Last Labour Reforms In Italy

The scope and significance of a breakthrough in labour market regulation

The 2015 reform changed Italian labour law more significantly than that of May 1970, when the Statuto dei Lavoratori was enacted (a very important reform of the entire discipline of individual and collective labour relations, which introduced some very important protections against dismissal and discrimination in the workplace). In fact, at that time, albeit the enactment of that law marked a very important milestone indeed, it was a part of an ongoing process that had started some time previously, in the 1960s, with a number of statutory provisions granting labour protection: the ban on any interposition in 1960, a very restrictive regulation of fixed-term contracts in 1962, the protection of working women in connection with their marriage in 1963, the provision of compensation for unfair dismissal in 1966, long-term temporary lay-off insurance ("Cassa integrazione straordinaria") and special unemployment benefits in 1968, as well as the implementation of a very generous pension reform in 1969. A process of strengthening and improving the workers' protection system that continued throughout three decades of so-called "flexible guarantee approach", sometimes softening the protection granted in the "golden decade" 1960-1970, by adjustments and adaptations, but also reinforcing the protective system on some other occasions, like in 1990 in the field of individual dismissals, in 1991 in relation to collective redundancies, in 2000 relative to part-time, in 2001 regarding parental leave. In March 2015, conversely, when the first two legislative decrees (n. 22 and 23) started enforcing the delegation-law no. 183/2014, and in June 2015, when a third very important decree (n. 81) followed, Italian labour law changed its fundamental paradigm. Firstly, the property rule entailing an employee's right to reinstatement in case of unfair dismissal, which had previously been a keystone of the system, has been now replaced by a liability rule, i.e., a rule limiting the employer's contractual liability to the payment of an indemnification calculated according to the prevailing standards in Europe (decr. n. 23); secondly, much more flexibility into corporate personnel management was introduced, which allows the employer a broader discretion in the adaptation of the employee's duties to business needs (decr. n. 81). The unequivocal purposes of these changes are, on one hand, to provide the employer with a reliable forecast of termination costs, given that they have been already predetermined, and, consequently, to discourage any wager on the outcome of a lawsuit, which has pathologically increased litigation in Italy to date. On the other hand, the reform intends to pursue an increase in labour productivity through increased functional flexibility.

Let us focus on the first point: the dismissals reform. From a system of sanctions aimed, apparently, at preventing unilateral termination by an employer, since employees were assured that no forecast of the termination costs could be made by the employer, and that such costs were sure to be very high2, the Italian legal system has moved to a body of rules and sanctions inspired by a radically new design. The fundamental rationale underlying this new policy is to ensure possible predictability and, at the same time, to reduce termination costs, providing this is due to an adjustment of the workforce, a technological change, an organisational change, or the exercise of disciplinary power.

The new rules on dismissals

According to the new regulations, the monetary amount of damages that can be obtained by an employee following legal proceedings is set at two months of more recent wages per year of service in the company; with a minimum of four years and a maximum of twenty-four years. Moreover, the same decree no. 23 of 4 March 2015 - valuing the German experience - offers parties a standard settlement path, so as to avoid litigation in court and providing for immediate payment of an indemnification equal to one month's pay per year of service, that in no event should be any lower than two months' pay and no higher than eighteen months' pay: this solution is strongly supported by the total exemption of this compensation from income tax.

The only cases left in which an employer is sanctioned by an order of reinstatement of the employee in his/her job are those of null and void dismissal expressly provided by law: unlawful discrimination, anti-union retaliation and a working bride/mother in need of protection. Reinstatement is also ordered by the court whenever a disciplinary dismissal is subsequently proved in court to have been grounded on unsubstantiated facts; however, the same provision expressly excludes reinstatement in the event that the court should deem the dismissal disproportionate to the fault of the employee, provided that a fault has actually occurred (in this case the court will sentence the employer only to monetary compensation).

The new dismissals discipline, which, not surprisingly, had strong opponents who claimed it violated Italy's Constitution, can be explained within the new system framework created by the reform: in this new framework, reinstatement is no longer the main tool for protecting workers, since their economic and professional security will now be normally guaranteed in the market, rather than by freezing the employment relationship. Conversely, the reinstatement will be a penalty imposed on the employer only in cases in which individual dismissal power is used in an aberrant way (with aberrant use of dismissal power meaning something quite different to its merely debatable or unjustified use).

Overcoming the disparity between protected and unprotected employees

There were protests about this being a return to the 1950s, or even the nineteenth century. On the contrary, what should have been perceived as a return to weak regulations was the widespread use of long-term freelance agreements, or other contractual types, which were...