The Supreme Court of Cassation, by Order no. 25225 of 10 November 2020, affirmed that, if there is an unlawful infringement of a right to be employed by a public administration, the injured employee is entitled to compensation for loss of remuneration, but not for the loss of their social security position with the general compulsory social security.
The facts of the case involved an employee who challenged a decision declaring her disqualified from the minimum hiring percentage for civil invalids, which she had claimed at the time of her registration on the list of substitute teacher applicants at the nursery school.
The employee’s legal action was based on the belief that the measure was based on a medical assessment which unlawfully declared she was not invalid.
The employee’s appeal was upheld by the relevant Court of Appeal, which ordered the Ministry involved to pay compensation for the pecuniary and non-pecuniary damage and updated her contribution and social security position for the period she had been unemployed. This had to be carried out by paying the social security contributions due for that period.
The dispute was brought before the Court of Cassation, which stated that if the unlawful act by the Public Administration resulted in the infringement of the employment right, the employee could not claim compensation. Such claims presume “the establishment of the bilateral relationship”, a circumstance which did not occur. According to the Supreme Court judges, the employee is entitled “to claim compensation for damages under Art. 1218 of the Italian Civil Code.”
If the employee is in a position to demonstrate that she has been “deprived of employment or has worked in deteriorating conditions” as a result of the unlawful act, she may claim compensation for loss of earnings, i.e. for the loss of earnings resulting from the loss of wages.
The Court judges’ view was that the interested party could not request her social security position updated by way of compensation, since “the social security relationship, which is unavailable, arises only if the necessary legal requirements are met and the Social Security Institute could not accept undue contributions.”
The Supreme Court explains that employment is an essential prerequisite for the social security relationship, which is independent but unavoidably related. “The employer’s obligation to pay contributions due is part of the employment relationship, and is an obligation to do something, not an employee right to claim contributions.”
The existence of an employment relationship is a necessary condition for an employer to be ordered to pay contributions.
The Supreme Court partially accepted the appeal filed by the Ministry involved and declared that the social security position of the employee illegally removed from the compulsory employment lists should not be updated.
Following the continuation of the state of emergency, the 2021 Budget Law extended the COVID wage subsidies for a further 12 weeks.
These 12 weeks must be between 1 January 2021 and 31 March 2021 for Temporary Redundancy Fund payments and (ii) 1 January 2021 and 30 June 2021 for Ordinary Allowance and Exceptional Redundancy Fund payments.
All workers employed on 1 January 2021 are eligible, including those hired after 25 March 2020.
Using these 12 weeks is free of charge for employers. They do not have to pay any additional contribution.
The deadline for submitting applications is the end of the month following the activity suspension or reduction period. We are waiting for the Inps instructions to submit the application once the trade union phase (if any) has been carried out.
With its circular no. 33/E/2020 of 28 December 2020, the Inland Revenue, provided new instructions regarding the favourable tax regime granted to repatriated workers and recently governed by the “Growth Decree” (Decree Law no. 34/2019) and Tax Decree linked to the 2020 measures (Law no. 124/2019).
Regulatory reference
The “Growth Decree” has broadened the range of beneficiaries of the five-year favourable tax regime as from the 2020 tax year.
The Decree no longer requires that the “repatriate” worker has a top-management role and possesses “high qualification or specialisation requirements.” It is sufficient to have spent a period of residence abroad of at least two years before entering Italy and a commitment to remain in Italy for at least two years.
The incentive is increased by raising the taxable income reduction percentage from 50 to 70 per cent, with a possibility of a further increase up to 90 per cent with certain conditions (such as the transfer of the employee to a region in Southern Italy).
The benefit’s duration is extended for a further five tax periods for those who: (i) have a minor or dependent child and (ii) have purchased a residential property in Italy in the 12 months preceding the move or by the end of the first five-year period. In these cases, the taxable income would be reduced by 50 per cent, or 90 per cent for repatriates with at least three minor or dependent children.
To complete the regulatory framework described above, the Tax Decree linked to the 2020 tax measures has extended the start of the new tax regime as of 2019 to workers who had transferred their tax residence in Italy between 30 April 2019 and 2 July 2019.
Inland Revenue clarifications
This last “extension” required an Inland Revenue measure which, with its circular no. 33/E/2020, clarified that the reduction of taxable income from 50 to 70 per cent is not yet applicable.
