Draft legislation on labour market reform approved

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In June 2003, the Italian government approved a draft decree enacting the recent 'proxy law' on employment and the labour market. The decree envisages numerous measures and innovations in terms of employment services and contracts - such as staff leasing, on-call work, project work and work/training contracts - and of the involvement of the social partners in management of the labour market. Before the decree is finally passed, it will be discussed by the government and the social partners, which have differing views on the proposals.

On 6 June 2003, the centre-right government approved a draft decree enacting the recent 'proxy law'- ie a law which delegates power to the government to legislate on particular matters - on employment and the labour market (law no. 30 of 14 February 2003- IT0303103N). The reform law takes up many of the proposals made by Marco Biagi - the labour law academic and government consultant murdered by the Red Brigades (Brigate Rosse) in March 2002 (IT0203108N) - and set out in the White Paper on the labour market published in October 2001 (IT0110104F), and implements some of the measures included in the July 2002 Pact for Italy (Patto per l'Italia) - a national agreement on the labour market, the tax system and the South of Italy (IT0207104F). The text of the decree is now being examined by the social partners, the regional administrations and the relevant parliamentary committees, before returning to the government for definitive approval.

The draft decree

The draft decree, which implements the so-called 'Biagi reform', contains many measures, mainly relating to job placement services and forms of employment relationship.

Job placement

As regards job placement services, a special register for employment agencies will be created, the purpose being to 'create an efficacious and consistent set of instruments to ensure the transparency and efficiency of the labour market, and to improve work entry possibilities by the unemployed and by first-job seekers, with particular reference to the weak segments of the labour force' (article 3). Employment agencies may engage in such activities as staff leasing and job placement services, personnel recruitment and selection, and support worker redeployment and outplacement. Thus, private and public job placement services are practically placed on an equal footing, and the opportunity to provide job placement services is extended to public and private universities, local authorities, upper secondary schools, employers’ associations, trade unions and certain professional associations, including the National Order of Labour Consultants (Ordine nazionale dei consulenti del lavoro). All organisations authorised to offer job placement services will have to provide their assistance to workers entirely free of charge.

Another measure intended to enhance the match between labour demand and supply is the creation of a 'national continuous labour exchange' (borsa continua nazionale del lavoro). This consists of an on-line information system which can be freely consulted by workers and firms and is accessible from any point in a network. This system will also enable the Ministry of Labour and Social Policies to monitor ongoing developments, particularly as regards the effectiveness of active employment policies, equal opportunities measures and the labour market integration of disadvantaged workers.

New forms of employment contract

A second aspect of the Biagi reform bill focuses on the definition of new types of employment contract, and the modification of existing ones, with a view to 'enhancing the quality and stability of work' by making the employment relationship more adaptable to the needs of firms and workers. Moreover, ample room is left for collective bargaining to define the conditions of, and possible restrictions on, the use of the new types of employment contract. The main innovations are the following:

