Fixed-term contract: the August Decree’s regulatory changes
One of the most discussed regulations in recent years is that related to fixed-term contracts, and the numerous innovations have without doubt influenced employers’ choices and also affected the current regime of employment rules.
The provisions of the Dignity Decree
Lastly, the most significant structural changes were made by Decree Law No. 87 of 12 July 2018, converted by Law No. 96 of 9 August 2018 (the “Dignity Decree”), which amended a number of provisions introduced by the Jobs Act (Legislative Decree 81/2015).
More particularly, the Dignity Decree permits the first contract to be signed without the employer being required to specify the reasons justifying a fixed term contract, provided that the contract does not exceed 12 months in duration.
However, it may be extended (if the total duration exceeds twelve months) and/or a contract renewal may be signed extending it to twenty-four months provided that at least one of the following justifying reasons are present:
- the existence of temporary and objective requirements unrelated to the employer’s normal operations;
- the existence of requirements involving the replacement of other workers;
- the existence of requirements associated with temporary, significant and unforeseeable uptakes in the employer’s normal operations.
Therefore the fixed-term contract may not last longer than twenty-four months, including any extensions and/or renewals. This is without prejudice to the different or alternative provisions of collective labour agreements (territorial or corporate) signed by trade unions that are comparatively more representative at national level.
The legislation also set the maximum number of extensions allowable, by allowing for the fixed term contract to be extended at most four times. It also confirmed that the contract extension must relate to the same work activity for which the fixed-term contract was initially signed, and that the reason for a fixed term contract must be specified only if the contract is for longer than 12 months.
If the contract is renewed, however, one of the aforementioned reasons must be specified regardless of the duration of the contract originally signed.
The provisions of the August Decree
The Decree Law No. 104 of 14 August 2020 (the “August Decree”) introduced important regulatory changes in order to deal with the current resumption of activities following the COVID-19 health emergency underway, and to ensure greater flexibility for employers in the use of fixed-term contracts.
More specifically, Article 8 of the August Decree, in derogation from the provisions of the Dignity Decree, enables private employers to renew or extend fixed-term contracts until 31 December 2020, subject to the maximum duration of 24 months, without the need to indicate a justifying reason.
On this point, the National Labour Inspectorate clarified, in its Memorandum No. 713 of 16 September 2020, that the 31 December 2020 deadline refers exclusively to the formalisation of the extension or renewal. The employment relationship may be extended also during 2021, subject to the maximum duration of 24 months.
Lastly, the August Decree provided that renewals and extensions that do not specify justifying reasons are permitted only once.
This provision initially generated opposing views as to whether or not employers who exhausted the maximum number of extensions would be able to further extend the fixed term contract. The National Labour Inspectorate clarified this doubt in the same Memorandum No. 713 of 16 September 2020.
More specifically, the National Labour Inspectorate stressed that employment contracts could be extended once only, without the need to indicate a justifying cause, also if they had already reached the maximum limit of 4 extensions under previous contracts.
Note finally, for the sake of completeness, that according to the prevalent interpretation, these new provisions also apply to fixed-term staff leasing contracts, given the equivalence of both types of contract as confirmed by the Dignity Decree’s provisions.