THE STATE OF FIXED-TERM CONTRACTS AFTER THE LABOR DECREES REFORM

Sottotitolo

by Paola Primerano, Andrea Ambrosino

The subject of fixed-term contracts, still fully regulated by Legislative Decree 81/2015, has undergone a significant legislative reform aimed at mitigating the rigidities introduced by the Dignity Decree in 2018. This is particularly evident concerning the reasons that can be used to extend or renew contracts beyond the initial non-specific phase.

The Labor Decree (Law 48 of May 4, 2023, later converted into Law on July 3, 2023), titled “Urgent Measures for Social Inclusion and Access to the Labor Market,” intervened in essential aspects of the legislation: (i) causation; (ii) extensions and renewals; (iii) the computability of contracts entered into before May 5, 2023.

In confirmation of the reform’s aim to favor and promote employment, the Decree also addressed indefinite-term labor supply, identifying new and more favorable methods for calculating the percentage limits of workers who can be hired under this contractual type.

The Ministry of Labor also addressed certain interpretative doubts raised by the new rules through Circular No. 9 of October 9, 2023.

The article aims to provide an overview of the current regulatory framework for fixed-term contracts, considering the interesting possibilities for using this institution until April 30, 2024 (provided that the relevant provision is not extended).

A. ON THE DURATION OF FIXED-TERM CONTRACTS

The general rule remains that it is possible to establish a fixed-term contract without specific cause for a maximum of 12 months (Art. 19, 1st para, Legislative Decree 81/15). Beyond this period, the continuation of the contract is only possible under specific conditions, which we will analyze separately.

However, contracts between the same employer and the same worker cannot exceed an overall duration of 24 months (Art. 19, 2nd para, Legislative Decree 81/2015), subject to different provisions in the sectoral National Collective Bargaining Agreements (CCNL).

The possibility for the parties to proceed with the signing of an additional fixed-term contract (so-called “assisted contract”), with a maximum duration of twelve months, at the territorial seat of the National Labor Inspectorate, remains unchanged (Art. 19, 3rd para, Legislative Decree 81/15). Adherence to the procedure is essential to prevent the transformation into an indefinite-term contract from the time of its stipulation.

Nothing new in terms of sanctions. The rule is confirmed that (i) if the 12-month duration limit is exceeded, in the absence of conditions legitimizing the extension to 24 months, or (ii) if the overall limit of 24 months is exceeded, the contract transforms into an indefinite-term contract from the date of exceeding the term.

B. ON THE “CAUSALI” (REASONS)

The main novelty of 2023 concerns the regime of conditions, or “causali,” under which it is possible to extend the duration of the fixed-term contract beyond 12 months (remaining within the overall limit of 24 months or the different term identified by the CCNL).

The reference to the rigid reasons introduced by the Dignity Decree (temporary and objective needs, external to ordinary activity, and needs related to temporary, significant, and unpredictable increases in ordinary activity) has definitively disappeared, which had generated many operational problems.

According to the new Art. 19, 2nd para, Legislative Decree 81/15, the contract can have a longer duration (not exceeding 24 months) only in the presence of at least one of the following conditions:

a) In cases provided for by collective agreements under Article 51 b) In the absence of provisions under (a), in the company’s applied collective agreements, and in any case by April 30, 2024, for technical, organizational, or production needs identified by the parties b-bis) As a replacement for other workers

With regard to (a), the new system of causation undoubtedly enhances the role of collective bargaining, entrusting social partners with the task of identifying hypotheses, cases, and needs based on the peculiarities and requirements of the relevant sector.

However, these must be national, territorial, or company-level collective agreements concluded by trade union associations comparatively more representative on a national level and company-level collective agreements concluded by the company’s trade union representatives or by unitary union representation.

The Ministry of Labor has clarified some doubts that emerged regarding the concrete application of collective agreements containing references to the previous regulatory references:

  • In cases where collective agreements still include a mere reference to the legal circumstances of the Dignity Decree (Decree Law July 12, 2018, no. 87), these may be implicitly considered outdated by the new regulations.
  • In cases where collective agreements include reasons introduced in implementation of the regime referred to in the previous Art. 19, 1st para, letter b-bis) inserted during the COVID-19 pandemic (the “specific needs provided for by collective agreements under Article 51”), given the substantial identity of this provision with the specific needs provided for by collective agreements under Article 51 of the new Art. 19, 1st para, letter a), it is believed that these conditions can continue to be used for the duration of the collective agreement.
  • Causation introduced by any level of collective bargaining (as defined in the frequently mentioned Article 51 of Legislative Decree no. 81 of 2015) that identifies concrete conditions for resorting to the fixed-term contract can still be used, as long as it does not limit itself to a mere reference to the legal circumstances of the previous regulation, now outdated by the reform under consideration.

Of particular interest is the provision in letter (b): the legislator introduces the possibility that, in the absence of the conditions under letter (a), it is precisely the parties that identify the conditions, as long as they are linked to technical, organizational, or production needs.

However, this flexibility – at least for the moment – seems destined to disappear by April 30, 2024.

On this point, the Ministry of Labor has also confirmed that the date of April 30, 2024, is not the cessation of contracts but a temporal window within which it will be possible to conclude fixed-term contracts based on the provisions under letter (b).

