Dramatic changes to atypical / consultant contracts raise real risks for employers
On 25 June 2015 an Italian Government decree made substantial changes to the provisions governing the many types of working relationships in the Italian legal system. The changes create a more uniform labour market where the prevalent contractual type is a permanent (open-ended) employment contract.
What is the impact on atypical employment contracts?
One of the main changes in the decree affects how organisations engage with atypical workers such as consultants, freelancers or contracters, and other parties they wish to work with on a collaborative basis, in a long-term, single-client relationship.
The new law provides out that from 1 January 2016 project-based contracts are no longer allowed. All long-term, single-client, autonomous relationships where the hirer (or client) organises the individual’s work (including in terms of working time and place of work) shall be treated as permanent employment relationships. This means that where the hirer exerts a level of coordination and control over the individual’s services, the latter may be entitled to obtain a transformation of his/her contract into a permanent employment contract.
What does this mean for my business?
Companies who are looking to:
- expand their workforce by hiring consultants, or
- enter into collaborative agreements,
should take particular care when drafting these contracts and managing the relationship so as to comply with the new regulations and avoid the contracts being deemed as permanent employment contracts at a later stage.
If a court finds that the hirer has organised such an individual’s activity, it may order the employer to retroactively convert the working relationship into a permanent employment contract with effect from its starting date, and to pay salary differences to the employee and social security contributions to the social security bodies.
To protect your business from these risks, consultancy or collaborative contracts may be signed under the auspices of a certified commissioning authority (which includes Universities or Territorial Labour Offices), requesting that they certify that the contract is autonomous in nature. Although this would strengthen the position of the company in court, should the contract later be challenged by the individual and it is deemed that the individual’s work is actually organised by the employer, a court might still hold that the relationship was in fact an employment relationship.
Companies who currently have such agreements in place
Companies with consultancy or other collaborative agreements in place can adopt one of the following solutions.
If the working relationship between the parties is essentially autonomous, companies can:
- draft and sign a new collaborative or consultancy contract in order to make sure that they comply with the relevant laws, as recently amended; and
- certify the contract as previously mentioned.
On the other hand, if the working relationship is not genuinely autonomous the companies may convert the current collaborative or consultancy contract into a permanent employment contract. Should this solution be adopted, the new law provides that, as from 1 January 2016, any prior administrative, tax and social security offenses, relating to any potential inaccurate classification of such agreement, will be revoked (except for offenses established following labour inspections, prior to the commencement of the employment relationship).
The cancellation of these offenses will only apply if:
- the consultant / collaborator waives any claim against the company relating to the conditions of the prior consultancy or collaborative agreement, in accordance with Art. 2113 of the Italian Civil Code; and,
- if the permanent employment contract is not terminated by the employer during the first 12 months from the hiring date, except for disciplinary reasons.
Legislative Decree no. 81/2015