739: EU Pay Transparency Directive Series: Italy

Speaker A: Hello, everybody, and welcome to Employment Matters, a AH podcast brought to you by the Employment Law alliance, the world's largest network of labour and employment lawyers from the best law firms around the globe. I'm your host, Marianne Parkinson, Senior Counsel in the employment department at A.H. travers Smith in England and Wales. On this program, we span the globe with updates on critical issues from ELA members in each region. Joining us on the program today is Francesca Pittao, partner at Advant NCTM in Italy. Today we're kicking off a brand new ELA podcast series on the EU Pay Transparency Directive. We will speak with leading employment lawyers across Europe about when and how the EU Pay Transparency Directive is being implemented in their country and what this means for employers on the ground. I should start by saying that we're assuming for the purpose of this podcast, that most listeners know some of the key changes under the Directive and are familiar familiar with those. For example, the requirement to provide greater pay transparency, access to pay information throughout the employment life cycle, pay reporting, a ban on salary history questions during recruitment and pay secrecy clauses, and increased obligations to communicate information about pay. If you'd like to recap on the key provisions of the Directive itself, check out our Employment Matters podcast on the ELA webpage. Exactly how the requirements of the Directive will be implemented across Europe will vary depending on how the relevant jurisdiction addresses the Directive or whether Member States choose to include enhanced protections, for example, in their national legislation. So, hopefully, today's discussion will help you understand the status of pay transparency legislation in Italy, what you should be doing now, and how approaches to implementation are shaping up across Europe. So, Francesca, welcome to the programme. Thank you very much for joining us.

Speaker B: Thanks for having me.

Speaker A: Great. Okay, so starting at the beginning then, Francesca, would you be able to give us an update on where things currently stand in Italy and what the status is of your transposing legislation?

Speaker B: Sure. Italy has transposed the Directive by means of legislative decree number 96 on May 7, and then the decree was published on the Official Gazette, which is the way we enforce the law and make it public. On June 1, we also had a deadline for entering into force of the law, which is June 7. So we met exactly the deadline that the European Union had indicated. The legislative process that was followed started with a delegation by the Parliament to the government that proposed a draft. Then the draft was subject to consultation with the relevant third parties, which included social partners that were consulted In February, various NGOs relevant for the matter, Women's Rights Advocate Committees, and then a preliminary deliberation of the Council of Ministers was adopted in February. The draft then passed through the examination of the Parliamentary Committee. As you may know, in Italy we have two chambers, the Parliament and the Senate. And at the same time also the Data Protection Authority delivered its opinion in March. Some of the inputs that were delivered in the process were incorporated into the final version that was then adopted and transposed.

Speaker A: Okay, thank you so much. And interestingly, Italy is one of the only countries to have actually met the deadline set by the eu. So in what way does Italy's draft legislation differ from the Directive? And we'll come on to some of the more specific provisions. But kind of in general, are there any points you wanted to flag at the outset?

Speaker B: I have to say that Italian legislation has departed from the Directive quite in a while of number of significant ways. The difference starts from the scope of application and the definition of worker that we have used. But the most notable departures concern the concept of pay level, which is narrower than the one of the Directive, and above all the role that uh, Italy has assigned to national collective bargaining agreements in defining what constitutes the same works or work of equal value. The reliance on collective bargaining agreement I think is the one that really has no parallel in the Directive itself. Although of course we know that social partners in the Directive can play a significant role in the discussion, in structuring for example the job architecture structure. But we went very far in this kind of path. Basically all the definition of say, work and work of equal value is anchored in national collective bargaining agreement.

Speaker A: Okay, thank you so much, that's really interesting. So then you also mentioned that there was some differences in the definition of worker. Ah, so what workers are in scope of the Directive in Italy? And for example, what type of contingent workers, like agency workers or contractors or secondes are they in scope?

Speaker B: As we know, the Directive takes a very broad and inclusive approach. It applies to whole workers who have an employment contract and employment relationship, uh, uh, regardless of the working time and regardless of the duration. Although Italy has departed from this very broad and inclusive approach and basically has narrowed it down to what we describe as subordinated employment contract, both fixed term and open ended, including also part time and management roles. But is expressive as excluded domestic work totals and on call that in Italian are defined as contrati intermittenti. Second is to the extent that the underlying relationship is an employment relationship and is still in place are included in the notion, although it's not indicated in which group and which employer they should be considered, whether in the employer there is the formal, uh, employer of their contract or in the host company. The same applies also to staff list employees, which is a contract that is very used in Italy, although we know from, uh, domestic legislation that they are granted with equal rights and remuneration. Comprehending the direct employees, any form of quasi employment as defined under our law is excluded from the notion because as I said, basically it makes reference wholly to what we describe as subordinate employment contracts.

