Country overview
There is no right in Italy for employees to be represented at board level, although there is interest in the topic. Unions and employees agreed a joint opinion on the transposition of the directive, which was subsequently accepted by the government.
There is no employee board level representation in Italy in either the public or private sector, other than in a handful of companies which have voluntarily agreed to permit it. However, there is some interest in Italy in models of corporate governance which allow greater employee involvement at board level.
The unions and employers’ associations were deeply involved in the implementation of the directive in Italy in that they negotiated a text setting out the rules for its transposition in Italy, which was subsequently adopted by the government and passed as a legislative decree. The negotiations began early in 2003 and finally resulted in a joint opinion on the transposition of the directive in March 2005. The three main union confederations, CGIL, CISL and UIL were the signatories on the union side and the associations representing industry, banking, insurance, commerce and services signed for the employers.
The negotiations on the implementation of the directive resulted in a number of articles in the trade union and specialist press in Italy on the issue of employee involvement at board level. However, there was no wider public debate on the issue.
Directive was implemented through legislation in August 2005, ten months after the October 2004 deadline. The legislation itself was based on a joint opinion agreed between the unions and employers in March 2005.
The directive on employee involvement in European companies was implemented in Italy by a legislative decree dated 19 August 2005 and published in the Official Gazette on 21 September 2005. However, the text of the decree is essentially the same as a joint opinion agreed between the unions and the employers in March 2005 after two years of negotiations. The key differences between the two texts are a number of articles, such as the penalties to be imposed for any breach of the legislation, or the consequences of any misuse of procedures, where the text agreed between the unions and employers simply asks the legislator to find appropriate solutions, while the decree sets out what will happen.
The title of the legislation is Legislative Decree 19 August 2005 No. 188 “Transposition of the Directive 2001/86/EC which supplements the European Company Statute with regard to the involvement of employees” ( Decreto Legislativo 19 agosto 2005, n. 188 Attuazione della direttiva 2001/86/CE che completa lo statuto della società europea per quanto riguarda il coinvolgimento dei lavoratori).
Special negotiating body (SNB)
Italian members of the SNB are chosen by the trade union representative body at the company, in conjunction with the unions. If there is no representative body, the unions remain key in deciding how SNB members are chosen.
Italian SNB members are elected or appointed by and from the trade union representative body (RSU/RSA) in conjunction with the union organisations which have signed the collective agreement covering the company. (The RSU, the more usual form of representative structure at company level, is essentially a union body, although it is largely elected by all employees: the unions nominate the candidates for the two-thirds of the members directly elected by the whole workforce, and they choose the remaining third themselves.) SNB members do not have to be employees of the company involved, although it is not clear what this means in practice (see section on external union representatives).
If there is no trade union representative body in a workplace or a company it is for the unions who are signatories to the collective agreement at national level that covers the company to decide how the workers in that workplace or company are to “participate in the election or appointment of the members of the special negotiating body” (Article 3).
External union representatives in Italy can in theory be appointed to the SNB.
The Italian legislation says that SNB members do not have to be employees of the company involved: “members may include trade union representatives independent of the fact that they are or are not employees of a participating company or establishment” (Article 3). However, the fact that they are chosen from the trade union representative body, which normally consists of company employees, means that it may be difficult for external trade union representatives in practice to be chosen.
Funding limited to a single expert.
The Italian legislation on the operation of the SNB limits funding to a single expert. It does not limit the number who can be used, stating that the SNB “may request experts of its choice, for example representatives of appropriate Community-level trade union organisations, to assist it with its work” (Article 3), but it is more restrictive on funding. Here it states in the same Article that “expenses relating to the functioning of the special negotiating body … should be borne by the participating companies to enable the special negotiating body to carry out its task in an appropriate manner”, and uses as a point of reference the costs to be borne in relation to the work of the SE representative body under the fallback procedure. These include the costs of “organising and interpreting of the meetings, the expenses relating to the costs of a single expert, and the travelling and accommodation expenses of the members” (Annex 1, Part 2).
Standard rules under the fallback procedure
Italian members of the SE representative body are to be chosen by the existing employee representatives or by the employees and the unions if there are no existing employee representatives.
The Italian legislation provides for a similar approach to the election of the SE representative body, known as the representative body (organo di rappresentanza) in the text, as for the SNB, although the wording is not the same. The representative body is chosen by the existing employee representatives where they are present. They can only choose from among themselves, and – in contrast to the position on the SNB – those chosen must be employees. If there are no existing employee representatives, the members of the representative body are elected or appointed by all employees, together with the trade unions which have signed the collective agreement which applies to the company concerned. The legislation goes on to say that the method of electing or appointing representative body members should be in line with national legislation and the agreements of December 1993 and July 1994, which set up the current system of Italian workplace representation – or in line with other collective agreements if they apply in the particular industry. In other words, in most cases two-third of those elected or appointed will be chosen by the whole workforce – but on the basis of union nominations – and one third will be appointed directly by the unions (Annex 1, Part 1).
