The Supreme Court of Cassation, by Order no. 16135 of 28 July 2020, confirmed that meal vouchers do not constitute remuneration and, consequently, the employer may suspend their monthly distribution to employees at any time, including unilaterally.
The facts of the case involve a worker who instituted legal proceedings against his employer, aimed at having the company’s decision to suspend meal voucher distribution to its employees ruled as unlawful. Specifically, in his appeal the worker claimed the function of meal vouchers as a supplement to the contract, a component of remuneration including based on the legitimate expectations of workers following the repeated and generalised company practices from 1999 to 2006. Consequently, meal voucher distribution should be linked to the principle of irreducibility of remuneration.
The Supreme Court judges – in upholding the ruling of the Court of Appeal – first confirmed that meal vouchers do not represent an element of ordinary worker remuneration and thus, are not considered as distribution of a remuneration nature.
According to the Supreme Court, meal vouchers are classifiable as a benefit of a predominantly welfare nature and related to employment by a link that is merely occasional in nature.
In terms of the remuneration nature of meal vouchers, the repeated distribution of the same over time by the employer is not significant, even if such distribution constituted a consolidated company practice. Therefore, since meal vouchers are not part of remuneration in the strict sense, the employer may decide unilaterally regarding their distribution, because it is a company measure of a discretionary nature and completely unrelated to contractual or bargaining agreement provisions.
Given the above considerations, the Court of Cassation rejected the worker’s appeal and confirmed the lawfulness of the employer’s actions.
The Supreme Court of Cassation, under Order no. 18955 published on 11 September 2020, stated that in cases of dismissal due to reaching the age limit, the employee is due notice or related pay in lieu.
Facts
The case facts concern an employee, classified as a manager, to whom the National Collective Labour Agreement (CCNL) for managers in the industrial sector was applied. The manager (who was entitled to an old-age pension from 4 February 2009, the date on which he turned 65) had received an initial employment termination notice on 26 March 2008 with effect from the following 30 June.
On 14 January 2009, the company notified the manager of the employment termination on 4 February 2009, and amending the notice sent on 26 March 2008.
The manager referred the matter to the judicial authorities and, as the losing party , appealed.
The Court of Appeal before which the case was brought held that there was an employer’s obligation to give notice, noting that art. 2118 of the Italian Civil Code did not place any restrictions, nor did art. 22 of the National Collective Labour Agreement exclude such an obligation for employment termination due to age limits.
As for the quantum, the Court of Appeal observed that the notice received by the employee was only 18 days, from 14 January 2009 to 4 February 2009, not even remotely in line with the collective bargaining agreement, which has consequences in terms of indemnity payment for the period not granted. For this reason, the Court of Appeal ordered the employer to pay the manager the indemnity in lieu of notice referred to the difference between the 12 months due under the national collective bargaining agreement and the 18 days of notice received.
The employer appealed the Court ruling, and the manager replied with a counter-claim.
The Supreme Court of Cassation’s ruling
According to the Supreme Court, the ruling under appeal specified that the employer’s conduct confirmed that reaching an age limit did not exempt it from an obligation to give the employee notice, even though it authorised the company to proceed with the ad nutum dismissal. This was in line with a correct interpretation of art. 22 of the National Collective Labour Agreement.
The same Court stated on several occasions that “the typical and peremptory nature of employment termination reasons excludes automatic termination upon reaching a certain age or the attainment of pension requirements.” This is unlike what happens, for example, for mandatory retirement in the public administration employment.
In the absence of a valid termination measure by the employer, the Court felt that the relationship “continues with the employee’s right to receive wages even after reaching the age of 65. In private employment, relationship termination due to age limits, the employer must give notice.”
Contrary to what was ruled on appeal, the Court considered the employer’s first notice sent to the employee dated 26 March 2008, valid instead of the second notice sent on 14 January 2009. According to the Supreme Court of Cassation’s judges, the second notice did not extinguish the first, as it “was only aimed at bringing forward the originally fixed employment relationship termination date without prejudice to the expressed termination intention.”
