On February 20, 2015, Italy approved significant but
controversial reforms to Article 18 of Italy's Workers'
Statute of 1970 in an attempt to combat soaring unemployment,
currently 42% among workers under the age of 29 and 12.8% overall,
and facilitate growth in an otherwise stagnant economy. The
reforms, referred to as the "Jobs Act" ("Jobs
Act" or "reforms") were implemented by several
Legislative Decrees and based upon the guidelines provided by Law
no. 183 in December of 2014. The Jobs Act seeks to improve the
economy by establishing a more flexible labor market by making
dismissals less costly and burdensome to employers, by enticing
employers to hire new employees and by providing more employment
opportunities and benefits to unemployed workers. The reforms do
not apply to public sector employees, religious institutions,
non-entrepreneurial entities or employees hired before January 1,
2015. The significant reforms are as follows:
Previously, Article 18 required that
employers with at least 15 employees reinstate permanent employees
who had been unlawfully terminated. Pursuant to the reforms,
employers will only be required to reinstate employees who were
unlawfully terminated for discriminatory or retaliatory reasons,
those subject to terminations which are null and void pursuant to
statute, such as the termination of an employee on maternity leave,
and in the case of non-written terminations. Employees subject to
other unlawful terminations, such as ones for economic reasons,
will only be entitled to compensatory relief, not
Monetary damages for unfair
dismissal claims are now two months' salary for each year of
service with a minimum cap of four months' salary and a maximum
cap of twenty-four months.
The reforms introduce a new type of
open-ended employment contract that includes gradual protections
for new employees which increase with the employee's length of
There are now tax incentives for
employers who hire new employees during 2015.
Project-based employment contracts,
which were often misused by employers, are now prohibited.
Employees will have to be hired pursuant to either an open-ended or
fixed-term contract or be treated as "self-employed"
under the law.
Maternity benefits are available to
employees hired pursuant to open-ended contracts.
The reforms create a new benefit for
unemployed workers that can last for up to two years by extending
the scope of funds to be utilized for such benefits.
An employer can offer an employee who
challenges a termination a settlement in order to prevent a formal
lawsuit filed in an Italian labor court. However, the settlement
offer must be made within sixty days of the termination and the
amount must be determined based upon the employee's tenure with
the company. The employer's settlement offer and the
employee's acceptance of the offer must also take place in an
approved forum such as a labor office or trade union office.
The reforms extend the information
and consultation requirements of collective dismissal procedures to
executives' trade unions. Failure of an employer to meet these
requirements could result in damages to the executive in the amount
of twelve to twenty-four months' salary.
Although not all of the reforms are favored by Italian
employers, the reforms overall are likely to improve the job market
by decreasing employers' overall exposure in cases of unlawful
termination, simplifying dismissal procedures, and making it easier
and less risky to hire new employees.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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