Simone Carrà
Littler, Milan
scarra@littler.com

Pandemic and reorganisation/restructuring needs

The world is much changed from before the pandemic. If we thought that the end of the pandemic (if it really has come to an end) would have meant the beginning of a new life, where all activities would have restarted from where they stopped, then we are disappointed. It is now well understood that we need to deal with new challenges posed in the economic/financial and political/geopolitical world.

From a labour perspective and primarily from the perspective of the employer, irrespective of whether we really are out of the pandemic or not, it is a fact that companies, entrepreneurs and employers need to reorganise and in some cases downsize their business. The issue is how to carry this out in terms not only of technicalities, timing and best practices, but also correctly pinpointing ultimate aims and preventing any unintended negative consequences.

Rediscovering an ethical approach

An ethical approach underpinning a strategy for restructuring requires careful consideration of the aims to be achieved. There are several ways to achieve pragmatic, short-term targets, but identifying the ultimate aims is much more complex.

Our actions in legal practice rest on the principle of good faith and reasonableness. As lawyers we all need to understand our client’s aims and build the most effective and tailor-made strategy, based on those aims. But we would not be doing our best if we did not use our experience and track record to also show alternatives which while apparently differing from the original ones, may actually be much more forward-looking. This is because lawyers wish their clients to thank them not only because they have achieved the short-term aims, but also because the lawyer advised on the most efficient long-term perspective. There is rarely only one strategy available to the employer. Instead, potential options depend on clients, expectations, people, timing, geographical area, involved trade unions and several other factors depending on the context.

As a first step therefore, the lawyer may suggest rethinking the ultimate implications of their client’s potential actions, to identify proposed strategy.

The restructuring and reorganisation process – two recommendations

A comprehensive discussion of all possible considerations aimed at building an effective restructuring and/or reorganisation processes is beyond the scope of this paper. However, two recommendations are outlined below for helping to define the strategy of a planned restructuring/reorganisation process.

First, is to activate a system of constructive and fair relations, both on an individual and collective basis. Doing so does not give employees the right to prevent the process. Italian trade unions may appear to be far from ready to build a constructive industrial relations system; and this may be the first obstacle for any non-Italian entrepreneur approaching a restructuring and reorganisation process in Italy. Nevertheless, it is important to involve trade unions and works councils; identify the correct content and timing for disclosing relevant information; and convey the right messages about the process.

Second, as argued in the section above, a lawyer needs not only to achieve outcomes required by clients within their mandate, but more pragmatically, to foresee and resolve potential future problems such as media exposure, bad precedents that could affect future processes, or diversity issues. In such a situation, the lawyer should anticipate the litigation phase, not only to help build a robust strategy in case the matter goes before a judge, but also to minimise conflict and the risk of litigation.

Potential tools

The expansion contract

Frequently, employers do not harness the advantages of potential tools of law, simply because they are unaware of them. Just as an example, one tool which remains underused in practice but could become conclusive evidence proof of ensuing restructuring/reorganisation processes, is the so-called ‘expansion contract’ (contratto di espansione).

The expansion contract is a sort of social shock absorber, which is on trial until 2023. It aims to, on the one hand, deal with the need to restructure and achieve redundancy for the more mature generation of employees and, on the other, support the recruitment of a new generation of workers and their competencies and skills. It allows employers of more than 50 employees to support the pre-retirement of employees over the ensuing five-year period.

This measure is therefore particularly useful if the employer has to introduce a process of renewal aimed at the technological development of a business, requiring the recruitment of new employees with backgrounds in new professions.

During this process the employer has the right to benefit from an 18-month period of CIGS which is a public fund covering the reduction in employee working hours. The average reduction in overall working hours is 30 per cent but it could be as high as 100 per cent, depending on individual job profiles.

The net contract

Another tool which is often overlooked and could have multiple advantages in a reorganisation process, is the ‘net contract’ (contratto di rete) which provides the mechanism of the joint employer (multidatorialità), therefore allowing the employers of the ‘net’ group the possibility of applying it to all employees belonging to the same ‘net’ group shared by more employers.

Also, following the Covid-19 pandemic, it is clear how work is organised can be very different to the traditional way companies thought about employment relationships. ‘Smart’, or remote working can be used to introduce more flexibility around most of the statutory regulations governing working time. It could also eventually allow for dismissal following poor performance, which had previously been prohibited in Italy for several years. The introduction of remote working has given several companies the opportunity to reduce their fixed costs, terminating lease contracts for premises and workplaces no longer used.

Benefits and incentives under Italian law

Employers cannot expect to meet their reorganisation/restructuring targets if they do not have a clear picture of the complex package of benefits and incentives granted under Italian Law, which are often unknown to them.

There are several incentives and benefits. A couple of examples are: for the recruitment of new employees under certain conditions; for cooperative companies established in the context of workers’ buyout; or for employers recruiting people benefitting from what is known as ‘citizenship income’ (reddito di cittadinanza). These can be very effective in a restructuring/reorganisation process.

Additionally, welfare benefits (eg, complementary pension and health insurance funds, the activation of long-term care and critical illness policies, etc) can be used to reduce company labour costs significantly. This can be achieved not only in favour of employees but also, in the wider context of industrial relations, for self-employed individuals.

Conclusion

Although the pandemic changed approaches to work and employment matters significantly, not all employers understand how to use the potential benefits of a workplace reorganisation. This also introduces several possibilities for making the organisation of the company more efficient: focusing on long-term individual incentives, increasing profitability and reducing labour costs. The ultimate aims and scope of the restructuring/reorganisation process should always be kept in mind.