We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
02 November 2016
Section 30 of Law 122/16 amended Article 29(3) of Decree-Law 276/03, which distinguished between a change of contractor and a transfer of undertaking, stating that when a new contractor hires employees already employed by the previous undertaking, the employees are not covered by the regulation concerning the transfer of undertakings. The EU Commission decided that this provision breached the EU Transfer of Undertakings (Protection of Employment) Directive (2001/23/EC), which aimed to provide guidelines concerning the maintenance of employee rights in the case of a transfer of business, without considering a change of contractor. The Busto Arsizio Trial Court's July 12 2016 judgment is notable in this context. In this case, an employee applied to the court for reinstatement by a new contractor – which had taken over the loading and unloading contract at an incinerator – under the rules concerning the transfer of an undertaking.
In assessing the regulation's compatibility with EU regulations, the EU Commission decided that the Italian Supreme Court's interpretation – according to which the rules relating to the transfer of an undertaking may be applied in the case of a change of contractor when the takeover is accompanied by a transfer of significant assets in addition to the transfer of employees – was unsatisfactory. Therefore, the commission requested Italy to amend Section 29 of Decree-Law 276/03 under the threat of an infringement procedure. According to the resulting changes, the regulations regarding the transfer of business do not apply when:
Although this constitutes an attempt to comply with the provisions of the Transfer of Undertakings (Protection of Employment) Directive and the European Court of Justice's interpretations in that regard, the new legislation remains unsatisfactory, as while it may appear easy to define an organisational and operational structure, it is more difficult to analyse the elements of discontinuity which determine a specific corporate identity.
According to the Busto Arsizio Trial Court, the transfer of the company's assets from one contractor to another constituted the transfer of business (under Section 2112 of the Civil Code). The court adhered to case law, according to which the transfer of undertaking is configurable in case of a change of contractor when the transfer concerns non-negligible assets and would make the performance of specific company activity possible. Established case law states that the policy concerning the transfer of business is an expression of the inherency principle of an employment relationship, which remains bound to a business group in all cases where its organisational structure remains unchanged.
In the present case, it was undisputed that the new contractor had taken over the economic activity previously carried out, and that almost all of the employees previously involved in the same activities (excluding the applicant) had been recruited by the new contractor. The new contractor's business was:
However, according to the court, this did not exclude the policy concerning the transfer of undertaking, especially considering that most of the assets remained the same.
The Busto Arsizio Trial Court decision goes beyond Supreme Court Statement 7121/16, which had already stated that in the case of a takeover involving a labour intensive contract, the transfer of undertaking policy will be applied if the transfer concerns employees with special know-how (eg, nurses), in compliance with EU Directive (2001/723/EC).
In light of the above, the court confirmed that an employee has the right to continue an employment relationship with a new contractor under the same conditions acquired under the previous employer.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.