Speaker A: Okay, thank you so much, that's really helpful. So, moving on to work of equal value. So we know that employers under the directive need to have a pay structure in place which ensures equal pay for equal work or work of equal value. So how must employers in Italy determine the appropriate categories of worker, uh, for the purposes of identifying work of equal value or pay structures? Any kind of local requirement or guidance.

Speaker B: In Italy, this is really where the Italian transposition becomes the most distinctive. The starting point for determining categories of worker, uh, and identify what constitutes the same work or work of the equal value is the national collective bargaining agreement. Under the decree, we have a definition of same work that means work performed in identical or equivalent function within the same pay level and grading, considering the national collective bargaining agreement. Also, work of equal value makes reference to national collective bargaining agreement, which basically means different work performing incomparable functions across the grading of the national collective bargaining agreement. So the assessment of whether work is of equal value is carried out on the basis of common objectives and gender neutral criteria also taken into into account skills, responsibility, working condition. But our legislation basically said that the national collective bargaining agreement is already aligned with those requirements that we can find in that directive.

Speaker A: Okay, interesting. Thank you. So does that mean that there's a requirement for employers to engage with any social bodies or employee representatives about the pay structures?

Speaker B: As for the engagement with social bodies, yes, there is a meaningful role for worker representative. The role is not specifically associated with building a pay architecture as such, but since the pay architecture that we are using is the one established in the national collective bargaining agreement, they kind of have a role that is very important by definition and is recognized from the outset. Company level. First of all, the accuracy of pay reporting data must be confirmed by the employer following prior consultation with workers representative who have access to the methodology that applies. So there is a verification function built into the process before the reporting is made available. As you may know, in Italy there are several collective bargaining agreements and they are classified based on their ability to be representative in a specific sector. This is not a straightforward concept, but in implementing the directive, the choice was made to give the possibility to use a national collective bargaining agreement. To define the category of workers based on classification, while only the comparative, most representative one are granted the presumption of conformity that it's a way that Italy has differentiated itself from the directive to. Because this presumption of conformity means that when you apply one of those more representative national collective bargaining agreements, equal pay principle and transparency are granted without obviously the prejudice to the possibility to make a case about individual treatment. This is clearly a tricky part because one has to understand how this presumption would fit with the shift of burden of proof. This is paramount in the directive and is also implemented in Italy in the call for equal opportunities that I have already mentioned before moving on to the

Speaker A: definition of pay in the Italian legislation. So is the same definition of pay applicable throughout the Italian legislation? So, for example, is it the same definition of pay which applies for the pay reporting obligations or providing the pay range information to job applicants and the right to information for employees?

Speaker B: This is a very important point because the Italian degrees has brought a decision that is not found in the directive, really between pay and pay level in a very distinctive way. The two concepts are not synonymous in directive either, but the decree formalizes the distinction in a very specific way, rather than relying on different definition of pay depending on the obligation. Uh, the general definition of pay, which translates in retribuzione in Italian, is very broad. It covers basic wage salary, or the sum and value paid by the employer directly or indirectly, and including also those in kind. So it's very much aligned with the directive. But then, um, the decree has introduced a separate concept of pay level, which translates in li velo retributivo in Italian, which is narrower than the concept that we find in the directive. This is the reference category for both the right to information, as we know also in the directives reporting this way, and for the reporting on gender pay gaps as the reference parameter for such reports is indeed the difference in average pay level. In the Italian notion, pay level refers to gross annual pay and the corresponding gross hourly pay, but is limited to what we define as continuous and fixed pain element only. Basically, the law expresses excludes what the decree cost, not structural economic benefits, meaning pain components that are recognized on personal, discretionary and temporary basis, that are not generalized across the same category of worker, and that are based on individual objective criteria. I must say that I needed to read it out because it's a very complicated definition. Now, don't get me wrong. The interpretation of this definition has to be considered as tentative because actually no one has a full, clear mind on the Point, the only reference that we are relying on for defining what is not structural, uh, is this preliminary memorandum to the law which basically indicated that non structural means everything that has been given as Persona. So everything that's been paid individually on top of the contractual minimum wage, that are assigned to a certain employee that are typical of that specific individual. This is also something that in Italy we call super minimi, which means something that is above the minimum pay. And according to this description that I gave, it would fall into the concept of pay, but it would not fall into the concept of pay. Lava, uh, frowning upon this concept is very legitimate in my opinion because uh, then it becomes very unclear where and how it's possible that non gender neutral difference can arise if the assessment is made in such a way. But it should not be underestimated that those individual payments that we just described qualify for the exclusion only as long as they are based on objective, meaning gender neutral criteria. So I think it's fair to say that employer must clarify upfront, at least in his policy, which criteria have been applied at individual level in order to grant this kind of payment. This creates clearly some complications as we anticipated, when it comes to pre employment transparency, for example, the information provided to candidates is based on the concept of pay, which is more inclusive than the concept of uh, pay level that I just described. But when the worker exercises the right to information, then the pay level kicks in again, which can also create confusion because you have your pay that is based on the all comprehensive definition and then your pay level of your category, which is based on something that has been narrowed down. And then in pay gap reporting, the decree requires employment to report both the overall gender pay gap and the gap specifically complementary of various components. So basically we have a, uh, pay level that does not include complementary variables. But at the end of the day the employer will be anyway required to disclose the gender pay gap that might have been created in the complementary and variable components. This is something the employer really need to map carefully in my opinion, because the scope of what must be disclosed changes depending on which obligation we are looking at.

