Italy: Agreement reached on new collective bargaining system

The Italian Government and the main social partner organisations (with the exception of the Cgil trade union confederation) signed an agreement on 22 January 2009 introducing a reform of the collective bargaining system.

On this page:
Agreement reached
Bargaining structure
Duration of agreements
Forecast inflation and pay
Bargaining procedures and strikes
Workers’ representation
Cgil opposition.

The present Italian collective bargaining system is based on a national agreement signed by the Government, trade unions and employers’ organisations in 1993. It gives a leading role to national industry-wide agreements, which cover an estimated 80% to 90% of the workforce. The role of “second-level” bargaining, conducted at company or sometimes local level, is to build on the provisions of sectoral agreements in specified areas or to deal with matters not covered by the higher level of bargaining. For instance, in the area of pay, industry-wide agreements lay down basic minimum rates and provide for general pay increases that take account of inflation, while second-level agreements may provide for additional increases and supplements linked to company performance. The non-pay (“normative”) provisions of sectoral collective agreements are valid for four years, while the pay provisions are valid for two years. All provisions of second-level agreements run for four years.

A reform of the bargaining system has been on the agenda since the early 2000s. In 2004 and 2005, Confindustria, the main employers’ confederation, proposed a number of changes to the current rules, including: a rationalisation of the large number of national industry-wide agreements (estimated at some 400); a rebalancing of the relationship between sectoral and second-level bargaining (notably linking pay more closely to productivity at company level); and limitations on industrial action related to bargaining.

The three main trade union confederations, Cgil, Cisl and Uil, decided to reach a common position on bargaining reform among themselves before opening negotiations on the matter with employers and the Government. This proved difficult, given significant differences between Cgil on one part and Cisl and Uil on the other, but a joint union document was agreed in May 2008, allowing tripartite talks that had already started informally to proceed. The new centre-right Government that took office in May was strongly in favour of bargaining reform.

Agreement reached

On 22 January 2009, an agreement on reform of the collective bargaining system was signed by: the Government; Confindustria and a range of sectoral employers’ bodies (notably representing services sectors not fully covered by Confindustria); and Cisl, Uil and the smaller, right-wing Ugl union confederation.

The left-leaning Cgil, which is Italy’s largest trade union organisation, did not sign the agreement.

The agreement’s stated aim is to promote economic development and employment growth, based on increased productivity and an efficient pay “dynamic”. It will run for an initial four-year “experimental” period and covers both the private and public sectors. The 1993 agreement provided for separate private and public sector arrangements, and the establishment of a common system was a major demand of the Government, which believes that this will enable productivity to be increased through the public sector. The welfare minister, Maurizio Sacconi, therefore argued that the new agreement is of “historic importance, especially for the public sector”.

Bargaining structure

The agreement confirms that collective bargaining has two levels: national industry-wide agreements covering all employees in the sector concerned; and second-level agreements at company level or covering a number of companies in the same geographical locality (the nature of second-level bargaining in a particular sector is regulated by its industry-wide agreement).

National industry-wide agreements will set minimum wages and basic pay increases for the sector concerned and the overall rules for employment conditions, as well as regulating industrial relations procedures and structures, and union-employer cooperation. The parties agree that the structure of industry-level bargaining should be simplified and the number of agreements reduced.

Second-level agreements may deal with the issues delegated to them by the relevant national industry-wide agreement. In particular, they should link pay to productivity, quality, efficiency, profitability and other aspects aimed at improving company competitiveness. The bargaining reform agreement expresses support for possible measures to promote such second-level pay bargaining and provides that there should be flexibility in the rules on second-level agreements to take account of such future measures. This refers to the Government’s stated intention to reduce or abolish income tax and social security contributions on the part of workers’ pay based on second-level bargaining.

At present, company-level bargaining is mainly limited to larger firms, while local bargaining covering a number of firms in the same district is relatively uncommon in most sectors. The new agreement provides for efforts to extend second-level bargaining to more small and medium-sized companies. Further, where the employees of these companies do not benefit from second-level bargaining, sectoral agreements should introduce new mechanisms to provide them with a degree of pay compensation for this lack.

The most controversial point of the new agreement, and a key factor in Cgil’s rejection of the deal, relates to deviations at second level (company or district) from the terms of national industry-wide agreements. The bargaining reform agreement states that sectoral agreements may lay down “appropriate procedures, methods and conditions” whereby second-level agreements may “modify, in whole or in part, temporarily or on an experimental basis, specific pay or non-pay provisions of national industry-wide agreements”, in order to tackle situations of crisis or to promote economic and employment growth in the company or district concerned.

