DID YOU KNOW THAT… Since 17 September 2024, the “Salva Infrazioni” decree has increased the compensation indemnity for fixed-term contracts declared unlawful?

Decree-Law No. 131/2024, published in the Official Gazette on 16 September and in force since 17 September, introduced important changes for employers in the management of fixed-term contracts. This measure, known as the “Decreto Salva Infrazioni”, meets the request of the European Union – which started an infringement procedure against Italy – to align national legislation with the EU Directive 1999/70/EC on fixed-term work. 

In particular, the EU Commission found that the provision of a minimum and, especially, a maximum payment to the worker was not an effective deterrent against the abuse of fixed-term contracts. 

The Decree in question has therefore amended Article 28, paragraphs 2 and 3 of Legislative Decree No. 81/2015 (“Jobs Act”), introducing significant changes regarding the compensation indemnity for damages in case of fixed-term contracts declared unlawful. 

Compensation indemnity exceeding 12-month instalments 

One of the most impressive aspects for companies concerns the extension of the judge’s power to set compensation indemnity exceeding 12-month instalments in cases of unlawful fixed-term contracts. Previously, when a fixed-term contract was converted into an open-ended contract, the employee was entitled to a lump sum indemnity ranging from 2.5 to 12-month instalments of the last reference salary for calculating severance pay. Now, as a result of the amendment introduced, the employer may be sentenced to pay significantly higher sums if the employee proves greater damage, such as an extended period of litigation. 

Abrogation of the limit of 6 months of payments 

Another important change is the abrogation of the 6-month limit on indemnity due to workers in the case of fixed-term contracts that have been declared unlawful, a limit that previously applied in the case of collective agreements that provided for procedures to stabilize fixed-term workers. Under the previous legislation, companies could benefit from this cap, reducing the economic risk associated with any disputes. 

Implications 

The amendments introduced by the “Salva Infrazioni” decree imply a significant change in the management of human resources for employers. In fact, they will have to pay more attention to complying with the rules on fixed-term contracts, avoiding abuses and ensuring the correct application of the rules in force. As a result, companies will have to adopt a more prudent and rigorous strategy in the use of fixed-term contracts in order to reduce the risk of expensive claims. 

Other related insights: 

• The “Salva infrazioni” Decree is in Force – Main changes on the regulation of fixed-term contracts in the private sector