Termination in Italy - DLA Piper Guide to Going Global

Legal system, currency, language

Civil law. Member of European Union (EU), so required to implement relevant EU directives. The official currency is the Euro (EUR). The official language is Italian.

Corporate presence requirements & payroll set-up

A foreign entity may engage employees in Italy with proper payroll registrations, subject to business and corporate tax planning considerations. Withholdings for social contributions (ie, up to approximately 30 percent for the employer portion and up to approximately 10 percent for the employee portion) and income tax (up to approximately 43 percent) to be done through payroll. The employer must give notice to the labor authorities that employment has commenced at least 1 day before the commencement of the relationship.

Pre-hire checks

Required

Immigration compliance.

Permissible

Criminal and credit reference checks are only permissible for specific roles (eg, certain finance positions) and subject to proportionality requirements. Reference and education checks are common and permissible with applicant consent.

Immigration

Depending on the duration and reason of the immigration, work permits are required for anyone who is not an Italian national or EU citizen.

Hiring options

Employee

Indefinite, fixed-term, full-time or part-time. Part-time and fixed-term employees have the right not to be discriminated against due to their status. Additional engagement options are available, such as on-call employment, job sharing or apprenticeships.

Independent contractor

Independent contractors may be engaged directly by the company, provided that certain requirements are met. Freelancers may also be engaged on an open-term basis, but there is increased misclassification exposure.

Agency worker

Agency workers are common. Agency workers have the right to equal treatment to employees in relation to pay and other benefits terms.

Employment contracts & policies

Employment contracts

Written employment agreements are required according to national collective bargaining agreements and the rules granting Transparent and predictable working conditions (Legislative Decree No. 104/2022 and subsequent amendments and additions). Certain clauses are not valid if they are not put in writing (eg, probationary clauses or non-compete covenants).

Probationary periods

Permissible, with statutory limits, depending on the category and level of the employee. The maximum duration is 6 months for executives (dirigenti). Collective bargaining agreements may provide for specific limits on the basis of employees’ category and level.

Policies

Permissible but not mandatory.

Third-party approval

No requirement to lodge employment contract or policies with, or get approval from, any 3rd party.

Language requirements

No statutory requirements, but all documents should be in Italian.

Working time, time off work & minimum wage

Employees entitled to minimum employment rights

All, with distinctions based on the employee level pursuant to the applicable collective bargaining agreement.

Working hours

48-hour-per-week limit on working time. Daily statutory rest: 11 hours. Weekly statutory rest: 24 hours.

Overtime

Statutory limits to overtime depending on the industry sector and the applicable collective bargaining agreement.

Wages

Minimum rates are set in the applicable collective bargaining agreement and depend on the category of employee and enrollment level. Under Italian law, there are 4 categories of employees: workers/blue collar employees (operai), white-collar employees (impiegati), middle managers (quadri) and executives (dirigenti). Collective bargaining agreements set sub-levels within the category of white-collar employees. The applicable collective bargaining agreement may require 13th or 14th salaries.

Vacation

Employees are entitled to a minimum of 4 weeks (excluding public holidays) of paid vacation for each year of service. At least 2 weeks of vacation must be taken during the entitlement year. Vacations cannot be replaced by monetary compensation before the employment is terminated. Collective bargaining agreements may provide additional holidays. In addition, Italian law provides for the following public holidays: January 1, January 6, Easter Monday, April 25, May 1, June 2, August 15, November 1, December 8, December 25, December 26 and the day of the patron saint of the place of work.

Sick leave & pay

In case of illness or accident, employees cannot be dismissed before a period of time determined by law or by the time the applicable collective bargaining agreement has expired. The entitlement to sick pay depends on the applicable collective bargaining agreement.

Maternity/parental leave & pay

Pregnant employees must not work for 2 months before and 3 months after childbirth. Subject to certain conditions, the leave may be taken earlier or later. Female employees cannot be dismissed from the 1st day of pregnancy until the child is 1 year old, except in certain circumstances (eg, shutting down of the company or just cause). During maternity leave, employees receive an allowance from the social security body (INPS). Certain collective bargaining agreements provide for a maternity supplement to be paid by the company. Subject to and conditional on a specialist doctor's opinion, mothers may be allowed to work until the 9th month of pregnancy. In these circumstances, mothers therefore take the entire 5 months' period of maternity leave after childbirth. Since 2022, fathers are obliged to take 10 days off within 5 months of their child's birth. They may also take 1 additional optional day as an alternative to 1 day of the mother's maternity leave. Collective bargaining agreements may contain requirements for company-paid leave. Parental leaves may be taken by the parents until the child is 12 years old.

