The Italian Court of Cassation, called upon to rule on the possibility of applying the joint and several liability provisions of Article 29 of Legislative Decree 276/2003 to service contracts other than those formally governed by Article 1655 of the Italian Civil Code (“contratti di appalto” in Italian parlance), with its recent judgment no. 26881 of October 16, 2024, has stated an important legal principle that extends beyond the issue of joint and several liability and impacts the entire legislative framework concerning fictitious labor outsourcing.
The judges of legitimacy, after reaffirming the background behind the joint and several liability stated in Article 29—that is, to avoid the risk of situations where workers suffer adverse consequences due to outsourcing practices—highlighted that, in the case of an atypical mixed-purpose agreement commonly used in large-scale retail, it is not a question of the precise classification of the contract, but rather “the need to determine whether a mechanism of outsourcing and detachment between the ownership of the employment relationship and the utilization of the labor activity was established, which could justify applying the guarantee provided by Article 29″.
Upon closer examination, however, the impact of this ruling seems to extend beyond the mere issue of joint and several liability because, regardless of the contract’s classification, it leads to the conclusion that the outsourcing arrangement and the resulting detachment between the formal holder of the employment relationship and the actual user of the labor are sufficient to justify not only the application of Article 29 but also of the entire regulatory framework designed to protect employees who are unlawfully used.
If as observed by the Court, the purpose of the analysis is to determine which party bears the “business risk“, it cannot overlook the other criteria outlined in the first paragraph of Article 29 of Legislative Decree 276/2003 to assess the lawfulness of a contract:
The three requirements mentioned are indeed the distinguishing features of a lawfulness contract as opposed to unlawful supply of labour. Although the Italian Court of Cassation, in this decision, focused on the business risk criterion, it is clear that assessing the lawfulness of the contract must also consider the organization of resources and personnel.
This holds true regardless of the legal classification of the contract governing the relationship between the parties, in any case where there is a separation between employer and user. Naturally, this does not apply if the labor supplier is an agency expressly authorized by the Ministry of Labor.
Furthermore, this interpretation should not be surprising if we consider that labor law as a whole generally prioritizes substance over form.
Consequently, any outsourcing arrangement lacking the required criteria risks being non-compliant with the law and may therefore be reclassified as irregular or fraudulent labor supply.
The ruling underscores the importance for companies to exercise caution with regard to these types of arrangements in light of increased judicial scrutiny, including in criminal matters, as evidenced by recent investigations into the fashion and logistics sectors and also by the italian legislator, who, with Decree Law 19/2024, has toughened the penalties for illicit or fraudulent labor supply, increasing the fines applicable in the event of violations and introducing imprisonment of 1 to 3 months depending on the severity of the violation.
In cases where the contract is deemed unlawful, the contracting company may face a range of adverse consequences, including the right of the supplied workers to demand the establishment of an employment relationship with the actual user from the beginning of the supply and to claim any unpaid wage and contribution differences that may have accrued.
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Italian Decree-Law no. 19 of 2 March 2024 (‘DL PNRR-bis’), in force from that date, introduced important changes to the employment sector, particularly regarding contracting-out and employment agency entities.
The most important changes are summarised below:
Contracting-out thresholds: contractors and subcontractors must pay personnel employed under the contract overall remuneration that is not lower than that provided for by the national and local collective bargaining agreements that predominantly apply in the area and in the sector related to the contracted-out activities.
Joint and several liability under the contract: joint and several compensation liability for the user is extended and extends to unlawful agency work, contracting-out and secondments.
Undeclared work: the fines for employers who employ undeclared workers have increased by 30%.
Sanctions for unlawful contracting-out and/or agency: introduction of a criminal sanction of imprisonment for up to one month or a fine of EUR 60 in the event of an irregular contract, or for each employed worker and for each day of employment. In the event of a ‘recidivism’ (i.e. if in the previous three years the employer has already been the recipient of criminal sanctions for the same offences) the fine is increased to EUR 72.
Tightening of sanctions for fraud: if the employer’s evasion of legal regulations or collective bargaining agreements is intentional, the sanction of imprisonment up to three months or a fine of EUR 100 is applied for each employed worker and for each day of work.
Licences for construction sites: from 1 October 2024, businesses and self-employed workers operating on temporary or mobile construction sites will be required to have a “licence”. The applicant must satisfy the following requirements: registration with the Chamber of commerce, industry and crafts; the training obligations provided for in Article 37 of Italian Legislative Decree no. 81/2008 applicable to employers, executives, managers and workers; hold a valid Certificate of Contributions Compliance (Documento Unico di Regolarità Contributiva, ‘DURC’); hold a Risk Assessment Document; hold a Certificate of Tax Compliance.
Agricultural businesses and seasonal work: tightening of sanctions so that if the limit of 45 days per year of “casual and temporary employment agricultural work” is exceeded, the employment contract is transformed into a full-time contract.
Compliance list: if, as a result of inspections relating to employment and social legislation, no breaches or irregularities emerge, the Italian National Labour Inspectorate (Ispettorato Nazionale del Lavoro, ‘INL’), issues a certificate and register the company in an on-line list called the “INL compliance list”. For 12 months from the registration date employers will not be subject to further checks in the matters subject to the investigations, while in the event of breaches or irregularities established through evidence subsequently obtained by supervisory bodies, INL will remove the employer from the list.
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The Court of Santa Maria Capua Vetere, by decree under art. 28, Law no. 300/1970, of 24 February 2022, stated that the dismissal of a trade union delegate, in the absence of prior authorisation from the trade union to which they belong, is ineffective and constitutes anti-union conduct.
