DO YOU KNOW THAT… If the contractor does not properly pay the workers employed in the service contract, the principal company is considered responsible?

According to Article 29, paragraph 2, of Legislative Decree 276/2003 (known as the “Legge Biagi”), in the context of service contracts (“contratti di appalto” in Italian parlance), the principal company or employer is jointly and severally liable with the contractor, as well as with any subcontractors, within two years after the termination of the contract, for the payment of amounts owed to workers for work performed during the contract period, including:

• salary, including severance pay (T.F.R.);
• social security and insurance contributions.

However, joint and several liability does not apply to civil sanctions, for which only the defaulting party is responsible.

Consequently, in the context of service contracts, although the obligation to pay salaries and social security contributions falls on the contractor — the company directly hiring the workers and managing the service contract — Italian law assigns the principal a “guarantee” role regarding these obligations, introducing a genuine joint obligation on the principal.

In concrete, this guarantee allows workers to act against either the contractor or the principal to obtain payment of unpaid salaries owed for work performed under the service contract.

Moreover, the principal’s joint and several liability also applies to compensation and social security obligations of self-employment workers, pursuant to Article 9 of Legislative Decree 76/2013, converted with amendments into Law No. 99 of August 9, 2013.

The principal’s joint and several liability is subject to a two-year limitation period, starting from the termination of the contract. However, this two-year period applies exclusively to claims made by workers, while, according to case law, it does not apply to recovery actions initiated by social security or insurance institutions such as INPS (the Italian National Social Insurance Agency) or INAIL (the Italian National Institute for Insurance against Accidents at Work), which remain subject to a five-year statutory limitation period.

The principal, who, due to joint and several liability, has paid the workers the salaries or contributions owed, may seek recovery from the contractor under the general rules provided by the Civil Code. However, the principal can no longer invoke the benefit of prior enforcement against the contractor, as was allowed until 2017.

Finally, the Court of Cassation recently stated that joint and several liability between the principal and the contractor is not limited to contracts formally classified as “service contracts”. It applies whenever workers are employed in a mechanism of outsourcingwhere “detachment between the ownership of the employment relationship and the utilization of the labor activity was established, which could justify applying the guarantee provided by Article 29” (see Court of Cassation, Labor Section, order no. 26881 of October 16, 2024). Based on this principle, joint liability has been deemed applicable, for example, in cases of “department delegation contracts” (“affidamento di reparto” in Italian parlance) or supply contracts.

Other related insights: 

• Outsourcing contracts and the power to dismiss;
• Fictitious contracts and illegal labour supply: liability 231 for tax offences;
• Lawfulness of contracts, verification of resources and personnel;