Expansion Contract: what it is and why it will help businesses
Expansion Contract is a new instrument to support companies employing more than 1000 employees investing in reorganization and reindustrialization programs for managing redundancies and work-hours reductions. According to the current draft Growth Decree Law, the Expansion Contract abrogates and replaces the "Solidarity Expansive Contract". In addition to the abovementioned aspects, the employer is entitled to discuss with the social partners and include in an Expansion Contract a set of provisions concerning a "pension slide" for the employees who have not met the pension requirements yet, upon certain conditions.
The Expansion Contract ("Contratto di Espansione") is a new instrument which should be introduced in the Italian legislation with the so-called Growth Decree ("Decreto Crescita"), in these days under discussion in the Italian Parliament.
The core purposes of the Expansion Contract are, on the one hand, to stimulate the big-sized companies employing more than 1000 employees in investing in reorganization and reindustrialization plans entailing new hiring and, on the other hand, to mitigate the relevant negative impacts on redundant employees.
According to the current draft Growth Decree Law, the Expansion Contract abrogates and replaces the so called Solidarity Expansive Contract ("Contratto di Solidarietà Espansivo"), a measure that had been introduced by the Legislative Decree no. 148 of 2015, enacted within the wide labour law reform plan known as "Jobs Act".
The measure at issue should apply, on an experimental basis for the years 2019 and 2020, within a total expense budget of 70 million Euros.
In essence, by stipulating an Expansion Contract, employers with more than 1000 employees have the chance to implement re-industrialization or reorganization processes, allowing the redundant employees to receive welfare payments.
In order for being admitted to stipulate an Expansion Contract, big-sized firms are required to design business plans aimed at enhancing the internal processes providing for measures concerning:
(i) the technological development of the activities;
(ii) the training or retraining of the employees on the innovations, according to their skills;
(iii) the hiring of new permanent employees, with apprenticeship contracts also, for performing duties consistent with the purposes of reorganization or reindustrialization plans.
Provided that the aforesaid prerequisites are met, in order to stipulate an Expansion Contract, employers are required to follow a special consultation procedure involving the Labour Ministry and the trade unions or the company' works council.
At the completion of such consultation procedure, the Expansion Contract is executed at a Labour Ministry office and provides for: (a) the number of employees to be hired under open-ended contracts and indication of their professional capabilities; (b) a timetable of the envisaged hiring of new resources; (c) the detailed working-time reduction schedule and employees whom such measure apply to.
It is to be underlined that the employees whose working-time is being reduced within the reorganization or reindustrialization plan can benefit from the special wage guarantee fund named "CIGS" ("Cassa integrazione guadagni straordinaria"), which supplements their salaries for a period up to 18 months, even non-continuous.
In addition to the abovementioned aspects, within the aforesaid procedure the employer is entitled to discuss with the social partners and include in an Expansion Contract a set of provisions concerning a "pension slide" for the employees who have not met the pension requirements yet, upon certain conditions.
More in detail, employees who are going to reach the public pension requirements within the following 84 months, i.e. 7 years, should terminate immediately their employment relationships by stipulating settlement agreements with the employer.
The company (or a bilateral solidarity fund, if any in the specific business sector) pays out in advance to the employees the amount of the pension treatment they would earn if they were entitled to retire upon the date of cessation of their employment relationships.
Such amount can be paid out by the employer in monthly installments or in a lump-sum. At the end of such period that may last up to 7 years, the individuals are able to retire receiving the normal public pension treatment.
Periodical checks by the labour ministry
In order to ascertain the compliance with the commitments undertaken by the employers which benefit from an expansion contract, the Labour Ministry investigation officers are expected to carry out periodical checks during the reindustrialization or reorganization process and thereafter.
Possible changes in the Law Decree
It is to be underlined that the draft Growth Decree Law is currently under discussion by the Parliament, it can not be therefore ruled out that any, even significant, amendments are provided to the final version of the law compared with its current contents outlined above.