Jobs Act Addressing Employment Contracts, Protections for New Hires and Unemployment Passed By Italian Parliament
Piergiovanni Mandruzzato, Lawyer and Sara Bittolo, Lawyer, Studio Legale Ichino Brugnatelli e Associati, Milan
The “Jobs Act,” which aims to reform the Italian employment system focusing, among other things, on types of employment contracts, employee protection against unfair dismissal and unemployment subsidy, was passed by the Italian Parliament, D.D.L. no. 1428 B,1 on December 4, 2014.
The main changes brought by the Jobs Act are:
- The aim of the reform is to render open-term employment contracts the normal form of employment, replacing other “hybrid” contractual forms currently in use, such as consultancy contracts and project work contracts. To achieve such results, the reform has either increased the social charges connected with consultancy contracts and project work (that are as a result closer to those related to open-term employment contracts) and reduced the protection against unfair dismissal (see below), which results in a lower liability in case of termination for employers.
- Progressive increase of protection for new hires (i.e. those occurred after the new regulation became effective), the level of protection applicable to employees will increase along with their length of service. For example:
- Reinstatement limited
Reinstatement will not be considered a remedy in case of unfair termination due to organizational reasons and an employee will only be entitled to compensation, with the amount determined based on their length of service with the company.
Reinstatement will still apply in the event a dismissal (including a dismissal due to organizational reasons), if the termination is determined to be:
- null (e.g. oral dismissal);
- blatantly unsupported, but only in the event of disciplinary dismissal (e.g. if it is shown that the employee did not commit the alleged misconduct that led to the termination).
Besides the cases listed under letter a. above, the only remedy in case of unfair termination is damages, which
- are determined based on an employee’s length of service and are equal to two-month pay per each year of service.
- cannot be lower than four-month pay and are capped at 24 month pay (i.e. employees with one-year service are granted a four-month indemnity, while employees with 13+ years of service or more are granted a 24 month indemnity).
- The duration of the unemployment subsidy will be based upon the length of service, rather than on the age of the employee. Moreover, consultants will be included amongst the individuals eligible to the unemployment subsidy.
The details of the new regulation will be determined by execution decrees to be issued by the Italian Government, the first of which is expected to be published by mid-February, 2015.