LAW DECREE NO. 76/2013: LIGHTS AND SHADOWS IN THE PROVISIONS ON EMPLOYMENT

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1 July 2013 LAW DECREE NO. 76/2013: LIGHTS AND SHADOWS IN THE PROVISIONS ON EMPLOYMENT On 28 June 2013, Law Decree no. 76/2013 (entitled Preliminary urgent actions to promote employment, especially of young people, social cohesion, and on Value Added Tax (VAT), and other urgent financial measures, hereinafter referred to as the Decree ) came into force after being published in the Official Gazette of the Italian Republic. The stated purpose of the Decree is to adopt a number of measures to promote employment, particularly, of young people, and to intervene on some provisions introduced by the July 2012 so-called Fornero Reform which had been negatively evaluated by companies and enterprises. The content of the Decree is quite complex and may be considered final only after the Decree is converted into law (within 60 days from its coming into force). However, it is already possible to note how some measures seem to ensure greater flexibility, as the business community was hoping for, also to facilitate the creation of new jobs, whilst some others appear to introduce additional burdens and formalities in connection with the adoption of certain types of contracts. Finally, some provisions aimed at facilitating the use of flexible contracts on the occasion of the Expo 2015 have been deleted from the Decree and are expected to be discussed with the social parties. THE MAIN NEW PROVISIONS IN FAVOUR OF ENTERPRISES Apprenticeship contracts In an attempt to simplify the complex provisions on apprenticeship, which have prevented so far many enterprises from using this type of contract, the Decree has set a specific deadline (30 September 2013) for the Conferenza Stato Regioni (State-Regions Conference) to adopt specific guidelines to depart from certain provisions of the Consolidated Act no. 167/2011, i.e. the law which regulates apprenticeship. Should the guidelines not be adopted by the above deadline, the departing provisions will directly come into force (subject to the Conferenza s right to adopt guidelines at a later stage).

2 However, these simplified provisions will only apply until 31 December 2015 and only for the benefit of microenterprises, small- and mediumsized enterprises 1. This means that large-sized enterprises which are also penalized by the existence of different (and often complex) regional laws at their different sites - will not benefit from said provisions. Furthermore, the Decree expressly contemplates the succession of two apprenticeship contracts, the first one for the acquisition of the professional qualification or diploma, to be subsequently converted into a second different contract, i.e. a professionalizing apprenticeship contract. The total duration of the two contracts shall however not exceed the maximum duration provided for by the applicable collective agreements. Fixed-term contracts As much sought-after by enterprises, the Decree reduces the time intervals between different fixed-term contracts from days to days (for contracts with more than/less than six months term, respectively), thus restoring the discipline existing before the Fornero Reform. Collective agreements, including at company level, may identify cases in which the succession of fixed-term contracts will be allowed even without respect of the aforesaid time intervals. Collective agreements, including at company level, are allowed to identify further cases in which fixed-term contracts may not be specifically related to technical, production-related, organizational or substitutive reasons (i.e. in addition to the first relationship case introduced by the Fornero Reform, for a maximum duration of 12 months). Furthermore, the Decree repeals the prohibition of extending such kind of contracts, although the most correct interpretation seems to be the one according to which the total maximum duration of the relationship (including the possible extension) shall not exceed, in any case, the above-referenced 12 months. The Decree repeals the obligation to give the Local Employment Centre prior notice of the continuation of the fixed-term contract after the expiry of the term (permitted by the Fornero Reform for up to days after the original expiry date). Finally the Decree, clarifying different interpretations given by courts, expressly specifies that employees dismissed within the frame of a collective layoff procedure may be hired by other enterprises under fixedterm contracts for up to 12 months and, in such case, the ordinary rules on fixed-term relationships shall not apply, i.e. new employer shall not be subject to the obligation to specify the reasons for entering into a fixed- 1 Pursuant to Recommendation (EC) no. 361/2003, a medium-sized enterprise is an enterprise which employs fewer than 250 persons and whose annual turnover does not exceed EUR 50 million or whose annual balance sheet total does not exceed EUR 43 million. A smallsized enterprise is defined as an enterprise which employs fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million. Finally, a microenterprise is defined as an enterprise which employs fewer than 10 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 2 million.