This provision was inspired by an agreement reached in the chemicals industry in July 2007. Under this accord, management and local unions in companies facing particular financial difficulties may reach agreements to temporarily opt out of the rules set by the national agreement for the sector, for example on pay, leave and training. This cannot apply to the national agreement’s basic pay rates and guaranteed “inalienable” individual workers’ rights.

The chemicals industry's “derogation” scheme was welcomed by employers but caused a heated debate in the trade union movement. Some unions affiliated to Cgil in other industries attacked the scheme as a threat to the primacy and binding nature of industry-level agreements. This controversy has resurfaced in respect of the new agreement on bargaining reform. The signatory unions defend the initiative on the grounds that only temporary or experimental deviations are permitted and that such limited exemptions can help companies survive periods of crisis, without affecting key workers’ rights or employment levels.

Duration of agreements

National industry-wide agreements will have a duration of three years for both their pay and non-pay provisions (rather than the current four-year term for non-pay elements and two years for pay elements). Second-level agreements will also have a duration of three years (currently four years).

Forecast inflation and pay

Sectoral collective agreements provide for basic pay increases linked to the forecast rate of inflation. At present, the predicted inflation rate is announced by the Government following consultation of the social partners. This annual process of deciding the forecast rate is often long and difficult and can delay the opening of industry-level pay negotiations.

The reform agreement provides for a new, independent measure of forecast inflation, based on the Eurostat harmonised index of consumer prices (excluding the price of energy imports). This will be used as the reference point for basic pay increases in all sectors, both public and private. The Eurostat index generally puts inflation higher than the Italian measure and trade unions see it as a more effective means of protecting workers’ purchasing power.

Bargaining procedures and strikes

Negotiations over new collective agreements are often protracted and the previous agreements can expire long before the parties are able to reach a settlement. To tackle this problem, the bargaining reform accord provides that, in future, all collective agreements should lay down timetables and procedures for unions to submit their bargaining demands, and for the start and end of negotiations. Sectoral agreements may also now provide for representatives of trade union and employers’ confederations to intervene if negotiations become deadlocked. Further, collective agreements should provide, in the event that the previous agreement expires before a new one is signed, and where the above-mentioned timetables are respected, that employees should receive pay compensation for the intervening period.

The reform agreement states that sectoral collective agreements should lay down the conditions for an effective “union truce” during negotiations, in order to facilitate agreement. This implies the introduction of a strike-free period during bargaining over new collective agreements. Strikes to apply pressure during negotiations have traditionally been an important trade union tactic in Italy, and this provision was another factor in Cgil’s rejection of the agreement.

Workers’ representation

The parties have agreed to reach an agreement within the next three months on new rules for workers’ representation in collective bargaining. This is a key issue for Cgil, Cisl and Uil, which have long called for a simplification of the situation whereby in some sectors a proliferation of smaller unions, not affiliated to the main confederations, engage in bargaining. The talks will also examine the possibility, with regard to second-level bargaining in public services, of permitting only larger unions to call strikes (once the “union truce” has expired). The Government had already announced that it would take action in this area, to avoid cases such as that at Alitalia, where minor unions have in recent times held numerous strikes, halting the airline’s operations despite their small membership.

Cgil opposition

Since it reached the common position on bargaining reform with Cisl and Uil in May 2008, Cgil’s relations with the two other union confederations have deteriorated markedly, and it has also increasingly come into conflict with the Government. Unions affiliated to Cgil have taken the unusual step of not signing sectoral agreements reached by Cisl and Uil affiliates in commerce and the  public sector, while Cgil did not sign an agreement on bargaining reform for small and medium-sized firms concluded by the other unions in December 2008.

Cgil was always somewhat lukewarm about bargaining reform and, as the talks reached their later stages, its general secretary, Guglielmo Epifani, took the view that this issue was “not a priority in this period of economic crisis”. When the other unions accepted a number of employers’ proposals that were not foreseen in the unions’ joint position, Cgil finally refused to sign the agreement. Nevertheless, the other parties decided to proceed with the reform. Confindustria commented: “The system agreed in 1993 was too old and unable to meet the new needs of companies in the globalised market. We have worked hard to avoid a separate agreement without Cgil … but we could not suffer the consequences of a Cgil veto, thus stopping a key process of modernisation.”

Cgil has called for a referendum among all workers on the bargaining reform agreement, and has said that it will sign the accord if a majority approve it. However, the other union confederations are opposed to the idea, and it seems unlikely that a referendum will be held. Cgil has also stated its willingness to discuss the most controversial points of the agreement, but that if the other parties do not agree to changes, it will probably present its own separate demands in forthcoming collective bargaining rounds.

This article is based on material provided by Antonio Deruda, European Employment Review correspondent for Italy.

European Employment Review 422 (EER 422) contents