  • The introduction of fixed-term or open-ended staff leasing contracts (contratto di somministrazione di lavoro). Under this system, companies may 'lease' the workers they need for technical, productive or organisational reasons from employment agencies. Permanent staff leasing is allowed only for particular kinds of work, such as portering and cleaning, surveillance and security, information technology consultancy and assistance, personal assistance and care services, the management of call centres and other areas to be specified by collective bargaining. As regards the leasing of workers on a fixed-term basis, this may also concern the 'user' company's core activities, and collective bargaining may impose restrictions on its use by employers. The workers on staff leasing contracts enjoy the same rights as do the employees of the user company, including trade union rights, and they receive the same pay. The leasing companies must pay a sum equivalent to 4% of the remuneration received by the workers on staff leasing contracts into a joint worker/employer fund, to be set up by the parties to a forthcoming national collective agreement for staff leasing companies. These financial resources will be used to fund training and retraining courses, social security provisions or income support at the conclusion of the workers' period of employment, and work-entry schemes for disadvantaged workers. The staff leasing system, where the user company has full managerial authority over the workers concerned, will differ sharply from subcontracting or outsourcing, in which cases it is the subcontractor firm that exercises such authority. A staff leasing agency, moreover, must fulfil all the requirements that temporary work agencies must meet, and it must furnish all the protection envisaged for temporary agency work, whose place will be taken by fixed-term lease work. Moreover, the decree envisages that staff leasing may be used to favour the entry or re-entry into work of disadvantaged groups of workers, initially through specific projects carried out jointly by staff leasing agencies, job placement services and local authorities.
  • The reform bill envisages new types of contract for reduced, 'modulated' or flexible working time. One of these is the so-called on-call job (lavoro intermittente), whereby the worker is available to be used by the employer during a pre-established period of time. However, the employer may make use of the worker for only a limited number of days in this period, depending on production peaks and organisational needs, and must notify the worker that his or her services are needed at least one working day in advance. The on-call job contract must stipulate the monthly allowance to be paid to the worker during the period of his or her stand-by availability to the employer. The amount is to be fixed by collective agreements but may not be less than a level established and periodically updated by the Ministry of Labour and Social Policies, after consultation with the employers’ associations and trade unions.
  • The reform bill confirms and specifies regulations on job sharing (lavoro ripartito), an arrangement based on 'a special contract whereby two or more workers jointly assume the responsibilities of a single work obligation' (article 41). The workers may decide - informing the employer on a weekly basis - on substitutions and exchanges, as well as alter their working hours schedules. Pay and social security contributions are not calculated beforehand but on a week-by-week basis.
  • In order to encourage firms to use part-time work, and to facilitate the labour-market entry of people who need to reconcile work with family responsibilities, study or other commitments, the bill seeks to foster the use of part-time work - both 'vertical' (ie comprised of working days similar to those of full-time workers, but with the number of working days reduced), or 'horizontal' (with reduced hours every day) - by including 'elastic' clauses which allow employers (according to criteria and at the conditions agreed by the parties) to increase working time and modify schedules.
  • An especially significant part of the reform bill concerns the rules on contracts for employer-coordinated freelance work (collaborazione coordinata e continuativa) - 'semi-subordinate' contracts which, according to the most recent surveys, currently affect around 2.3 million Italian workers (IT0011273F). The new rules state that employer-coordinated freelance work should concern 'one or more specific projects or work programmes, or phases thereof, determined by the employer and managed autonomously by the freelance worker, who is responsible for the final result, in coordination with the employer’s organisation and regardless of the time taken to complete the work' (article 61). This provision effectively forbids open-ended contracts for employer-coordinated freelance work. It intends to re-regulate this type of employment relationship, either by linking it to a project or bringing it under the regulations on subordinate work.
  • The reform bill also introduces supplementary work (lavoro accessorio) - that is, 'work of a merely occasional nature undertaken by persons at risk of social exclusion or who have not yet entered the labour market or who are about to leave it' (article 70). By 'merely occasional' is meant activities involving a worker for no more than 30 days per calendar year, and for which in any case the remuneration amounts to no more that EUR 5,000 in a calendar year. The service performed must take the form of minor and exceptional domestic work (for instance, child-minding or care for the elderly), private tuition, gardening or the organisation of social, sporting, cultural or charitable events. In order to regularise these employment relationships, the employer must purchase 'vouchers' comprising both pay and social security contributions which it issues to the worker (each voucher booklet for supplementary work has a nominal value of EUR 7.5 for an hour of work, of which the worker receives EUR 5.8).
  • Another set of employment relations addressed by the reform bill are those with a training content, such as apprenticeships. It will be possible to conclude an apprenticeship contract with a young person aged between 18 and 29 for various purposes, these being: (a) fulfilling the right/duty to education and training; (b) gaining a qualification by means of on-the-job training and technical-professional instruction; and (c) acquiring a diploma or complementing a higher education programme. Furthermore, for particular categories, such as young people aged 18 to 29 and disadvantaged workers (long-term unemployed people aged under 32, unemployed workers aged over 45, women resident in areas with high levels of female unemployment etc), the bill introduces a 'work entry contract', in order to achieve 'by means of an individual project to adjust the worker’s professional skills to a particular job, his or her labour market entry or re-entry' (article 55). This employment relationship will replace the existing work/training contract s, which have been criticised by the EU for their overly wide scope of application.

Other issues

Further significant aspects of the reform bill concern the introduction of a certification procedure for contracts, the purpose being to reduce disputes over the validity of employment contracts, as in the cases of on-call jobs, job sharing, part-time work or project work. Certification takes place on the basis of a voluntary procedure, activated jointly by both parties to the individual contract, and is carried out by authorised organisations, such as joint bodies (see below), provincial labour agencies, and public and private universities enrolled on the register of employment agencies.

Finally, the reform bill seeks to foster cooperation between trade unions and employers in the labour market area by creating joint bodies (enti bilaterali). Joint bodies may deliver a variety of services to job-seekers (counselling, training and placement), to workers concluding work contracts (certification - see previous point), and to people already in employment (mutual management of funds for training and income support, health and safety protection, and the promotion of good practices against discrimination and for the inclusion of disadvantaged workers). In this way, the reform seeks to promote a model of participatory and collaborative industrial relations.

Reactions

Approval of the draft decree enacting the proxy law on employment and the labour market was greeted with great satisfaction by the government, which believes that the law will turn the Italian labour market into one of the most flexible in Europe. Numerous members of the centre-right governing coalition hailed the reform law as an excellent means with which to increase the employment rate and to bring underground activities out into the open. Wholly favourable comments were also expressed by Confindustria, the major Italian employers’ association, whose president, Antonio D’Amato, declared that the law, 'which results from genuine dialogue between the social partners and the government', will be important in creating new jobs, especially for young people, and in increasing the country’s competitiveness.

