 to 24 months’ wages of the last annual salary. Employees of small firms (fewer than 15 employees) are entitled to receive compensation ranging from 2.5 to six months’ wages.

In case of discriminatory and void (e.g., oral) dismissals, regardless of the number of employees, point 1 applies.

Dismissals After Enforcement of Jobs Act
In the event a court finds unfair termination for economic or disciplinary reasons, employees are entitled to an indemnity equal to two months’ wages for each year of employment, with a minimum of four months up to a maximum of 24 months. The court may require reinstatement of the employee only in the case of void and discriminatory termination or should it find that the allegation for dismissal on subjective reasons was not based on fact.

In smaller firms (fewer than 15 employees), the indemnities will be halved and cannot in any case exceed six months’ wages. Reinstatement is prescribed only for void and discriminatory dismissals.

In order to prevent possible disputes, a fast and convenient extra-judicial settlement procedure has been established, allowing the employer to offer the worker an indemnity equal to one month’s wage per year of service, for a minimum amount equivalent to two months’ wages up to a maximum of 18 months’ wages. Acceptance of this transaction prevents any further appeal by the employee. 

Dismissal of Executives
Though similar principles apply, dismissal of executives is not regulated by the same statutory provisions governing termination of lower-level employees. Given the high-level engagement, an executive’s dismissal is normally assessed as fair unless it is shown to be a violation of correctness and good-faith principles. The High Court (Corte di Cassazione) has indeed repeatedly confirmed that the concept of “fairness” of an executive’s termination does not coincide with the notion of “just cause” and “justified reason” (applicable to normal employees), but that it includes any reasonable ground for termination not limited to a breach of the correctness and good-faith rules that underpin an employment relationship.

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Collective Dismissals
Pursuant to Article 24 of Law No. 223/1991, a mandatory procedure must start whenever an employer with more than 15 employees intends to dismiss five or more employees in the same business unit within a timeframe of 120 days because of a reduction, reorganization, or closure of the company’s business. The collective dismissal applies to all employees, including executives. The procedure begins with the employer submitting a written notice to the works councils (if any) or to the trade unions to inform them of its intention to carry out a collective dismissal.

The notice must include the following information:

  • The reasons for the collective dismissal
  • The technical, organizational, and productive circumstances for which such dismissal cannot be avoided
  • The number of affected employees, their duties and characteristics
  • The date on which the dismissal shall be implemented
  • The measures, if any, that will be taken in order to reduce the social impact of the dismissal

Unfair Dismissals
Note that employers may face different outcomes for the same collective dismissal depending on the date the employee was hired.

Workplace Safety

The Constitution and the Civil Code impose a general obligation on employers to safeguard their employees’ physical integrity and moral personality. A consolidated Act on Workplace Safety (Legislative Decree No. 81/2008) unifies all legal provisions regarding health and safety in the workplace and is enforceable in all sectors. The Act provides an exhaustive explanation of safety rules, including the powers, responsibilities, and functions that may be delegated.

Employees are entitled to elect a representative to deal with health and safety matters and to be trained on the peculiar risks to which the company is exposed.

Labor Proceedings

Ordinary Proceedings
Special provisions of the Italian Code of Civil Procedure (Article 409) apply to labor proceedings and provide for special and quick resolution of individual disputes. The main features of the special procedure of individual labor disputes are:

  • A quick proceeding compared with ordinary civil proceedings
  • A mandatory conciliation attempt by the judge prior to the hearing stage
  • Wide powers granted to labor courts, including the faculty to introduce on its own initiative new evidence and to order one of the parties to pay sanctions, indemnities, and compensation during the proceedings for the amount that has already been ascertained to be due
  • Prohibition on changing the parties’ initial pleading

Judgment in the first instance may be challenged before the Court of Appeal; further appeal may be made to the Supreme Court.

Fornero Special Proceeding
The Fornero reform (Law No. 92/2012) introduced an even faster procedure restricted to unfair dismissal disputes in companies with more than 15 employees. Judges in this case are obliged to schedule the first hearing within 40 days of the complaint. The judge, within 10 days of the first hearing, must issue a judgment to reject or uphold the claim. The judgment is immediately enforceable. The parties may appeal this judgment to the Court of Appeal, which may in turn be challenged before the Supreme Court. The Fornero procedure does not apply to workers engaged under the new Jobs Act regime.

Employee Representation Bodies, Employee Participation

Overview 
The Italian regulatory system has two sources for employee representation bodies: legal and contractual. With regard to legal sources, the basic right to establish and join a trade union association in the workplace or perform union activity is granted to all workers and is protected by a network of anti-discriminatory provisions (Articles 14-17 of Law No. 300/70, i.e., “Workers’ Statute”). Rappresentanze Sindacali Unitarie (RSUs) were established by national agreement in 1993 and reformed in 2014. RSUs are formed by a general election among the workforce. The unions compete in the election and are represented in proportion to the votes they receive. As an alternative to taking part in the election of RSUs, a union can establish its own Rappresentanza Sindacale Unitaria (RSA).

Rights and Obligations
Both types of works council, RSA and RSU, are involved in collective bargaining and verifying the correct application of laws and collective agreements. They exercise information and consultation rights as laid down both by collective bargaining and by law. They should be consulted on issues such as overtime levels, employment policy, hiring policy, or corporate restructuring.

Social Security and Assistance System
The social security system provides retirement, survivor, and disability pensions, as well as healthcare, unemployment benefits, and family allowances. Benefit amounts are generally based on accrued social security contributions and length of service. All employees and wage earners, including executives, project-work employees, and self-employed workers, are obliged to take part in the Italian social security scheme.

Social security contributions are paid to the Italian social security administration (INPS). Employees can join some pension funds (provided by NCAs) to increase social security benefits.

The national work accident insurance institute (INAIL) covers almost all employees for workplace accidents and occupational diseases. 

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