Since 1 January 2017 companies in the metalworking and mechanical engineering sector have been required, every three years, to provide workers employed under permanent contracts with continuing professional development courses of a duration of 24 hours per participant, within their working hours and according to the procedures identified by Fondimpresa [Italian Inter-Professional Fund for Continuing Professional Development]. The first three-year period for which this measure is applicable will end on 31 December 2019. Safety training is not included in the 24-hour duration. The training initiatives available to workers are predominantly those on which the company, in possible agreement with the RSU [unitary trade union representation], has provided information to its workers. Alternatively, workers can exercise their right to receive training by requesting to participate in training initiatives aimed at the acquisition of transferable, linguistic, digital, technical or managerial knowledge, that can be used in the working context. If workers have still not participated in training courses by the end of the second year (that is, by 31 December 2018 in the initial phase of application), they may exercise their right during the third year (2019) until they have received 24 hours of training. In such cases, 2/3 of the hours taken up by the training initiative chosen by the worker (16 hours) will be scheduled during working hours, and 1/3 of the hours taken up by said training initiative (8 hours) will be scheduled outside of working hours. If the training initiatives involve an attendance fee, the company must cover the costs, up to a maximum of 300 euros, which may also be supplemented with any available public or private funds. In order for workers to take advantage of this subjective right during the third year of the three-year period, they must make a written request within the 10 working days prior to the start of the training activity in which they intend to participate, and – if requested by the company – submit the documentation necessary for exercising such rights. As a rule, 3% of the total workforce employed by the production unit can be absent at the same time in order to participate in training activities, unless otherwise agreed by the company and provided this is in line with the unit’s technical-productive demands. In companies with up to 200 employees, if the application of the aforementioned percentage generates fractional values, they will be rounded up to the nearest whole number. Any unused hours cannot be carried forward into the hours required for the next three-year period, unless they have remained unused due to technical-organisation demands, including cases where the maximum overall percentage for simultaneous absence has been exceeded. Training initiatives shall be duly documented by the provider or company, and registered. Exercise of the subjective right to receive training shall be subject to reporting to the RSU [unitary trade union representation]; any disagreements shall be reviewed jointly by the Management and the RSU.
Draft law no. 726 (the “DL”), which introduces significant changes to Italian Legislative Decree no. 231/2001 (the “Decree”) governing administrative liability for legal persons, companies and associations, including those not recognized as a legal entity (“Entities” or individually the “Entity”), is currently being examined by the Justice Commission of the Italian Senate.
The administrative liability of Entities
As is known, for the first time in our legal system, the Decree introduced administrative liability for Entities for certain offences committed in their interests or to their benefit by individuals occupying a senior position, or individuals who are subordinate to those occupying senior positions, within said entities.
The offences are compulsorily listed in the Decree, and the list has gradually grown over the years to include the following offences, among others: offences against the public administration, computer-related offences and the unlawful processing of data, corporate offences, offences committed for the purposes of terrorism or organized crime, manslaughter and serious personal injury or grievous bodily harm committed in breach of the laws and regulations on health and safety at the workplace, environmental offences, money laundering offences, the receipt and use of money, assets or benefits of unlawful origin, and offences against industry and trade.
There are many different penalties that may potentially be applicable in the event of a breach of the provisions contained therein (and, therefore, in the event that one of the offences provided for by said legislation is committed), and they may entail the application of the following:
– a quota-based financial penalty, which could entail a financial disbursement for the Entity ranging from a minimum of 25,800 euros to a maximum of 1,549,000 euros;
– a prohibitory penalty, such as (i) prohibition from carrying out the working activity, (ii) the suspension or revocation of authorizations, licenses or concessions, (iii) prohibition from entering into contracts with the public administration, (iv) exclusion from incentive schemes, grants and subsidies, and (v) prohibition from advertising goods or services;
– ancillary penalties, such as the publication of convictions and the confiscation of sums equivalent to the value of the profit obtained from the criminal offence.
In order to avoid incurring liability, the Entity must demonstrate that (i) it has adopted and effectively implemented a valid organization, management and control model (231 Model) aimed at preventing the commission of the offences listed above, and (ii) it has established a supervisory board (“SB”) responsible for ensuring compliance with the 231 Model. This board must function correctly and regularly, and supervise correctly.
Time and time again, case law has established the need for companies to have a 231 Model, even if it is not currently obligatory, in demonstration of the importance that it is taking on within the corporate compliance system.
As stated in the Senate’s announcement of 30 July 2018, the 231 Model consists of a combination of various elements (organizational and procedural arrangements for safety, control and support, and codes of conduct) that make up a proper management system aimed at preventing corporate risks. Its adoption brings with it improvements in the effectiveness and transparency of the Entity’s operations.