Conflicting opinions were expressed by the trade union confederations, however. The General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil) is decidedly hostile towards the reform of the labour market, criticising the government because, in its view, legislation of such importance for millions of workers has been adopted without the government and its experts discussing it with the other social actors. As regards the content of the decree, Cgil maintains that it will indeed turn the Italian labour market into one of the most flexible in Europe, thereby leading to an increase in job precariousness. According to Cgil, labour will increasingly become a commodity, so that the work contract will be turned into a form of mere 'commercial exchange'. Cgil has begun to organise industrial action against the labour market reform, starting with a two-hour strike and assemblies in all workplaces.

Decidedly more cautious in their reactions have been the other two large union confederations - the Italian Confederation of Workers' Unions (Confederazione Italiana Sindacati Lavoratori, Cisl) and the Union of Italian Workers (Unione Italiana del Lavoro, Uil) - which acknowledge that it is necessary to make the labour market more flexible, but maintain that such flexibility should arise from negotiations between the social partners and not from unilateral action by companies. Although the two confederations have expressed their approval of certain aspects of the reform law - the new rules on employer-coordinated freelance work, in particular - they argue that talks with the government should introduce some improvements.

On 18 June 2003, the talks between the government and the social partners on the draft decree started. All of the employers’ associations and trade union organisations presented detailed evaluations and demands for adjustments, including Cgil, which remains the organisation expressing the most critical views on the reform. The other social partners, in general, welcomed the overall approach of the reform, but asked for a number of specific modifications. For instance, the unions, in order to be in a position to express a positive evaluation of the reform, demanded a substantial increase in the regulatory role of collective bargaining as regards access to, and the scope of application and conditions of, the new employment relationships, and new worker protection guarantees, with a view to avoiding flexibility becoming precariousness. Confindustria, by contrast, criticised some parts of the draft decree which it regards as too restrictive or burdensome for firms. This is the case, for instance, for the new rules on project work which, according to Confindustria, may deprive firms of an import form of 'collaboration'- that of employer-coordinated freelance workers - and for the 4% contribution levied on the pay of workers involved in staff leasing contracts, which Confindustria believes to be too high.

Commentary

The reform law on the labour market seeks to intervene on two fronts: the efficiency of the labour market and the variety of work contracts. The aim is to ensure greater transparency, certainty of relationships and protection for workers. From a qualitative point of view, the declared objectives of the law are to improve the quality of work, reduce irregular work and increase the stability of the employment relationship, including by reducing the 'fixed costs' connected with new recruitments.

The greater efficiency and transparency of the labour market should be achieved by two means in particular: (a) increasing the number and extending the role of the private actors in management of the job placement system, by setting up an integrated system with the public service; and (b) the creation of a 'continuous national labour exchange'. These are initiatives that will take time to implement and which it will be possible to assess only after they have been in operation for a certain period. However, two considerations should be borne in mind. First, even in countries where job placement services are almost entirely liberalised, the amount of people who find work through them is still relatively small. Moreover, problems of adverse selection may affect the public services, which may find themselves having to deal with the most difficult situations. Consequently, a response to the shortcomings of job placement services cannot consist solely in providing a greater role for private operators; it should also involve the upgrading of the public operators. Second, the idea of creating a national labour exchange emphasises the importance of the circulation of information and - apart from the technical and administrative difficulties of setting up such an system - seems to underestimate the social implications of the geographical mobility of labour, and therefore the need to flank this information system with a series of services able to make such mobility socially sustainable. Furthermore, it is a measure which seems to neglect the heterogeneity of labour demand and supply, as well as to overlook the key importance to firms of personnel selection processes, which it is difficult to replace with information culled from an on-line database.

As regards employment contracts, the law has opted for greater variety, in order to furnish a range of alternatives from which employers (or workers, albeit to a lesser extent) can choose according to their needs. At the same time, in order to protect workers more effectively, stringent rules have been included and ample margins for collective bargaining have been envisaged. In some respects, this approach seems to conflict with the goal of achieving a simpler and more transparent labour market. Besides, it cannot be taken for granted that it will give rise to greater adaptability of the labour market and reduce irregular work. In practice, the increase in forms of contract and the complication of the rules could make the handling of employment relationships by companies more complex and difficult.

In general, the steps taken seem to be a 'second-best' solution compared with initiatives that would:

  • on the one hand, include overall reform of the 'social shock absorbers' (the measures which seek to protect workers affected by job losses and restructuring - IT0205204F) - a reform on the agenda for years but still not under way - to make the labour market more fluid by providing concrete support during spells of unemployment in the form of income support, work re-entry services and retraining; and
  • on the other, define a set of fundamental rights and protections applicable to all workers (including the self-employed) regardless of the contractual form, according to the model proposed in the so-called 'Jobs’ Statute' (IT9709310F).

Whatever the case may be, the ability to achieve the goals of increased employment and an improved quality of work can be assessed only through close monitoring of the reform’s effects. From this point of view, the monitoring activities envisaged by the decree and the involvement of the social partners in its application may enhance the effectiveness of its provisions. (Diego Coletto and Roberto Pedersini, Fondazione Regionale Pietro Seveso)

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