Labour & Employment – Annual Review 2016 (Financier Worldwide, agosto 2016 )

Financier Worldwide canvasses the opinions of leading professionals around the world on the latest trend sin labour & employment.

Q: WHAT NOTABLE DEVELOPMENTS IN EMPLOYMENT LAW HAVE YOU SEEN IN ITALY OVER THE LAST 12 MONTHS OR SO? HAVE THERE BEEN ANY,SIGNIFICANT CHANGES TO EMPLOYEE RIGHTS OR COMPANY OBLIGATIONS,FOR EXAMPLE?
DE LUCA: Over the last 12 months, significant developments have characterised Italian employment law. A broad, in-depth reform known as the Jobs Act was implemented in 2015. The reform has radically changed several aspects of employment and self-employment relationships in Italy. In particular, the reform provided for the reorganisation of all types of employment contracts, the introduction of permanent contracts with increasing levels of protection, thus defining a new system of compensation in the event of unlawful dismissals marked by the certainty and objectivity of the law. This has reduced the possibility of reinstating employees who have been unlawfully dismissed to merely cases of discriminatory termination only, and, thus almost entirely eliminates the discretionary power of the courts.
To help reduce unemployment, simplify the existing legislation and ensure greater flexibility in employment relationships, the reform also introduced social security exemption system for new hires, liberalised fixed-term contracts and significantly reviewed the regulation of duties, drastically increasing cases where downgrading is lawful.

Q: HOW WOULD YOU DESCRIBE LABOUR RELATIONS IN YOUR REGION AT PRESENT? TO WHAT EXTENT HAS THE INFLUENCE OF UNIONS AND WORKERS COUNCILS GROWN?
DE LUCA: In the past, labour relations had a fairly influential role in the labour market, based on a triangular system where trade unions, employers and public authorities were involved in negotiations. However, in recent years, many unions have lost their past negotiating power against the government. This has also been confirmed by the recent Jobs Act reform, which has been implemented without any substantial trade union involvement. Therefore, trade unions should overcome the role of national trilateral negotiation, promoting instead increased negotiations on a company level and workers’ councils’ power of representation.

Q: ARE YOU SEEING ANY RECURRING THEMES IN EMPLOYMENT RELATED LITIGATION IN ITALY?
DE LUCA: Historically, since reinstatement entitlement was introduced into the workers’ statute, the most frequently recurring theme in employment has been dismissal. However, due to protections against unfair dismissal, litigation concerning dismissal due to discrimination is still fairly uncommon. Since overall employee protection – and in particular, the chance for employees to be reinstated at work – have been radically reduced due to various reforms implemented since 2010 and the implementation of effective alternative dispute resolution (ADR) procedures, we expect that in the future, the number of court disputes for unfair dismissal will drastically decrease and at the same time, a higher number of dismissals due to discrimination will be brought to the attention of judges, as happens in most western countries.

Q: FOR COMPANIES IN THE PROCESS OF RESTRUCTURING, WHAT EMPLOYMENT ISSUES DO THEY NEED TO EVALUATE WHEN RESIZING THE WORKFORCE, REDUCING PAYROLL COSTS AND ADJUSTING PENSIONS AND BENEFITS? WHAT KINDS OF RISKS AND LIABILITIES MIGHT ARISE IN SUCH CIRCUMSTANCES?
DE LUCA: The restructuring of a company, including a reduction of the workforce, entails several actions. The most important are those related to the joint meeting to be held with unions in terms of bargaining power, timing and possible disruptive actions. The entitlement of the unions to meet the employer derives from the Italian implementation of law arising from specific European Union directives. According to the law, unions are indeed entitled to request that an employer participate
in meetings in order to explain the reasons behind redundancies, and verify whether there may be alternatives to such dismissals and, if not, to agree on possible company measures. During the consultation procedure, companies are required to consider, in terms of costs and benefits, the opportunity to reach an agreement with unions by making any economic or organisational concessions in order to speed up the process and avoid any possible disruptive actions being carried out by
the latter. If the parties fail to reach an agreement, the employer is, in any case, entitled to deliver dismissal letters and employees are free to object to the reason behind the dismissal, which may be an unfair
dismissal.

Q: WHAT GENERAL ADVICE WOULD YOU GIVE TO COMPANIES ON MANAGING THEIR HUMAN CAPITAL AND RETAINING KEY TALENT?
DE LUCA: In our experience, managing people by setting objectives and offering fair, performance-related bonuses, rewards and retains key talent. As a general rule, employers should always be clear about the targets employees are expected to meet. It may be useful to draft and negotiate specific retention plans aimed at granting employee cooperation for a predefined period of time, especially for companies acquired via investment funds which need to prevent key managers from being able to decide to leave before the end of an investment period.

Q: IN YOUR OPINION, HAS IT BECOME MORE DIFFICULT FOR COMPANIES TO REWARD THEIR EXECUTIVES AND EMPLOYEES? WHAT DO COMPANIES NEED TO TAKE INTO ACCOUNT WHEN STRUCTURING COMPENSATION PACKAGES, INCENTIVES AND BENEFITS?
DE LUCA: In recent years, it has become more difficult to reward executives, due to their increased expectations in terms of having tailor-made employment offers. The main thing that employers should avoid when structuring compensation packages, incentives and benefits is to use standard international contracts which have not been adapted and made compliant with local regulations. For instance, international companies often apply complex employment contracts to Italian employees without considering that in Italy, the main provisions governing employment relationships are defined by National Collective Bargaining Agreements. As far as a fixed annual salary is concerned, National Collective Bargaining Agreements provide for the minimum
annual remuneration to be granted to employees depending on their level of employment. Furthermore, under Italian law, employees and managers are entitled to the so-called leaving indemnity, consisting of compulsory deferred compensation due to the employee at the end of the employment relationship equal to 1/13.5 of the annual salary due to them.