Other leave/time off work

Employees may also be entitled to leave for other purposes, including death and serious illness of a close family member, disability, marriage leave (15 paid calendar days), childcare; blood donation (1 day of paid leave for the whole day on which the blood donation is made), bone marrow donation (day of paid leave for bone marrow donation, plus additional days of paid leave for performing pre-donation acts and convalescence days), study and for social, political and trade union offices.

Discrimination & harassment

Employees are protected against direct and indirect discrimination during the course of their employment on several grounds, such as sex, religion, race, color and political opinion. Discrimination is always prohibited, from the hiring procedure to the termination of employment.

Whistleblowing

Legislative decree no. 24/2023 transposing the EU Directive (2019/1937) on whistleblowing was published on March 10, 2023. Private companies are mandated to establish an internal reporting channel if they meet specific conditions. In addition, the establishment of an external reporting channel (at ANAC) is also envisaged. See Whistleblowing Laws in Europe: An international guide.

Benefits & pensions

Enrollment in the social security public system and public insurance of employees is mandatory for all employers.

In addition to the ordinary social security and insurance, collective bargaining agreements provide for supplementary forms of social security or healthcare insurance.

Data privacy

Employees generally must be notified of personal data processing – and, in certain cases, give consent. Special rules apply to data transfer outside the European Economic Area (EEA). Not possible to control or monitor employees remotely with devices unless upon agreement with works council or authorization of the Labor Office, with the exception of the instruments used by the employee to carry out their work or to detect access or attendance.

Since May 2018, Italy has been subject to the General Data Protection Regulation (GDPR), which introduced significant new obligations and onerous sanctions for employers.

Rules in transactions/business transfers

Automatic transfer of those employees who belong to the transferred business or branch of business, without any interruption of the employment, to the transferee, regardless of the employees' consent. The transferred employees maintain all the rights to which they were entitled with the transferor. The transferor and transferee are jointly liable for entitlements that the transferred employees had at the time of the transfer. Duty to inform and consult with employee representatives.

Employee representation

All employees have the right to form, or become members of, labor associations, as well as the right to perform labor-related activities. On the initiative of the employees, a works council may be established in every plant with more than 15 workers within the trade union's associations that have executed the collective agreement applied in the company. Employees' representatives are granted certain rights (eg, additional protection in case of transfer and dismissal).

Most companies are subject to mandatory industrywide collective bargaining agreements.

Termination

Grounds

Termination permissible on these grounds:

Just cause (ie, an irremediable and serious breach of trust – or serious violation of contractual duties – between the parties of the employment relationship. In this case, the contract terminates immediately without notice.
Justified reason, which may be subjective (eg, breach of employee's contractual obligation is less serious than just cause) or objective (eg, redundancy). In this case, the contract terminates with notice.

Dismissals must be notified in writing. Reasons for dismissal must be detailed. If the dismissal is due to just cause or subjective reasons, a special disciplinary procedure must be complied with.

Resignation and mutual consent terminations

Under Jobs Act reforms, which are effective as of March 12, 2016, resignations and mutual consent terminations can only be implemented in electronic form; such forms are provided by the Labor Ministry. Within 7 days of the submission of the form, employees have the right to revoke their resignation or mutual termination, provided they do so via electronic means. The Ministerial Decree of December 15, 2015 details the procedure for communicating resignation and mutual consent terminations.

Employees subject to termination laws

All employees except for those under probationary period.

Restricted or prohibited terminations

Discrimination, retaliation, pregnant women, mothers until the child is 1 year old, women within 12 months of marriage and employees with disabilities, under certain conditions.

Third-party approval for termination/termination documents

Dismissal based on objective and economic reasons for employees hired before March 7, 2015 must be preceded by a mandatory administrative conciliation procedure when more than 15 employees are employed in the office where dismissal takes place, or more than 60 in the national territory. Employees hired from March 7, 2015 are not subject to this procedure and may be dismissed without prior involvement of the labor office. Notice to labor authorities must be given within 5 days of the termination of employment.

