Despite the growing impact of EU law on employment rights, the harmonisation of employment law across the union is still a long way off. Michele Bignami of Italian law firm Calabi, Bignami & Mainardi highlights the key employment law issues in Italy
Italy has a heavily codified system, which has been entrenched for many decades. This is in contrast to the typically leaner common law systems such as the UK, where employment rights have developed through a more flexible combination of legislation and binding court decisions. In the global market, flexibility is key; the legal systems of those countries without that flexibility are audibly creaking under the strain of modern business needs.
The current Italian labour system is based on a considerable number of Acts, some of which date back to the early 20th century. This has left a legacy of an awkward patchwork of old, new and often conflicting rules that make up the system.
As a consequence it was left to the Italian labour courts to try to rationalise the system and to adapt ageing legal provisions to the ever-changing labour market. This has proved difficult as Italian courts are not obliged to follow the earlier decisions of other courts. This is because the Italian system is based mainly on codes and Acts, not case law precedent.
As a result each court – and in each court, each judge – can build its own case law. Even today the chances of winning a case, particularly borderline cases, in the Italian labour courts often directly depend on the identity of the judge in charge of the case.
System lacking in flexibility
The second, and perhaps most important, factor an HR manager needs to appreciate in approaching the Italian system is that most of the provisions contained in the Labour Acts or the Collective Bargaining Agreements – the “CBAs” – are mandatory and cannot be amended or interpreted in favour of the employer. This leaves little room for flexibility.
The recruitment process
It is a fundamental principle of the Italian constitution that there must be no discrimination in recruitment. In particular, a prospective employer may not select or reject candidates on the basis of their sex, political or religious persuasion or racial origins. Also, the inclusion of a condition which automatically terminates the employment following marriage or pregnancy of the employee is null and void and is subject to certain penalties.
There can also be no discrimination between Italians and other EU citizens. Each year the Ministry of Labour indicates the number of non-EU employees that may be hired in that year. Exceptions are made for highly specialised workers who can not be found in the Italian market but those categories are very small.
The employment terms must be put in writing and the employment letter must contain certain basic information concerning the employment. These are the date of commencement, the place of work, the status and level, the salary and the probation period.
That should not, however, lead HR professionals to believe that there is much room to negotiate individual or tailor-made terms and conditions.
Terms and conditions cannot be negotiated which are less favourable to the employee than those contained in the applicable Labour Acts or CBA. It is not possible to agree a lower salary, a lower level of social contributions, less holiday, a shorter notice period or longer working hours than those set out in the Acts and the relevant CBA.
Each CBA sets out, for example, the minimum salary standard for each professional level. Any negotiated provisions that do not meet the mandatory requirements are automatically replaced by the codified rules.
Terms for negotiation
So what can the parties agree, besides a higher salary, more holidays or a shorter working hours?
First, they can, subject to certain restrictions, agree the length of a probationary period. But it needs to be agreed in writing before the employment agreement begins and before the employee starts working. The probationary period may not, however, last more than the mandatory periods set out in the Labour Acts or the CBA, the maximum period for senior managers being six months.
During the probationary period the employer is free to terminate the employment provided that it can be shown that he, in good faith, gave the employee the chance and every reasonable assistance to satisfy the requirements of the job during the probationary period. Failing to do so will constitute an unlawful termination of the employment agreement by the employer.
Second, the parties can agree a salary provided it is higher than the mandatory minimum set out by the Labour Acts or CBA.
Third, agreement can be reached on benefits in kind, such as private health insurance.
Fourth, the parties can agree the employee’s participation in a stock option plan and the terms of such participation.
Fifth, the employer may impose a non-competition clause provided, however, that it is set out in writing and that the employee receives a separate financial consideration for agreeing to the restriction.
The clause must be limited in terms of geographic area and duration, and it must not prevent the employee from finding another job. The validity and the enforceability of such clauses is one of the most controversial topics in Italian labour law.
As far as the duration of the employment is concerned, most arrangements are for an indefinite period. It is possible in limited circumstances to agree a fixed-term employment. This has to be agreed in writing before the employee starts work. But there are major limitations on the validity of fixed-term employment.
Despite recent efforts by the Italian parliament to provide greater flexibility for employers, it is still the case that a fixed term of employment is valid only in very limited circumstances:
- Where the job has a seasonal nature – for example the holiday industry, hotels, restaurants in sea or mountain resorts and so on
- When the activity of the employer has peaks concentrated in particular periods of the year (such as shops and department stores during Christmas)
- When the activity may be considered extraordinary and exceptional (as in the need to carry out extraordinary maintenance works at a factory)
- When the activity is split between different phases that require different skills (for example, the naval industry which requires the work of different teams during the different phases of the building of a ship)
- Where there are particular activities connected with showbusiness or air transport
- Where it is necessary to replace an employee who has the right to return to work after a period of absence (due, say, to illness, pregnancy or having to perform particular public services).
Even if a fixed-term contract is held to exist, where an employee has a series of such contracts with an employer, the employment will automatically be treated as indefinite and the expiry of the fixed term will not in itself be effective to terminate the employment.
Greater flexibility in employment arrangements in Italy has, however, been achieved by the recent introduction of the right for organisations to hire temporary staff, provided they are employed by specially authorised temporary works agencies.
Clare Murray is a partner specialising in employment law at Fox Williams