The decision stems from an appeal filed by the trade union association to which the employee belongs (RSU delegate), which said the employer was guilty of anti-union conduct having imposed the dismissal for just cause, in violation of art. 14 of the Multi-industry Agreement of 18 April 1966.
The above rule, referred to by the Metalworking Industry’s National Collective Labour Agreement, for cases of disciplinary dismissal announced during the period of validity of the trade union office, provides that its operation is subject to the employer obtaining the authorisation of the trade union association to which the union representative belongs. The employer must notify the dismissal to the trade union delegate and the trade union association which rules on the expulsion measure within six days. The trade union organisation may refuse the authorisation, thus preventing the dismissal from taking place. If the trade union does not express its opinion within the following six days or does not decide to initiate the optional conciliation procedure under Article 14, the dismissal becomes effective.
The purpose of this procedure is to (i) verify that the dismissal is not instrumental and unjustified, and (ii) to avoid possible disturbances connected with the dismissal of a trade union representative.
Only after filing the appeal under Art. 28, Law no. 300/1970 by the trade union association, the company had activated the procedure, communicating the re-admission of the trade union delegate, to fulfil their purpose but exempting them from providing work.
The court noted that the absence of the request for authorisation by the employer entails the “inoperability” of the dismissal and counted as anti-union conduct. In the court’s view, the procedure’s start (following the appeal filing), with the simultaneous formal readmission of the worker to service did not result in the anti-union conduct ceasing to exist, as the company claimed, or the conclusion of the disputed matter.
What mattered to the Court for the purposes of the existence of the interest in bringing proceedings under Art. 28, Law no. 300/1970 was not only the existence of the anti-union conduct but its continued damaging effect. In this case, the damaging effects was that the employer effectively prevented the RSU delegate, who had been suspended from work, from accessing company premises and exercising their functions.
The court ordered the continuation of the employment relationship without exemption from work and for the time necessary to carry out the procedure under Article 14 of the Multi-industry agreement.
Based on previous case law, the decree held that the sanction of reinstatement under Article 18 of the Workers’ Statute does not apply in cases of nullity of dismissal. This is because the infringement of Article 14 is a breach of contract and not a breach of law. Dismissal is only invalid if the employer’s termination is based on the employee’s membership of a trade union or participation in trade union activities and is therefore discriminatory.
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Enrico De Luca and Valentino Biasi will be speakers in the “Contracts for hiring and applicable benefits” webinar organised by Assolombarda on 7 April at 10 am.
The speakers will provide an overview of the main types of employment contracts, tax benefits and financial incentives linked to new hires.
The meeting analyses the different types of subordinate employment contracts available to companies for the recruitment of new resources.
Special attention will be paid to the contributory benefits applicable following the hiring of new workers or linked to changing existing employment relationships.
The meeting is reserved for Assolombarda member companies: it is necessary to sign up in advance using the function
The Supreme Court of Cassation, with its ruling no. 23385 of 23 October 2020, stated that regarding waivers and settlements, the employee’s declaration may be considered as a waiver if the settlement agreement was issued with awareness of determined or objectively determinable rights and with a conscious intent to waive or settle them.
This case originated from an appeal filed by a manager of a public limited company, who was appointed company CEO in 1995. No specific remuneration was paid to the manager for this position. Having ceased to hold office, the manager applied to the Court of Venice asking for the payment of the remuneration, indicating as a quantification parameter the remuneration that had been determined in 1998 in favour of a new CEO.
The Court of First Instance and the Court of Appeal rejected the manager’s request on the grounds that the remuneration issue was settled under an agreement reached between the parties on 17 September 1998, despite the fact that the text was unclear. The Court of Appeal considered that the settlement had definitively ended the management relationship and all matters relating to the CEO position, including remuneration. This decision assumed that when interpreting contracts, the agreement wording cannot be the only element to be considered but it must include other factors such as subsequent conduct, to identify the parties’ common intention.
The manager appealed to the Court of Cassation against the decision on the merits, complaining of an “unjustified” devaluation of the settlement agreement’s literal elements. He argued the parties had used the terms only in the singular and referred only to the management employment relationship, while there was no reference to the CEO position and no waiver of the related remuneration.
The Court of Cassation considered the appeal filed by the manager to be unfounded and referred to several basic principles regarding the interpretation of waiving and settlement acts concerning reciprocal rights deriving from the employment relationship.
Firstly, it was stated that “Regarding waivers and settlements, employment relationship and its termination, the employee’s declaration may be considered as a waiver provided that, based on the interpretation of the settlement agreement, it is ascertained it was issued with the awareness of determined or objectively determinable rights and with the conscious intent to waive or settle them. (see 10056/1991; Court of Cassation ruling no. 1657/2008).
According to the Court of Cassation the settlement agreement subject must be identified not by literal expressions used by the parties, but the objective situation of conflict that they have begun to settle through mutual concessions in the dispute and any dispute that they intend to prevent. To investigate the scope and content of a settlement agreement, the trial judge may draw on any element suitable for clarifying the agreement terms, even if not directly mentioned, without this entailing a violation of the principle according to which the settlement must be proved in writing (cf. 729/2003; Court of Cassation ruling no. 9120/2015).
The Court of Cassation stated that “on the general interpretation of contracts, if the literal expressions used are insufficient to reconstruct the common will of the parties, it is necessary to consider the common intent they have pursued.” To verify the nature of such a settlement agreement and its content, it is necessary to investigate whether the parties tried to end the dispute through the agreement. It is not necessary, however, for the parties to express their disagreement on the opposing claims, nor to use directly revealing expressions of the settlement agreement, the existence of which can be inferred from any element expressing the will to end any further dispute.
According to the Court of Cassation, the decision of the trial judges can only be considered legally correct and logically appropriate, thus avoiding any Court evaluation.
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