THE EMPLOYMENT PROVISIONS OF THE LETTA GOVERNMENT: AMENDMENTS BECOME FINAL AFTER CONVERSION INTO LAW

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1 September 2013 THE EMPLOYMENT PROVISIONS OF THE LETTA GOVERNMENT: AMENDMENTS BECOME FINAL AFTER CONVERSION INTO LAW On 23 August 2013, Law no. 99/2013 (hereinafter referred to as the Conversion Law ) converting Law Decree no. 76/2013 (hereinafter referred to as the Decree, the content of which was outlined in our July 2013 newsletter, was published in the Official Gazette of the Italian Republic. The Conversion Law has confirmed all the most important new provisions introduced by the Decree, which we reproduce here below highlighting in italics the (few) amendments made by the Conversion Law, as well as indicating the operative clarifications provided by the recent Ministry of Labour Circular Letter no. 35/2013 (hereinafter referred to as the Circular Letter ). THE MAIN NEW PROVISIONS IN FAVOUR OF ENTERPRISES Apprenticeship contracts In an attempt to simplify the complex provisions on apprenticeship, which have prevented so far many enterprises from using this type of contract, the Decree (which has not been changed in this respect by the Conversion Law) has set a specific deadline (30 September 2013) for the Conferenza Stato Regioni (State-Regions Conference) to adopt specific guidelines to depart from certain provisions of the Consolidated Act no. 167/2011, i.e. the law which regulates apprenticeship. Should the guidelines not be adopted by the above deadline, the departing provisions will directly come into force (subject to the Conferenza s right to adopt guidelines at a later stage). These provisions on apprenticeship, which depart from the provisions of Consolidated Act no. 167/2011, will apply to all employees hired under apprenticeship contracts, regardless of the size of the

2 employer and of the time when they are hired. More specifically, the Conversion Law has deleted a provision which limited the applicability of the new legislation to employees hired until 31 December 2015 by microenterprises and by small- and medium-sized enterprises. Furthermore, the Law Decree has expressly permitted the succession of two apprenticeship contracts, the first one for the acquisition of the professional qualification or diploma, to be subsequently converted into a second different contract, i.e. a professionalizing apprenticeship contract. The total duration of the two contracts shall however not exceed the maximum duration provided for by the applicable collective agreements. However, this provision shall apply - as specified by the Circular Letter - only in the case that the collective agreement applied identifies the total maximum term of the two apprenticeship relationships. Fixed-term contracts As much sought-after by enterprises, the Law Decree reduces the time intervals between different fixed-term contracts from days to days (for contracts with more than/less than six months term, respectively), thus restoring the discipline existing before the Fornero Reform. Therefore, for all fixed-term contracts executed starting from 28 June 2013 (i.e. the date of coming into force of the Decree), it is sufficient to comply with an interval of 10 or 20 days, even if the previous fixed-term relationship arose prior to such date. Collective agreements, including at company level, may identify cases in which the succession of fixed-term contracts will be allowed even without respect of the aforesaid time intervals. Collective agreements, including at company level, are allowed to identify further cases in which fixed-term contracts may not be specifically related to technical, production-related, organizational or substitutive reasons (i.e. in addition to the first relationship case introduced by the Fornero Reform). In this respect, the Circular Letter specifies that the provisions set forth in the collective agreements supplement the Legislator s provisions; as a consequence, the collective agreements, including at company level, may provide, for example, that fixed-term contracts that are not specifically related to technical, production-related, organizational or substitutive reasons may last more than twelve months or that they may also be entered into by parties who were previously under a subordinate employment relationship. However, the Conversion Law has specified that, although fixed-term contracts that are not specifically related to technical, production-

3 related, organizational or substitutive reasons may be extended pursuant to art. 7 of the Decree (even if executed prior to 28 June 2013, i.e,. the date of its coming into force), the total maximum duration of the relationship (including the possible extension) shall not exceed 12 months. The Decree has repealed the obligation to give the Local Employment Centre prior notice of the continuation of the fixed-term contract after the expiry of the term (permitted by the Fornero Reform for up to days after the original expiry date). Finally the Decree, clarifying different interpretations given by courts, clarifies that fixed-term employment relationships of employees dismissed within the frame of a collective layoff procedure shall not be subject to the provisions of Legislative Decree no. 368/2001, i.e. the ordinary rules on fixed-term relationships(in particular, new employers shall not be subject to the obligation to specify the reasons for entering into a fixed-term contract, there will be no limitation to extend the contract, save for the maximum 12 months term, etc.), except for as specified by the Conversion Law - articles 6 (principle of non-discrimination) and 8 (criteria of calculation) of Legislative Decree no. 368/2001. Project-based contracts (so-called contratti di lavoro a progetto) The Conversion Law has confirmed the change of the wording which identifies the tasks and duties that may not be assigned to the independent contractor: no longer alternatively execution or repetitive tasks, but rather execution and repetitive tasks. However, it seems that the aforesaid measure (which is also part of a provision that can be interpreted in different ways) cannot extend significantly the cases where this type of contract can be used. The Conversion Law has introduced an additional flexibility measure: if the project-based contract regards a scientific research activity and this is broadened so as to include related subjects and is extended in time, the project will automatically continue. Dismissal for organizational reasons The Decree has solved a case law conflict that raised numerous doubts among enterprises and expressly provides that the preventive settlement procedure before the Local Employment Office in the case of dismissal for justified objective reasons (also introduced by the Fornero Reform) shall not be followed in the case of dismissal due to exceeding the maximum protected period of sick leave. The carrying out of said procedure is also excluded in the case of dismissal due to change of contract (cambio di appalto) or, with sole regard to the building sector, due to shutdown of the construction site.