Speaker A: Wow, thank you very much, Francesca. That's quite complicated, isn't it? Well, thank you for taking us through that. Um, very interesting to see how that's been implemented in Italy and looks like you'll probably be getting lots of questions from clients on that. So, moving on to the recruitment and job applicants, so how and when must the pay range information be provided to job applicants under the Italian legislation?

Speaker B: The tenant decree is quite clear on this and I think it was also more protective compared to the directive because basically the information on the initial pay and pay range must be provided in advocacy notices and the announcement through which the employment opportunities are made public. So before an interview takes place and even before any application takes place. This is consistent with the directive approach of ensuring informant as part of negotiation. From the very outset, the content of that information must indicate the initial pay or the range based on objective and gender neutral criteria and the relevant provision of the applicable national collective bargaining agreement in relation to the position. So there is a direct link back to the collective bargaining framework that we discussed earlier. I should also add that all the information shared with workers or applicants, um, under the decree must be provided in a format that is accessible to people with disabilities, taking into account their particular needs.

Speaker A: Thank you very much. And as we know, under the directive there is a ban on asking candidates about their salary history. Does that ban, um, apply to internal candidates? Under the Italian legislation, the decree does

Speaker B: not draw any splitting decision between external and internal candidates. Well, actually neither does the Directive. In absence of specific guidance, I think that a cautious approach is strongly visible for internal advocacy. I think the expectation from the internal candidates would also be to receive the same set of information of external applicants. Uh, while the question about salary is or information that actually the employer already has, it's a bit more nuanced. Also in this case there is no prohibition on using information that the employer already has in his system. Although if we really want to abide by the scope of the directive and the spirit of the directive, I think that actively using non salary history would be very risky and also it will be very risky as far as this is used as determinative factor. Because the reason why, we all know that, but the reason why there is a prohibition on uh, using salary history is because it's actively perpetuating the gender pay gap by relying on salary historical data.

Speaker A: Yeah, completely agree. Thank you very much. So, moving on to the right to information under, uh, the Italian legislation. So has your legislation clarified what the directive means by objective and gender neutral criteria that should be used by an organisation when determining pay and pay levels and pay progression?

Speaker B: I think by the end of this discussion you will believe that we actually kind, uh, of tried to figure a shortcut because obviously the decree does clarify this and builds on it and also indicates that the assessment whether the work is of equal value must be carried out based on common objective denimita criteria, taking into account what the directive states, that is the skills, responsibility, working condition and any other factor that is relevant for the specific work. But as I said before, we touched upon this earlier, the role of the national collective bargaining agreement is key on that because basically we have a presumption that the national collective bargaining agreement grading while they have been signed by the most comparative representative trade unions are abiding by those specific criteria. So they are gender neutral by definition and they take into account skills, responsibility, working conditions by definition. I uh, have to say that for most of the national collective pagan agreement this might be proven as true because they have very structured system, they have very structured criteria that are uh, properly and directly indicated also in the context of the national collective bargaining agreement explanation of degrading. But this might not be true for all of them or maybe for those that are, let's say older, that have been uh, uh, updated uh, some time ago. So I think this is something that we need to see in reality. How does it work out?

Speaker A: Thank you very much, that's really helpful. Shall we move on to pay gap reporting now? Because this is obviously an important part of the legislation. So does the Italian law apply the same thresholds, headcount thresholds or different thresholds than those set out in the directive for the pay reporting obligations on the threshold?