However, the deadline applicable in this case (12 months from 26 March 2008) was not fully complied with, with the consequence that the Court of Cassation granted the employee the right to an indemnity in lieu of notice corresponding to the unbenefited period, equal to a month and twenty-two days (from 4 February 2009 to 26 March 2009). This solution was considered consistent with art. 1231 of the Italian Civil Code, which excludes novation (and an extinguishment) if there are modifications concerning the application or cancellation of a term.
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The ruling concludes that in the private employment field when terminating the relationship due to the employee’s age limit, the employer can proceed with an “ad nutum” termination while complying with contractual notice obligation.
Art. 1 of Decree Law no. 14 August 2020 no. 104 ( “August Decree”), converted, with amendments, by Law 13 October 2020 no. 126, has reviewed the period of ordinary and extraordinary wage subsidies and ordinary allowance that can be requested in the second half of 2020 to deal with the current health emergency.
The employer could have access to a maximum period of 18 weeks (nine plus a further nine) from 13 July 2020 to 31 December 2020.
INPS guidelines
The operating guidelines for wage subsidies for the Ordinary Redundancy Fund (CIGO), Wage Subsidy Fund (FIS) and Extraordinary Redundancy Fund (CIGD) for COVID-19 reasons, are laid down in INPS circular no. 115 of 30 September.
In this circular, the Institute set a 31 October 2020 deadline to submit applications for wage subsidies for July and August. It should be noted that the original legal deadline was 30 September 2020.
The August Decree confirmed that consultation with trade unions and a joint examination by the most representative trade union organisations was preparatory and mandatory to apply for the subsidy to the Institute. Employers who have less than five employees are exempt from this obligation.
The operating procedure requires two separate applications to be sent to INPS.
Employers are granted 18 weeks, divided into two distinct nine-week periods, to be used during 13 July and 31 December 2020.
For the first nine weeks, the wage subsidy application can be sent using the INPS platform and the “COVID- Nazionale” reason using the same method for wage subsidy applications under the “Cura Italia” and “Relaunch” Decrees.
For the additional nine weeks of wage subsidy, the August Decree introduced an additional contribution to be paid by the employer, making the use of social shock absorbers for COVID-19 reason “on a payment basis”, under turnover conditions as described below.
In addition to the explanatory circular on the August Decree provisions, with message no. 3525 of 1 October 2020, INPS issued the application procedures with the new “COVID 19 con fatturato” application reason for additional nine weeks, which may apply to periods before 14 September 2020 and completed by 31 December 2020.
Requests for the additional nine weeks, starting from 14 September 2020, requires the employer to send the self-certification attesting the turnover decrease for the first half of 2020 compared to the first half of the previous year.
The employer must self-certify the existence of one of the following conditions: not having suffered a drop in turnover, having had a reduction in turnover of less than 20 per cent, having suffered a drop in turnover of 20 per cent or more or, having started a business after 1 January 2019.
Access to the second period of nine weeks of wage subsidies without charges to the requesting employer will only be possible for employers who (i) have suffered a reduction in turnover in the first half of 2020 of at least 20 per cent compared to the first half of 2019 or (ii) have started a business after 1 January 2019.
When there is a reduction in turnover of less than 20 per cent, the employer will be subject to the payment of the additional contribution of nine per cent of the salary that would have been due to the worker for the unworked hours during the business suspension or reduction.
If there is no reduction in turnover, the additional contribution due will be 18 per cent.
To identify the rate of the additional contribution referred to in art. 1 of the August Decree, the requesting employers must attach the INPS application for wage subsidy with a declaration of responsibility, made under art. 47 of Presidential Decree no. 445/2020. With this declaration, employers must alternatively self-certify the existence and index of any turnover reduction and the right to exemption from the payment of the additional contribution if the business started after 1 January 2019.
As expressly stated in message no. 3131 of 21 August 2020, if the application is unaccompanied by the self-certification, the additional contribution requested will be a maximum of 18 per cent of the total remuneration that would have been due to the employee for the unworked hours during the suspension or reduction of work.
