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.