A high level outline of the obligations that apply in relation to a collective dismissal procedure in Italy.
If an employer is dismissing a number of employees at, or around the same time, this may trigger obligations to inform and consult on a collective basis which do not apply when an individual employee is being dismissed. This note sets out the circumstances in which these additional obligations are triggered and what they require.
Definition of a collective dismissal
A collective dismissal is defined as a dismissal which results from “a reduction or change in activities or work” and involves at least five out of the 15 or more employees in the production unit (or several linked units within a specified region) within a period of 120 days.
When making such collective dismissals an employer must follow a strict procedure (the mobility procedure). The entire procedure should take around 75 days (38 days if there are less than 10 dismissals).
Obligations to inform and consult works councils
The EU Directive on European Works Councils was implemented in 2002. However, the national legislation which was in place prior to this implementation is generally applicable in the event of a collective dismissal.
Obligations to inform and consult other representatives of employees
A collective dismissal is likely to give rise to obligations to inform and consult any pre-existing internal council or other internal body representing workers. If there is no such internal body, the local sections of the major trade unions should be informed and consulted instead.
Obligations to consult individual employees
There is no obligation to consult individual employees in a collective dismissal situation. The only requirement is that notice of termination be given in writing.
Obligations to notify public authorities
Depending upon its social security position, an employer proposing collective dismissals may have to pay a deposit (or entrance contribution) to the INPS.
Initial redundancy negotiations are conducted on a “no names” basis and by reference to job descriptions alone. The individuals to be dismissed are only identified at the end of the procedure. This will either be in accordance with the criteria agreed with the trade unions or, if agreement is not reached, in accordance with the law. The criteria set out by the law are: (i) the production and organisational needs of the company; (ii) family status, and (iii) the employee’s length of service.
Penalties for failure to comply with requirements provided by law
If an employer fails to:
- follow the collective procedure properly, any dismissal notices given to employees will be unlawful. Employees will be entitled to: (i) be reinstated in their place of work (or instead of reinstatement they could opt for a lump sum equal to up to 15 months’ salary), and (ii) receive compensation as assessed by the Labour Court.
- comply with the selection criteria set out by the law (see above), any dismissal notices given to employees will be unlawful and the employer can be ordered to reinstate the employee (or instead of reinstatement he/she could opt for a lump sum equal to up to 15 months’ salary) and pay damages of up to 12 months' salary.
- comply with any other aspect of the mobility procedure any dismissal notices given to employees will be unlawful. In this case, the employer can only be ordered to pay compensation of between 12 and 24 months' salary.
Under the Jobs Act, for employees hired after 07 March 2015, save for the case of collective dismissal made in oral form, reinstatement is no longer a remedy for unlawful collective dismissal and the employer is subject only to pay compensation depending on the employee’s length of service.
Employers are required to give dismissed employees the notice period set out in the applicable collective bargaining agreement, but employees normally receive payment in lieu of the notice.
Compensation/termination payments due to employees
In addition to the amounts payable to INPS, employees who are to be dismissed must be paid: (i) payment in lieu of notice (indennità di preavviso); (ii) a statutory severance payment (Trattamento di Fine Rapporto) (TFR); (iii) salary due for the duration of the redundancy procedure.
In addition to the amounts payable to employees, an employer may, depending on its social security position, be obliged to pay INPS the following “redundancy social security charges”: (i) an “entrance contribution” and (ii) a further sum equal to eight further Extraordinary Redundancy Fund monthly instalments for each employee to be dismissed.
Settlement/waivers of claims
It is standard practice that, during the consultation procedure with the workers’ representatives, settlement agreements may be reached with some of the employees involved.
The procedures set out above apply also to employees at executive level (dirigenti).
Further information on collective dismissals in Italy is available from our International Employment Issues microsite here.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.