Speaker B: The Italian degree mirrors completely the directive. So there is no Italian specific on this. And also the timeline have been adopted as is.

Speaker A: Got it, thank you. And is there any guidance which addresses the question of whether consolidated reporting across multiple entities is possible or across cross border entities?

Speaker B: As for consolidated reporting and cross border situation, the degree does not address group level reporting in an international setup, but it states that an employer can adopt a uh, unified policy and may provide uh, information by aggregating data at national level when you have multiple entities. In any case in which this approach enables a more reliable representation of data and can also reduce statistical distortion. This approach may also be very useful when the pool of data is limited and disaggregation could lead to the identification of specific employees. So there is room for a group level approach, but it must be justified by the quality of the data, uh, and in any way. That said, I think that the cross border comparison is something that companies may voluntarily consider to implement internally. Particularly where workers perform the same work or work of the same value, are spread across different entities within the group as to allow for meaningful comparison and to demonstrate consistent and fairness. But in practice they can prove to be very complicated because as we know each jurisdiction in Europe has its own rules. The labor market dynamics may differ and salary levels are not the same in Italy, in Germany or Poland. So just as other factors such as cost of living or statutory minimum wage are not aligned. So while I think there is a viable option for qualitative description of role, it could also work on the quantitative side if we apply correcting falter. But for this reason we need definitely the legislation to give some kind of guidance and to make the employer safe when they decide to go for this route. Got it?

Speaker A: Okay, thank you so much. So, in terms of the pay reports themselves, where do companies have to share their pay gap reports?

Speaker B: Provided that we are still waiting for decrease, uh, from the Ministry of Labor that should be actually implemented on these, uh, details. The data that are referred in Article 9 of the directive, which is basically mirrored in the Article 9 of our decree, must be communicated to the monitoring bounty in the modalities established by the Ministry of Labour. But those details, as I said, are still to come. Employers may also choose to make this data publicly available, for example by publishing them directly on the website. This is an option that I see, for example, that some of our clients are considering, especially where they have pretty flat composition of the workforce. So they have decided that instead of exposing themselves basically to potential hundreds or even thousands of requests on right to information, they have decided to go basically for the publication themselves. In some categories of employees that are, as I said, more flat or which, uh, there are not a lot of distinction between roles, then there is a second layer of sharing of the reporting. The gender pay gap data broken down by categories of worker must be made accessible by employers to the workers and workers representative and transmitted upon request to the labor inspectorate and the competent quality bonuses. As I said, this is something that is still to come because we need the details and we need all the, let's say, implementing degrees that will give us also the guidance for how to do it and when to do it.

Speaker A: Okay, thank you so much, Francesca. So, coming on to the joint pay assessment. So obviously this will come into play later down the line when companies are required to report their data and then they'll have to think about joint pay assessments. If there is a gap identified that can't be remedied. So what is the time scale under the Italian legislature in which an employer has to remedy an identified gap?

Speaker B: Uh, once figuring the assessment itself is quite comprehensive and the Italian legislation aligns pretty perfectly with the content of the directive. Based on these, the employer must adopt the measures identified as necessary to remove the unjustified pay difference within a reasonable period of time. So we didn't give any given time, like in months or in whatever other period in cooperation with the worker representative. So the decree does not prescribe a fixed deadline, which is an area where further ministerial guidance would certainly be welcome and is something that we expect the Ministry indeed to clarify. On the cooperation side, worker representatives are essential partners in this process. And what we see is that in case there is no agreement on the remedial measure, there is also possibility for the Labor Inspectorate to intervene into the consultation with the uh, worker representative and to also help to build up some kind of agreement on this part and in the implementation of the measure. So basically there is a built in escalation mechanism in the degree.

Speaker A: Okay, thank you so much. And I guess it sounds like kind of watch this space for a bit more guidance on that. So a question that we've had already, and I'm sure you have as well from clients, uh, and your kind of contacts, is about the question of balancing rights under the directive with data privacy rights. So what is the position under Italian law if disclosing pay information under the directive might risk leading to the disclosure, either directly or indirectly of pay of an identifiable employee? Does the law kind of set out what an employer should do in that situation, or is there any other guidance available to employers?

Speaker B: Unfortunately not yet, because this is also one part that is delegated to the upcoming decrease. Basically what the law states is that from the data protection side there is not departing away from what the DPR says and the data must be processed under the supervision and may not be used for purpose other than the application of the principle of equal pay we expect, because this is also something that is built into the law that especially for employers with up to 49 workers, in order to avoid direct or indirect identification, the right and information data, uh, might be provided using aggregated modalities that as I said, need to be indicated by the legislature with the degrees that are, uh, yet to come.