Mass layoff rules

Strict information and consultation rules apply where 5 or more employees are to be made redundant over 120 days or less an enhanced consultation procedure (lasting up to 180 days and involving several public authorities) is provided for employers engaging more than 250 employees who intend to close a plant, office or autonomous department making redundant at least 50 employees.

Notice

Notice is set out in the collective bargaining agreements and varies depending on enrollment level, category and tenure.

Statutory right to pay in lieu of notice or garden leave

The employer or employee may pay an indemnity in lieu of working the notice period. Garden leave is not possible under Italian law.

Severance

In all cases of termination, including for just cause, the employer must pay a severance pay known as TFR, which is equal to the sum of each annual salary divided by 13.5, accrued for any single year. TFR is usually set aside on the books of the company. Employees are also entitled to receive the indemnity in lieu of any holidays or permits accrued and not used, as well as the pro-rata portion of the supplementary salary installments.

Post-termination restraints

Those that protect the employer's legitimate business interests may be enforced if reasonable.

Non-competes

Typically no longer than 6-12 months. To be valid and enforceable, such clauses must be agreed in writing and limited in scope, territory, time (ie, up to 3 years for non-executive and up to 5 years for executives) and must provide an adequate compensation – usually around 25 percent to 50 percent of the annual salary for a 1-year non-compete for the entire Italian territory. If such requirements are not met, the clause is null and void.

Customer non-solicits

Permissible.

Employee non-solicits

Permissible.

Waivers

Immediately unchallengeable if signed before a "protected venue" (ie, an administrative, union or judicial office or when all parties are assisted by lawyers), or challengeable within 6 months after termination.

Remedies

Discrimination

Re-instatement or, alternatively, at the employee's discretion, compensation for damages of 15 months' pay. Additional compensation equal to salary lost from dismissal to re-instatement with a minimum of 5 months' pay.

Unfair dismissal

If the company employs up to 15 employees in the same business unit and 60 employees total, the employer may be ordered to rehire the employee or, at its choice, pay compensation for damages, ranging from 2.5 to 6 months' salary.

If the company employs more than 15 employees in the same business unit and 60 employees in total, sanctions are more serious and may result in compensation from 12 to 24 months' pay or, in other cases, forced.

Re-instatement of the employee in the job (or, alternatively, the employee may choose to receive 15 months' compensation), plus compensation for damages up to 12 months' pay. Those provisions apply to employees employed before March 7, 2015.

Under legislation which applies to employees hired from March 7, 2015, in a company that employs more than 15 employees, newly hired employees who are unlawfully dismissed are entitled to compensation for damages of a minimum of 6 months' and a maximum of 36 months' salary. For companies with up to 15 employees, the penalties range from a minimum of 3 up to a maximum of 6 months' salary.

The employer must re-instate an employee in the event of a discriminatory, void or oral termination (or, alternatively, the employee may choose to receive 15 months' compensation) and must also pay damages of an amount equal to salary from the date of dismissal to the date of re-instatement. Re-instatement (plus compensation for damages of up to 12 months’ salary) is also provided for in the event of a dismissal for cause or justified subjective reason when it transpires that the alleged unlawful behavior did not occur.

Failure to inform & consult

Failure to follow the collective dismissal procedure leads to compensation of 12 to 24 months' pay. If the breach relates to the social criteria chosen for selecting which employees to dismiss, then re-instatement (or, alternatively, at the employee's discretion, compensation for damages of 15 months' pay) plus additional compensation of up to 12 months' pay.

Employees hired from March 7, 2015 who are unlawfully dismissed are entitled to compensation for damages of a minimum of 6 months' and a maximum of 36 months' salary.

Re-instatement (or, alternatively, 15 months' compensation) is provided for in the event the termination is solely communicated orally, with the additional payment of compensation for damages for a minimum of 5 months.

Criminal sanctions

Generally limited to the most serious cases of failure to comply with regulation regarding health and safety in the workplace. Under certain circumstances, failure to fulfill a court decision may lead to criminal liability. In addition, criminal sanctions may be imposed in case of irregular labor agency activities (ie without authorization).

Key contacts

Giampiero Falasca

Partner DLA Piper Italy [email protected] T +39 06 68 880 1 View bio

Fabrizio Morelli

Partner DLA Piper Italy [email protected] T +39 06 68 880 1 View bio