It is necessary to wait for the Ministry of Economy and Finance to issue an implementing decree that will shed light on the criteria to access the new favourable regime for 2019, considering the limited resources available.
According to the circular, pending the implementing decree issuance, those who “have transferred their tax residence in Italy from 30 April 2019 to 2 July 2019, and meet regulatory requirements, may use the benefit in the lower measure of 50 per cent.” There is no mention of regime extensions for cases under the new description.
It is understood that “for those who have returned during the 2020 tax period, the favourable regime is operational regardless of the decree issuance.”
All that remains is to wait for the implementing decree.
The 2021 Budget Law continues to focus on social security contributions, to generate employment and ensuring greater company liquidity. Below is a brief overview of the main legal exemptions.
Social security contribution exemption for companies that do not apply for COVID-19 emergency wage subsidies.
The August Decree introduced a social security contribution exemption, available until 31 December 2020, for private employers, excluding the agricultural sector, who:
This exemption was calculated up to double the hours of wage subsidy already obtained in May and June 2020, excluding INAIL premiums and contributions.
The 2021 Budget Law grants the same employers an exemption from the payment of social security contributions up to eight weeks. This must be used by 31 March 2021, up to the hours of wage subsidies already obtained in May and June 2020, excluding INAIL premiums and contributions.
This exemption is exactly half of the exemption under the August Decree.
New contribution exemption for permanent hires under 36 years of age
To reduce social security contributions to be paid by employers when hiring, a contribution exemption has been introduced for permanent hires of those under 36 years of age for the 2021-2022 two-year period.
Managers or domestic workers are excluded. In addition to the age requirement, those hired must not have had permanent employment relationships with other employers.
The contribution exemption is 100 per cent of the contributions due by the employer up to a maximum of €6,000 annually, excluding lNAIL premiums and contributions.
The exemption’s duration is 36 months, which is increased to 48 months for employers with headquarters or production units located in the regions of Abruzzo, Molise, Campania, Basilicata, Sicily, Puglia, Calabria and Sardinia.
Employers who have dismissed employees with the same qualifications as the hired employee for justified objective reasons in the six months prior to recruitment are not eligible for the exemption.
The period during which the exemption may not be granted for individual redundancies for justified objective reasons or collective redundancies of persons in the same production unit with the same qualifications as the hired employee is increased from six to nine months after hiring.
Tax exemption for hiring women
The 2021 Budget Law modified the existing exemption for hiring women. This included some features and enhanced its benefits.
Two essential changes have been introduced (albeit experimental because they are limited to the 2021-2022 two-year period), namely:
Similar to the exemption for those under 36 years of age, the contribution exemption for hiring female workers is 100 per cent and up to a maximum amount of €6,000 annually.
The exemption’s duration is 12 months for fixed-term hires, which can be increased to 18 months for permanent hires or change from fixed-term to permanent contracts.
A necessary and sufficient condition to benefit from the exemption is that the hiring results in a net increase in employment calculated based on the difference between the number of employees recorded in each month and the average number of workers employed in the previous twelve months.
Contribution reduction for Southern Regions
Following the provisions of the August Decree, the legislator is looking at the contribution reduction for Southern regions again. The European Commission gave its authorisation and INPS already provided some initial operational clarifications with circular no. 122/2020.
The measure’s objective is to ensure employment levels in some regions of central and southern Italy (Abruzzo, Molise, Puglia, Campania, Basilicata, Sicily and Sardinia) during the pandemic crisis.
The Southern Regions’ contribution reduction includes an exemption from private employer contributions other than those in the agricultural sector or using domestic work contracts, without prejudice to pension benefit calculation rate.
The exemption concerns private employers (including professional firms, moral and religious bodies, and associations), other than those in the agricultural sector or using domestic work contracts.
All subordinate employment relationships are included provided that the geographical requirement is met, i.e. work must be carried out in one of the following regions: Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily.
Since this measure will be operational until 2029, the exemption during the different years is:
The exemption from social security contributions is cumulative with other benefits up to the total social security contribution rates owed by the employer.
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The 30 per cent contribution exemption for Southern regions will be granted for hires until 30 June, in compliance with the European Commission’s “placet” which already took place for the exemption that concerned the last months of 2020, under art. 27, paragraph 1, of the August Decree.
The effectiveness of the above exemptions and benefits for subsequent periods is subject to a new decision of the European Commission, under art. 108, of the EU Treaty.