Update on Italian fixed term contracts

New law changes for fixed term contract in Italy.

In recent months there have been many changes in regards to the fixed term contracts in Italy.

On 19 May 2014 urgent measures to encourage the creation of new jobs was published in the Italian Official Journal, edition 114, law number 78. Currently additional clarifications are still forthcoming from the Ministry of Labour.

THE NEWS IN DETAIL

Contract “without reason”

A fixed-term contract no longer needs a justification as to why it is a fixed term.

As it is no longer necessary to justify a reason for a fixed term contract these contracts will become the general contract of choice for many employers.

A fixed term contract is allowed in the following circumstances:

  • to replace absent employees who have a right to retain their current job due to circumstances such as vacation, illness, injury;
  • to replace employees on maternity leave;
  • or employees registered on mobility lists.

Maximum duration

The maximum duration allowed of a fixed-term contract is 36 months, this includes contract renewals.

Contract extensions

Employers are allowed to extend an initial contract up to five times within a period of 36 months; provided the contracts refer to the same work activity. This new rule on contract extensions apply to employment contracts signed from 21 March, 2014.

Contract renewals

Contract renewals are allowed.

A renewed contract with the original duration of six months must begin 10 days after the initial contract concludes.

For a contract longer than six months the renewed contract must begin 20 days after the initial contract concludes.

20% limit

The law 78/2014 states that the number of fixed-term contracts cannot exceed the quota of 20%. This is calculated on the number of employees with open-ended contracts.

In some circumstances if the collective agreement already provides legislation on the subject, even by indicating different percentages, the collective agreement prevails.

The legal limit to the adoption of fixed-term contracts is considered an alternative to the limit provided in the national collective bargaining agreement.

Some examples of collective agreements are:

  • Trade: 20%
  • Construction craft: 25%
  • Construction industry: 25%
  • Transportation: 35%
  • Wood and furniture industry: 25%
  • Wood and furniture craft:
    - from zero to five employees: one employee with fixed-term contract;
    - if employees are more than five, only 50% of the employees can have fixed-term contracts.
  • Private rest homes: 30%
  • Mechanical Engineering craft:
    - from zero to five employees: one employee with fixed-term contract;
    - if employees are more than five, only three employees can have fixed-term contracts.
  • Mechanical Engineering industry: no regulation

Employers who employ up to five employees may adopt only one fixed-term contract.

The calculation shall be executed by taking a "snapshot" of the workforce as at 1 January of the hiring year.

Exceptions to 20% limit

The employment contracts that are not included in the limit are:

  • contracts with workers older than 55 years
  • contracts for replacement
  • contracts for seasonal work
  • contracts with researchers;
  • or contracts with workers registered in mobility lists (Law 223/1991).

Fixed-term contracts signed before 21 March 2014

Employers who on 21 March 2014 had a number of fixed-term contracts exceeding the above mentioned percentage are required to comply with the limit by 31 December 2014. Otherwise, the employers will not be allowed to adopt new fixed-term contracts until they are compliant to 20% limit.

Right of pre-emption in case of new open-ended contracts

The following two situations with pre-empted contracts do not apply to the above mentioned limits:

a) seasonal workers have the right of pre-emption for further seasonal work. This right shall be claimed by a written request to the employer which is to be submitted within three months from the termination of the employment contract.

b) employees with one or more fixed-term contracts exceeding six months, have the right of pre-emption if the employer intends to hire an employee with open-ended contract to carry out the same tasks of the above mentioned employee. This must be claimed by a written request to the employer within six months from the termination of the employment contract.

The claim of this right requires a prior expression of interest of the employee towards the employer by three months and six months after the termination of the employment contract. This right can no longer be claimed after one year from the termination date of the employment contract.

When hiring the employer must inform employees with fixed-term contracts, including seasonal contracts, of their right of pre-emption.

Violation penalties for fixed-term contracts

The law penalizes companies for each staff member employed over  the percentage limit equal to:

  • 20% of the salary for each month of duration of the employment contract, in the case of one employee.
  • 50% of the salary for each month of duration of the employment contract, in the case of more than one employee.