The spread of COVID-19 in Italy

The spread of COVID-19 is putting the Italian economy and society to a huge test as Italy is one of the hardest-hit countries in terms of number of infected individuals. And as growth of Italian GDP is already at the bottom of European economic performance rankings, the impact that the coronavirus is having will only create further uncertainty and strain.

National and local authorities have adopted a host of measures to safeguard public health as a primary interest, but the downside of these measures to curb the spread of the coronavirus is the severely negative toll that they are taking on Italian businesses, employees, and generally on the entire national economy.

The measures have included cancellations, for the time being, of many important events, conventions and trade fairs including Design Week in Milan, the “Vinitaly” wine convention in Verona, and sports and entertainment events all over the country. Needless to say, there will be highly negative economic repercussions due to these decisions. Presidential Decree of 1 March 2020 colour-coded certain geographical areas in Italy based on the severity of the spread of the virus and imposed accordingly-strict measures within those areas (Red Zone, Yellow Zone and Green Zone).

Given this daunting scenario, it is important to take a look to the newly-adopted emergency laws and regulations introduced to counter this emergency and to face the legal problems that are emerging.

Measures

As at today’s date, the Italian national and regional governments have adopted the following emergency measures to contain the spread of COVID-19 (coronavirus) in Italy:

• Law Decree No. 6 of 23 February 2020, “Urgent measures to contain and manage the COVID-19 epidemic”;
• President of the Council of Ministers Decree of 23 February 2020, “Provisions implementing Law Decree No. 6 of 23 February 2020 setting out urgent measures to contain and manage the COVID-19 epidemic”;
• President of the Council of Ministers Decree of 25 February 2020, “Additional implementing provisions of Law Decree No. 6 of 23 February 2020 setting out urgent measures to contain and manage the COVID-19 epidemic”;
• President of the Council of Ministers Decree of 1 March 2020, “Additional implementing provisions of Law Decree No. 6 of 23 February 2020 setting out urgent measures to contain and manage the COVID-19 epidemic”; and
• Law Decree No. 9 of 2 March 2020, “Urgent measures in support of families, employees and businesses affected by the COVID-19 epidemic”.

Local ordinances have also been issued for the following colour coded zones:

Red Zone:

• Ministry of Health Ordinance of 21 February 2020 in agreement with the President of the Lombardy Region

Yellow Zone:

• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the Lombardy Region;
• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the Veneto Region;
• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the Emilia Romagna Region;
• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the Piedmont Region; and
• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the autonomous region of Friuli Venezia Giulia.

Green Zone:

• Ministry of Health Ordinance of 23 February 2020 in agreement with the President of the Liguria Region;
• Contingent and urgent presidential order of 23 February 2020 of the autonomous province of Bolzano; and
• Contingent and urgent presidential order of 22 February 2020 of the autonomous province of Trent.

How should personal data protection be dealt with in an emergency situation?

In a press release issued on 2 March 2020, the Italian Data Protection Authority (Garante per la protezione dei dati personali) responded to the many requests that it has received from public- and private- sector employers, saying that employers must not collect information from employees, clients, and suppliers or conduct investigations regarding coronavirus symptoms that these parties or their close contacts experience. Only authorised institutional parties – e.g. health workers and civil defence – can collect the information necessary to help prevent the spread of the coronavirus.

And although employees have a general obligation to inform their employers of any situations that could affect health in the workplace – which naturally includes communicating coronavirus symptoms – how should employers in Italy safeguard health in the workplace, especially in the midst of the expanding coronavirus epidemic?

Some practical suggestions include the following:

• sending out a notice to current and potential clients and suppliers to inform them that they must not access the workplace if they come from the Red Zone, have been in contact with anyone in the Red Zone, or experience coronavirus symptoms. This notice can also be placed at the workplace entrance so that it is visible to anyone who comes or goes from the workplace;
• making thermometers available in the workplace so employees can take their temperatures themselves when necessary;
• having a doctor available at the workplace, as long as the doctor provides employees – if their personal data is collected – a privacy notice and collects their consent to the processing of any health data.

Criminal aspects and 231 model

Companies that fail to adopt suitable security measures to safeguard their employees’ health in the midst of the coronavirus emergency can be held liable criminally under Legislative Decree No. 231/2001. To avoid this risk, it is essential that they have adopted a suitable 231 Organisational Model, with this model including the implementation of appropriate prevention measures proportional to existing risks.