If the employer is unable to advance the wage subsidies and opts for direct payment by INPS, they will be required to send the Institute the data necessary for the wage subsidy payment or balance by the end of the month following the month to which the wage subsidy period refers (SR41 form).
To simplify the bureaucratic process to access the extraordinary redundancy fund, which required sending the wage subsidy application to the relevant Region and INPS, the August Decree ordered the transmission of applications to be carried out using the same methods used for CIGO and FIS, i.e. using the INPS platform directly.
With Resolution no. 55/E/2020, of 25 September, the Inland Revenue responded positively to a request submitted by a Company intending to activate a Welfare plan using two separate company regulations under which employees would be granted a Welfare credit to be used through a specific web platform, upon achievement of a minimum turnover target.
The Company asked:
Inland Revenue Considerations
For tax regime applicability under art. 51 paragraphs 2 and 3 of the TUIR, the Inland Revenue stated that the amounts granted as Welfare credit were not considered as part of income if the benefits were made available to all employees or categories of employees.
This was confirmed by Circular no. 28/E/2016, when the Inland Revenue had underlined the possibility of bonus-related welfare plans, even if provided to all or similar employee categories.
The expression “categories of employees” is to be understood broadly and not limited to the categories provided for by the Italian Civil Code. For example, employees of a certain “level”, “classification” or with a certain “seniority” are considered “categories.”
According to the Inland Revenue, the regime under art. 51 paragraphs 2 and 3 applies to bonus or incentive-related Welfare plans where the provision goods and services is linked to the achievement of a company objective, and when goods and services are provided as employee bonuses.
In this case, the Agency has considered employee “loyalty” as a prevailing aspect, which does not cease to apply when the distribution of benefits “is not based on the evaluation of the employee’s work, either individually or collectively, i.e. on evaluations strictly related to the work performance.”
According to the Inland Revenue resolution, a welfare plan must follow paragraphs 2 and 3 of article 51 of the TUIR, reward employees if the company’s turnover increases, with benefit payments based on the gross annual salary of each employee and ensure benefits do not replace the fixed or variable salary.
The Inland Revenue has not shown any issues in applying art. 95 of the TUIR for deductibility of the Welfare Plan costs for IRES purposes, if the welfare credits are provided to employees under a contract, an agreement or a company regulation which includes the fulfilment of a contractual obligation.
The Inland Revenue, with Circular no. 28/E of 15 June 2016, clarified that for a regulation to constitute the fulfilment of a contractual obligation, must not be revocable or modifiable autonomously by the employer. In this case, the welfare plan costs incurred by the employer are fully deductible for IRES purposes and not only limited to the five per thousand provided for by art. 100 of the TUIR.
With Circular 105/2020, INPS, has provided initial clarifications for the management of social security contribution exemption obligations for employers who do not need further wage subsidies due to the COVID-19 epidemiological emergency.
August Decree provisions
Article 3 of Decree Law no. 14 August 2020 no. 104 ( “August Decree”), converted, with amendments, by Law 13 October 2020 no. 126, outlines an economic incentive, in the form of social security contribution exemptions, for employers who (i) do not require further wage subsidy periods under the same decree and (ii) have already benefited from wage subsidies in May and June under Decree Law 17 March 2020, no. 18 ( “Cure Italy” Decree).
The contribution exemption can be used for up to four months, by 31 December 2020, and up to double the hours of wage subsidy already obtained in May and June 2020.
Employers who have benefited from this exemption are subject to the prohibitions against collective and individual dismissals for justified objective reasons, referred to in Article 14 of the August Decree. Violation of this provision shall result in the contribution exemption’s retroactive revocation and losing the right to apply for wage subsidies under the same Decree.
