Italy: The New Labour Market In Italy: A Quick Overview Of The New Rules And The Challenges Posed By Technological Revolution, Industry 4.0 And GIG Economy

Last Updated: 26 January 2018
Article by Michele Bignami

On 10 May 2017, the new Decree concerning freelancers and smart working was finally enacted in Italy. The adoption of this Decree completes the so called "Jobs Act" project which was made up of a series of reforms of labour law and practice. The reform project aimed at fundamentally changing the labour market in Italy. It must be seen as a natural continuation of the first reforms introduced under the so called "Fornero Law" (after the then Ministry of Labour). The end result is that Italy's rigid labour market has evolved considerably over the past five years to achieve a better balance between the rights of labour and the rights of employers.

The labour law reforms were triggered by the famous "secret" letter sent by the European Central Bank to the Italian Government on August 5, 2011 in which ECB pushed for a series of economic measures "to be implemented as soon as possible". The support of ECB to the Italian economy and in particular the massive purchase of Italian bonds on the secondary market was conditional on Italy implementing these reforms.1

To understand the significance of the reform it must be recorded that until the Fornero Law was enacted, any kind of invalidity in the termination of a labour contract, irrespective of the seriousness or the nature of the invalidity, lead to the reinstatement of the employee; this remedy was available unless the employee was an executive (dirigente) or employed by a "small employer" (i.e. with less than 15 employees). This right of reinstatement was the based on the famous (or notorious according to the opinions) Section 18 of the Statute of Workers, a Law enacted in 1970.

As a result of the Fornero Act, except for a number of limited and marginal exceptions (e.g. discrimination, verbal termination or termination during maternity leave), the only consequence of a finding of unfairness in the termination of a contract is now the payment of a penalty which varies from 12 to 24 months' salary.

Subsequent to the Fornero Act, the Jobs Act further lowered the level of the protection by providing that anyone engaged after March 7, 2015 is subject to the "increasing protections system". This means that the penalty payable in case of unfair termination increases with the length of service: 2 monthly salary per year of employment, with a minimum of 4 months and a maximum of 24 months. The major consequence of this new rule is that there has been a massive drop in number of the Court cases concerning termination of labour contracts. Now, both parties know in advance what is the maximum possible risk (or opportunity) on termination: quick settlements are now much easier and thus much more the norm.

The new rules are valid for all "ordinary employees" (i.e. blue and white collar). However, at the same time they triggered the lowering of protection for executives (dirigenti) under the National Collective Bargaining Agreements that traditionally provided a higher level of protection. Between 2105 and 2016 the NCBA for Executives of the Industry Sector firstly and then subsequently the NCBA for Executive of the Commercial Sector introduced a material decreased level of protection for those executives who have a short length of service.

These measures are also in line with the progressively decreasing power and appeal of the role of the executive in favour of a more modern concept of a "manager" who is no longer desperately looking for a "status" (and its set of cumbersome privileges) of dirigente. Today many middle managers (legally speaking, classified as "ordinary employees") are earning more than those defined as dirigente.

In addition to the modifications to the consequences of termination, the Job Act Reform addressed a number of other matters such as reform of the pensions and of the unemployment benefits (that now are granted on a more rational basis), the fixed term employment (now largely allowed while in the past it was only allowed in restricted circumstances), remote control (now possible under certain conditions), the power to change the duties and to demote (until the Reform strictly forbidden: this gives much more flexibility to the employer to adjust its organization according to ever changing needs of the market) and the battle against irregular work (composed not only by totally unregistered workers but also by fake freelancers). All these measures are aimed at making the labour market more flexible (and equitable), something which had become too rigid and thus unattractive for both local and international investors.

A further consequence of the reforms has been the marked decrease in the length of court proceedings. Whereas before proceedings could last years now they can be completed in 4 to 6 months. This is due not only to the Job Act reforms but also a result of a reaction to the general criticism of judges that trials in Italy take too long.

The result of the measures is that Italy has now substantially closed the 'gap' between it and other European Countries and, to a certain degree is now in an avangarde position (France is trying to introduce now some of the new rules approved in Italy). However, there is still a lot to do. In particular work needs to be done so as to reduce the difference between the cost of labour to the employer and the net salary of the employee.

New challenges now face the Italian labour market. These are the result of innovation and the new technologies with the consequent change of the organization of work: these latter changes are accelerating the division between high added value jobs and jobs with low added value, introducing, as I called them in a workshop recently organized by Nctm, the possibility of "new freedoms and new forms of slavery".

On one hand the new technologies result in, for many jobs, a disconnect of between the concept of working with the concept of a place of work and controlled working time. There is a shift of focus to the quality and timing of delivery and the substance of the output and performance. The most recent Decree on smart working allows the giving of more certainty to these new modalities of work by regulating hot topics such as the remote control and the health and safety in the workplace.

On the other hand, the new technologies make now possible, especially in the service industry, to divide up to the absolute maximum the activity of a worker and to pay him/her only for the time that he/she has really worked; this is the so called GIG economy where the worker gets a compensation that is strictly measured on the time required for the accomplishment of the job, net of any time during which the worker is waiting for new assignments. 2

With particular reference to these activities, the classical distinction between employees and freelancers is – like in other jurisdictions – now under investigation, inasmuch it is not always immediately clear how a delivery guy who delivers packet lunches at the client's domicile, under the strict instructions of the company that organizes the deliveries, could be immediately compared to a professional consultant who provides skilled and intellectual services to his clients. The recent Decree introduced some provisions in favour of those freelancers who are basically working for a single principal. However a grey area that the Courts or the legislator has to regulate in a more clear way remains.

From a political point of view this is the most complex and challenging issue facing the legislator. Like other economies Italy needs to balance the conflicting needs of flexibility (that is necessary to compete) and the need to address the lack of security and the precarious nature of the work.

In addition to the rapid changes in the services sector, in manufacturing there is the ongoing revolution named Industry 4.0 contributing to the demolition of the classic pillars of the labour market (including large layoffs of workers often with obsolete or non-convertible skills). The so called "technological layoffs" are going to be more and more frequent and all the players in the labour arena (workers, Unions, Courts and lawyers) must get prepared to deal with them as well as with concepts such as "reskilling", "job rotations" "continuous education programmes". 3

Footnotes

[1] See "Letter of ECB to Italy on 5th August 2011", in Wikipedia: The Free Encyclopedia, https://en.wikipedia.org/wiki/Letter_of_ECB_to_Italy_on_5th_August_2011, (Accessed 24 October 2017)

[2] Marion Schmid-Drüner, "The Situation of Workers in the Collaborative Economy", European Parliament Think Tank: In-Depth Analysis, October 2016, http://www.europarl.europa.eu/RegData/etudes/IDAN/2016/587316/IPOL_IDA(2016)587316_EN.pdf

[3] See the presentation "Chances and Challenges of Industry 4.0 workforce", published by the International Labor Organisation, http://www.ilo.org/wcmsp5/groups/public/—asia/—ro-bangkok/—ilo-jakarta/documents/presentation/wcms_552349.pdf, Jakarta, Indonesia 17 April 2017

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