During health crises, such as the current coronavirus emergency, given the high risk of contagion, companies must do the following:

• draw up, with the support of the occupational health physician and the Protection and Prevention Service Manager (RSPP), a risk evaluation on potential exposure to biological hazards (Article 271 of Legislative Decree No. 81/2008) and to identify the prevention measures that concretely exclude or limit the risk for employees;
• implement the above measures (e.g. by having employees use gloves, disinfectant soaps, masks, or by allowing telecommuting);
• make reference, in the 231 Model, to the specific risk evaluation (risk evaluation document (DVR) carried out and the preventive measures adopted;
• ensure increased hygiene in the workplace; and
• inform employees and workers of the risks and adopted measures (Article 36 Legislative Decree No. 81/2008).

It is also recommended that:

• the competent company departments and supervising bodies (e.g. Compliance and Internal Audit departments, board of directors, supervisory board) continuously supervise compliance with the prevention measures;
• employees and workers be completely and timely informed, also through paper or online brochures that illustrate the adopted prevention measures;
• the information that is given to employees be continuously updated, also by referencing the Ministry of Health’s dedicated webpage;
• companies subject to high risk (e.g. with frequent contact with the public) evaluate the possibility of implementing specific internal procedures for the adoption of specific measures against coronavirus as well as procedures to provide information regarding and supervision of the measures;
• companies make extremely clear that failure to comply with government measures and those taken by the company can result in disciplinary measures.

Implications on employment and management

Naturally, the adopted legislative measures also include specific provisions regarding the management of employment aspects that have been hard-hit by the spread of the virus. Prime Minister Decrees No. 6/2020 and No. 9/2020 and the Decree of 4 March 2020 address a number of employment matters in the Red Zone, Yellow Zone and Green Zone.

Red Zone:

• suspension of any business activity, with the exclusion of businesses that provide essential and public utility services;

• suspension of any work by employees residing in the affected municipalities or areas, even if they work outside the affected municipalities or areas;

• if feasible, implementation of “simplified” telecommuting solutions¹ for employees residing in the Red Zone but who work outside the zone, until 31 July 2020 (barring future amendments);

• if telecommuting is not feasible, extraordinary measures to use social safety nets:

  • simplified procedures to request to use the Ordinary Redundancy Fund (CIGO) or obtain other funds (assegno ordinario) for the suspension or reduction of working activity for businesses or employees located in the Red Zone;
  • possibility for businesses that cannot request to use the Ordinary Redundancy Fund (CIGO) or the Wage Integration Fund (Fondo Integrazione Salariale) to request to use the Wage Guarantee Fund (Cassa integrazione in deroga) for production units located or employees residing in the Red Zone;
  • possibility for businesses that are benefiting from the Extraordinary Redundancy Fund (CIGS) to opt for the Corona Virus Emergency Ordinary Redundancy Fund (Coronavirus CIGO); and
  • €500 per month for up to 3 months (based on the actual period of suspended work) for self-employed professionals.

Yellow Zone (limited to the Lombardy, Veneto and Emilia Romagna regions):

• if feasible, implementation of “simplified” telecommuting solutions for the suspended business activity and for employees residing in the Red Zone but who work in the Yellow Zone, until 31 July 2020 (barring future amendments);

• if telecommuting is not feasible, extraordinary measures to use social safety nets:

  • possibility for businesses that cannot request to use the Ordinary Redundancy Fund or the Wage Integration Fund to request to use the Wage Guarantee Fund for up to 1 month for production units located or employees residing in the Yellow Zone;

• if feasible, possibility for the businesses not subject to mandatory suspension to implement “simplified” telecommuting solutions until 31 July 2020 (baring future amendments);

• where telecommuting is not feasible, businesses can adopt prudential measures to suspend or reduce business for the duration of the health emergency by having employees use annual leave or permits with the employees’ agreement.

Green Zone

• general application of “simplified” telecommuting throughout the entire Italian territory for the duration of the health emergency (for now up to 31 July 2020).

Practically speaking, employers throughout Italy shall:

• notify employees via email of the commencement of telecommuting, indicating how long this period is supposed to last, attaching information on health and safety while telecommuting (including pertinent links to INAIL’s website) and recommending to avoid working in at-risk situations (such as in public or crowded locations);
• request that employees confirm receipt of the above email and have read and understand both the email and attached information;
• forward the information delivered to the employees also to the Protection and Prevention Service Manager;
• inform the Ministry of Labour of the beginning of the telecommuting period through the ministry’s dedicated portal (this can also be done through the company’s employment consultants).

