Fixed-term employment contracts: a complex regulation for an instrument to be handled carefully
Fixed-term employment contract represents a key-element to meet the businesses' needs of flexibility: the 2018 legislative reform known as "decreto Dignità" introduced strict limitations which have being brought controversial effects on the labour market after almost one year from its enacting. The new set of law rules has resulted in a significant contraction of fixed-term employment contracts, as well as the relevant extensions and renewals. Companies' desire is to avoid, as far as possible, linked to the law requirements of the decreto Dignità.
Law n. 96/2018, which converted into law the so called " HYPERLINK "http://www.ipsoa.it/dossier/contratto-tempo-determinato-come-gestirlo" decreto Dignità", has brought significant changes affecting the rules governing fixed-term employment contracts.
According to the new rules provided for by such recent reform passed last year, the maximum length of a fixed-term relationship can not exceed 24 months including extensions and renewals.
Moreover, if the fixed-term employment contract is stipulated for an initial duration exceeding 12 months or it is extended beyond such term, specific reasons are required to be specified in writing.
The only lawful business needs which can used for justifying a fixed term contract over beyond such term are: (a) to temporarily replace employees who are absent from work; or (b) to fulfill transitory, objective business needs not related to the ordinary course of business; or (c) to cope with temporary, unforeseeable and relevant production peaks.
If the fixed-term contract has a duration not exceeding 12 months, it can be lawfully executed without obligation to specify the relevant reasons in writing.
The term of a contract can be extended a maximum of 4 times and if the overall duration of the fixed-term contract exceeds 12 months by effect of one or more extensions, the prorogation deed which leads the contract to exceed the duration of 12 months must be grounded on one of the three reasons listed above.
Once a fixed-term contract expires, it can be renewed only if the employer meets one of the three legal conditions mentioned above. This provision applies also in case the initial duration of the fixed-term contract does not exceed 12 months. It is worth underlining that an additional fee contribution must be paid to the social security agency for the first contract and each renewal.
A fixed-term contract can be challenged judicially within a 180-days expiration period.
Failure to meet the requirements indicated above entails that, in case of judicial dispute, fixed-term contract is converted into an open-ended one. In such event, the employer is also obliged to pay the employee an indemnity ranging between 2,5 and 12 months' salary.
The 2018 reform implemented by the decreto Dignità has introduced significant restrictions in the utilization of fixed-term employment contracts. Such key-changes have led, on the one hand, to an appreciable increase in the legal transformations of employment relationships from fixed-term to indefinite ones, also thanks to the public aids to promote hiring of certain categories of individuals (e.g. young people, disadvantaged workers, etc.).
On the other hand, the new strict set of law rules has resulted in a significant contraction of fixed-term employment contracts, as well as the relevant extensions and renewals, beyond 12 months. Such outcome means that companies' desire is to avoid, as far as possible, the potential risks and criticalities linked to the very strict law requirements governing the fixed-term relationships lasting more than one year.
At the same time, a surge in the number of self-employed (VAT holders) has been registered compared to the past - especially in the last few months - also due to the tax changes of the budget law that facilitate professionals with incomes up to 65,000 Euros per year.
Such upward trend of self-employment contracts might be a perverse effect of the last year law reform, enacted with the aims of facilitating the stabilization of working relationships, reducing the precariousness and "giving back dignity" to the workers: an evident example of heterogenesis of intents.