- within Consumer Protection topic(s)
In this episode of our Cross-Border Catch-Up podcast series, Lina Fernandez (Boston) joins Julie Brooks (New York) to discuss Italy's fast-evolving rules on fixed-term contracts, from the 12- and 24-month thresholds to the new grounds introduced by Law 85/2023. The speakers also explain caps on headcount, fresh prohibitions, heightened damages exposure and the practical steps multinationals must take now to avoid unintended conversions to open-ended employment.
Transcript
Announcer: Welcome to the Ogletree Deakins podcast, where we provide listeners with brief discussions about important workplace legal issues. Our podcasts are for informational purposes only and should not be construed as legal advice. You can subscribe through your favorite podcast service. Please consider rating this podcast so we can get your feedback and improve our programs. Please enjoy the podcast.
Lina Fernandez: Welcome to the Cross-Border Catch-Up, the podcast for global employers who want to stay in the know about cutting-edge employment issues worldwide. My name is Lina Fernandez, and I'm here with my colleague Julie Brooks. We are cross-border attorneys at Ogletree Deakins, and today we're going to dive into changes to fixed-term employment in Italy. Our episode will give you a breakdown of what the law covers and why it matters. So, let's dive in. Julie, for those that are not familiar with Italian law, can you give us an overview of fixed-term employment contracts in Italy, and why they're important?
Julie Brooks: Yeah, so in Italy, the open-ended contract is the standard form of employment offering stability and long-term security for employees. But alongside this, there's a more flexible option, the fixed-term contract, which has been a hot topic in recent years due to evolving regulations.
Lina Fernandez: So, what's exactly a fixed-term contract, and how does it work?
Julie Brooks: A fixed-term contract is an employment contract that only lasts for a specific length of time. In Italy, you can enter into a fixed-term contract for any reason, as long as it doesn't exceed 12 months, no justification needed. But if you want to extend or renew a contract beyond 12 months, up to a maximum of 24 months, you'll need to meet one of these specific conditions. First, temporary and objective needs that aren't part of the company's usual operations. Second, the need to replace other employees, or third, temporary, significant and unpredictable increases in regular business activity. If you go beyond 12 months without one of these conditions, the contract automatically converts into an open-ended one. That's a big deal for employers, as it could mean unexpected long-term commitments.
Lina Fernandez: Julie, and are there any limitations on the number of fixed-term employees an employer could have?
Julie Brooks: Yeah, so there is a cap on how many fixed-term employees a company can have. The law says fixed-term workers can't make up more than 20% of the permanent workforce based on the headcount as of January 1st of each year. If a company exceeds this limit, they face fines, but the contracts themselves remain valid.
Lina Fernandez: And what about situations in which fixed-term contracts are prohibited?
Julie Brooks: Yeah, so there's also situations where contracts are outright prohibited. For example, you can't use them to replace striking workers, in units where employees doing similar tasks were recently laid off, or where employees with similar duties are suspended. Also, employers who haven't conducted a proper risk assessment under legislative decree number 81 of 2008 are barred from using fixed-term contracts.
Lina Fernandez: So, Julie, what are the recent changes?
Julie Brooks: So, there's been recent legislation that gives employers more flexibility to renew contracts on a fixed-term basis. Law 85 of July 2023 expanded the reasons for entering into fixed-term contracts longer than 12 months but not exceeding 24 months. These reasons now also include first specific reasons outlined in collective bargaining agreements, whether at the national, territorial, or company level or second, technical organizational or production-related reasons agreed upon by the employer and employee, but only if collective bargaining agreements don't already provide specific guidance. That last point, technical, organizational, or production reasons was initially set to expire on April 30th, 2024, but it was extended to December 31st, 2025, so end of this year. Likely because many national collective labor agreements had not updated their rules to include specific reasons for fixed-term contracts over 12 months.
Lina Fernandez: So, the key takeaway here is that any reason for a fixed-term contract over 12 months must be a specific, verifiable, and tied to a genuine temporary need. And if it is vague, fabricated, then the contract could be converted into an open-ended one. Are there any other updates?
Julie Brooks: Yeah, so there is one more update on the compensation for employees when fixed-term contract rules are violated leading to a conversion to an open-ended contract. Previously, employees were entitled to compensation ranging from 2.5 to 12 monthly salaries to cover damages. This was considered full compensation no matter the actual harm suffered. Now judges can award additional compensation beyond the 12-month cap if the employee can prove they suffered greater damages. And this makes penalties more proportionate and acts as a stronger deterrent against the improper use of fixed term contracts.
Lina Fernandez: So, what does this all mean for employers?
Julie Brooks: For employers, it's critical to stay on top of these regulations, make sure your fixed-term contracts comply with the law, especially if they exceed 12 months. Document the specific reasons for the contract and ensure they're verifiable.
Lina Fernandez: Well, thank you so much, Julie, for providing this information. Until next time, thank you for joining us for today's Cross-Border Catch-Up. Follow us to stay in the know about cutting-edge employment issues worldwide.
Announcer: Thank you for joining us on the Ogletree Deakins podcast. You can subscribe to our podcast on Apple Podcasts or through your favorite podcast service. Please consider rating and reviewing so that we may continue to provide the content that covers your needs. And remember, the information in this podcast is for informational purposes only and is not to be construed as legal advice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
