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Labour law in Germany and Italy

Employment contract regulations or representation in disputes

We support you in all legal matters relating to labour law

We advise on both individual and collective labour law. The latter includes areas such as works constitution law and collective bargaining law, in which we see ourselves not only as legal advisors but also as discussion partners for companies in order to manage conflicts and work out long-term, economically viable solutions.

In individual employment law, we offer comprehensive advice, starting with the drafting of employment contracts and extending to the law on protection against dismissal, as well as in the legal structuring and implementation of extensive personnel measures.

Mediation in labour law

Conflicts between employers and works councils, but also between employees and superiors or managers among themselves, cannot always be settled by labour law means alone. It is quicker, more sustainable and often more cost-effective to use mediation or mediation-analogue counselling to enable those involved in the conflict to work out solutions for their conflict on their own responsibility.

Specialised in German and Italian labour law

Our lawyers specialising in labour law were trained in Italy and Germany, are admitted to the bar in both countries and offer not only sound legal know-how on the differences in labour law between Germany and Italy, but also the necessary sense for pragmatic solutions and understanding of internal decision-making processes.

Our employment law services in detail

  • Operational restructuring including spin-offs, mergers and closures of businesses
  • Support in corporate restructurings, in particular on questions of co-determination in supervisory bodies
  • Support in transformation processes, e.g. cross-border mergers, including negotiation procedures with employee representatives
  • Advice on transfers of undertakings
  • Insolvency labour law

In Germany, the employee is indirectly defined in ยง 611a BGB in the context of the employment contract: "Through the employment contract, the employee is obliged to perform work in the service of another in personal dependence, bound by instructions and determined by others." The distinction from a freelancer ("free lancer") is of considerable importance here, as an employee is subject to social security contributions and the employer must withhold both social security contributions and wage tax for him. In borderline cases, the company risks that the employee status of a "free lancer" will be established during a company audit and the employer will have to pay the arrears of wage tax, for which he is jointly and severally liable with the employee, but also the social security contributions of the last six years.

The designation of the legal relationship between the parties as a "freelance contract" or a "service contract" is only indicative. The test is whether the employee is bound by instructions, is integrated into the company and is socially dependent. There are many criteria for this examination; one criterion that is usually easy to check is whether the employee can determine the period of annual leave himself or herself, or whether he or she must obtain the company's approval for this. In the latter case, there is much to be said for an employment relationship.

In Italy the legal situation is similar. Art. 2222 codice civile defines the "contratto d'opera", by which someone undertakes to provide a work or service to a principal. The risks for Italian employers who employ a staff member as a "free lancer" (in Italy freelancers are referred to as "partita IVA", as they must have a VAT registration) are comparable to the risks in Germany. In Italian courts, the state social security system also sues employers in borderline cases to determine the status of their alleged employee.

Even in cross-border legal relations, employers are free to choose the applicable law with their employees. In doing so, however, the employee cannot be deprived of the rights he or she would enjoy at the place of work. For example, if a German employer agrees with an employee working in Italy that German law will apply, the Italian employee can assert the collective bargaining claims under Italian law and is also entitled to the protection rights under German law. It is therefore a win-win situation for the employee, but often a double burden for the employer. As a rule, it is advisable for the employer to choose the labour law of the workplace.

If the employee is only temporarily working in another state, the law of his or her home state continues to apply. However, if the employee works in the other state for more than 12 months, the law of the workplace also applies to his/her employment relationship.

Special features of labour law in Italy

Generally binding collective agreements

Italian labour law is determined by the collective agreements, which are generally binding in all sectors and contain mandatory minimum standards.

Italian employment contracts are therefore often very short, in the form of a letter of engagement, which only states the salary and the collective agreement classification. Everything else follows from the collective agreement.

Surprising social benefits

The German employer who hires an employee for his Italian agency must observe the indispensable provisions of Italian labour law. If he agrees with his employee on the number of days of leave according to German criteria, he will be surprised to find at the end of the year that due to certain benefits unknown in Germany (entitlement to reduction of working hours "ROL", entitlement to compensation for former public holidays, etc) the employee's entitlement to paid time off has increased by 50%. German employers are well advised to refrain from their own ideas of an individual employment contract.

Collective agreements also for managers

Italian labour law also protects managers in executive positions. In the event of unjustified dismissal, they are also entitled to severance pay under the collective agreements, which can amount to up to 3 years' salary.

In addition, there may be considerable claims for damages.

Particularities of separation

Further surprises may await the German entrepreneur in the event of separation. If the employee has not been employed in a way that corresponds to his or her classification in the collective agreement, the employer is threatened with claims for damages in addition to claims for severance pay.

Dismissals can still be contested within very long time limits (60 days to the employer and 180 days then for legal action) and a lot of time passes before legal certainty is established for the employer.

No works council in the German sense

Workers' rights of co-determination in the management of the enterprise, on the other hand, are much less pronounced. By and large, the employer has a free hand in business decisions.

