On Dec. 30, 2021, the Italian Parliament voted Italy's 2022 budget into law. As usual, the budget legislation is long, spanning various matters. This year, some of its provisions outlined new rules intended to address the employment consequences of offshoring transactions.
Over the course of 2021, when the COVID-19-related dismissals freeze started to be lifted, the media, unions and parliament representatives voiced concerns about cases of multinational companies closing units that had operated for a long time in Italy, especially when the absence of financial distress suggested the closed units were being offshored. The negative public sentiment stirred over the loss of jobs led to requests for restrictions on offshoring.
The subsequent restrictions that were enacted apply to more than just offshoring situations, and therefore employers that are planning layoffs in Italy should carefully consider the new provisions.
Affected Companies
The new rules apply to employers that, during the year prior to the layoff, had an average headcount of at least 250 employees.
Layoffs Covered by the New Law
The newly enacted provisions apply to the closing of a business unit, a plant, a branch, or an autonomous office or department in Italy, if the relevant activity is definitively ended (i.e., not in case of a mere reduction in force) and provided that the layoffs involve at least 50 employees. The law does not explicitly take into consideration the existence of a plan to offshore activities that are being discontinued.
Required Notice
The new law requires employers that intend to cease an activity to provide a written notice of such a plan at least 90 days before starting a collective dismissal procedure. Under European Union law, collective dismissals need to comply with a mandatory procedure; the new Italian law added this prior communication obligation and the other requirements described below.
The notice needs to be sent to:
- The works councils, if any.
- The local unions.
- The governments of the impacted regions. Italy is administratively organized into regions, each with an elected council and governor.
- The Ministry of Labor.
- The Ministry of Economic Development. This ministry has a unit that follows major company layoffs.
- Agenzia Nazionale Politiche Attive Lavoro (ANPAL), the national agency for placement and active employment policies.
Said notice must outline:
- The economic, financial, technical or organizational reasons for the closing.
- The number and job profiles of the employed staff.
- The time within which the business will cease to operate.
Plan to Mitigate the Social Consequences
No later than 60 days after giving the notice, the employer must draw up a plan to limit the occupational and economic consequences of closing the business and present it to the union representatives, the regions, the Ministry of Labor, the Ministry of Economic Development and ANPAL. The plan may not have a duration longer than 12 months and must outline:
- The actions planned to safeguard occupational levels and manage possible layoffs in a nontraumatic way, such as through the use of furlough, redeployment to another employer and incentive-to-leave measures.
- The actions aimed at re-employment or self-employment, such as training and professional requalification, also through the use of interprofessional funds.
- The prospects for the sale of the company or company branches with the goal of continuing the activity, including through the sale of the company or its branches to workers or workers' cooperatives.
- Any plans of reconversion of the production site, also for sociocultural purposes in favor of the interested territory.
- The timeline and measures to implement the planned action.
No later than 30 days after the presentation of the plan, the company and the works councils and unions must discuss it with the regional governments, the Ministry of Labor, the Ministry of Economic Development and ANPAL.
Until the review of the plan has been completed, the employer may neither start a collective layoff nor make individual layoffs. Moreover, the employer must update the works council and the other parties monthly about the implementation of the plan, including compliance with timeline and modalities and the relevant results.
Incentives
The law provides that the measures envisioned in the mitigation plan may be partly co-funded by the regional governments.
Moreover, in order to act in favor of an employment transition, employers and the unions may reach an agreement to obtain the social security funding of a furlough for employees for a period of up to 12 months.
If the mitigation plan encompasses the sale of the business or a part of the business so that the activity can be continued and occupational levels maintained, the law provides a material tax reduction of the sale-related taxation, meant to incentivize this type of transaction.
In the event that the employer, works council and unions reach an agreement on the mitigation plan and, following the implementation of the plan, the company has to start a collective layoff, the law provides a partial exemption from the payment of the dismissal fee normally due by employers within the context of a collective layoff.
In case the employer and the unions do not reach an agreement on the mitigation plan, the law grants a reduction of the length of time normally necessary in a collective dismissal procedure, thus acknowledging the efforts already spent in search of such an agreement.
Sanctions
Individual and collective layoff dismissals, where employers fail to provide the required 90 days' notice to works councils and unions or that occurred before the expiration of said 90 days' period, are void.
Employers that fail to present a mitigation plan or present a plan that does not outline the required content are subject to pay a sanction equal to twice the dismissal fee due in the event of a layoff.
Uberto Percivalle, a long-time SHRM member, is an attorney with Andersen
in Milan. He can be reached at uberto.percivalle@it.Andersen.com.