European Court of Justice finds Italian state monopoly of job placement services is illegitimate

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A December 1997 ruling by the European Court of Justice has declared that the Italian state's monopoly of job placement services is contrary to the principles of free competition, and is therefore illegitimate. The judgment comes at a time when the job placement system is being reformed in Italy, and is therefore likely to accelerate the move towards the greater liberalisation of labour market mediation in the country.

On 11 December 1997, the European Court of Justice (ECJ) issued its ruling in the non-contentious proceedings brought by Job Centre coop arl(C-55/96).

Background

In 1994, the Job Centre cooperative intended to set up in business in the job placement sector, and for this purpose applied to the Milan Law Court (Tribunale di Milano) for legal approval of its statute. Before granting the approval, the Law Court applied for a ruling by the ECJ, given that the cooperative's intended area of business conflicted with Italian law, which provides for a public monopoly of job placement services. However, since it had not been presented with a judicial dispute, the ECJ decided in December 1995 (Case C-111/94) that it was unable to rule on the matter. The Milan Law Court consequently rejected Job Centre's application. The higher-level Court in Milan (Corte d'Appello) to which Job Centre subsequently appealed, then referred the issue to the ECJ for a decision on questions of the interpretation of Community law.

ECJ ruling

The operative part of the ECJ's December 1997 ruling was as follows:

Public placement offices are subject to the prohibition contained in Article 86 of the EC Treaty, so long as application of that provision does not obstruct the performance of the particular task assigned to them. A Member State which prohibits any activity as an intermediary between supply and demand on the employment market, whether as an employment agency or as an employment business, unless carried on by those offices, is in breach of Article 90(1) of the Treaty where it creates a situation in which those offices cannot avoid infringing Article 86 of the Treaty. That is the case, in particular, in the following circumstances:

In short, the ECJ substantially declared that the state's monopoly of job placement in Italy is illegitimate. It based its decision on the consideration that job placement, like all economic activities, is subject to the European Union's rules on competition. The Italian state's monopoly of job placement is contrary to the principles of free competition, and is therefore illegitimate because the public job placement offices in Italy were unable to offer an adequate service in the field of intermediation between labour supply and demand. Thus the state's monopoly penalised the users of the service.

Responses from Italian Government and social partners

The Government and the social partners have reacted in contrasting ways to the ECJ ruling.

Within the Government, the Minister of Labour,Tiziano Treu, declared that the ruling had in any case been superseded by the reform of job placement services introduced by the Government in a draft decree-law presented in September 1997. This draft decree-law envisaged the decentralisation of competence for job placement to the regions and the elimination of the public monopoly of labour market mediation through the creation of a mixed system comprising both the state and private organisations (IT9710312F).

Nevertheless, the European Court's sentence has accelerated the reform. The Italian Council of Ministers approved the draft decree-law on reform of placement services on 19 December 1997 and issued a decree-law. Moreover, one of the critical points covered by the draft decree-law was the time-scale of opening the job placement sector to private organisations. The government proposal presented before the ruling provided that private organisations could begin operating in the sector 12 months after approval of the law. Parliament had suggested a delay of 18 months. Furthermore, before permitting the entry of private organisations, the necessary regional laws on job placement would have to be approved, given that powers on such matters are being passed to the regional administrations, and the time envisaged for such approval was six months. It was the time-scale for opening the sector to private organisations that provoked reactions to the reform proposed by the Government from the social partner. Whilst the Cgil, Cisl and Uil trade union confederations argued that the entry of private organisations should be preceded by reform of the public job placement system, the Confindustria employers' organisation criticised the delay envisaged by the reform. After approval of the decree-law on 19 December 1997, the Minister of Labour declared that the first private job placement bureaus should begin operations in June 1998.

The reactions by the social partners to the ECJ ruling are part of their broader assessment of the reform of job placement in Italy. On the part of the employers, Confindustria and Confcommercio pronounced themselves in favour of the ruling, given that it would accelerate the liberalisation of job placement. As regards the unions, the secretary of Cisl, Sergio D'Antoni, declared that elimination of the public monopoly of placement services had already been envisaged by the reform presented by the Government.

Commentary

Reform of job placement services in Italy began in the 1980s, and it has always proceeded at a leisurely pace. The most significant legislative measure was the abolition of the so-called chiamata numerica(hiring by number) system and the introduction of the so-called chiamata nominativa(hiring by name) system in 1987. A number of constraints on firms' freedom of action were thus eliminated, but the state's monopoly of the sector was never questioned. The reforms introduced did nothing to enhance the efficiency of the state job centres, which continued to perform only a marginal role in manpower placement.

It was this situation that in 1997 induced the Government to undertake more radical reform of labour market regulation. The ECJ ruling therefore comes at a time when the Italian labour market is undergoing profound change. Firstly, in June 1997 a law was approved which introduces temporary agency work (IT9707308F), and in 1998 the first temporary work agencies will open for business. Secondly, in September 1997 the Government presented a draft reform of the job placement system which envisages the lifting of the state's monopoly (see above). The use of new forms of employment contracts and transition to a mixed placement system are therefore the instruments selected to enhance the efficiency of labour market mediation.

The ECJ judgment should thus help to accelerate the passage to a placement system in which the state is flanked by private organisations. In fact, as stated, it was the delayed entry of private organisations that dominated the parliamentary debate prior to the ruling. (Marco Trentini, Ires Lombardia)

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