Transferring employees on an outsourcing in Italy: overview
A Q&A guide to outsourcing in Italy.
This Q&A guide gives a high level overview of the rules relating to transferring employees on an outsourcing, including structuring employee arrangements (including any notice, information and consultation obligations) and calculating redundancy pay.
To compare answers across multiple jurisdictions, visit the Transferring employees Country Q&A tool.
This Q&A is part of the global guide to outsourcing. For a full list of jurisdictional Q&As, visit www.practicallaw.com/outsourcing-guide.
For the general rules relating to outsourcing, visit Outsourcing: Italy overview.
Transfer by operation of law
For a transfer of a going concern, all the employment contracts belonging to the going concern (or a part thereof) are automatically transferred to the transferee by operation of law and the consent of the employees is not required (Article 2112, Italian Civil Code, implementing Directive 2001/23/EC on safeguarding employees' rights on transfers of undertakings, businesses or parts of businesses (Transfer of Undertakings Directive) (TUPE)). Article 2112 must be applied each time the transaction provides for a transfer of a going concern (or a part thereof), irrespective of the kind of transactions to be carried out (for example, the sale of a business or merger, among others).
A going concern is defined as "all the assets organised by an entrepreneur for the purpose of carrying out the business" (Article 2555, Italian Civil Code). The assets of a business as a going concern include, among others:
Contracts (including employment contracts).
Article 2112 of the Italian Civil Code defines a part of a going concern (ramo d'azienda) as a sub-set of organised assets within a going concern, which can be identified by the transferor and the transferee at the moment of the transfer.
With regard to the meaning of "a part of a going concern" court precedents have specified that the possibility of identifying it at the moment of the transfer does not allow the parties to "create" a going concern by unifying various elements carved-out from different business units which were separately operating before the transfer. If this is the case, no transfer of a going concern occurs and, as a result, the relevant employment contracts cannot be automatically transferred to the transferee without the individual consent of each employee involved in the transfer. The possibility to identify "a part of a going concern" at the moment of the transfer must be limited to the carve-out of a pre-existing part of the transferor's business to be qualified as an organised business unit able to carry out a business both before and after the transfer.
The transferor and the transferee are not allowed to tailor the perimeter of the going concern (or a part thereof) at their discretion ("cherry picking" is not permitted) and, consequently, all the employees belonging to the going concern (or a part thereof) will be automatically transferred to the transferee and such transfer cannot be overridden by any agreement between the transferor and the transferee.
On the other hand, in all the cases which fall outside the scope of Article 2112 of the Italian Civil Code, the consent of each employee to be transferred is required.
Change of supplier
There are no legal provisions providing for an autonomous discipline regarding the transfer of employees on a change of supplier. Nevertheless, there are some collective bargaining agreements which provide for the transfer from the old supplier to the incoming one.
There are no provisions regarding the termination of an outsourcing with the subsequent transfer back to the customer. If the transfer back is a TUPE transfer, all the employment contracts belonging to the relevant going concern (or a part thereof) are automatically transferred to the transferee by operation of law and the consent of the employees is not required.
As a result of the TUPE transfer, the:
Employment relationship of the transferred employees continues with the transferee and they are entitled to terms and conditions of employment equivalent to the ones set out by their individual employment contracts with the transferor.
Collective bargaining agreement (CBA) applied by the transferor will automatically be substituted by the CBA applied by the transferee if the relevant CBAs are of the same level. If this is not the case, the transferee will have to apply to the transferred employees the CBAs applied by the transferor, until their expiry.
Transferor and the transferee will be jointly liable for all the entitlements of the transferred employees accrued prior to the transfer.
Employees do not have the right to refuse to be transferred. However, employees can resign on reasonable grounds (provided that a substantial change of the working terms and conditions occurred after the TUPE transfer) within three months from the relevant TUPE transfer: if this is the case, they are entitled to an indemnity in lieu of the notice period (if they decide to not work during the relevant period).
If there is a change in control following a TUPE transfer, employees or executives (dirigenti) can exercise their collective right, if any, to resign within the period set out by the relevant CBA. In this case, under the most common CBA for executives, they are entitled to receive an indemnity (this indemnity is due if the change in control resulted in a detrimental situation for the relevant executive).
Regarding redundancy due to the TUPE transfer, see Question 3.
In Italy, the pensions regime is mainly public, and therefore it is not affected by a TUPE transfer.
Private pensions or healthcare schemes are usually granted to employees under a CBA: therefore, if the buyer and the seller apply different CBAs, the pension and/or healthcare schemes applied to employees may change.
Employees' benefits can change in relation to the principle of equivalence (see above, General terms).
See Question 4.
For further information regarding the opportunity of implementing individual and/or collective redundancies before or after the outsourcing, see Question 2.
Generally, in case of dismissal other than for cause (as redundancy), an employee is entitled to work his/her notice period or receive a payment in lieu of this notice period.
In the case of payment of the indemnity in lieu of notice, the relevant monthly salary to be taken into account must be calculated by including base salary, benefits and average of bonuses paid in order to determine the so called overall monthly salary. The length of the notice depends on the:
Category and contractual level of an employee (for example, executive, first level white collar and so on).
Employee's length of service.
In any case, each time an employee is made redundant, the employer must also pay to the employee:
Trattamento di fine rapporto (TFR). This is a statutory payment due upon any termination of the employment, equal to 7.4% of all sums paid to the employee during employment.
Other salary items. This includes accrued and not taken holidays, leave of absence, overtime pay and other salary items due to the employee.
