Italy: Freeze on Layoffs Will Come to an End for Certain Industries

Global HR

​A layoffs-and-dismissals freeze enacted in Italy when the pandemic started is finally coming to an end for certain industries. Some unions fear there will be a flood of dismissals as a result.

Background

In February 2020, Italy became the first western country to find itself dealing with the rapid spread of the coronavirus. Within days, employers, like the rest of the nation, had to face increasing, once unthinkable limitations to their activities and a growing sense of uncertainty.

In March 2020, a few weeks after the outbreak, the Italian government enacted a dismissal freeze. The law prohibited individual and collective layoffs with a few exceptions, such as for executives and disciplinary dismissals. Furloughs were still permitted. The government approved special social security funds to provide income to furloughed employees.

There were two goals: prevent panic-triggered massive dismissals and preserve business organizations in hopes of an economic recovery after the crisis.

The first dismissal ban was supposed to last 60 days; in May 2020, it was extended for three months. In August 2020, the prohibition was further extended, this time with a deadline that could vary, depending on the additional furlough offered by the government. In December 2020, the end of the freeze was set for March 31, 2021. At that time, new provisions were enacted that are still in effect.

Before each extension, employers tried to guess what might happen next. Many had to postpone restructuring plans. Other companies resorted to voluntary plans that the law had expressly excepted from the ban. Voluntary plans consist of negotiations with the unions for a voluntary severance, offered to those employees who consensually terminate employment in exchange for a severance package.

Another exception to the general ban on collective layoffs is for companies that have started a winding-up procedure, or in any way definitively ceased their activity. Such companies can start collective layoff procedures, despite the otherwise stringent general ban. This does not apply if a business is transferred to another company.

Rules Currently in Force

The ban affected all employers until June 30, 2021. As of July 1, some companies are no longer limited by COVID-19-related emergency laws, except if they continue to furlough employees using the social security allowance granted by the government, in which case the ban will still apply, up to the end of December. The ban will continue to affect other employers until the end of October.

Hence, it is essential for employers to understand in which group they fall. Employers need to check their classification for social security purposes and which social contributions they normally pay. Generally, manufacturing companies and construction companies should no longer be subject to the dismissal freeze as of July 1, except, as mentioned, if they choose to furlough employees after said date. Companies active in the services sector, retail and trade, tourism, and entertainment will continue to be limited in their ability to dismiss, until the end of October, regardless of whether they actually furlough their employees using governmental funds.

Impending Dismissals?

Because of the impact of the pandemic, unions fear that as soon as the restrictions on dismissals are lifted, as many as 500,000 workers might be dismissed. Some estimate closer to 1 million jobs are at risk.

Such numbers would have a drastic impact on Italy, which has a total population of about 60 million people, 14 million of which are deemed not active in the workforce. Not everyone agrees that so many jobs are at risk, partly because about 1 million jobs were already lost since the beginning of the pandemic—through terminations that were not caught by the dismissal ban, and through voluntary plans—and partly because the economy has recently given some signs of a recovery that is stronger than expected.

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Unions Called for an Extension

Nonetheless, this concern prompted unions to campaign for a uniform extension of the dismissal freeze until the end of October, for all employers. The call for additional measures gained support across various political parties. The government has remained firm in excluding an outright extension of the dismissal freeze, but at the time of preparing this article, the minister of social affairs and employment seems in favor of a selective extension of the dismissal ban to the industries that suffered the worst consequences from the pandemic.

Limited Extension Granted

In response to unions’ pressing calls for an extension of the layoffs freeze, the Italian government recently adopted a law:

  • Extending the layoffs freeze until Oct. 31 but only for the textile, apparel, leather and furs industries and providing further social security funds to provide allowances to employees furloughed by such industries, if necessary.
  • Making additional social security funds generally available across industries—in order to pay social security allowances for up to 13 more weeks of furlough—to be used before Dec. 31, for those employers that have already used up all furlough options previously granted by the government; and freezing layoffs by the employers that use such furlough options.

HR professionals should keep their attention focused on further legislative initiatives, as they might also result in measures different from a mere extension of the dismissals freeze.

Uberto Percivalle, a long-time SHRM member, is an attorney with Baker McKenzie in Milan. He can be reached at uberto.percivalle@bakermckenzie.com

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