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Employment law dismissal in Italy

After an employee’s relationship with an employer in Italy ends, both parties must follow certain guidelines and procedures to ensure compliance with local labor laws and regulations.

In this guide, we will provide everything you need to know when offboarding a worker in Italy. This includes the notice period, waivers, termination, post-termination restraints, and more.

Notice period in Italy

Having a notice period is standard practice when ending an employment relationship. In Italy, the following variables may affect the length of the period:

  • The relevant national collective bargaining agreements or NCBAs.
  • The classification of the employee.
  • The length of employment with the company.

According to the Italian Civil Code, when an employer terminates the employment contracts, employees are entitled to at least 15 days of notice if they have been with the company less than six months, and at least 30 days if they have been employed there for more than six months.

Employers should also keep in mind that the Civil Code regulations are superseded by collective bargaining agreements if they are applicable in the situation.

For example, a few major NCBAs in Italy outline how the notice period can range from 30 days to four months if the employee initiates the end of employment or 30 days to 12 months if the employer decides to terminate the contract.

Changes to employment notice periods in Italy

Notice periods may be shortened in certain cases. One of the most common uses of this change is when both the employer and employee decide to end the employment contract, and either shorten the notice period or forego it entirely.

Another case in which shortening or waiving the notice period is acceptable is when employment is terminated because of severe breach of company policies. An employee committing a serious offense, such as gross misconduct can trigger immediate termination proceedings. In these cases, no notice period is required.

Resignation notice period for temporary agency workers in Italy

Temporary agency workers (lavoratori in somministrazione) are employed by an agency and assigned to work for a third-party company for a fixed period. The resignation or notice period for these workers follows the terms set by their employment contract with the agency, rather than the company where they are assigned.

Typically, there is no mandatory notice period for resignations, unless specified in the individual contract or relevant collective bargaining agreement that governs the specific sector.

That said, early termination by the agency or the company using the worker’s services may require compensation to the worker for the remaining contract period. Italian labor law, particularly Legislative Decree 276/2003, regulates temporary agency work, ensuring workers have similar rights to direct employees, but the specific terms for resignation and notice depend on the contract and agency policies.

Severance pay in Italy

Whether the end of employment is caused by termination or resignation, in Italy, employees are entitled to receive severance pay or Trattamento di Fine Rapporto (TFR).

The value of the TFR is based on the employee’s annual salary divided by 13.5. A 1.5% is added for every year of employment, as well as adjustments made in accordance with inflation.

In some cases, a part of the employee’s yearly salary is also set aside to eventually be included in the TFR.

The TFR is paid out in full when the employee’s contract is terminated, regardless of the reason. If the worker retires, they also receive the pay in full. For employees who need funds for substantial medical expenses or purchasing a home, they may come into an agreement with their employer about advance TFR payments.

Termination of employment in Italy

The end of employment in Italy can be initiated by either the employee or employer.

Termination grounds in Italy

In Italy, the dismissal of an employee may be based on one of the following reasons:

  • Just cause: A significant breach of contract that renders the employment relationship unable to continue, even temporarily. This is the most common reason for disciplinary dismissals.
  • Justified subjective reason: Also, a material breach of contract, but of a less serious nature compared to dismissal due to just cause.
  • Justified objective reason: A company’s closure or reorganization falls under this category of dismissal.

The termination of an employee has to be presented in written form and signed by the company’s legal representation. These documents can be served via telegram.

Resignation in Italy

When they decide to resign from their position, employees in Italy are advised to follow an online procedure through the Ministry of Labor and Social Policy – Directorate-General for Information Systems, Technological Innovation, Data Monitoring and Communication.

Employees should also comply with the notice period outlined in the applicable collective bargaining agreement in the industry.

Mutual agreement and release of employment in Italy

In Italy, the employer and employee can come to a mutual agreement where both parties agree to end the employment contract. The technical Italian term is “rinunzie e transazioni” or settlement agreement.

These agreements usually include the following clauses:

  • The employer agrees to give a sum of money to the employee as an incentive to terminate the employment contract.
  • The employee agrees to renounce all potential claims against the employer While it is not legally required to include the employee’s waiver in the agreement, it is typically added to prevent the employee from raising any possible claims towards the employer regarding the employment relationship.

Since these agreements are typically initiated by the employer, they are only considered in effect once the employee agrees as well. This happens only after the employee signs the agreement.

There is generally no obligation, requirement, or cause to involve trade unions when creating or signing these kinds of agreements since they technically count as private deals between parties. If an administrative, judicial, or union office is present during signing, the agreement is automatically rendered unchallengeable.

Post-termination restraints in Italy

Some reasonable post-termination restraints may be enforced in Italy if they protect the employer’s legitimate business interests.

Non-competition agreements in Italy

These written agreements between employees and companies are signed for the former to avoid taking on work that will be in direct competition with the latter once their employment relationship concludes.

According to Article 2125 of the Civil Code, non-compete agreements should not be longer than three years for regular employees and five years for managers. The agreements also need to detail which activities may be considered as competitive and prohibited. It is expected to include a provision that outlines compensation because of the resulting reduction in scope for the employee as well.

Non-solicitation agreements in Italy

There is no legal regulation of non-solicitation agreements for both customers and employees. This is why it is important to clearly outline these agreements within the employment contract.

Non-solicitation agreements in Italy are usually included in the non-competition clauses in employment contracts. This also means that most of these agreements last as long as the non-compete ones. However, they can also have a different duration as long as it is properly stated in the agreement.