The company should bear the costs of the representative body, but it is only obliged to pay for a single expert.
The company is obliged to cover the costs of the representative body to enable its members “to perform their duties in an appropriate manner and undertake any relevant training”. This includes the costs of “organising and interpreting of the meetings, the expenses relating to the costs of a single expert, and the travelling and accommodation expenses of the members” (Annex 1, Part 2).
The Italian legislation leaves it to the representative body to decide on how employee representatives at board level are to be chosen. There are no specific rules for those from Italy.
The legislation does not include any rules setting out how Italian board-level representatives should be chosen under and simply reproduces the wording of the directive. It states that the representative body should decide “on the way in which the SE’s employees may recommend or oppose the appointment of the members of these bodies [the company board level structure]” (Annex 1, Part 3).
Misuse of procedures and structural change
There should be new negotiations if, after the SE has been set up, there are substantial changes which have the aim of depriving employees of their rights.
The Italian legislation requires that if there are substantial changes after the European Company has been registered “with the purpose of depriving employee of their rights to be involved,” there should be new negotiations (Article 11).
There is no requirement in the Italian legislation to renegotiate the agreement if there has been structural change, unless this has been done to deprive employees of their rights.
Apart from the requirement to renegotiate the agreement where substantial changes have been undertaken in order to deprive employees of their rights to be involved (see section on misuse of procedures), there is nothing in the legislation that requires the agreement to be renegotiated if there are structural changes after it has been set up.
The bulk of the text of the Italian legislation was negotiated between unions and employers and both sides seem satisfied with the agreed outcome.
The majority of the text of the Italian legislation, as finally passed, is identical to the agreement reached earlier between the unions and the employers. It is therefore clear that the two sides were able successfully to resolve the differences they had.
For the unions the key concerns were that some progress should be made towards increased employee participation in their companies, or “economic democracy”, (although there are differences between the three main union confederations on how this should be achieved), but that the unions should retain control of the choice of employee representatives.
Confindustria, the main employers’ body, had previously expressed scepticism about employee involvement at board level but following the negotiations with the unions was willing to agree the joint text.
Both sides wanted the directive’s implementation in Italy to be based on a negotiated agreement rather than simply be left to legislation.
SEEurope report
Marcello Ries
On 2 March the Italian social partners signed a Common Opinion on transposition of the SE directive and they recommend that this opinion be taken into account when transposing the directive into law.
The document was accordingly sent to the Minister of Welfare with a request for action. The social partners also express the wish to be consulted on the government's next initiatives. At present the government has several options for the transposition of the directive into law. The most probable course of action would appear to be that used for the EWC directive, where a collective agreement became law by means of government decree. The three main trade union confederations CGIL, CISL and UIL reached an agreement on worker participation in the SE. They give precedence to the dual system, whereby employee representatives in the supervisory body will be appointed by the trade unions. If companies opt for a monistic board structure, the member of board representing employees can be an external expert who is able to represent employee interests while having the necessary skills and know-how to be an active board member.
Marcello Ries
During the week preceding Christmas 2004, the social partner delegations met to finalise a draft agreement on transposition of the SE directive. The meeting was successful. The resulting agreement must still be subject to internal discussion and approved by all the social partner organisations. Thus it is not an official document and not available to the public. For this reason it is impossible to give a detailed overview of its contents. However, some important points are clear:
1. There will be no opt-out.
2. There is a preference for a dualistic model, with employee representation on a supervisory board.
3. There is agreement between the three major trade union confederations that employee representatives on the supervisory board (or, where that is impossible, the administrative board) shall not be elected, but jointly appointed by the trade unions.
4. Also, provisions for experts, etc., were defined in detail (in more detail than in the CBA transposing the EWC directive).
5. The social partners did not lay down any sanctions, as this is not their role (although they did recommend some).
This agreement constitutes major progress towards transposition. However, while the way forward is simple on paper, it is quite complicated in reality. The CBA will (probably) be signed and registered by mid-February (by the end of January, according to optimists). At this point, it can be submitted to the government, which will probably enshrine it in law by decree. At this point the government will inform the European Commission and the directive will be considered officially transposed. In any case, in Italian jurisprudence collective bargaining agreements have juridical value, as the erga omnes principle is normally applied. This means that the CBA is legally binding from the moment it enters into force, even if there is no government decree – a temporary solution that allows the government time to tackle (and possibly resolve) the contradiction between the SE regulation and directive and the recent reform of company law (the so-called Vietti reform – see Country Report on Italy). In this case, however, sanctions would not apply.
As a matter of fact Italy finds it itself in a paradoxical situation. The government must “reform the Vietti reform” if it wants to transpose the directive. On top of that, while technically all the necessary conditions are in place for transposition of the SE directive, the SE regulation still needs to be adopted.
