On 9 August 2018 the Italian government introduced a number of legislative changes, including several affecting the regulation of fixed-term contracts and temporary agency work. Details of the new provisions are set out in this article.

Author: Valeria Morosini

Firm: Toffoletto De Luca Tamajo e Soci

Duration of fixed-term contracts

The maximum total duration of fixed-term contracts is 12 months. This limit can be extended to 24 months, but only if at least one of the following grounds (which must recorded in writing and given to the employee) applies:

  • a temporary and objective need that is unrelated to the ordinary activity of the company or resulting from the need to replace other employees;
  • a need resulting from temporary, significant and unpredictable peaks in ordinary activity.

If a contract that exceeds 12 months is concluded between the parties without one of the above conditions being satisfied, the contract will be turned into an open-ended contract from the date on which it exceeds 12 months.

Contracts can be extended freely in the first 12 months, following which an extension can only be arranged only where one of the conditions set out above is fulfilled.

A maximum of four extensions are allowed in the 24-month period. If this limit is exceeded, the contract will be turned into an open-ended contract, beginning with the fifth extension.

Even if the initial length of a fixed-term contract is less than 12 months, it can only be renewed if one of the above conditions are fulfilled. If a contract is renewed without this, it will be turned into an open-ended contract.

Fixed-term contracts for seasonal work may be renewed or extended without fulfilling the conditions above.

The maximum total duration of fixed-term contracts between the same employer and the same employee, for duties of the same seniority level, is now 24 months, including any periods of temporary agency work.

A fixed-term contract can be challenged within 180 days of the end of the single employment contract.

Temporary agency workers

The new provisions also apply to contracts concluded by temporary agencies with employees who will be sent on a work mission to a client company. The conditions imposed will refer to the client company. Agencies are only exempted from the minimum time interval requirement (‘stop and go’) between one contract and another, from the maximum fixed-term contract limit of 20% of permanent staff and from the ‘right of priority’ in hiring (this means that temporary workers will not have a right to be hired in priority over other workers if the organisation in which they are temporarily employed is hiring permanent staff). Different conditions for contract extensions may be provided for in future by the temporary agencies’ national bargaining agreement.

Proportion of fixed-term and temporary workers

Unless otherwise regulated in the collective bargaining agreement applied by the client company, the total number of temporary and fixed-term workers employed by the user cannot exceed 30% of permanent workers. The maximum limit of 20% for fixed-term contracts remains unchanged. These percentages do not affect the recruitment of particular categories of workers.

Fraudulent use of temporary agency work arrangements (i.e. when temporary agency work is carried out with the aim of avoiding mandatory laws or collective agreements that apply to employees), the temporary agency and client company will be punished with a criminal fine of EUR 20 euros for each worker involved and for each day of temporary agency work.

As far as indefinite-term contracts are concerned, the new rules apply immediately to new contracts. The old regulation applies to extensions and renewals of previously agreed contracts until 31 October 2018.

Social security contributions

In addition to the above, the recent reform also increases social security contributions for fixed-term contracts. The additional social security contribution for fixed-term contracts has been increased by 0.5% for each renewal of a fixed-term contract, even in the case of agency workers.

Unfair dismissal

Compensation due in cases of unfair dismissal for employees hired after 7 March 2015 has been increased and now ranges from a minimum of six months' to a maximum of 36 months' salary. A settlement offer that is the outcome of a settlement procedure (under art. 6 of Legislative Decree no. 23/2015) now ranges from no less than three months' salary to no more than 27 months' salary.

However, please note that the Italian Constitutional Court has recently issued a statement declaring it is unconstitutional to use an employee’s length of service as the sole basis for calculating the compensation due in the event of an unfair dismissal. This declaration will certainly have an impact on dismissals from now on, but also on those that have already been issued and on pending court cases.