Decree-Law No. 131/2024, published in the Official Gazette on 16 September and in force since 17 September, introduced important changes for employers in the management of fixed-term contracts. This measure, known as the “Decreto Salva Infrazioni”, meets the request of the European Union – which started an infringement procedure against Italy – to align national legislation with the EU Directive 1999/70/EC on fixed-term work.
In particular, the EU Commission found that the provision of a minimum and, especially, a maximum payment to the worker was not an effective deterrent against the abuse of fixed-term contracts.
The Decree in question has therefore amended Article 28, paragraphs 2 and 3 of Legislative Decree No. 81/2015 (“Jobs Act”), introducing significant changes regarding the compensation indemnity for damages in case of fixed-term contracts declared unlawful.
One of the most impressive aspects for companies concerns the extension of the judge’s power to set compensation indemnity exceeding 12-month instalments in cases of unlawful fixed-term contracts. Previously, when a fixed-term contract was converted into an open-ended contract, the employee was entitled to a lump sum indemnity ranging from 2.5 to 12-month instalments of the last reference salary for calculating severance pay. Now, as a result of the amendment introduced, the employer may be sentenced to pay significantly higher sums if the employee proves greater damage, such as an extended period of litigation.
Another important change is the abrogation of the 6-month limit on indemnity due to workers in the case of fixed-term contracts that have been declared unlawful, a limit that previously applied in the case of collective agreements that provided for procedures to stabilize fixed-term workers. Under the previous legislation, companies could benefit from this cap, reducing the economic risk associated with any disputes.
The amendments introduced by the “Salva Infrazioni” decree imply a significant change in the management of human resources for employers. In fact, they will have to pay more attention to complying with the rules on fixed-term contracts, avoiding abuses and ensuring the correct application of the rules in force. As a result, companies will have to adopt a more prudent and rigorous strategy in the use of fixed-term contracts in order to reduce the risk of expensive claims.
Other related insights:
The Supreme Courte, by its decision no. 23852 of 5 September 2024, examined the question of the dismissal for just cause of an employee who, during a period of illness, participated in a football tournament already scheduled, thereby breaching his obligations of diligence, loyalty and fairness, thus jeopardising his recovery or return to work. The employee appealed the dismissal, arguing that the participation in a football tournament during his sick leave did not breach his contractual obligations. The company claimed that the employee had simulated illness in order to participate in the competition, thereby jeopardising his recovery and breaching the principles of fairness and good faith. The Supreme Court rejected the employee’s claim, stating that “the performance of physical activity during the period of illness <<…>> constitutes a breach of the contractual obligations of diligence and loyalty”. Furthermore, it stated that: “<<…>> sporting activity, by its very nature, may affect or delay recovery or the return to work”. Perhaps because of the particularly serious nature of the employee’s conduct, the judgment in question represents an important decision in a matter in which the case law has too often shown a tendency to tolerate conduct that raises doubts as to the employee’s true state of illness
On 16 September was published in the Official Gazette the Decree-Law no. 131/2024 (i.e. “Decreto Salva Infrazioni”) – in force since 17 September – which also intervened on the regulation of fixed-term contracts through which the European Union requested Italy to align Italian legislation with EU Directive 1999/70/EC on fixed-term work.
The “Salva Infrazioni” decree amended Article 28, paragraphs 2 and 3 of Legislative Decree No. 81/2015 (i.e. “Jobs Act”), introducing significant changes regarding the compensation indemnity for damages in case of fixed-term contracts declared unlawful.
Pre-existing regulation:
The maximum limit of the indemnity is reduced to 6 months’ salary in the case of collective agreements that provide for procedures to stabilize fixed-term workers.
Amendments introduced by Decree-Law No. 131/2024:
“By including the role of workers’ safety representative (i.e. “RLS”) in the area of protected subjects such as trade unionists as representatives of collective interests, the expression of solidarity with other workers with general trade union political significance is included in the constitutionally protected right to criticize and the right to express opinions”.
This has been ruled by the Court of Cassation, order no. 23850/2024. In other words, within the scope of the right to criticize and express the collective interests of which he/she is the bearer, the employee who also performs the role of workers’ safety representative must be granted the same protection as that provided for trade unionists. This means that the “RLS” can use harsher language in the exercise of his/her activities as a representative of the workers, because he/she is on an equal footing with the employer.
Of course, this shall always take place within the limits of formal correctness and the protection of the human person, so much so that “only when these limits are exceeded by attributing to the employer company or its managers openly dishonorable qualities and unproven denigrating references, can the employee’s conduct be legitimately sanctioned by disciplinary measures”.
Other related insights:
The Court of Appeal of Milan, in its judgment no. 470/2024, again addressed the issue of whether the income from the sale of stock options may be included in the remuneration for the purposes of calculating notice and severance pay. The Court ruled that, in the present case, the income from the stock options was of a continuous and not occasional nature and therefore was an essential part of the remuneration. The Court thus overturned the decision no. 246 of 7 May 2024 issued by the same body, triggering a discussion on the issue.
The dispute originated from an appeal by an executive dismissed for just cause. The dispute concerned, inter alia, the inclusion in the calculation of the remuneration of the amounts resulting from the exercise of stock options which the manager claimed to be part of the remuneration due to their regular and non-occasional nature, as they had a predetermined frequency, forming part of three-year or four-year plans. The Court of first instance rejected the latter argument, excluding such income from remuneration on the grounds that there was a company regulation that excluded it from the calculation of the global remuneration.
However, the Court of Appeal decided to adopt a different perspective, referring both to Article 2099 (paragraph 3) of the Civil Code, which states that «the employee may also be remunerated in whole or in part by profit-sharing or product-sharing, by commission or by benefits in kind», and Article 2120 of the Civil Code, which states that «unless otherwise provided for by NCBAs», the remuneration relevant to the calculation of severance pay «shall include all sums, including the equivalent of benefits in kind, paid in connection with the employment relationship on a non-occasional basis, with the exception of those paid by way of reimbursement of expenses».
The Milan Court therefore ruled that stock options constituted a form of remuneration by way of profit-sharing provided for by Article 2099 of the Civil Code and also stated that, pursuant to Article 51 of the Italian Income Tax Code (i.e. “TUIR”), «all sums and values in general, (…) even if they do not come directly from the employer», as could be the case with a payment made by another group company, are considered to be the employee’s income. Continue reading the full version published on Norme e Tributi Plus Lavoro del Il Sole 24 Ore.
