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Global Employment briefing: Italy, October 2018

  • Italy
  • Employment law


“Dignity Decree” implements significant employment law changes

The “Dignity Decree” was implemented with effect from August 12, 2018 and makes significant changes to labour relations. Several new provisions on fixed term employment, temporary agency workers, young workers and to compensation for unfair dismissal have been implemented and a brief summary of some of the changes can be found below.

Fixed-term employment contracts

  • The maximum duration of a fixed-term employment contract is now 24 months (previously 36).
  • No more than four (previously five) extensions of the same contract are permitted.
  • If a contract is extended for a duration over 12 months, in case of each renewal or for the first contract with a duration longer than 12 months, a specific justification must be given. Justifying reasons include: temporary and objective reasons, not related to the ordinary activity of the employer; the need to temporarily replace absent employees; temporary, significant and unpredictable increases in ordinary employer activities.
  • A fixed-term contract longer than 12 months will be considered as open-ended if no valid justification is given.
  • These new rules concerning justifying fixed-term contracts apply to contracts signed after July 14, 2018 and to renewals or extensions executed after October 31, 2018.
  • Upon each renewal of a fixed-term employment contract, an extra 0.5% social security contribution must be paid by the employer (the current rate is 1.4%).
  • The limitation period for challenging a fixed-term contract termination is 180 days from its expiry (and not 120 days as before).

Fixed term temporary agency work

  • Fixed term temporary agency work is subject to the same rules on fixed-term contracts (see above changes) with some exceptions such as the “stop and go” provisions (required gaps in contract between the same worker and employer) and giving priority, when hiring permanently, to fixed term employees.
  • In order to limit the use of fixed term employees and temporary agency workers, there is a new overall maximum number for such workers. This is set at 30% of all open-ended employees as of January 1 of the year in which such workers are hired.
  • If temporary workforce supply contracts are used to avoid mandatory provisions of law or of the NCBA, a criminal fine equal to EUR 20 applies for each worker and for each day of working.

Compensation for damages in case of unfair dismissal

  • In cases of unfair dismissal, the employee is entitled to compensation for damages equal to two months’ salary per year of service, with a minimum of six months’ salary and a maximum of 36. On September 26, 2018, the Italian Constitutional Court has declared the two months’ salary per year of service’s criteria for determining the indemnity in case of unlawful dismissal in violation of the Constitution.
  • The tax exempt indemnity that can be offered in the event of dismissal, in order to settle the claim, is raised and is now a minimum of three and a maximum of 27 months’ salary.

Incentives to hire young workers

Employers who hire workers younger than 35 in the years 2019 and 2020 on an open-ended basis are exempt from paying 50% of the relevant social security contributions.