The obligatory nature of the 231 Model
The intention of the DL is to make the 231 Model and SB obligatory for certain categories of Entities.
In particular, this includes corporations and consortiums which have reported, even just on one of the last three balance sheets,
(i) total assets of at least 4,400,000 euros, or
(ii) revenue from sales and services of at least 8,800,000 euros.
Such Entities must also file both the decision by which the SB is appointed and the decision by which the 231 Model is approved with the Chamber of Commerce within 10 days from when they are adopted, respectively. If they fail to comply, obliged companies are ordered to pay an administrative penalty of 200,000 euros.
Conclusions
If the DL is approved at the end of the parliamentary process, then what has until now been a right left to the discretion of individual entrepreneurs will become an obligation. In fact, with this legislative intervention, the system provided for by the Decree will be strengthened, and companies that have still not complied with it will become obliged to do so. Consequently, the number of Entities required to prepare 231 Models will inevitably increase.
The increases provided for by the 2019 Italian Budget Law
Article 1, paragraph 445, of the 2019 Italian Budget Law concerns increases to the penalties for measures affecting the protection of workers’ interests and dignity.
According to the provisions in question, the values of the following penalties, in the context of employment and social legislation, are being increased as follows:
– Article 3 of Italian Decree-Law 12/2002 (converted with amendments by Italian Law 73/2002) governing the maximum penalty for unreported employment;
– Article 18 of Italian Legislative Decree 276/2003, which punishes sham employment intermediation; and
– Article 12 of Italian Legislative Decree 136/2016, which punishes breaches of administrative obligations linked to procedures for the transnational posting of workers.
– Article 18-bis, paragraphs 3 and 4, of Italian Legislative Decree 66/2003, which punish breaches of obligations
– concerning the maximum limits for working hours, weekly rest time, public holidays and daily breaks;
The Italian Budget Law also established that the increases must be doubled if, in the three previous years, the employer has been subject to administrative or criminal penalties for the same offences.
Without prejudice to the provisions of Article 13, paragraph 6, of Italian Legislative Decree 81/2008, the increases in question must be paid into the government budget in order to be reassigned, with a decree of the Italian Ministry of the Economy and Finance, to the preliminary budget of the Italian Ministry of Labour and Social Policy and allocated to an increase in the National Employment Inspectorate’s Decentralized Resources Fund for the optimization of personnel of the same Inspectorate according to criteria to be defined through supplementary collective bargaining in accordance with the provisions of the Italian Legislative Decree of 27 October 2009.
The Employment Inspectorate’s circular
With Circular 2 of 14 January 2019, the Italian Employment Inspectorate provided some clarifications. Specifically, it noted that, by virtue of the principle of tempus regit actum, the increases in question are applicable in relation to conduct carried out from 2019 onwards.
According to the Italian Employment Inspectorate, account must be taken of the fact that – as has been demonstrated by case law on several occasions – conduct of a permanent nature must be deemed to have been carried out when said conduct ceases (e.g. the maintenance of an unreported employer between 2018 and 2019 will be subject to the new penalty amounts).
The Employment Inspectorate also specified that further increases of 20% may be established for amounts due for breaches of other provisions concerning employment or social legislation, identified in a decree of the Italian Ministry of Labour and Social Policy.
Moreover, the Inspectorate confirmed that the procedures for establishing a special tax code have been initiated, and that “pending the issuance of said code, the increases must in any case be applied using the current tax codes”.
Contribution of De Luca & Partners on human resources as a sustainability objective. The HR is expected to have an increasingly substantial impact, as it can focus the whole organisation on ESG criteria. A sustainability trend was also identified in the projects that competed in the first edition of the Excellence & Innovation HR Award, promoted by the Law Firm ito select the best business operations or practices in Italy.