4 Finally, the Decree provides that failure by either party to appear before the aforesaid Office may be regarded as argument of evidence should a lawsuit be thereafter commenced. Said provisions have remained unchanged upon conversion into law. Employment incentives The Conversion Law has confirmed the two types of incentives introduced by the Decree, to encourage employers to offer new jobs, especially to young people. In fact, despite the adoption of these measures, the greatest and most durable savings on the high labour costs seem to be those made through apprenticeship contracts. The first type of incentive is for employers who employ young people aged between 18 and 29, who, alternatively, (i) have not had a paid job for at least six months; (ii) have not attained an upper secondary educational or vocational qualification (the Conversion Law has eliminated the third case in which the incentive could be granted, i.e. employees who live by themselves or with one or more dependant ). The incentive shall be equal to one third of the gross taxable salary for social security purposes (with a monthly cap of 650 Euros) and shall be granted for 18 months in case of open-term employment and for 12 months in case of conversion of a previous employment relationship into an open-term contract. The employment shall result in a net employment increase (the Conversion Law specifies that within a month the employer shall hire an additional employee ( ) under a subordinate employment contract ), calculated taking also account of the employment reductions occurred within subsidiaries, affiliates or companies under the same control. The incentive can be used only after the adoption of the deeds required for planning the allocation of funds and until 30 June 2015, within the limits of the available funds. The second type of incentive regards employers which (albeit not being bound to) employ, on a full-time basis and under open-term contracts, unemployed people who receive the ASpI allowance (i.e. the unemployment allowance introduced by the Fornero Reform). The incentive shall be equal to fifty per cent of the residual monthly unemployment indemnity to which the employees would have been entitled. The incentive shall not be granted if the enterprise which has dismissed the employees has assets substantially coinciding with those of the new employer, or if the dismissing enterprise and the new employer are associated or under a control relationship.

5 Internships plus vocational training The Conversion Law has deleted the possibility until 31 December 2015 to extend by a month the maximum term of internships that included vocational training. With regard to internships that include vocational and orientation training, the Conversion Law permits enterprises with more than one site (so-called multi-localizes enterprises) to apply at all their sites the provisions in force in the Region where their registered offices are located. Association contribution of labour The Conversion Law has introduced the possibility for collective agreements at company level to provide from 1 June to 30 September 2013 for the hiring under open-term employment contracts (including apprenticeship contracts) of persons who are already parties to an association with contribution of labour (associazione in partecipazione) on particularly favourable conditions (in particular, the signing of a settlement agreement concerning the previous joint venture relationships). Secondment The Conversion Law provides that, if the secondment of employees occurs between enterprises which have executed a network contract (so-called contratto di rete di impresa), the interest of the seconding entity arises automatically by virtue of the operation of the network, subject to the provisions set forth in art of the Italian civil code. For the same enterprises, the Conversion Law allows an employment relationship to be held jointly by a plurality of employers that belong to the network for those employees who are hired in compliance with the rules set forth in the network contract. ADDITIONAL BURDENS AND FORMALITIES FOR ENTERPRISES Joint liability in works and service contracts The Decree extends the principal s joint liability envisaged by art. 29 of Legislative Decree no. 276/2003 to remuneration and social security contribution obligations relating to self-employed people engaged in the contract. Furthermore, the Decree specifies that the possibility, granted to collective agreements by art. 29, to depart from the joint liability

6 regime only regards remuneration, and cannot extend to social security and welfare obligations. Project-based contracts and so-called self-employment continuative relationships The Decree requires that all the information provided for by art. 62 of Legislative Decree no. 276/2003 be specified in writing in projectbased contracts, i.e. no longer for the sole purpose of giving evidence of their existence. This provision entails additional risks for the enterprises, which need to be extremely careful upon drafting the contract, under penalty of voidness and unenforceability. Clearly, in case of absence of just a few elements not particularly important within the contract (such as, for instance, specification of timing and manner to pay remuneration or to reimburse expenses) the nullity sanction would seem really abnormal. The obligation to comply with the procedure of validation of resignation and termination by mutual consent extends to certain selfemployment relationships (including project-based contract). Job on call The Decree reduces the maximum number of days of utilization of job on call contracts: if an employee works more than 400 days over three solar years, the relationship shall be converted into a full-time and open-term employment contract. For this purpose, only the days actually worked from the coming into force of the Decree (i.e. 28 June 2013) for the same employer (as specified by the Conversion Law) shall be counted. Fines and administrative pecuniary sanctions relating to health and safety at work breaches The Decree requires that the fines and administrative pecuniary sanctions envisaged by Consolidated Act no. 81/2008 and by the other legally binding and enforceable deeds on health and safety at work be re-valued every five years. The same fines and administrative pecuniary sanctions shall be revalued, effective from 1 July 2013, in the amount of 9.6%. However, the Conversion Law specifies that revaluation shall not apply to breaches committed prior to 1 July 2013, regardless of the date when they are ascertained.

7 Company collective agreements departing from statutory provisions and national collective agreements (contratti aziendali in deroga) The Conversion Law has deleted the provision of the Decree which made the effectiveness of the above agreements (executed pursuant to art. 8 of Law Decree no. 138/2011, for example with regard to the employee s duties, classification of personnel, working time and fixed-term contracts, part-time work, modulated working time or flexible working time) subject to the filing of the same agreements with the Local Employment Office). * * * * *

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