Or will Italy find itself in a situation in which employee participation in the SE is defined, but it is impossible to establish an SE under Italian law? For some time – particularly with general elections coming up – this will probably be the case.
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Marcello Ries
The principles laid down in the directive are rather innovative in relation to the Italian legal system. While employee representation is well defined also with regard to information rights (for example, in laws 223 of 1991, 428 of 1990 and 626 of 1994), the concept of “participation” has hitherto been defined only in collective bargaining agreements or jointly established regulations. The most substantive change as regards the Italian system will be provisions regarding the composition of management or supervisory boards, in which the presence of employee representatives is envisaged.
Existing Italian company legislation excludes any form of employee participation in the governing body of a company. The administrative board, elected/appointed by the shareholders, mainly following internal regulations, governs the company. The correctness of financial management and company information must be guaranteed by a committee of auditors, whose sole aim is to audit the financial information of the company as a whole, and in the interest of the company as a whole. The auditors do not act on behalf of one group of shareholders (or stakeholders), but on behalf of their collectivity.
These legal provisions leave room for grey areas concerning corporate governance. Recently, the government has taken action to develop more stringent legislation and to fill these gaps and, at the same time, has come up with proposals concerning the introduction of employee participation rights.
Also because of the financial scandals involving major Italian companies, reform of company legislation has been accelerated, whereas the introduction of a “participatory” system is lagging behind.
According to the government, one reason for this “dual speed” approach is the difficulties experienced by the social partners in reaching a joint opinion on the matter. The government says it intends to respect the “Pact for development and employment of December 1998”, according to which it will follow the “joint opinions” of the social partners with regard to transposition of EU social directives, as was the case with the transposition of Directive 945/45 EC on European Works Councils. At present the social partners have not reached a joint opinion on Directive 2001/86 EC, so the government is proceeding with transposition of the SE regulation [1], while the SE directive remains “on hold”.
In February 2002 the government encouraged the social partners to begin negotiations, which should lead to transposition of the SE directive. The government specifically called for a “joint opinion” from the social partners which could be transposed into law, following the general agreement on social dialogue of December 1998.
The trade unions, whose approach in this matter has always been unified and proactive, after defining their joint position invited the employers’ organizations to open discussions on this matter. In February 2003, the industry confederation Confindustria accepted. This roundtable is presently engaged in discussions.
At the same time, the trade unions held informal talks with Confcommercio (the confederation of commerce, in particular wholesalers and retailers), ABI (the national association of banks) and ANIA (the national association of insurance companies) with the aim of setting up a roundtable leading to an interconfederal agreement (or “joint opinion”), signed by all the representative organisations of industry, trade and finance on one side and of employees on the other. Such an agreement could be validated by the government and consequently become a legally binding text for implementation of the directive. As described above, a similar approach was established in 1998 quite successfully and was followed for the implementation of the EWC directive. In that case, the parties reached a collective bargaining agreement which was legally binding on all its signatories as early as 1996 and was transposed into law in 2002, thus setting an example of a positive modus operandi.
However, in recent months, other issues have had priority on the government’s and the social partners’ agendas, and the general relationship between government, employers’ organisations and trade unions has deteriorated, so that little or no progress has been made.
In June 2004, during a seminar [2] organized by CESOS [3] and CISL on the subject of employee participation in the SE, the representatives of the three trade union confederations CGIL, CISL and UIL reiterated their desire to reach a joint opinion with the representative organizations of industry (Confindustria), banking (ABI), insurance (ANIA) and commerce (Confcommercio) by October 2004. This joint opinion will then be submitted to the government as a basis for the law transposing directive 2001/86 EC.
Thus the way towards transposition appears to be clear. [4] However, it appears that the social partners have different views and that there is still a long way to go before a joint opinion is reached. There appears to be unanimity on one point. On the question “what form of participation do we want?”, the representatives of the social partner organizations all agreed that they did not want a “German model”. The trade union confederations CGIL, CISL and UIL have already reached a joint position, and invited the employers’ organizations to present their proposals so that a fruitful debate can begin.
In consideration of the consensus among social partners and government that a law will be discussed following the definition of a joint opinion, debate in parliament on the transposition of Directive 2001/86 EC cannot be expected before November 2004. It is not on the agenda for the September session, when Parliament convenes after the traditional August holidays to debate, among other items, the “acquis communautaire”, which in general terms is the sum of all EU legislation to be transposed into Italian legislation.
Footnotes:
[1] This is the government’s vision. The social partners take a different position according to which the government has so far failed to come up with a proposal which they could discuss with view to reaching a joint opinion.
[2] “La società europea, la partecipazione dei lavoratori e la governance delle imprese”, Rome, 14–15 June 2004.
[3] Centro di Studi Economici, Sociali e Sindacali, a research institute of CISL.
[4] While there has always been a consensus that the social partners should formulate a joint opinion as a basis for the transposition law, there have been different views on how such an opinion should be reached. See note 1.