Italy : Termination clauses
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- Italy : Termination clauses
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Italy : When hiring someone, a company can now insert a clause in the contract which will constitute a fair reason for termination
Major reforms of Italian employment law began in summer 2011. These include allowing employers to apply terms and conditions which are different from those set out in collective bargaining agreements, new regulation of fixed term contracts, the introduction of a new apprentice contract and the so-called certification of contracts. Those reforms will be concluded this spring, when the entire Italian labour market system will be reshaped in order to increase flexibility. This article examines the first step of these reforms.
Law. No. 183/11 was introduced early last year. It is intended to enable employers, through the certification of employment contracts, to insert special clauses which will not be subject to challenge. It even allows the employer to insert a fair reason of dismissal into the employment contract, in order to avoid any claims from employees in the event of termination. An employee would not be able to challenge the reason for dismissal due to the certification procedure which the employer must undergo before the commencement of the employment relationship.
Previously, employers were unable to set out, either before or during an employment relationship, any reasons which could constitute a fair reason for dismissal. Even when an employer had an ETO (economical, technical, or organisational) reason for dismissal, the employee could still challenge the termination and employers therefore had to wait for a court order to establish whether or not the dismissal was fair and lawful.
Employers and employees may now request and obtain the “certification of contract” from the so-called Body of Certification (a third party body set up in the local office of the Ministry of Labour). This provides certainty regarding the fairness and lawfulness of the clauses set out in individual contracts.
Employers can therefore insert clauses in employment contracts which set out economic or financial data (e.g. sales targets, performance, turnover etc.) which reflect the cost of the employment relationship. In the event of a dismissal, there will be no doubt about the fairness of the dismissal as the reasons for dismissal stated in the contract will no longer be subject to challenge. Employers and employees can therefore set out, at the outset, facts, circumstances and causes which will minimise the risk of litigation.
It is worth noting that the entire process of certification is based on the agreement of both parties (employer and employee). The employee's consent is always required.
This system not only creates a more flexible procedure but also allows employers to avoid the risks associated with dismissal claims (which typically, for companies with more than 15 employees, involve reinstatement and the payment of back pay from the date of dismissal up to the date of reinstatement).
By Federico Strada, La Scala Studio Legale e Tributario, in association with Field Fisher Waterhouse LLP