Speaker A: Okay, so moving on to sanctions. So what are the penalties or enforcement mechanisms available under Italian legislation to the relevant authorities if a company fails to comply with relevant bits of the pay transparency legislation?

Speaker B: As far as the penalties and enforcement mechanism, the Italian legislature did not create a new set of rules, but has decided to rely on those existing in the Equal Opportunity Code by relation of rights arising under the decree, ah, are subject therefore to those provisions. Importantly, the available remedies may also be activated on uh, the basis of specific delineation by working representation, representative 10 union and association with a legitimate interest in ensuring equality between men and women. So it's not just only the individual work and that can act upon those, but also the national equality committees where discriminatory contrast in variation on the degree is established. The equal opportunity course applies and this provides for administrative fines that may go from €100 to thousand euro, but they are actually not very high if we think about the consequences that may be triggered on the individuals. There is also specific provision against victimization. And on the compensation side, any worker who has sustained damage as result of infringement of any right or obligation related to the decree on the principle of equal pay is entitled to full compensation of reparation. That includes full recovery of the back pay, the related bonus and payment in kind compensation for lost opportunities, no material damages and interest on arrears. So the scope of recovery is very broad in aligned with the one of the directives. As in the directive, the most powerful mechanism is the shift of the portal proof. And also the Italian legislature has introduced a penalization for those that do not apply the pay transparency in the public standards generally. The first comment indicated that maybe the legislation could be bit harsher in the part of the sanction, because as I said, the maximum amount is some, uh, several thousand euro, so maybe it's not as high in order to really discourage breach of the law.

Speaker A: That's very interesting. Thank you. Agreed. It doesn't seem like a particularly high sanction. Okay, so coming on to kind of next steps, Francesca, and you've mentioned that we're waiting kind of, we're hoping for some guidance on various points, but. So is there anything that the legislature has produced at this point or kind of employers groups in terms of guidance or templates or checklists that might help organisations comply with their obligations under the directive?

Speaker B: Not really. So far we have not registered anything coming from the Ministry of Labour that is more detailed than the law. It's also true that it's just 10 days, so I guess time will come and they will give more explanation on this. And also, uh, when we look at the association of employer, they're clearly working on the topic and nothing that can be used as guideline or is official as I can recommend it comes to my mind.

Speaker A: Okay, thank you so much. So if you could just name two things that you think employers should do now, if they haven't taken any steps already for compliance with the Italian legislation. What would you suggest those two most important things would be?

Speaker B: Uh, the first one is to conduct an internal pay audit now to map the current pay structure for the category, understand whether you are nearby the 5% or more of difference between female and male employees, considering the average pay level and also assess whether existing pain setting criteria are objective and gender neutral. Maybe relying on your national equality package agreement and understanding whether your job architecture actually fits or you need to do something different. The second intent is reviewing, uh, immediately the policy associated to job advertisement advocacies, because this is something that you need to have already in place on day one to include initial pay and pay range, to have a gender neutral language within the job title, to remove any question about salary history. So also to have some kind of internal training. If this is something that is not already done by the companies. I have to say that a lot of our clients are very compliant already to this kind of process. So, for example, everything that is associated to pay range or initial pay or gender neural language, it's already in the culture of those, but this clearly does not apply to the majority of the entities that operate in our country.

Speaker A: Okay, well, thank you so much, Francesca. This has been a really fascinating discussion. I think it's been really helpful. So thank you very much for your time today.

Speaker B: Thanks for having me today. I'm also happy that I was the first one. So I hope you will have a very successful series with the other countries.

Speaker A: Thank you so much and thank you to everyone who's tuned in today. If you've got any questions or would like to connect with Francesca, please click on huh. Her bio, which is in the description of this podcast. And we'd also encourage you to reach out to any of the ELA lawyers around the world by selecting Find a Lawyer on the ELA website at ELA Law. And in addition, you can search the ELA website and you can, for example, sign up to receive invitations to upcoming webinars, download white papers and other on demand content from our, uh, online library, or you can access the ELA's exclusive global employer Handbook. You've been listening to Employment Matters.

Speaker B: Ah.

Speaker A: A podcast brought to you by the Employment Law alliance, the world's largest network of labour and employment lawyers from the best law firms around the globe. I'm Marianne Parkinson. Thank you very much for listening.