Pro-rata of the additional months' salaries. Depending on the CBA applied by a company, employees' salary can be paid in 13th or 14th instalments. Assuming that employees' salary is paid in 14 instalments (with the 13th and 14th instalments being paid in December and June/July respectively), on a termination part-way through the year an employee will be entitled to a pro rata payment for those additional instalments.
The above sums (except for the indemnity in lieu of notice) are not considered as additional costs of the redundancy since they are already notionally accrued in the employer's balance sheet.
No other redundancy pay is due to employees by the employer in case of individual or collective redundancy unless the relevant dismissal is deemed unfair. In the latter case, they will be entitled to the relevant and applicable remedies set out by the law. Please also note that is market practice to budget a payment of incentive to leave (on top of the mandatory costs highlighted above) in order to avoid challenging of the dismissal and the costs of a potential litigation.
Generally, the transferee will only be able to make changes to terms and conditions of employment with the express consent of the employees.
Regarding collective rights arising under a CBA, the collective rights granted by the transferor and the transferee can be harmonised through a negotiation with the relevant unions or work councils. The transferee can also unilaterally substitute its CBAs for the CBAs applied by the transferee if the CBAs are on the same level (for example, they are both national or company collective bargaining agreements).
Under Italian law, a TUPE transfer is not per se a valid reason to ground dismissals (either individual or collective ones). Italian law prohibits dismissals grounded on the fact that a TUPE transfer will occur/occurred. This prohibition applies to both the transferor and the transferee.
Termination for economic reasons remains possible but it will be advisable to make employees redundant after some time has passed from (or some time in advance of) the transfer. No statutory provision or material case-law exist in this respect and a period of three months before or after the transfer would in all probability be too short. A period of 12 months can materially reduce the risk of the dismissal being held as grounded by the transfer.
If individual or collective redundancies to be implemented within 12 to 18 months following the TUPE transfer are already foreseen before the transfer, the envisaged redundancies must be disclosed to the relevant unions in the context of the mandatory information and consultation procedure to be carried out with the unions before the implementation of the TUPE transfer.
Secondment is not generally seen as a tool to structure an outsourcing. However, the employee arrangements of an outsourcing may be structured as a secondment, but above all when they are carried out between companies within the same group.
In case of an employee's secondment, all of the following conditions must be fulfilled:
An economic interest of the seconder must be satisfied through the secondment.
The secondment must be temporary.
The seconder remains responsible for the economic and normative treatments due to the employees.
The seconded employee is subject to the hierarchical power of the employer of the company where he has been seconded.
The employee's tasks cannot be modified due to the secondment without his express consent.
Information, notice and consultation obligations
In general, there is no legal obligation to provide the other party with information in relation to the employees. However, it is market practice that relevant information regarding employees to be transferred within a TUPE transfer must be disclosed by the parties before the implementation of the relevant transaction.
A duty to inform and consult trade union representatives arises whenever a TUPE transfer is proposed, provided the transferor or the transferee of the business has more than 15 employees and at least one is going to be transferred.
Both the transferor and the transferee must consult with their respective work councils (Rappresentanze sindacali aziendali and Rappresentanze unitarie aziendali) and the appropriate local bodies of the trade unions that signed the collective bargaining agreement applied by the transferor or transferee. If no work councils exist, they must inform and consult the local bodies of the trade unions of the most representative union in the relevant industry.
The transferor must provide the trade unions with a written statement containing all of the following:
Date (or proposed date) for the TUPE transfer.
Reasons for the proposed transaction.
Legal, economic and social implications of the TUPE transfer for employees.
Measures it envisages will be taken by the transferee in relation to the employees.
The written notice must be given to the trade unions at least 25 days before the first binding agreement between the transferor and the transferee. The trade unions may then request a meeting with the transferor and transferee by submitting a written request within seven days of receiving the transferor's notification.
The meeting must take place within seven days of the union's request. The obligation to inform and consult is fulfilled on the earlier of:
An agreement being reached.
Ten days after the consultation process starts (that is, ten days from the date of the first meeting).
Therefore, it is not a legal requirement to reach an agreement with the trade unions. In the event of an infringement of the duty to inform and consult, the trade union may apply to the labour court (Tribunale del Lavoro) for an injunction which may lead to one of the following consequences:
An order to provide unions with proper information and consultation (this is the most common consequence).
An order that effectively freezes the TUPE transfer until proper information or consultation has taken place (this is a less common consequence.
An order that invalidates the TUPE transfer (this is a rare consequence).
Failure to comply with the court's injunction is a criminal offence, the penalty for which is up to three months' imprisonment for the directors or a fine of up to EUR206.
Employers that carry out a business transfer must inform the relevant Provincial Employment Body (Centro per l'Impiego) within five days of the TUPE transfer. Failure to comply is sanctioned with fines.
Luca Capone, Partner
Freshfields Bruckhaus Deringer LLP
Professional qualifications. Italy bar, Avvocato
Areas of practice. Employment; outsourcing
- Assisting Italian and international clients in local and multi-national outsourcing deals as well as in complex carve-out transactions.
- Providing legal assistance to providers and customers of outsourcing services.
Luca Ulissi, Partner
Freshfields Bruckhaus Deringer LLP
Professional qualifications. Italy bar, Avvocato; admitted to defend before the Italian Supreme Court (Corte di Cassazione)
Areas of practice. Information technology; telecommunications; outsourcing; procurement.
Assisting Italian and international clients in local and multi-national outsourcing deals as well as in complex carve-out transactions.
Providing legal assistance to providers and customers of outsourcing services.
Languages. Italian and English