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Fixed-term contracts: how will the new law affect tire dealers and car repairs

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The new law, called “Decreto Dignità”, is set to reduce contractual flexibility as concerns rise among firms called upon to cope with periodic changes in the workload. However, a few solutions do exist

Matteo Prioschi • Giornalista de Il Sole 24 Ore

The new law, “Decreto Dignità” (literally Dignity Decree), in force first on July 13, and then, following a few amendments, from August 12, significantly reduced the contractual flexibility available to companies that have to face periodic changes in their workload.

The law, in fact, changed the rules of fixed-term contracts, reducing the maximum standard duration from the previous 36 months (reachable by adding up different contracts or through extensions of the same) to 12 months. The limit of one year can be exceeded, up to 24 months, but only for specific reasons, the same that were once in the contractual order before the cancellation dated 2014. The only two conditions considered valid for an extension or renewal of a fixed-term contract are: temporary and objective needs, unrelated to ordinary activities such as worker substitution and needs connected with temporary, significant and non-programmable growth of ordinary activities.

Therefore, a fixed-term contract with a duration of more than 12 months can only be signed if one of the two conditions provided for by the law are met. The same applies also to possible renewals, even if, when added up, the duration of the contracts does not exceed 12 months. For example, if a company employs a 2-month contract worker and then after some time decides to offer another contract of the same duration, the worker can be hired only if the abovementioned two conditions are met. Contract extensions represent the only exception and can be made without a specific reason until the 12-month limit is reached (we talk about extensions when the duration of a fixed-term contract is extended before the expiration date, without interruption - if there is an interruption between two contracts, then it is a renewal).

Tire dealers experience a sudden surge of activities as motorists replace their tires in spring and autumn, which determines the need for temporary workers. According to the new rules, however, if a company employs a worker in autumn, perhaps for a couple of months, to employ that worker again in spring, the contract must specify that the company is faced with one of the two reasons already mentioned at the beginning of the article. However, it is difficult to maintain that such increase is unrelated to the company’s "ordinary activity" (thus excluding the possibility of using the first reason) or that the temporary increase is "non-programmable" since it is a matter of managing a peak of work that occurs periodically in foreseeable moments (therefore rendering also the second reason useless). The sanction considered in case of contracts renewed without complying to either one of these conditions, is the automatic transformation of the same into a permanent contract.

Nevertheless, the rule provides for an exception. In fact, "seasonal contracts may be renewed or extended even in the absence of the conditions referred to in Article 19 paragraph 1 of the Legislative Decree 81/2015 as amended by the “Decreto Dignità”. Seasonal contracts, according to the decree dated 2015, are those identified by a decree of the Ministry of Labour, which, however, is still to be issued. In the absence of such provision, reference must be made to the Presidential decree number 1525 dated 1963, which lists a series of seasonal activities, but seasonal tire replacement is not among them. Still, the exemption can also apply "in cases identified as collective agreements". So a possible solution is the adoption of a collective labour contract that identifies a certain number of activities as seasonal, and for which workers can be hired for a fixed term without being subject to the same two conditions. Even in this case, though, the maximum limit of 24 months still applies instead of the 36 found in the previous legislation, but we can still consider it a step forward.

In the absence of such “collective” contracts (a likely situation, given that in the recent past there was no need to identify seasonal activities in which fixed-term contracts could be used), the social partners need to update existing ones or define a new one for the whole sector. This opportunity provided for by current regulations could spawn a series of updates on existing contracts so as to allow companies to waive the requirements set in the new “Decreto Dignità”. Several activities may be involved: just think of tourism and trade, as well as the production sector, and it is also possible that a comprehensive review of all current collective agreements will be soon undertaken by the social partners as it is appropriate to assess whether these are in line with the new rules.

Another solution, applicable on a case-by-case basis, is the adoption of so called “contratti di prossimità”, collective labour agreements signed at company or regional level by associations, provided for by Article 8 of Decree-Law 138/2011, which allows the general rules to be adapted to the company's needs, by means of waivers. These contracts can have business or territorial effectiveness, must be signed with local or National labour union representatives and must meet certain objectives: higher employment, quality of employment contracts, exposing irregular labour practises, higher competitiveness and wages, business and employment crises management, investments and new start-ups, adoption of forms of employee participation. Following the necessary assessment of the conditions required by Decree 138/2011, through these agreements the 36 months limit could be re-established, even eliminating the two primary conditions set forth in the Decreto Dignità.

Temporary solutions such as occasional labour appear rather impractical as, following the abolition of the vouchers, is now regulated by a new casual employment contract scheme called "Presto". The “Decreto Dignità” has also made changes to this instrument, but limited to sectors such as tourism and agriculture. For all other sectors, the already existing limits remain in force, i.e. the possibility to employ casual workers for up to a maximum wage ceiling of 5,000 euro per year. Since the minimum cost-per-hour is 12.41 euro, this means being able to employ casual workers for a maximum of 400 hours which translates into 50 working days of 8 hours each, observing the limit of 280 hours and 2,500 euro for each casual employee. In addition, we should mention that if specific categories of people are employed, such as unemployed or beneficiaries of the income inclusion program, the wages are valued at 75% for the 5,000 euro threshold, with the possibility of reaching 6,666 euro.

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