Recent amendments to the provisions on fixed-term employment

Recent legislation has removed the need to have a specific reason (be it technical, organizational, production-related or substitutive) for hiring employees under fixed-term contracts.

Following the entry into force of the new law, an employer who wants to recruit fixed-term employees no longer needs to specify any reason to justify its need to employ only for a fixed term. In the past this made it very difficult for employers to use this type of contract and caused an enormous number of disputes between employers and employees.

The law did not amend the rules regarding the maximum percentage of employees who can be engaged on a fixed term basis in relation to the whole workforce (20%), the only exceptions being fixed-term contracts entered into for substitutive reasons (i.e. to substitute temporarily absent employees entitled to return to work, e.g. on maternity leave) or for seasonal jobs.

The law has also set the financial penalty which an employer must pay if the above limit is exceeded, that is equal to 20% of the employee’s salary if only one employee exceeds such limit or to 50% of the relevant employees’ salaries if there are more employees exceeding the 20% threshold. The law has, however, confirmed that the threshold can be altered through collective bargaining agreements.

Following the reform the maximum duration of each fixed-term employment relationship is 36 months, unless established differently by collective bargaining agreements.

A significant change has been introduced regarding the number of permissible extensions to a fixed-term employment contract, which has been increased to 5 within the (maximum) permitted period of 36 months (see above). Again no specific reasons are required to justify the extension.

The position on renewals remains unchanged, however, as the new law still provides that, once a fixed-term contract is ended, an employer cannot hire the same employee through another fixed-term contract before a period of 10 or 20 days (depending on the initial duration of the fixed term employment) has expired (so called “stop and go”).

The recent reform is aimed at granting employers more flexibility with the purpose of enhancing the employment in Italy.

Legislative Decree No 34/2014, entered into force on 21 March 2014

Law No 78 on 16 May 2014

Legislative Decree 368/2001