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Erratic reform of the Italian labour market

Erratic reform of the Italian labour market

Everyone agrees that in Italy there is a dramatic and urgent need to change the basis upon which the employment market is structured in order to provide transition to current workforce current needs while accelerating growth thereby rendering the employment market more competitive.

Italy has historically had an antiquated and rigid culture of the employment relationship constructed on the principle of a stable employment with the consequent lopsided–protection afforded workers by Italian law .

Times have changed and the Italian job market structure must change and face the new challenges raised from the worldwide economic crisis: i.e. competiveness of the Italian economy to ease the dislocation of multinational commerce and attract investments.

The changes, as advocated by the Italian prime minister, should generate a profound revolution of the employment structure foundation, the stable employment relation, and consequently the balance of rights between employers and employees.

The Italian technocratic government has in fact stated at the beginning of the reform process that this challenge should by now have been implemented by developing specifics tools to boost employment and permit both hiring on a temporary basis and allow reasonable termination of employees and thus instilling flexibility in the employment relationship .

These should have been the goals of the project reform but, in reality, it appears to be a failure.

Indeed, compared to the past provisions of law, it appears that the existing reform will increase the cost,-in terms of social security contributions,– on the assumption of a the temporary basis instead of reducing it. For example, the cost of temporary employment will rise 1,4% while contract employment on a project basis grows to 33%.

The concept of flexibility in case of termination of the employment relationship is elusive. In fact, it has arisen that the employer decision to terminate, for disciplinary or objective reasons, will continue to depend on the judge. This will undoubtedly generate uncertainty on the requirements needed to justify the dismissal.

The reform does not provide any standards regarding the criteria to be applied for the above assessment leaving it to the unbridled discretion the judge.

Moreover, it is of import that the  sanctions to be applied will also be determined upon the assessment of the judge.  If the dismissal is deemed by the judge to have been patently unjustified, the sanction is reinstatement of the employee and payment of damages. In the remainder of cases,-which are neither listed nor detailed in the reform, the sanctions will be merely economic.

It is clear that the reform opens further issues in case of termination of the employment relationship which augur inflexibility.

The foregoing situation was mainly generated by  the trade-unions in the process of negotiations.

In Italy, the unions have always been a influential and potent actor in the social and employment sectors. It is well known that they are the historical ally of the centre left Democratic Party (PD) whose vote was necessary to pass the reform. The Unions are also well-organized in the Italian territory with its high number of unionized employees. In the event the unions oppose the reform movement, this poses  for the government and the populace a high risk of potential conflict, namely, the threat of strikes with the risk that protests against the reform could turn violent.

Accordingly, it clearly appears that the Italian government, pressing ahead with labour reforms while sensitive to the pressure of union objections and the threats of strikes, was obliged to compromise which has diluted the government’s plans for the promised and needed flexibility in the labour market.

Andrea Nicodemi

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