In its circular No. 17 of 31 October 2018, the Ministry of Labour has provided the first operational instructions on the application of Decree Law No. 87 of 12 July 2018, now converted into Law No. 96 of 9 August 2018 (“Dignity Decree”)
a) New rules for fixed-term contracts
First of all, the circular has taken a position on the changes made by the Dignity Decree to the rules governing fixed-term contracts pursuant to Legislative Decree 81/2015, with the maximum duration now reduced significantly from 36 months to 24 months.
On this point, the circular clarifies that the parties concerned have the option to freely enter into fixed-term contracts for a maximum duration of 12 months and, after such term, must indicate the specific reasons for the continuation of the contract, specifically:
- temporary and objective needs, not linked to ordinary business activities;
- to replace other workers;
- requirements linked to significant, temporary increases in ordinary activities that could not be planned for in advance.
As clarified in the circular, the calculation of the 12-month period must take into account the overall duration of all of the fixed-term contracts entered into by the employer and the employee, including those already ended and those to be extended prior to expiry. In this regard, the circular provides the following example: “Consider the case of a 10-month contract that is to be extended for a further period of 6 months. In such case, even if the extension period is added before the relationship exceeds the duration of 12 months, it will still be necessary to specify the reasons indicated above, since the overall length of the relationship will exceed such duration, as provided in article 19, paragraph 4, of Legislative Decree 81/2015”.
In any event, as provided in art. 19, paragraph 3, of Legislative Decree 81/2015, the parties will still have the option, once the 12-month limit has been reached, to enter into a new 12-month contract before the competent local Labour Inspectorate. The circular also clarifies, on this point, that the measures provided for in circular No. 13/2008 continue to apply, specifically:
– “verification of the formal completeness and accuracy of the contract’s contents” and
– “authenticity of the worker’s consent to enter into the contract, without this having any certification effect on the actual existence of the preconditions to be met under laws in force”.
According to the circular, the extension implies that the reasons for the fixed-term contract being entered into have not changed, excluding the case where the date needs to be extended within the expiry of the contract. The circular therefore clarifies that:
(i) a fixed-term contract cannot be extended if the reasons have changed, since this would result in a new fixed-term contract, which would be subject to the renewal rules, and
(ii) an extension cannot be considered as such when the new fixed-term contract starts after the expiry of the preceding contract.
A novel aspect compared to the Jobs act is the reduction in the number of possible extensions, from 5 to 4, within the limit of the maximum duration of the contract and regardless of the number of existing contracts, excluding, however, seasonal work contracts.
In any event, the Dignity Decree has not amended the section of art. 19, paragraph 2, of Legislative Decree 81/2015 under which there is the option to derogate from the maximum duration of the fixed-term contract by collective bargaining. Therefore, collective bargaining agreements can continue to have a different duration, even in excess of the new limit of the 24 months. The circular does however clarify that if the provisions of a collective agreement signed before 14 July 2018 provide for a duration of fixed-term contracts of or longer than 36 months, such contact will continue to be effective up to the expiry of the associated collective agreement.
The circular also addresses the matter of the required structure of the contracts. In detail, the reference to art. 19, paragraph 4, of Legislative Decree 81/2015 has been eliminated (requirement for the term of the contract to be specified directly or indirectly in a written document), therefore providing greater clarity in terms of the existence of the foregoing requirement.
No changes to the provision that, in certain cases, the term of the contract can continue to be indirectly linked to the specific reason for which the person was hired, for example, as maternity leave cover when the date of the employee’s return to work is not known in advance, but always within the limit of the maximum duration (24 months).
The circular also deals with the issue of identifying the additional contributions payable by an employer that uses fixed-term contracts. In fact, pursuant to art. 3, paragraph 2, of the Dignity Decree – as amended by the ratifying law – as of 14 July 2018, the additional contribution payable by an employer is 1.4% of the salary subject to social security in contracts that are not open-ended, increased by 0.5% on each renewal of a fixed-term contract, including staff-leasing contracts.
