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backGLOBALtalk April, 2012

The latest fashion in industrial relations in Italy: the bespoke employment code

On September 14, 2011, Law 148 was passed by the Italian Parliament, approving Law-Decree n. 138/2011, which contains urgent measures intended to face the current employment and financial situation in Italy.

In particular, article 8 of the above Law states that employers and local unions or works councils can sign collective agreements at local or shop level which can derogate from statutory provisions of law and the regulation set forth by national collective bargaining agreements in a wide range of subjects. These collective agreement can be signed by any works council or employee representation, as long as it passes a majority vote, and shall be enforceable "erga omnes", i.e. binding on all employees of the work unit or territory which the agreement refers to.

The law also clarifies that this kind of agreements are intended – and should be used - as tools to pursue certain objectives, including increasing profitability and salary, managing redundancies, reducing "black work" and generally enhance the quality of employment contracts and level of participation of employees to the management of the company.

Pursuant to the same article 8, derogations to the law and the collective agreement are allowed without prejudice for the Italian Constitution, international conventions and EU employment regulations and can cover a limited number of subjects as wide and diverse as classification and duties of employees, part- time, fixed-time and other flexible forms of work to temporary work and service contracts, working time, monitoring of working activities and, most notably, the consequences of dismissal (with the exceptions of cases of dismissal due to discrimination and maternity).

In respect to dismissal, media have given wide resonance to this aspect of the reform (obliterating any other), calling to a sort of "freedom to fire". In fact, it is prudent to say that the law does not actually introduces a concept of dismissal at-will, but rather enables the parties (employers and union representations) to regulate differently the consequences of an unlawful or unfair dismissal (outside the scope of discrimination and maternity, which remain off-limits). Particularly, the parties may for instance agree for the exclusion of forced reinstatement (which under article 18 of the Italian Labour Statute applies to companies with more than 15 employees) and monetize instead the loss of job with an indemnity increasing by certain factors (e.g. seniority, age, family dependants). It is however pretty unlikely that in the present scenario of high tension in industrial relations by and large in Italy and in light of the strong opposition that unions have expressed against this law, Italian companies will see many shop agreements including a specific regulation of individual dismissals.

Article 8 also confirmed the enforceability "erga omnes" of the shop agreement signed earlier this year by FIAT with a part of the union associations (and with the fierce opposition of the biggest and most powerful FIOM-CGIL union), which had created a lot of uncertainty and a dispute in front of the Turin Labour Court. Commentators have not failed to criticize this part of the law as an evident gift made by the government to FIAT, and raised questions of violation of the Constitution.

All in all, article 8 has been hailed by some as a "gentle" revolution, that rather than deeply reforming certain rigidities of employment regulation, has opted instead to enable companies and union representations to adapt the laws and collective regulation to their needs and achieve higher flexibility. On the contrary, the same article has been strongly criticized by others as potentially fragmenting Italian employment regulation and also allowing possible abuses, particularly in smaller work units where works councils may be more sensitive to heavy pressure by the local employer. Critics of this law have also raised several questions on whether article 8 could be deemed consistent with the Constitution, thus generating much uncertainty on companies which may want to engage into a negotiation with their works councils on the subjects allowed by article 8: any shop agreement signed under a law which is later declared unconstitutional would be automatically voided or, to the very least, stripped of their enforceability "erga omnes", with the consequence of throwing the company into chaos.

For their part, the major national unions have unanimously criticized article 8 as an unduly interference in a matter that should be left to the unions themselves to regulate. Therefore, they also declared their intention to stick to the inter-union agreement that they had signed with the Industrial Employers Association on June 28, 2011, which had already introduced on an experimental basis a limited possibility for the local works councils (jointly with local unions) to derogate from the collective agreement (of course not from the law), in a selected number of subjects (working time and organization of work) and within the boundaries and procedures set forth by the same national collective agreements.

With an official joint statement signed only a week after Law 148 was approved, on Septemeber 21 the major unions and the Employers' Association have reiterated their will to fully implement the agreement of June 28, thus implicitly rejecting the much stronger faculties bestowed on them by article 8. With regard to the specific subject of dismissals, the unions have declared in several statements to the press that they will not stipulate collective agreements that apply the new provisions implemented by article 8 and Fiom-CGIL have also called for an immediate cancellation of the entire article.

In conclusion, this situation of economic crisis that Italy is dramatically facing, part of which is generally ascribed to an excessive rigidity of the labour market, calls for a new approach of the government by pushing for some important and radical reforms of the Italian employment and labor system. However, the intervention in this case seems to have been too hasty and too radical, and it is fair to doubt that Italy shall see many local collective agreements under article 8 of Law 148/2011 in 2012.

Source: Baker & McKenzie - GAI

For more information or to contact Baker & McKenzie, please click here.

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