COVID-19 vs commercial contracts

The emergency situation resulting from the spread of COVID-19 is severely affecting Italy’s economy, with total damage still being impossible to predict. And a sector that is undoubtedly in difficulty and will continue to suffer is that of commercial contracts and relationships.

Practically speaking, it is necessary to understand on a case-by-case basis whether a contract can be terminated – with no liability arising – if the coronavirus emergency situation prevents a contractual party or both parties from performing some or all of their obligations.

When dealing with written agreements, it is essential to understand whether a ‘force majeure’ clause exists in the contract. If it does, it should be understood whether the clause expressly includes pandemics or, in any case, whether it allows the enforcement of the provision in the current coronavirus situation.

In any case, and also where no written agreement – or express force majeure clause – exists, it is however likely that the party that is unable to (definitively or temporarily) perform its obligations under a contract might have to find legal solutions to handle its inability to perform under the contract.

A potential solution is that found in “factum principis” (e.g. orders issued by the public authorities to close commercial establishments or cancel events² ) and that substantially acts as a force majeure event. Another possibility, where the commercial contract/relationship is governed by Italian law, might be found in the application of the provisions concerning the (definite or temporary) supervening impossibility to perform a contract (Article 1256 and ff and Article 1463 and ff of the Italian Civil Code).

Italian lawmakers took this latter approach in Law Decree No. 9/2020 and introduced, among others³, the following provisions:

• reimbursement, under Article 1463 of the Italian Civil Code, of tickets for travel (e.g. via air, seat or rail) and tourist packages in all cases listed under section 28 of Law Decree No. 9/2020;
• suspension of terms of payment of duties and/or penalties due to the chambers of commerce in the municipalities included in the Red Zone;
• suspension of payments of insurance premiums; and
• suspension and rescheduling of payment plans for utilities (energy, environment, etc.).

Prime Minister Decree No. 9 of 2 March 2020 ordered the suspension of the terms to fulfil contractual obligations for persons residing or based in the Red Zone from 22 February 2020 to 31 March 2020, with these terms starting back up again at the end of the suspension period.
Additionally, of note is that the Ministry of Finance, together with the ABI (Italian Bank Association), announced a forthcoming decree that will suspend loan payments in the Red Zone. The details of this decree are not yet available, therefore it is not possible to understand exactly who the beneficiaries will be (e.g. individuals, businesses).

The current emergency situation could also lead to further complications involving banking contracts, including:

• the enforcement of force majeure events in the event of delay or lack of payment by persons residing or based in the Red Zone and Yellow Zone;
• the interpretation of ‘business days’ (as generally defined within banking contracts) for the purpose of calculating interest terms, in the event of closure of banks due to the current emergency situation; and
• the potential enforcement of material adverse change provisions due to the current emergency situation.

Despite the above, it is difficult to estimate the damage that the coronavirus situation will have once the emergency is over. Not just in economic terms, but also from a perspective of a likely increase in litigation concerning breach/non-fulfilment/ termination of contracts during this period.

Civil litigation

Starting the day following the date of entry into force of the Prime Minister's decree of 2 March 2020 no. 9, the following applies to civil proceedings within the Red Zone:

• hearings for civil proceedings pending before the courts in municipalities in the Red Zone areas are postponed to 31 March 2020;
• hearings for civil proceedings in which a party/the parties or their lawyers are residents of or based in the Red Zone are postponed until 31 March 2020;
• deadlines for serving any form of notice, documentation, or communication are suspended in the Red Zone municipalities; and
• any final, legal, contractual, substantive and procedural deadlines entailing time-barring or forfeiture of any rights, actions or claims, as well as terms for fulfilling contractual obligations, are suspended from 22 February 2020 to 31 March 2020 and will start back up again at the end of the suspension period.

The above measures do not apply to emergency proceedings.

Finally, it is worth noting that, apart from the Red Zone – which is subject to the above legal restrictions – the Italian association representing the legal profession (Organo Congressuale Forense) issued a resolution on 4 March recommending that lawyers and judges avoid attending hearings and any other court-based activity from 6 March 2020 to 20 March 2020. This resolution covers the entire Italian territory and many Italian lawyers and judges are likely to will abide by this recommendation.

Tax implications

The Italian Government has issued special tax-related measures amidst the spread of COVID-19, with these measures aiming to relieve the tax burden on individuals and corporate taxpayers due declining revenues and difficulty in making tax payments in an uncertain economic context:

1. Ministerial Decree of 24 February 2020, whereby tax compliance deadlines and tax payments are suspended in the Red Zone⁴; and

2. Law Decree No. 9/2020, whereby special tax measures concerning tax compliance and tax payments were introduced and apply: (a) to the Red Zone specifically⁵, and (b) to the entire Italian territory.

