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Extending Italy’s covid redundancy ban
22/04/2021
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Art of Neapolitan nativity of S. Gregorio Armeno
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Marcello Floris
Marcello Floris is a partner and co-head of Eversheds Sutherland’s employment and pensions team in Italy

In March 2020, the Italian government passed emergency legislation placing a ban on redundancies for economic reasons. This was accompanied by the introduction of a furlough scheme across all sectors of the economy that was not just limited to manufacturing, as had historically been the case.

Dismissals for disciplinary reasons were not included in the ban which concerns solely dismissal for objective reasons or economic, technical, organisational reasons, such as where the role is being abolished due to specific business needs of the company.

The ban was extended without interruption by way of a number of law decrees throughout last year and the beginning of 2021, together with the extension of furlough. The last (so far) of the decrees was issued on 22 March 2021 and extended the ban on dismissals for any employer to 30 June 2021.

In addition to this, decree no. 41 further extends the ban for employers that can apply for the specific furlough scheme for non-manufacturing companies, such as private companies operating in the agriculture and fishing sectors, as well as those in the “Third sector” providing assistance to disabled individuals, such as health care and environment care services (Cassa Integrazione in deroga).

This particular furlough scheme has been extended until 31 December 2021, while the standard furlough scheme for manufacturing companies (Cassa Integrazione Ordinaria) lasts until 30 June 2021.

Decree no. 41 also introduced a new provision exempting companies that have genuinely ceased operations in Italy to the ban.

In the majority of cases, the liquidation procedure takes a long time, so dismissals in case of closure of business followed by liquidation seemed to be hardly feasible. This is the reason why decree no. 41 amended the existing rules, allowing also the possibility to terminate employment relationships for companies that ceased operations even if the liquidation of assets does not take place.

However, the ban is not extended to companies that have been declared bankrupt or those that have entered into a company-level collective bargaining agreement with trade unions, providing for an incentive package in return for termination of the employment relationship, limited to employees who sign up to the agreement.

The ban also does not extend to mutual terminations or to voluntary resignation, and is not applicable where there is a change of the contractor in supply agreements.

Finally, it has been common opinion that the ban is not applicable to executives (dirigenti) because law no. 604 of 1966 is not applicable to executives.

Notwithstanding this provision, last February the Court of Rome issued a decision whereby an executive’s dismissal was declared null and void because the ratio of the ban is to protect employees against the economic consequences of the pandemic. In light of this, the court established that such protection need to be applied to all subordinate employees, including executives.

Surprisingly enough the same court recently issued a decision that reaffirms the exclusion of executives from the ban. In this regard, it has to be pointed out that the Italian case law system is not based on binding precedents. This implies a judge is entitled to move away from opinions expressed by another judge in a different decision.

This is the perfect example of such Italian peculiarity: two decision very closely issued, by the same court, stating opposite principles. The latter decision, published on 19 April 2021 is grounded on the fact that law no. 604 is not applicable to executives.

In addition, for employees not classified at executive level, employers are entitled to rely on furlough schemes to reduce costs. Thus, a ban on dismissals, but the state provides furlough treatments to support employers. This is not feasible for executive who are not entitled to benefit from furlough schemes. Therefore, a ban on dismissals extended to executives is likely to have a strong negative economic impact on employers that are not entitled to include executives in furlough schemes.

One further peculiarity: executives can be terminated individually, but they cannot be included in mass dismissal procedures; this is likely an oversight of the Italian legislator.