Consequently, the duration may go beyond April 30, 2024, provided that the employment contract is concluded by and not later than that date.

Nothing new, however, regarding the reason for replacing employees, as mentioned in letter (b-bis).

With Circular 9/23, the Ministry of Labor has reiterated that the employer remains responsible for specifying in the contract the concrete and effective reasons for the replacement, especially in cases where the employer intends to avail itself of the benefits provided by current legislation for specific replacement scenarios (e.g., maternity replacement under Article 4, paragraphs 3-4 of Legislative Decree no. 151/2001).

C. ON EXTENSIONS AND RENEWALS

The Labor Decree has introduced a significant novelty regarding extensions and renewals, establishing now in Art. 21, 1st para, Legislative Decree 81/15 that “The contract can be extended and renewed freely in the first twelve months and, subsequently, only in the presence of the conditions under Article 19.”

This aims to overcome the previous mechanism that required causation even in cases of renewals for contracts that had not yet exceeded 12 months.

However, the rule previously established, and reiterated by Ministerial Circular of October 31, 2018, No. 17, remains unchanged. The condition of free extension and renewal cannot extend beyond 12 months.

The extension is allowed up to a maximum of 4 times within 24 months, regardless of the number of contracts. If the number of extensions exceeds four, the contract transforms into an indefinite-term contract from the date of the start of the fifth extension.

D. ON FIXED-TERM CONTRACTS IN PROGRESS AS OF MAY 5, 2023

The main doubts arising from the Labor Decree concern the practical and certain scope of the provision aimed at modifying Art. 24, Legislative Decree 81/15 (introducing paragraph 1-ter), according to which “For the purposes of counting the twelve-month period provided for in Article 19, paragraph 1, and Article 21, paragraph 1, of Legislative Decree no. 81 of 2015, as amended by paragraphs 1 and 1-bis of this article, only contracts entered into from the date of entry into force of this decree are taken into account.”

On a practical level, this provision has given rise to more than one interpretative doubt, leading to inevitable cautious solutions.

The main question concerned the connection between new fixed-term contracts and those established before May 5, 2023 (or in progress at that date) for the purpose of identifying the starting point from which causation becomes mandatory.

It was then wondered whether the provision could also extend to extensions and renewals.

The Ministry of Labor has quickly resolved any doubts, stating:

  • For the calculation of the 12 months, contracts entered into before May 5, 2023, are not taken into account: essentially, the legislature allows the same parties to benefit from the period of non-causality, regardless of the existence of previous fixed-term relationships, as long as the 24-month limit is not exceeded.
  • With the expression “contracts entered into,” reference is made to both extensions and renewals: referring to the Ministry of Labor’s example, if a fixed-term employment contract established before May 5, 2023, expires after that date, the same contract can be freely renewed or extended for an additional twelve months.

E. ON STOP & GO – PERCENTAGE LIMITS – RIGHT OF PRECEDENCE

The Labor Decree has kept other rules on fixed-term contracts unchanged.

In particular:

  • The duration of the Stop & Go remains at 10 or 20 days in the case of renewals of fixed-term contracts that have had a duration, respectively, of less than or more than 6 months (Art. 21, 2nd para, Legislative Decree 81/15).
  • Except for different provisions in collective agreements, temporary workers cannot be hired in excess of 20 percent of the number of indefinite-term workers. Exemptions from the limits also remain in cases expressly contemplated by Art. 23, 2nd para, Legislative Decree 81/15.
  • According to Art. 24 Legislative Decree 81/15, unless otherwise provided by collective agreements, a worker who, in the performance of one or more fixed-term contracts with the same company, has worked for a period exceeding six months has the right of precedence in indefinite-term hirings made by the employer within the following twelve months, concerning the tasks already performed under fixed-term contracts.
  • The imposition of a term is still prohibited in cases expressly contemplated by Art. 20, Legislative Decree 81/2015.

F. ON INDEFINITE-TERM LABOR SUPPLY

The Labor Decree has also intervened in the matter of labor supply, albeit limited to indefinite-term contracts.

Specifically, Decree 48/23 has modified Art. 31, 1st para, Legislative Decree 81/15, introducing the following changes:

  • For the purpose of complying with the 20 percent limit, as provided for in the first period of the 1st para, workers supplied and hired by the supply agency under an apprenticeship contract are not considered.
  • The rules on quantitative limits for the indefinite-term supply of certain categories of workers strictly identified (including unemployed individuals benefiting from at least six months of non-agricultural unemployment benefits or social safety nets, disadvantaged or very disadvantaged workers, under Regulation EU 651/2014, specifically identified in the Ministerial Decree of October 17, 2017) will not apply.

It should be recalled that disadvantaged workers include those who meet at least one of the following conditions:

  • They have been without regular paid employment for at least six months.
  • They are between 15 and 24 years old.
  • They do not have a high school or professional diploma (ISCED level 3) or have completed full-time training no more than two years ago and have not yet obtained their first regular paid employment.
  • They are over 50 years old.
  • They are adults living alone with one or more dependents.
  • They are employed in professions or sectors characterized by a gender disparity rate that exceeds at least 25% the average gender disparity in all economic sectors if the worker belongs to the underrepresented gender.
  • They belong to an ethnic minority of a EU Member State and need to improve their linguistic and professional training or work experience to increase their prospects of accessing stable employment.