EMPLOYER ACTION CODE: ACT
The government has passed fairly controversial changes to an important source of employment regulations in Italy, the Workers' Statute of 1970, under the new Jobs Act. The act is one of a series of regulatory reforms aimed at reinvigorating the economy and is intended to make dismissals less costly and burdensome, reducing barriers to hiring.
Italy does not have a unified labor code. Labor legislation is wide ranging, and a number of laws, regulations and statutes have an important bearing on labor relations, the Workers' Statute in particular. Article 18 of the statute requires employers with 15 or more workers to rehire permanent employees who were wrongfully (i.e., illegally) dismissed. It is intended simply to protect workers from wrongful dismissal, but due to the restrictive, time-consuming and costly nature of the judicial process and the threat of automatic reinstatement, it provides workers with a significant amount of leverage in negotiations over dismissals and redundancies. Moreover, the article does not apply to companies with fewer than 15 workers or fixed-term employment, resulting in a labor market where employers are reluctant to hire employees on indefinite-term contracts or to add staff when near the 15-employee threshold.
In addition, the Jobs Act provides general guidelines aimed at reforming several institutions of Italian labor law, including various social tools such as unemployment insurance (ASPI and MINI-ASPI), local redundancy funds (CIGO/CIGS or CDS) and mobility indemnities (i.e., severance).
The act is primarily aimed at softening the application of Article 18 but does include some related measures such as increased funding and eligibility for unemployment benefits. The changes to Article 18 will affect permanent employees hired on or after January 1, 2015, once the law is fully implemented. These include:
- Employees found to have been wrongfully dismissed under Article 18 will be subject to automatic reinstatement for discriminatory reasons only. Employees dismissed for other reasons such as restructuring will be entitled to compensation only if the dismissal is later found to have been illegal.
- Disciplinary dismissals under Article 18 would likewise generally not be subject to reinstatement if later found to be illegal except under extraordinary circumstances. Successful claims would likewise be eligible for compensation.
- Compensation for unfair dismissal claims will be limited to two to 24 months’ pay depending on the reasons for dismissal, company size and years of service.
The government is still required to adopt specific decrees to actually implement the new rules outlined by the Jobs Act with reference to the 2012 ASPI and MINI-ASPI reforms, and the aforementioned social tools. ASPI is an unemployment benefit from social security (INPS) subject to specific eligibility requirements and payable at a base rate of 75% of covered pay for 10 to 16 months. The MINI-ASPI benefit is a lesser version of the ASPI benefit. The Jobs Act will replace both with a new benefit called NASPI, subject to enactment of implementing decrees. Until such time as the regulations take effect, the new regime could, in theory, be subject to further changes.
The immediate impact on employers will be slight since the new provisions on dismissal will apply only to staff hired from 2015, but over the longer term, if the revised law withstands legal challenges, it should result in lower costs for dismissals and potentially greater ease of hiring permanent staff.
The Jobs Act’s guidelines and developments in social plans’ regulations offer employers key takeaways that include:
- Company requirements to benefit from social plans should be modified and relevant procedures simplified.
- Some social plan provisions will be accessible only after applying all means of contractual reductions of working hours.
- Employer contributions to central redundancy funds will be reduced in general but subject to claim experience, with the result that higher contribution rates will be required for companies drawing on those funds.
- Mobility indemnities should be replaced by ASPI/NASPI starting in 2017.
- Financial obligations for social plans will be reduced in the event of cessation of business activity due to bankruptcy.
Please note that the above are only indications of what will likely be required of the Italian government.