Therefore, the ordinary additional contribution of 1.4% is to be increased by 0.5% at the first renewal and then by a further 0.5% at each successive renewal. This increase does not apply to contract extensions
b) New rules for staff leasing fixed-term contracts
The circular also clarifies a number of aspects linked to staff leasing fixed-term contracts, in light of the amendments introduced in the Dignity Decree.
Under Art. 2 of the Dignity Decree, the rules applicable to fixed-term contracts have been extended to staff leasing fixed-term contracts, which were previously governed under articles 30 ff. of Legislative Decree 81/2015, exception made solely for the provisions of art. 21, paragraph 2 (breaks between two contracts, or stop and go), art. 23 (maximum number of fixed-term contracts allowed for each employer) and art. 24 (right of precedence).
The circular does however clarify that no limit is set for workers sent on fixed-term assignments by staff leasing companies. In detail, pursuant to art. 31 of Legislative Decree 81/2015, workers can be assigned to client companies on both an open-ended and fixed-term basis without the requirement to indicate a reason or specify the duration limit of the assignment, provided, of course, that the percentage limits set out in the provision above are observed.
The option remains for extension and renewal rules to be established by collective bargaining, as provided in art. 34, paragraph 2, of Legislative Decree 81/2015.
The circular also clarifies that, as a result of the reform, art. 19, paragraph 2, of Legislative Decree 81/2015 applies also to staff leasing fixed-term contracts. Consequently, once the time limit of 24 months has been reached, the employer cannot make use of a staff leasing fixed-term contract for the same worker, to carry out duties of the same level and of the same legal category.
In this case also, the circular clarifies that the calculation of the 24-month period must take into account all the staff leasing fixed-term contracts that have been entered into by the parties, including those preceding the date the reform came into force.
Furthermore, the circular highlights that if the duration of the staff leasing arrangement with a single client company exceeds 12 months or the assignment is renewed, the contract between the staff leasing company and the worker must specify a reason, which must be based on the needs of the client company and not those of the staff leasing company.
The circular also specifies that the obligation to indicate the reasons for using staff leasing fixed-term contracts arises when the same client company had previously entered into a fixed-term contract with the same worker, to carry out duties of the same level and category.
In this case also, clarifications are provided on the maximum number of workers under staff leasing contracts. Indeed, the law ratifying the Dignity Decree sets a limit on the use of workers under fixed-term staff leasing arrangements. The new version of art. 31 provides that, while the maximum percentage (20%) of fixed-term contracts set out in art. 23 continues to apply, a company can employ workers under fixed-term contracts and workers supplied under fixed-term staff leasing arrangements up to a maximum of 30% of the number of employees with open-ended contracts on its payroll.
In this case also, any existing collective agreement that provides for higher percentages shall continue to be effective up to its expiry. The aforesaid percentage limit applies to all new hires with fixed-term contracts or under staff leasing arrangements from 12 August 2018.
c) Transition period
The circular also addresses the issue of the transition period. Art. 1, paragraph 2, of the Dignity Decree had established that the new provisions would apply to fixed-term contracts entered into after the Decree came into force, and to renewals and extensions of contracts in force at the same date. The ministerial circular specifies that, in the ratification of the Decree, the aforementioned paragraph 2 was amended solely in relation to renewals and extensions, providing that, for these, the new rules would apply only after 31 October 2018. The aim is to exclude the renewal and extension of ongoing contracts from the immediate applicability of the new limits until that date.
Consequently, the provisions introduced with the reform became fully applicable on 1 November this year, including the requirement to indicate the conditions in the case of (i) renewals, always, and (ii) extensions, after 12 months.
Last but not least, the circular clarifies that the transition period applies also to staff leasing fixed-term contracts, since the Dignity Decree has in fact extended the rules applicable to fixed-term contracts also to staff leasing fixed-term contracts.