INPS clarifications
In its circular, INPS, made it clear that, other than the agricultural sector, private employers, including non-entrepreneurs, can benefit from the reduction in contributions, if they:
INPS specified that employers who applied for social security benefits based on the “Cure Italy” Decree before 15 August (date of the August Decree’s entry into force), or alternatively after 14 August, may still benefit from this exemption. This is conditional on the subsidy periods starting before 13 July and ignoring wage subsidies that may partially accrue after 12 July.
Wage subsidy payments are based on individual production units belonging to the same employer (INPS number), and the employer can choose between the social shock absorber or contribution exemption for each production unit.
The incentive is equal to the employer’s unpaid contribution, excluding INAIL premiums and contributions and other minor contributions (such as, the 0.30% contribution for financing interprofessional funds. The contribution due to the “Fund for the payment of severance indemnities to private sector employees under Article 2120 of the Italian Civil Code”) – for double the hours benefited under social shock absorbers during May and June 2020 and regardless of the number of employees for whom wage subsidies have been paid.
The total incentive must be recalculated and applied on a monthly basis (within the maximum limit of the contribution theoretically due in the month by the beneficiary employer) for a maximum of four months and by 31 December 2020 which is the final deadline to use the benefit.
The Institute specified that the contribution exemption is subject to compliance with (i) the conditions to access contribution benefits and (ii) the ban on dismissals under Article 14 of the August Decree, with the approval of the European Commission.
Since it is addressed to a target group, it is considered as “State aid” for which prior authorisation by the European Commission is required, as underlined by the INL (National Labour Inspectorate) note of 16 September 2020, no. 713.
For the benefit’s effective application, we are waiting for the necessary authorisation from the European Commission and subsequent operating instructions from INPS.
Decree Law no. 125 of 7 October extended the current COVID-19 pandemic emergency to 31 January 2021. The previous deadline was 15 October 2020.
Simplified smart working follows a different timeline from the emergency extension. Previous provisions of the “Relaunch” Decree, stated that simplified smart working is to be extended until 31 December 2020.
Until that date, employers can grant workers smart working arrangements without having to enter into individual agreements. However, electronic communication to the Ministry of Labour using the “Cliclavoro” portal is still required within the usual terms. Further measures could be issued to regulate smart working and related deadlines.
With Circular No. 116 of 2 October 2020, INPS has given the relevant operational instructions on the ways in which employees may benefit from the so-called Covid-19 leave in case their school-age children are in quarantine.
As is well known, article 5 of Law by Decree No. 111/2020 has introduced an indemnified leave in favour of parents who are employees (the so-called COVID-19 leave for the school quarantine of their own children) to be used in order for them to be able to be absent from work, either totally or partially, for the period of quarantine of the cohabitant child of less than fourteen years of age, ordered by the Prevention Department of the territorially competent Local Health Authority (ASL) following the relevant contact to said extent inside the school complex.
Both parents may alternatively benefit from the aforesaid leave if they cannot do their respective job on a smart working basis.
In its Circular, the Italian National Social Security Institute has shown the cases of compatibility and incompatibility between the Covid-19 leave under examination and other types of absence.
For example, benefitting from the aforesaid leave is incompatible with types of absence like sick leave, maternity/paternity leave, holidays, unpaid leave, as well as the days off and leaves under Law No. 104/1992.
Furthermore, the Italian National Social Security Institute has shown the cases of incompatibility between the leave at issue and other types of absence concerning the other parent cohabiting with the child. Amongst same, it is possible to find parental leave, the daily rest of the mother or of the father, as well as the relevant income support measures upon suspension of work.
The Circular has also specified that the application must exclusively be filed through the Internet, (I) through the www.inps.it Web page, if one is a holder of the PIN issued by the Italian National Social Security Institute or (ii) through the Integrated Contact Centre of the Italian National Social Security or through the services offered by the relevant Benevolent Funds.
The application may concern periods of benefit from the leave prior to the date on which any such application is submitted, provided that falling within the period running between 9 September 2020 and 31 December 2020.
The application must mention the details of the quarantine decision ordered by the Prevention Department of the territorially competent Local Health Authority (ASL).