Since these agreements are a contractual undertaking, they can extend to both customers and employees that may not have had dealings with the employee who is leaving the company. This means the agreement may be enforced regardless of whether the soliciting party has ties with the customer or employee being solicited.

Separation agreement waivers in Italy

In mutual separation agreements in Italy, waivers play a crucial role in establishing the terms of the agreement. Typically, these are included to provide incentive to both parties, making it more appealing to sign and fulfill the agreement.

Waiver of employee claims in Italy

One of the primary elements of a separation agreement is the waiver of claims by the employee. This clause ensures that the employee agrees not to pursue any legal action against the employer for any rights or claims connected to the employment relationship or its termination.

Typically, the employee waives all claims relating to seniority, salary discrepancies, unpaid bonuses, and any outstanding remuneration. This can also include waivers on issues like tax withholdings, reimbursement of expenses, and differences in how salary items were calculated.

The waiver may also cover indemnities and any potential claims for damages, including non-material damages such as those under Sections 2043, 2059, 2087, 2103, and 2116 of the Italian Civil Code. These sections refer particularly to the following:

  • Tort liability: the legal responsibility of an entity for causing harm.
  • Compensation for non-pecuniary damages: compensation for harm not tied to financial losses, such as emotional distress or pain and suffering.
  • Protection against harmful working conditions: laws or regulations designed to safeguard workers from dangerous or unhealthy work environments.

By signing this waiver, the employee agrees not to bring forward any claims related to their employment, which provides the employer with a significant level of legal protection. This clause is beneficial for both parties as it provides closure to any lingering issues regarding compensation or potential legal disputes.

Employer’s waiver and final settlement in Italy

In return for the employee’s waiver of claims, the employer typically agrees to waive any potential claims against the employee, excluding cases of fraud or misconduct that were unknown at the time of the agreement.

This mutual waiver ensures that both parties can move on without concerns of future legal action, providing a clean break for the employment relationship.

As part of the separation agreement, the employer is usually required to pay an incentive to leave. This payment acts as compensation for the employee’s waiver of claims and is often a full and final settlement of any additional claims the employee might have. This settlement amount can include severance pay, bonuses, or other forms of compensation that the employee would be entitled to, ensuring that all financial obligations are settled at the time of termination.

Compliance of separation agreement waivers in Italy

It’s important to note that these agreements must comply with Italian labor laws and any applicable collective bargaining agreements. Employers must ensure that the terms of the separation agreement are fair and meet the minimum standards set by law. Failure to do so can result in the agreement being challenged in court, potentially leading to additional claims or compensation.

Transfer of undertakings in Italy

The transfer of undertakings is governed by Section 2112 of the Italian Civil Code and Section 47 of Law no. 428 of 29 December 1990. These provisions, along with Legislative Decree no. 276 of 10 September 2003, establish a legal framework designed to protect employees during business transfers.

The primary goal of these laws is to provide stability to workers by ensuring that their employee rights are preserved even when the ownership of the company changes. This means that when a business is transferred to a new employer, the terms and conditions of employment must remain intact, and the transfer itself does not justify the termination of employees or a decline in their working conditions.

Joint liability and notice of transfer in Italy

Italian law also imposes obligations on both the transferor (the seller of the business) and the transferee (the buyer). The transferor and transferee are jointly liable for fulfilling workers’ financial claims, such as unpaid wages or benefits, at the time of the transfer.

This joint liability is intended to ensure that employees do not lose out on their entitlements due to the change in employer. Additionally, the transferee must continue to apply the terms of the relevant collective bargaining agreement that was in effect under the transferor, unless more favorable terms are agreed upon.

For businesses with more than 15 employees, Section 47 of Law no. 428/1990 requires both the transferor and transferee to provide written notice to employee representative bodies, such as staff representatives or trade unions, at least 25 days before the transfer is finalized.

This notice must detail the reasons for the transfer, its economic and legal impact on employees, and any measures the new employer plans to implement. If there are no employee representatives, the notice must be delivered to the most representative trade unions in the sector.

Union involvement during transfer of undertakings in Italy

Since employee rights in Italy are protected by several laws and regulations, the involvement of workers’ unions is important during any business transfer.

Once employee representatives receive notice of the transfer, they have seven days to request joint consultations with the transferor and transferee. These consultations are aimed at discussing the implications of the transfer and negotiating any necessary protections for employees.

Although the law requires consultation, it does not mandate that an agreement be reached. If the parties fail to come to an agreement within ten days, the consultation process is considered complete, and the transfer can proceed as planned.

Failure to adhere to the information and consultation requirements may be deemed an anti-union practice under Section 28 of Law no. 300 of 20 May 1970, potentially resulting in legal action from the trade unions.

Insolvency of transferrorstransferors and limited protections in Italy

In cases of financial crisis or bankruptcy, the rules around business transfers are slightly different. Section 47, paragraph 4 bis of Law no. 428/1990 states that if the transferor is in a state of financial crisis or insolvency, the usual protections of Section 2112 may be limited.

If the transferor is bankrupt or in severe financial distress, Section 47, paragraph 5 specifies that Section 2112 does not apply. In such cases, employees may lose some of the protections they would ordinarily enjoy, unless the trade unions and the employer negotiate specific terms to preserve certain rights.

Minimise risk and missed opportunities with our end-to-end employment solutions

There are many different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in Italy — or you could end up facing legal issues.

Our solutions ensure your business is protected from risk when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible.

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