3 term contract, there will be no limitation to extend the contract, save for the maximum term, etc. Project-based contracts (so-called contratti di lavoro a progetto) The only flexibility measure introduced by the Decree for project-based contracts (which had already been subjected to stricter application requisites under the Fornero Reform) regards the change of the wording which identifies the tasks and duties that may not be assigned to the independent contractor: no longer alternatively execution or repetitive tasks, but rather execution and repetitive tasks. However, it seems to us that the aforesaid measure (which is also part of a provision that can be interpreted in different ways) cannot extend significantly the cases where this type of contract can be used. Dismissal for organizational reasons The Decree has solved a case law conflict that raised numerous doubts among enterprises and expressly provides that the preventive settlement procedure before the Local Employment Office in the case of dismissal for justified objective reasons (also introduced by the Fornero Reform) shall not be followed in the case of dismissal due to exceeding the maximum protected period of sick leave. The carrying out of said procedure is also excluded in the case of dismissal due to change of contract (cambio di appalto) or, with sole regard to the building sector, due to shutdown of the construction site. Finally, the Decree provides that failure by either party to appear before the aforesaid Office may be regarded as argument of evidence should a lawsuit be thereafter commenced. Employment incentives The Decree introduces two types of incentives differently funded with regard to Northern and Southern Italy, due to EU constraints to encourage employers to offer new jobs, especially to young people. In fact, despite the adoption of these measures, the greatest and most durable savings on the high labour costs seem to be those made through apprenticeship contracts. The first type of incentive is for employers who employ young people aged between 18 and 29, who, alternatively, (i) have not had a paid job for at least six months; (ii) have not attained an upper secondary educational or vocational qualification; or (iii) live by themselves with more than one dependant. The incentive shall be equal to one third of the gross taxable salary for social security purposes (with a monthly cap of 650 Euros) and shall be granted for 18 months in case of open-term employment and for 12 months in case of conversion of a previous employment relationship into an open-term contract. The employment shall result in a net employment increase, calculated taking also account of the employment reductions occurred within subsidiaries, affiliates or companies under the same control.

4 The incentive can be used only after the adoption of the deeds required for planning the allocation of funds (which is expected to occur within 60 days from the coming into force of the Decree) and until 30 June 2015, within the limits of the available funds. INPS (i.e. the Italian Social Security Administration) shall implement a specific procedure for submission of the relevant applications. The second type of incentive regards employers which (albeit not being bound to) employ, on a full-time basis and under open-term contracts, unemployed people who receive the ASpI allowance (i.e. the unemployment allowance introduced by the Fornero Reform). The incentive shall be equal to fifty per cent of the residual monthly unemployment indemnity to which the employees would have been entitled. The incentive shall not be granted if the enterprise which has dismissed the employees has assets substantially coinciding with those of the new employer, or if the dismissing enterprise and the new employer are associated or under a control relationship. Internships plus vocational training The Decree permits, until 31 December 2015, the extension by a month of the maximum term of internships that include vocational training (so-called tirocini formativi) (currently of 4, 6, 12 or 24 months). According to the first comments, however, this provision would apply limited to internships not exceeding 6 months. ADDITIONAL BURDENS AND FORMALITIES FOR ENTERPRISES Joint liability in works and service contracts The Decree extends the principal s joint liability envisaged by art. 29 of Legislative Decree no. 276/2003 to remuneration and social security contribution obligations relating to self-employed people engaged in the contract. Furthermore, the Decree specifies that the possibility, granted to collective agreements by art. 29, to depart from the joint liability regime only regards remuneration, and cannot extend to social security and welfare obligations. Project-based contracts and so-called self-employment continuative relationships The Decree requires that all the information provided for by art. 62 of Legislative Decree no. 276/2003 be specified in writing in project-based contracts, i.e. no longer for the sole purpose of giving evidence of their existence. This provision entails additional risks for the enterprises, which need to be extremely careful upon drafting the contract, under penalty of voidness and unenforceability. Clearly, in case of absence of just a few elements not particularly important within the contract (such as, for