The participation rights of the employee representative bodies ("RCA", "RSA") elected in larger companies are essentially limited to consultation rights and to measures affecting staff.

Cross-border labour law

Employers and employees are in principle free to agree on the law applicable to their employment relationship, but the minimum standards of the law of the workplace still apply in favour of the employee.

It is therefore often more favourable for the employee if German law is agreed upon for his employment relationship. He then enjoys the advantages of both legal systems.

Co-determination in the factory

German labour law is characterised by employee co-determination in the majority of company decisions - usually all those that have an impact on work. These collective co-determination rights do not automatically apply in all workplaces, but only in those where a so-called "works council" has been elected. This is the case in almost all large workplaces (although there are exceptions). In small workplaces it depends on the initiative of the employees whether a works council is formed. The minimum number for a works council election is (only) 5 employees in the workplace.

Once a works council is formed, it has a right of co-determination in all personnel matters, but also in decisions that only indirectly affect the employees. For example, if a company wants to set up new software for its operations, this can only be done with the consent of the works council. If the employer and the works council do not reach an agreement, an arbitration tribunal must be convened (conciliation board). Until an arbitration award is made, the employer may not implement the measures.

Termination of the employment relationship

Under German law, an employment relationship can be terminated by the employer at any time subject to the notice period. If the worker has been employed in the enterprise for more than 6 months and the enterprise employs more than 10 workers full-time, the worker has the right to challenge the termination before the labour court. The employer must then prove that the dismissal was socially justified either for operational reasons, behavioural reasons or personal reasons.

An employee may terminate an employment relationship in writing or agree termination with his/her employer at any time, subject to the notice period.

The Italian legal situation is similar, although the contestation periods are much longer and the notice period can be unilaterally settled by the employer, so that the employee must leave the company immediately. Effective termination of the employee's employment or the conclusion of a termination agreement is only possible if special forms are observed; for example, the termination or settlement must be concluded in a trade union's premises, or using a specific platform on the Internet. A private written termination agreement, which is common in Germany, would therefore be invalid in Italy.

Posting

In the case of posting to Italy, the employee remains insured under the German social security system. If he works in Italy for more than 183 days in a calendar year, he now becomes liable for tax in Italy and the employer is obliged to pay it. In addition, he has to fulfil reporting obligations.

Labour law particularities in Germany compared to Italy?

Are you Italian and interested in the special features of labour law in Germany? You can find information on the Italian version of this page.

Frequently asked questions by our clients

Hiring an EU citizen is generally not subject to approval in either Germany or Italy; in Italy, there are strict registration requirements with the social security authorities, which must be fulfilled the day before the employment relationship begins. While in Italy there is a single point of contact for the company in all matters of social security and health insurance (INPS), the German employee can choose between different health insurance funds, which then generally collect the contributions for all compulsory insurance from the employer.

In both countries, Italy and Germany, I can employ a worker on a fixed-term contract for up to 24 months; shorter contract durations are also possible and can be extended within the 24 months. If the worker is employed beyond that, the employment relationship converts into an open-ended one. Longer terms are also possible for start-up companies.

There are no legal restrictions in Germany. However, a probationary period longer than 6 months does not make sense, as the employee then already enjoys legal protection against dismissal, i.e. he/she can defend him/herself against a dismissal that is not sufficiently justified. In Italy it depends on the collective agreements, the probationary period can be 3-6 months. Unlike in Germany, the employee must actually be tried out; dismissal before starting work is not permitted in Italy.

In Germany, the employment contract basically specifies the mutual obligations; many German employment contracts contain a clause that entitles the employer to assign the employee other tasks as well, as long as it corresponds to the employee's qualifications and these are reasonable. In Italy, the employer has this right by law (Art. 2103 codice civile).

Yes! Italy provides for personal and criminal liability of the governing body in case of violation of duties in the field of occupational safety (every company is required to keep a book in which all risks in the workplace are described in detail), but also in case of unlawful acts of the employed staff if the company does not have a "modello organizzativo" in which all responsibilities are described in a comprehensible and transparent way.

Termination for "low performance" is very difficult to enforce in both countries. The employee must prove a concrete breach of duty; in both countries this must first be warned, whereby Italian law provides for a very formal disciplinary procedure. If this is not observed, the subsequent dismissal is invalid.

In both countries, dismissals for operational reasons are permissible. A social selection has to be carried out among comparable employees; employees with the shorter period of employment and the lower age have to be dismissed with priority.

In Italy - depending on the collective agreement - the employment relationship can be terminated after 180 days of uninterrupted incapacity for work. In Germany, the legal situation is more difficult; even in the case of long-term illness, it always depends on the individual case. The employer must be able to give a negative prognosis about the course of recovery in order to be able to terminate the employment relationship.

In Germany, in principle, yes. In Italy, changes in the law in recent years have meant that actual reinstatement ("tutela reale") is limited to a few individual cases, such as serious formal errors when giving notice.

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