On July 2, 2018, the Cabinet issued the so-called “Dignity Act” (in Italian Decreto Dignità) which is the first initiative of the new Government on employment law. In detail, the amendments to the existing employment law concern the rules to be applied to fixed term contracts set out in Legislative Decree no 81 of 2015 and the indemnities granted in case of unlawful dismissal of an employee hired under the so called “increasing protection” system regulated by Legislative Decree no 23 of 2015. Lgs. n. 23/2015.
These amendments were published on the Official Gazette on July 13, 2018 and enter into forces on 14 July 2018.
As the Government decided to set out the new rules by means of an emergency law, the decree will be effective for 60 days and subject to a confirmation process held by the Houses of Parliament. As a result it could be confirmed – with or without amendments – or, rejected. If rejected it will be no longer effective.
The purpose of this note is to draw your attention, in particular, to the new rules in relation to fixed term contracts - that are the subject matter of this comment – as they will immediately affect the use of such contract by many employers.
The new rules provide for the decrease of the maximum period available for such contract and the reintroduction, at least in part, of the need to specify in the contract the reasons why a fixed term of duration was agreed.
As a consequence of the new rules, the maximum extent of a fixed term contract will be 24 months instead of the former limit of 36-months.
The possibility to extend the contract for further 12 months upon authorization released by the Local Labor Office (as set forth by Section 19, par. 3, Legislative Decree no 81 of 2015) will still be available.
The Dignity Act reintroduced the necessity that - in certain circumstances - the provision of a fixed term in a contract must be based on the existence of a number of predetermined reasons.
In particular, the justifying reasons shall be:
From a first analysis of the new justifying reasons, it is clear that they are very strict and they limit the possibility to identify, in concrete, any occasion in which a justification in line with the law is effectively foreseeable.
As to the third possible reason under letter (c), the provision according to which the need has to be not only “related to temporary and significant increases” but also “not programmable” seems to exclude the possibility to manage temporary but predictable needs (for example, in the retail sector, the peak of sales during Christmas period), limiting such possibility only to situations that are not predictable (for example in case of unexpected orders).
Besides, assess when an increase is “significant” is not straightforward and, as such, will trigger disputes and litigation.
The Dignity Act provides the possibility to enter into a first contract “without any supporting reason” (e.g. without the need to indicate a supporting reason) with a maximum duration of 12 months (including also extensions). This means that an employee - without any former fixed term contract with the same employer – may be hired with a fixed term contract “without any supporting reason”:
The indication of the justifying reasons will be necessary in the following cases:
The Dignity Act has also modified the provisions related to extensions, reducing their number from 5 to 4.
The Dignity Act provides that the extensions may be granted:
The rules are generally aimed at discouraging the use of fixed term contracts: indeed, the Dignity Act provides an increase of the social contribution provided by Section 2, paragraph 28 of the Law no. 92/2012 (1,4% of the taxable income for social contribution), equal to 0.5 percentage points for each “renewal”, applied to any subsequent fixed term contract with the same employee.
It seems that this change in the rules is not applicable to the extensions of the same fixed term contract but just to the renewal.
The Dignity Act also provides an extension of the period after which the possibility to challenge the inclusion of the term in the contract is time-barred: the employee who wants to challenge the lawfulness of the term included in the contract has to give notice of this intention within 180 days - and not 120 days as before - from the termination of the relevant contract.
The new provisions apply:
The effects of the new provisions are immediate and must be respected in case of extensions of contracts already in force. As a consequence:
The content of this article is only for information and does not constitute professional advice.
For further information contact Michele Bignami.