5 instance, specification of timing and manner to pay remuneration or to reimburse expenses) the nullity sanction would seem really abnormal. The obligation to comply with the procedure of validation of resignation and termination by mutual consent extends to certain self-employment relationships (including project-based contract). Job on call The Decree reduces the maximum number of days of utilization of job on call contracts: if an employee works more than 400 days over three solar years, the relationship shall be converted into a full-time and open-term employment contract. For this purpose, only the days actually worked from the coming into force of the Decree (i.e. 28 June 2013) shall be counted. Fines and administrative pecuniary sanctions relating to health and safety at work breaches The Decree requires that the fines and administrative pecuniary sanctions envisaged by Consolidated Act no. 81/2008 and by the other legally binding and enforceable deeds on health and safety at work be re-valued every five years. The same fines and administrative pecuniary sanctions shall be re-valued, effective from 1 July 2013, in the amount of 9.6%. Company collective agreements departing from statutory provisions and national collective agreements (contratti aziendali in deroga) The effectiveness of the above agreements (executed pursuant to art. 8 of Law Decree no. 138/2011, for example with regard to the employee s duties, classification of personnel, working time and fixed-term contracts, part-time work, modulated working time or flexible working time) is subject to the filing of the same agreements with the Local Employment Office). ***

6 Legance s Labour and Employment Department remains available to provide any further clarification and/or to carry out any further close examination, including in relation to specific cases. For further information, please contact: Alberto Maggi Tommaso Li Bassi Tel Tel amaggi@legance.it tlibassi@legance.it Silvia Tozzoli Elena Ryolo Tel Tel Tel eryolo@legance.it stozzoli@legance.it or your usual contract lawyer at Legance. THE FIRM Legance is an independent Italian law firm with expert, active and result-oriented lawyers, with a strong team spirit that has permitted a flexible and incisive organisational model that, through departments active in all practice areas of business law, shows the right balance between the specialist and the lawyer as a global consultant. Legance comprises over 170 lawyers, working in its Milan, Rome and London offices, and has a diverse and extensive practice covering the following areas: Corporate Finance; Banking, Finance and Project Financing; EU, Antitrust and Regulation; Labour; Capital Markets and Financial Services; Investment Funds; Litigation & Arbitration; Restructuring & Insolvency; Tax; Administrative Law; Real Estate; Energy, Gas and Natural Resources; Shipping, Aviation and Transportation; IP and Data Protection; TMT; Environmental. DISCLAIMER The only purpose of this Newsletter is to provide a general information. Accordingly, it is not a legal opinion nor it should be relied upon as a substitute for legal advice. INFORMATION PURSUANT TO ARTICLE 13 OF LEGISLATIVE DECREE NO. 196/2003 (Data Protection Code) This Newsletter is being sent exclusively to persons who have freely provided their personal data on the occasion of professional relations, meetings, seminars, workshops or similar events. These personal data shall be processed on paper or through electronic instruments for purposes which are strictly related to the existing professional relations, or for information and divulgation reasons, but are not communicated to third parties, unless such communication is imposed by law or strictly necessary to carry out the professional relation. Data controller is Legance Studio Legale Associato, with offices in Rome, Via XX Settembre n. 5, 00187, in Milan, Via Dante n. 7, 20123, in London in Aldermary House, Queen Street, EC4N 1TX. Data processing is carried out at Legance s offices and is dealt with exclusively by Legance employees, collaborators, associates or partners appointed as data processors, or by assignees in charge of occasional maintenance works. In the event you have received this newsletter by mistake, or if you do not wish to receive such communications in the future, you may request that no further communication is sent to you, sending an to relazioni_esterne@legance.it. In any event, you are entitled to obtain at any time confirmation of the existence of your data and be informed about their contents and origin, as well as to check their correctness, or to ask that they are supplemented or updated or amended. You are also entitled to ask for cancellation, transformation into anonymous form or block of data processed in violation of the law, as well as in any case to object - for legitimate reasons - to your data processing. All the above requests must be forwarded by fax to Legance Studio Legale Associato, at no Milan - Via Dante, 7 Tel Rome - Via XX Settembre, 5 Tel London - Aldermary House Queen Street Tel +44 (0) Legance Studio Legale Associato and its partners are not regulated by the Solicitors Regulation Authority (the SRA ) and the SRA s compulsory insurance scheme does not apply to them (they are instead covered by equivalent Italian insurance). A list of the partners of Legance Studio Legale Associato is open to inspection at the office of its London branch at Aldermary House Queen Street London EC4N 1TX and also on the following website