Year 2015 saw the approval of a major labor law reform in Italy. The process for the implementation of the new rules is now closed and from now the attention will shift on the effects that the new provision will have on the labor market in Italy. In fact, the aim of the reform is to promote greater flexibility in the labor market and to encourage investments by foreign entrepreneurs into the Italian market.
The new rules affect several fields of labor law. The most relevant are the following:
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consequences of invalid dismissal;
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reorganization of employment contractual forms (employment and quasi-employment relationship, consultancy, staff leasing, job on call);
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unemployment benefits system;
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modernization and simplification of administrative procedures;
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protection of parenthood.
Other important provisions concern (i) rules on use of remote control devices for monitoring empoyees’ activity and (ii) limits and possibility of demotion.
OVERVIEW
INVALID DISMISSALS: CONSEQUENCES
One of the most relevant (and historical) reform introduced by the Jobs Act is the new system of remedies applicable in case of unfair dismissal.
It is a historical change because, generally speaking, the main remedies applicable in case a judge would declare a dismissal unfair move from the old mechanism based on the reinstatement to the new system based on a pure economic compensation.
The impact of the reform is mitigated by the fact that the new rules shall be applicable only to the employment relationships entered into force as of March 7, 2015 and so only to employees who are hired from that date. Old employment contracts continue to be governed by the old rules provided by article 18 of the Workers’ Statute (which provides the reinstatement as general rule).
Therefore, from now on, the dismissal of employees shall be treated by two different regulatory regimes depending on the date the employment contract is signed: before or after the March 7st 2015.
The Jobs Act considers the following cases of dismissal:
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Discriminatory: is this the dismissal caused by retaliation or discrimination based on political ideas, religion, race and/or gender. It is considered in the same group also the oral dismissal and the dismissal due to marriage, motherhood, and other special cases of nullity. It is the most serious case of “unfair dismissal”.
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Disciplinary: the dismissal based on employee’s negligence (termination for cause). It is defined as the violation (significant, serious or very serious) by the employee of one of employment contractual obligations that undermines the fiduciary relationship (insubordination, truancy, theft or damage, poor performance, etc.).
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For economic reasons: the dismissal based on reasons related to the reorganization of production system and to the allocation of the resources (deletion of the work position, overstaff).
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Collective: the dismissal is collective when, in companies that have at least 15 employees, is meant to dismiss more than 4 employees over a period of 120 days. The term “collective” refers to the situation of personnel redundancy which are subject to special consultation procedures involving labor unions.
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Formal defect: cases where the dismissal, although legitimate in its content, falls on procedural errors for violation in the disciplinary or communication procedure.
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Small businesses: different rules apply to those businesses that do not reach specific size limit of 15 employees in the same municipal territory or of 60 employees as a whole.
NEW DISMISSAL RULES
The consequences provided by Jobs Act in case of unfair dismissals are the following:
Discriminatory dismissal
This is the only case in which the applicable remedies are substantially the same as in the past.
If the Court assesses the presence of a case of retaliation or discriminatory dismissal, it will order the reinstatement of the employee in the previous position and will condemn the employer to pay an indemnity. The indemnity is equal to the compensation due to the employee from the date of termination until actual reinstatement. In addition it will order the payment of welfare and social security contributions. The indemnity, in any case, will not be less than a 5 months salary.
In lieu of reinstatement the employee may request the payment of an additional indemnity equal to a 15 months salary and the payment of social security contributions. The employment relationship will be considered terminated if the employee does not enter in service within 30 days after the call received by the employer. This protection is always applied regardless of the size of the employer (so even in small businesses).
Disciplinary dismissal
If the Court decides that the termination is not based on a just cause, it will however declare the termination of the employment relationship as of the date of dismissal and condemn the employer to pay an indemnity equal to 2 months’ salary for each year of service. The indemnity shall not be less than 4 and not more than 24 months. This indemnity is not subject to social security contributions.
If it is directly proved the non-existence of the material fact contested, the Court will order the reinstatement of the employee and will condemn the employer to pay a indemnity equal to the compensation due to the employee from the date of termination until actual reinstatement but not exceeding 12 months’ salary. It will also condemn to the payment of social security contributions. In this case, the employee may request, in lieu of reinstatement, an indemnity equal to 15 months’ salary.
Dismissal for economic reasons
If the Court judges that there are not the conditions for dismissal for economic reasons, it will declare the termination of the employment relationship on the date of the dismissal and it will condemn the employer to pay an indemnity equal to 2 months’ salary of the actual remuneration for each year of service of the employee.
This indemnity cannot be less than 4 and not more than 24 months’ salary and it will not be subject to social security contributions.
Collective dismissal
If an employer activates the collective procedure of dismissal, a specific procedure is to be followed: this provides for certain formalities including unions’ consultations.
In case of violation of the collective dismissal procedure or of the criteria for the selection of employees to be dismissed, the Court will, nevertheless, declare the termination of the relationship but it will condemn the employer to pay an indemnity equal to 2 months’ of salary for each year of service, with a minimum of 4 and a maximum of 24 months’ of salary.
Only in case of serious violation of the procedure (absence of a written notice), the Court will condemn the employer to reinstate the employee in the position and to pay an indemnity equal to the compensation due to the employee from the date of termination to actual reinstatement as well as of welfare and social security contributions.
Formal defect of dismissal
In those cases (and given that there are not other more serious reasons of invalidity) the Court will declare the termination of the employment relationship at the date of termination and will condemn the employer to pay an indemnity equal to 1 month of salary for each year of service, with a minimum of 2 and a maximum of 12 months’ salary.
Dismissal in small businesses
If the Court ascertains the absence of reasons for dismissal, even for lack of just cause or of objective reasons, it will declare the termination of the relationship at the date of the dismissal and it will condemn the employer to pay an indemnity equal to 1 month’s salary for each year of service.
The indemnity cannot be less than 2 nor more than 6 months’ salary and it will not be subject to social security contributions.