Italy’s Decreto Dignità’ is it time for a change?
The ‘Decreto Dignità’ was heralded as the law that would do away with job insecurity, however the reality is somewhat different. One year after it came into force, in November 2019 the numbers told a different story. Growth in the number of permanent contracts stalled while the number of fixed-term contracts increased. And jobs were lost – a sad outcome soon destined to worsen during the Covid-19 crisis. For the time being, the so-called ‘Decreto Rilancio’ lays out a number of measures aimed at relaunching the Italian economy. It is now possible to renew or extend fixed-term employment contracts until August 30, provided that they were already in force on February 23, 2020. It will no longer be necessary to state the specific reasons for such contracts, as previously required by the ‘Decreto Dignità’. The goal is to mitigate the risk of a further 1 million people becoming unemployed by August this year, as forecast by the experts at Italy’s Ministry of Economic Affairs. In the meantime, the government is working on further exemptions to adapt labour contract regulations to the crisis looming on the horizon.
But has the time come to change the ‘Decreto Dignità’ once and for all? In this back-to-back interview, we spoke with Pierangelo Albini, Director of the employment department at Confindustria and Luigi Sbarra, Deputy General Secretary of the CISL, to find out how both the Unions and entrepreneurs see the future.
What was your opinion of the ‘Decreto Dignità’ before the Covid-19 crisis hit?
Albini: Confindustria clearly stated that it was not in favour of such a measure due to its bias on fixed-term contracts. Common sense tells us that the longer a relationship with a person last then the greater the chances that it will strengthen and become permanent. This was clearly quite a different rationale which also cast agency work as an evil that we could well do without. The belief that a ceiling should be placed on the number of fixed-term contracts and that limiting their duration would also reduce job insecurity has never convinced me. Introducing restrictions and constraints on fixed-term contracts could lead to an increase in fake VAT registrations and the so-called ‘co.co.co’ contracts (contracts for coordinated and continuous collaboration whereby workers have a contract with a company as independent contractors on an open-end contract – mid-way between being a salaried employee and an independent worker) which often disguise salaried work contracts. What’s more, fixed-term contracts will always be needed to some degree, so we find ourselves back at square one.
Sbarra: The CISL has been critical of the ‘Decreto Dignità’ right from the start. This was not because it required companies to give specific reasons for hiring a person on a fixed-term or agency contract, but because these reasons are strictly defined by law leaving no room for collective bargaining. When we can negotiate with a company, then we can find a balance between the need to ensure the system is not being misused and the company’s need for flexibility. On site Union representatives are perfectly capable of identifying if the fixed-term contracts a company stipulates correspond to a real need for flexibility. After all, the aim of these institutions is to promote the equal treatment of workers, whether on fixed-term or permanent contracts. The other critical issue is that an additional contribution of 0.5% must be paid each time a contract is renewed.
At this point in time, what is the significance of lifting the obligation to state specific reasons for fixed-term employment contracts as foreseen by the ‘Decreto Rilancio’?
Sbarra: The ‘Decreto Rilancio’ has established that it is possible to renew or extend fixed-term employment contracts until August 30 provided that they were already in force on February 23, 2020, with no requirement to state the specific reasons for such a contract. The CISL insisted on this temporary waiver of the ‘Decreto Dignità’ to protect a large number of jobs, though limiting this possibility to those contracts “already in effect on February 23” has significantly reduced its scope as it excludes those contracts that had expired before February 23 and those stipulated after this date. The ruling only applies to those contracts in effect on that date. In our understanding, the regulation also refers to agency workers but this should be spelt out clearly when the regulation becomes law. Neither is it clear if August 30 is the deadline by which all extended or renewed contracts come to an end or – and this would seem to be the most plausible interpretation – if that is the last date by which contracts can be extended or renewed without the requirement to specify the reasons. This also needs clarifying.
Albini: This is an emergency measure. The government has already communicated that it accepts these measures in the current context. It is not a change of heart on the direction taken in the ‘Decreto Dignità’ but simply a response to remedy the situation highlighted also by the Unions. Due to the shutdown in activity, the furlough scheme would not have made it possible to maintain these fixed-term contracts, they would have simply expired terminating the working relationship. This is an emergency solution.