In recent years – in Italy too – we have noticed an exponentially increased attention on “sustainable finance” or “ethical finance”, as it is called , commonly identified with the acronym ESG, which stands for environment, social and corporate governance. This increased attention is not only the result of recent legislative actions, as Legislative Decree no. 254/2016 has transposed EU Directive 95/2014 as regards disclosure of non-financial and diversity information by certain large undertakings and groups, but it is also the result of a general and ever-increasing focus of economic operators on sustainability issues; and this was unprecedented since the industrial revolution. These aspects should clearly be – and increasingly are – used as a reference not only in large corporations, which are compelled to do so by law, but also by any companies (including small and medium sized businesses) that aim to be competitive and stand out at the national and international level. On the other hand, Legislative Decree no. 254/2016 is highly innovative in the legislative area, as for the first time companies have been required to issue a “non-financial balance sheet”, highlighting environmental and social issues related to personnel, respect for human rights and the fight against active and passive corruption. In such context, it’s more important than ever to have a well implemented organisation, management and control model pursuant to the Legislative Decree no. 231/01, with its code of ethics, which is an integral and essential part of it. However, the code of ethics takes on a new meaning, which is completely independent from the “231 system” – of which it is sometimes considered as a necessary corollary – since it becomes an actual charter of corporate values, with the aim of leading the actions of the parties involved in its organisation and operation. From an ESG perspective, the Human Resources Management (HRM) role – not the Human Resources Department – has a key role to play. For instance, the HRM – together with the managers in charge of sustainability – will have an increasingly substantial impact on the company organisation, as a result of its ability to focus the entire organisation on ESG values that are promoted by the company, for example by introdcing incentive systems. Therefore, human resources will play a key role in supporting the Sustainability strategy of corporations, actively contributing to the development of objectives to achieve sustainable performance on these issues. This is how the Strategic or Sustainable HRM has introduced the role of creating or strengthening the motivation and skills to achieve social and environmental objectives. Regarding in more details the “Social” area of ESG criteria, the goals and strategies of any Sustainable HRM are: equity, development and health, including the psychological well-being, of the individual. In other words, this means meeting personal and professional needs and expectations of employees. HRM has many tools at its disposal to achieve these objectives. Training, personnel performance assessements, remuneration system and active involvement of the staff in the corporate activities and to achieveany relevant objectives are just a few examples. In this context, the role of the labour lawyer evolves from “litigator” to “business partner” of the company that, in cooperation with HRM and with with Sustainability managers, contribute to develop a synergistic relation aimed at preventing any corporate issue with employees, i.e. a major category of stakeholders. A “sustainable” company that takes ESG criteria into account as its guiding principles will certainly have a limited number of lawsuits with its employees. Or rather, any high level of litigation with the employees, in our opinion, must certainly be carefully assessed as an indicator of a possible area for improvement n terms of sustainability. The major trend amoung companies in the Social area has also been identified in the projects that competed in the first edition of the Excellence & Innovation HR Award, promoted by our Firm, to select the best operations or practices in the labour and HRM sector in Italy. Reviewing the high number of projects that were submitted, it became clear how companies today invest in Sustainability, i.e. the promotion of social cohesion, of systems aimed at preventing rather than resolving conflicts and at pursuing the development and well-being of individuals. However, when employee-centered projects are implemented, paradoxically companies claim that a sustainable work enviroment encorages employees to “overperform” and to deploy efforts that may make a difference n terms of competitiveness and ability to attract talents as well as to maintain a high level of engagement. Therefore, business sustainability means efficiency, productivity and, basically quality.
Law no. 98 of 9 August, converting Law Decree no. 87/2018 (the so-called Dignity Decree) with amendments, was published on Official Gazette no. 186/2018.
While not altering the method of determination – linked to seniority – referred to in art. 3 of Legislative Decree no. 23 dated 4 March 2015, the Dignity Decree establishes that compensation in cases of wrongful dismissal should be equivalent to at least 6 months’ salaries (compared to 4 under the former legislation) and at most 36 months’ salaries (compared to 24), based on the final salary used to calculate severance pay.
The method for determining compensation, instead, required the involvement of the Constitutional Court.
On 14 November last, Official Gazette no. 45 published the operative part of judgement no. 194/2018 with which the Constitutional Court declared the constitutional illegitimacy of art. 3, para. 1, of Legislative Decree No. 23/2015 exclusively as regards the wording “equivalent to two months’ salaries, based on the final salary used to calculate severance pay for every year of service”.
According to the Constitutional Court, the method for quantifying compensation under Legislative Decree No. 23/2015, also in the version amended by the Dignity Decree, results in a “rigid compensation system that applies uniformly to all workers and cannot be scaled based on parameters other than seniority of service. In this way, compensation becomes a standard, flat-rate liquidation…of the damage to workers arising from wrongful dismissal from permanent employment”.
This contrasts with the principles of equality and reasonableness, and therefore the determination of damage in the event of wrongful dismissal should be a matter for the Courts.
As a result of the ascertained unconstitutionality of the Legislative Decree, today, the courts also have ample discretion over the dismissal of resources hired after 7 March 2015, which discretion – according to the Constitutional Court – shall have to be exercised “within the minimum and maximum limits of compensation (the new limits dictated by the Dignity Decree – ed.)”, “taking into account a number of criteria in addition to seniority of service”.
The courts, therefore, may exercise discretion in determining the amount of compensation due to workers in the event of wrongful dismissal, with the difference that workers hired after the entry into force of the Jobs Act may – in certain cases – be awarded greater compensation than those hired before 7 March 2015, thereby falling under the provisions of art. 18 of Law 300/1970.
With Lawyers Enrico De Luca and Stefania Raviele, we intend to review the situation on workers’ safeguards and on the risks of a lawsuit due to wrongful dismissal.
