Italy: Novelties in production decentralisation

Our legal system has long been characterized by the prohibition of the interposition of employment, whereby it was not permitted to formally hire workers, who were then actually sent to perform their activity in favour of others. The phenomenon of interposition in the employment relationship, already prohibited in the context of the Civil Code, was further regulated by Law No. 1369 of 23 October 1960, which prohibited the entrepreneur from contracting out or subcontracting the performance of mere labour services through the use of employees hired and paid for by a contractor.

In this respect, a triangular client-contractor-worker relationship could not exist since, for the Italian legislator of the 20th century (and with good reason), the separation between the formal employer and the one who would actually use the working activity and benefit from it would only facilitate the lucrative purposes of the so-called ‘interposto’ (more commonly known as ‘caporale’).

At the beginning of the new millennium, both fictitious interposition and subcontracting were the subject of far-reaching legislative reform: first Law no. 196 of 24 June 1997 (the so-called Treu Package), and then Law no. 30 of 14 February 2003 (the so-called Biagi Law): the latter, in particular, introduced into the legal system the lease of personnel, through which a subject, known as the ‘somministratore’, hires and pays a worker and sends him to perform his services at the user’s premises: the latter is obliged to pay a fee to the somministratore, thus being legitimized to exercise management power over the employee sent to him. 

To resort to lease of personnel, the requirements of the law must obviously be met: in particular, article 30 et seq. of Legislative Decree No. 81 of 15 June 2015, provide that the parties of the staff leasing contract must necessarily be, on one side, an agency duly authorized by the Ministry of Labour, and on the other, a user subject; the object of the contract is the providing, by the former in favour of the latter, of one or more employees, hired and paid by the former, so that they may perform their work under the direction and control of the latter for the entire duration of the contract.

It follows from this that interposition of employment (or, to be precise, the ‘separation’ between the nominal employer and the person directly benefiting from the working activity) is allowed only within specific limits. Outside such limits, an ‘irregular lease of personnel’ occurs.

This regulatory change has made it necessary to consider very carefully the distinction between lease of personnel and service contract, as will be seen below.

Although both service contract and lease of personnel are legal instruments involving a decentralisation of production, it is worth noting from the outset the common traits and differences between them. With a service contract (article 1655 of the Civil Code) one party undertakes, against payment and with organization of the necessary means and with management at its own risk, the performance of a work or service. 

As mentioned above, on the other hand, the lease of personnel is a contract, for a fixed or indefinite term, by means of which an authorized agency places at the disposal of a user one or more of its employees, who carry out their activities in the interest of and under the management and control of the user for the entire duration of the so-called mission.

Article 29 of legislative decree no. 276/2003 helps to delineate the distinctive features, providing that ‘the service contract [...] is distinguished from lease of personnel by the organization of the necessary means by the contractor, which may also result, in relation to the needs of the work or service covered by the contract, from the exercise of organizational and managerial power over the employees used in the contract, as well as by the assumption, by the same contractor, of the business risk’.

In other terms, whereas the lease of personnel consists in the mere conferral of personnel (therefore, to all intents and purposes, in an obligation to give), in the service contract the contractor brings and coordinates production tools and personnel, with the simultaneous undertaking of the business risk, binding himself to an obligation to do, i.e. to provide an autonomous productive result.

The service contract also provides for a fundamental protection mechanism in favour of employees: the joint  liability between principal and contractor, within a limit of two years from the termination of the contract, to pay employees all due salaries and social security contributions.

Lastly, Decree-Law No. 19 of 2 March 2024, converted into Law No. 56 of 29 April 2024, introduced a series of novelties regarding decentralisation, with regard to both lawful and unlawful hypotheses. 

The reform primarily affects the genuine service contract, with the rule guaranteeing the personnel employed therein an economic and regulatory treatment not inferior to that provided for by the national and territorial contracts applied in the sector and for the area whose scope of application is closely related to the activity covered by the contract.

As seen above, the principal is always jointly and severally obliged with the contractor towards the workers employed in the contract, thanks to the so-called principle of joint liability. One of the novelties introduced by the recent intervention is the extension of this liability to the hypotheses of unlawful service contracts, unlawful lease of personnel and unlawful secondments. Differently from the past, therefore, the number of employees benefiting from this paramount mechanism of economic protection has been broadened.

Novelties also in the criminal sphere: though they may be considered, in a measure, a return to the past, since the criminal sanctions in the case of unlawful lease of personnel are reinstated or in any case made more severe. The new legislation now provides, in the case of ‘non-genuine’ service contract, for arrest up to one month or, alternatively, a fine of Euro 60.00 per each worker employed and per each day of employment; conversely, the use of outsourced workers by parties other than the authorized agencies is sanctioned with arrest up to one month or with a fine of Euro 60.00 per each worker employed, per each day of employment; lastly, if the lease of personnel is carried out with the sole purpose of circumventing mandatory provisions of law or of the collective agreement applied to the employment relationship, the somministratore and the user are now liable to a term of imprisonment of up to three months or, alternatively, a fine of Euro 100.00 per each worker employed and per each day of employment.

The last two aspects to be addressed concern the aggravating circumstances and the caps set out for penalties. As regards the former, there is a 20 per cent increase in the amounts of the above-mentioned penalties if, in the preceding three years, the employer has been punished for the same offences, thus punishing recidivism. With reference to the maximum cap set out for the applicable sanctions, the Decree sets limits on the amount ranging from a minimum of Euro 5,000.00 to a maximum of Euro 50,000.00.

The reform is clearly aimed at countering the rampant phenomenon of the illicit interposition of employment – the progressive worsening of which is perhaps due to the questionable choice of the same legislator to repeal fraudulent supply in 2015 –, as witnessed by the increase in cases of labour exploitation (e.g., the recent cases in the fashion sector), as well as the significant increase in work-related accidents. These measures aim to crack down more severely on illegal conduct, which is almost always marked by obvious collusion between the client/user and the contractor/supplier of personnel. 

Concerning, on the other hand, the ‘serious’ players of the market, one can only reiterate the usual good practices, and always recommend the utmost care when assessing internal labour needs and selecting business partners, bearing in mind that the least expensive contractor is almost never the most reliable in terms of labour, wages and contributions.