What are the greatest risks for workers in these times of crisis?
Albini: We were already going through difficult times before the pandemic, it has further worsened what was already a challenging situation. We should never give up hope of a speedy recovery but given that a steep drop in GDP is forecast, we could expect that 3% of jobs will be lost. This is a serious problem because we do not have universal welfare schemes. The problem is two-fold. On the one hand we need to support struggling companies as they restart their normal production cycles, in the knowledge that there is a section of the economy that will not restart. On the other hand, we will need to tackle an employment crisis which cannot be overcome by simply making it impossible to let workers go and by financing unemployment benefits. We will need to invest in those factors that make it possible to create work. So far, we have been concerned with jobs, now it is essential that we focus on workers and work.
Sbarra: The risks for those workers who have a fixed-term or agency contract about to expire are clear: it is very hard to find a job in the current climate. So at least allowing employers to extend or renew these contracts without having to specifically explain the reasons is bound to help.
What changes should be made to the ‘Decreto Dignità’?
Sbarra: Our position remains unchanged. It’s a good idea to remove the obligation to specify the reasons for extending a fixed-term contract, but it’s a temporary measure that only covers the extension or renewal of pre-existing contracts. We strongly believe that two modifications should be made to the ‘Decreto Dignità’. First of all, make it possible for Unions to come to agreements with companies. Present on a national level, we can help identify additional reasons to those currently foreseen by the law whereby companies can justify hiring workers on fixed-term or agency contracts. The 0.5% additional contribution to be paid each time a fixed-term or agency contract is renewed should also be abolished.
Albini: A number of phases are ahead of us. We should try to contain their duration and identify the tools we need to deal with each phase. The ‘Decreto Rilancio’ is in force until the end of September but this second phase will be one of adjustment and adaptation. We know that some enterprises may no longer be able to furlough workers, but at the same time they will not be able to lay them off either. The third phase which will begin in the autumn and last about a year to a year and a half, will carry forward processes that have been partially put in place, like digitization, but it will also see the final stages of the pandemic. We will need new ways of dealing with the various issues we have to face, including the ‘Decreto Dignità’. When any government regulates its labour market it tries to get people into jobs or out of jobs. We appear to be preserving this inflexibility in both directions whereas the real issue will be to facilitate entry to the labour market. I don’t think the government is about to change course, but I hope that it will do everything possible to give enterprises the flexibility that will allow us to get people back to work and leave aside ideology.
What concrete proposals would you suggest?
Albini: Many people will lose their jobs. We need to deploy a master plan to help them find employment. This decree includes a measure to reduce working hours without reducing pay. This is not going to work. We first need to think about needs. Resources are needed to provide those who have lost, or are at risk of losing, their jobs with training programmes. It is time to start having serious conversations about active policies. Incentives should be given to those companies who reskill workers when they foresee reducing their workforces, and the burden of social contributions should be lowered for any company hiring in these times. Last but not least, we need to stop discrediting employment agencies because in Italy we do not have a public system for getting people into jobs. They know the market and understand the needs of businesses, they are the only ones who can find and train the skills we need. All of these actions are within our grasp but we need to be well aware of the needs and put an end to these battles of ideologies.
Sbarra: Investments needs to be released immediately to give the national economy the boost it needs to grow. Concretely that means dealing with the problems that have been putting a brake on growth and development for so long: kick off infrastructure projects, upgrade digital and social networks, incentivise research and innovation, revitalize education and public administration. Then focus on improving social conditions and increasing productivity in southern Italy, and foster unity with a plan to lift people out of poverty, a new law on self-sufficiency and by lessening the tax burden on average and lower wages and pensions. Work should take centre stage, at the heart of development processes based on a model of social and industrial relations that brings together productivity and solidarity through new advanced forms of participation and economic democracy. To achieve these goals and carefully steer our way through the momentous changes taking place we need a new social contract and a period of lasting cooperation between labour market players and our institutions.