Red Zone-only tax measures

The above decrees apply to individuals and legal entities with residence, registered offices, or operational headquarters in the Red Zone as at 21 February 2020, with the following tax measures being adopted:

• Deadlines to meet tax compliance obligations and pay taxes (e.g. periodic VAT settlement communications concerning Q4 2019 and VAT balance payments) from between 21 February 2020 and 31 March 2020 are suspended. However, these payments must be made in a single instalment by 30 April 2020.
• Withholding agents with registered offices or operating headquarters in the Red Zone are not required to apply withholding tax, mainly relating to employee income, from 21 February 2020 to 31 March 2020.
• Deadlines relating to tax payment notices (cartelle di pagamento), assessment notices, and payment terms applicable to the scrapping of tax bills (rottamazione delle cartelle) falling between 21 February 2020 and 30 April 2020 are suspended. However, these payments must be made in a single instalment by 31 May 2020.
• Deadlines to pay social security contributions and compulsory insurance premiums and due between 23 February 2020 and 30 April 2020 are extended until 1 May 2020 (with the possibility of paying in up to five equal months instalments).
• The deadline to pay chamber of commerce registration duties is extended up to 31 May 2020.

Italy-level tax measures

Law Decree No. 9/2020 also introduced tax measures that apply to the entire Italian territory:

• Tax calendar amendments introduced through Law Decree No. 124⁶ were brought forward to 1 January 2020 instead of 1 January 2021.
• The deadline to provide the Italian tax authorities with the form for each employee that shows remuneration, withholding tax, and tax deductions applied (certificazione unica) is extended to 31 March 2020.
• The deadline for third parties (e.g. banks, insurance companies, social security institutions, universities) to provide the Italian tax authorities with data to be included in taxpayers’ pre-completed tax returns is extended to 31 March 2020.
• Pre-completed tax returns will be available to taxpayers on the Italian tax authority’s website on 5 May 2020.
• Pre-completed tax returns (730 form) must be filed with Italian tax authorities by 30 September 2020.

Law Decree No. 9/2020 also introduced specific tax measures to protect the tourist sector from a potentially huge decline in revenues due to decreased travel in this period. The new rules apply to tourism-oriented businesses, travel agencies, and tour operators in Italy, which will see certain tax deadlines suspended from 3 to 30 April and in particular with reference to:

• payments of withholding tax (mainly) relating to employee income; and
• payments of social security contributions and compulsory insurance premiums.

These payments must, however, be paid in a single instalment by 31 May 2020.

¹ “Simplified” telecommuting means that companies can adopt telecommuting solutions even without a prior written employee/employer agreement as required under Law No. 81/2017.
² Among the orders issued lately in Italy, it is worth mentioning the Prime Minister’s decree of 1 March 2020, which prohibits a number of activities until 8 March 2020 (including attending schools, events, gyms and providing strict measures for businesses including bars, restaurants, and museums).
³ Suspension of terms for the fulfilment of tax duties for companies and self-employed workers that have their registered office or operate in the Red Zone.
Suspension for 30 days of all authorisation procedures concerning public safety to have the full availability of law enforcement.
Postponement of 30 days of all the civil hearings before courts located in the Red Zone, except for those that are extremely urgent.
In the Red Zone, supplementary salary and unemployment benefits for all companies that have reductions in production or suspend business due to the coronavirus.
An increase of €350 million of the national fund (SIMEST) to support exporting companies.
The SME Guarantee Fund will provide a guarantee, for the granting of credit, on behalf of all companies that have their registered office or operate in the Red Zone, with priority over other companies outside the Red Zone. The guarantee is free of charge, for a maximum amount per company of €2.5 million and maximum coverage of 80% in the event of direct guarantee; 90% in the case of reinsurance.
⁴ Under Prime Minister Decree of 1 March 2020, the Italian municipalities in the Red Zone are: (i) Bertonico; (ii) Casalpusterlengo; (iii) Castelgerundo; (iv) Castiglione D'Adda; (v) Codogno; (vi) Fombio; (vii) Maleo; (viii) San Fiorano; (ix) Somaglia; (x) Terranova dei Passerini in Lombardy, and (xi) Vò Euganeo in Veneto.
⁵ Law Decree No. 9/2020 must be converted into law by the Italian Parliament within 60 days of the date of its publication in the Official Gazette of the Republic of Italy.
⁶ Of 26 October 2019, converted with amendments into Law No. 157 of 19 December 2019.