In November 2018, the Italian Constitutional Court declared the partial invalidity of rules governing indemnities against unlawful dismissals, which certain categories of employees are entitled to – thus increasing the protections they receive.
For employees who are not executives, and who have been hired by “big” companies as of 7 March 2015, Legislative Decree No. 23/2015 (in force before the Italian Constitutional Court’s ruling at issue) set forth that employees who had been unlawfully dismissed (except for very limited cases such as verbal dismissals, instances where the employee’s misconduct is clearly shown not to have occurred, etc) were entitled to the payment of an indemnity amounting to two months’ wages for each year of service, totalling a minimum of six months’ wages and a maximum of 36 months’ wages. Both of these caps were recently increased pursuant to Law Decree No. 87/2018, converted into Law No. 96/2018.
According to the Italian Constitutional Court’s decision, this statutory algorithm – two months’ wages for each year of service – is in breach of provisions under the Italian Constitution. When applying this algorithm, the actual amount of the indemnity is quantified without taking into account the circumstances characterising each dismissal (including the size of the business, the overall number of employees, or the parties’ conditions or actions. The indemnity is also somewhat meagre where the employee has accrued seniority in a short space of time; it neither compensates the damage suffered by the employee as a result of dismissal, nor does it discourage the employer from practising unfair dismissal.
Following this ruling, the amount of indemnities against unlawful dismissal that apply to the above categories of employees is now established by the judge within the above caps (six to 36 months’ wages), taking into account general criteria provided for by Italian law such as the relevant employee’s company seniority, the size of the employer’s business as well as the overall number of employees with whom the latter is staffed.
This is likely to lead employers to adopt a careful approach when dismissing the above categories of employees as, while before the Constitutional Court’s decision the actual amount of the employer’s liabilities associated with the dismissal of employees hired as of 7 March 2015 were quantifiable in advance and – in any case – rather low, now such liabilities cannot be quantified in advance and may be significant also with respect to “newly hired” employees.
Law Decree No. 87/2018, converted into Law No. 96/2018, has introduced several constraints relating to fixed-term employment agreements.
This is a clear change of course in Italian law: regulations that came into force from 2015 were aimed at easing the recourse to fixed-term employment agreements, thus significantly reducing cases where fixed-term employees were entitled to legitimately claim the status of a permanent employee.
In particular, before Law Decree No. 87/2018 came into force, employers were legally entitled to offer fixed-term employment agreements – even where there is no good reason to hire on a temporary (rather than permanent) basis, conditional on the duration of the fixed-term employment relationship (including renewals and/or extensions) not exceeding 36 months.
According to changes introduced by Law Decree No. 87/2018, fixed-term employment agreements may be only executed in the following circumstances (except for agreements whose term of 12 months or less, which may be executed without specifying the reasons for hiring on a temporary basis):
In cases of breach, a fixed-term employment is to be re-qualified as a permanent one, and the employee is to be granted with an indemnity of between two-and-a-half and 12 months’ wages. The same applies whenever the maximum number of extensions (which has been decreased by Law Decree No. 87/2018 from five to four) is not complied with.
The “new” regulations governing fixed-term employment agreements are likely to result in the increased turnover of fixed-term employees, since a fixed-term employment agreement lasting under 12 months poses little risk for the employer. An increase in employment-related litigation arising from this contractual pattern is also expected: there were approximately 8,000 such proceedings in 2012, when similar constraints were in force. This decreased to just 490 claims in the first half of 2017, when these constraints were no longer effective (pursuant to regulations that came into force in 2015, as mentioned above).
In April 2018, the first case law in Italy concerning the extremely topical matter of platform workers’ status (freelancers versus employees) was issued.
Six “riders” working for the well-known food delivery app Foodora have made a claim for the requalification of their status from freelancers to employees. The basis of their argument was that, despite their roles being officially recognised as as autonomous, the nature of their work was consistent with that found in an employer–employee relationship. For example, among other obligations, they were subject to Foodora’s organisational, directive and disciplinary powers, and had to comply with the company’s working hours and place of work.
The Labour Tribunal of Turin, which heard the proceedings, has rejected the claims on the following principal bases:
The decision was challenged by the claimants before the Court of Appeal of Turin. In January 2019, the Court confirmed the first instance ruling, to the extent that the relationship between Foodora and its riders does not constitute an employment agreement. However, the Court also found that the riders’ working hours and workplace were both established by Foodora, and they therefore had to be paid in accordance with employees’ financial remuneration. The Court of Appeal ordered Foodora to pay its riders the difference between the minimum hourly wage (as established by the collective bargaining agreement for this sector) and the gross hourly wage actually paid to them (€5.60 per hour).
This decision clearly opens the door for further litigations by riders and platform workers. The outcome of these cases may, however, be different from that outlined above.
The European Parliament recently voted (with 591 votes in favour, 29 against and 33 abstentions) to adopt the Legislative Resolution of 16 April 2019 on the Proposal for a Directive of the European Parliament and of the Council on the protection of persons reporting on breaches of Union law (Legislative Resolution). This proposal is aimed at protecting whistleblowers who reveal breaches of EU law in a range of areas, including public procurement, financial services, money laundering, public health and data protection. This law must now be approved by EU ministers, and then member states will have two years to comply with provisions set forth therein.
According to the Legislative Resolution member states should adopt internal law regulations whereby private-sector employers who have least 50 employees, or who are active in the finance sector or vulnerable to money laundering or terrorist financing (regardless of company size), must establish internal channels and procedures for reporting and for following up on reports. Stipulations for this include, among others:
However, even if Italy joins the member states that have adopted comprehensive legal protection for whistleblowers, it seems to apply only to persons employed within specific sectors. Based on current Italian regulations, the legal requirement to establish internal channels and procedures for reporting applies only to public-sector employers (pursuant to Legislative Decree No. 165/2001), or to private-sector employers that are active in the finance or banking sectors (as per Legislative Decree No. 58/1998 and Legislative Decree No. 385/1993, respectively).
Other private-sector employers are obliged to set up the above channels and procedures only where they have voluntarily adopted an organisational model according to Legislative Decree No. 231/2001. This model aims to avoid the risk of crimes committed by high-level managers acting in the interests of their company. So far, adoption of this model is not mandatory except in very limited cases (such as large publicly listed companies).
Once the Legislative Resolution is effective and binding for all member states, Italian regulations on whistleblowing will have to be amended to include private-sector with 50 or more employees.