Waivers in conciliation proceedings: for INPS, compensation due and settled is also subject to social security contributions (Andrea Di Nino, Sintesi – Ordine dei Consulenti del Lavoro, May 2023)

18 May 2023

With Order No. 8913 of 29 March 2023, the Court of Cassation affirmed that the payment of the social security contribution to the National Social Security Entity (Istituto nazionale della previdenza sociale, ‘INPS’) is also due on the sums not paid to the worker when, following a conciliatory agreement, the worker waives compensation in lieu of notice.

A company appealed against an assessment report issued by the INPS, relating to the payment of the unpaid contributions and due on compensation in lieu of notice which was not paid to dismissed workers. The Bologna Court of Appeal repealed the first instance ruling and accepted the company’s application.

The employment relationships of the above-mentioned workers had been terminated through the use of voluntary resignation incentives, agreed in trade union conciliation. At the conciliation, therefore, the workers involved had waived, among other things, the compensation in lieu of notice provided for by the collective bargaining agreement.

In these circumstances, the Bologna Court of Appeal considered that the parties, in being able to waive the contractual element of the compensation in lieu of notice, had exercised an alienable right. In relation to this, and since no amount was paid on that ground, a contribution obligation could not arise.

The INPS, in appealing against the decision of the Bologna Court of Appeal, argued that, in its opinion, the prerequisites had been met for breach or misapplication of Article 12 of Italian Law no. 153/69 and Article 1 of Italian Decree Law no. 338/1989, on the subject of ‘minimum contribution’. According to the appellant, in fact, the economic-contractual elements provided for by law such as ‘compensation in lieu of notice’ provided for by Article 2118 of the Italian Civil Code, although not paid under the agreement reached between the parties, would still be subject to the contribution obligation.

In particular, Article 1 of Italian Decree Law no. 338/1989 provides that the remuneration to be assumed as the basis for calculating social security contributions cannot be lower than the remuneration established by law. The rule, therefore, refers to the limits of legal remuneration and not that actually paid to the worker. In this regard, for example, defaults by the employer in relation to the employee in the payment of wages are irrelevant. From this, therefore, it is inferred that the social security obligation is independent of the remuneration obligation.

By way of example, the Court of Cassation judges retraced their way through some previous rulings concerning agreements for the reduction of working hours or relating to the temporary suspension of performance and the subsequent omission of pay. These agreements, ultimately, “are not enforceable against the INPS” (Court of Cassation no. 15120/2019, Court of Cassation no. 13650/2019), firstly, as they refer to the employment relationship and not to the separate social security relationship. Secondly, since the latter is autonomous with respect to the former, as well as subject to the minimum contribution rule, under which the remuneration due by law is relevant for contribution purposes.

In the light of the law considered, the court has reiterated that the social security rights that arise as a result of legislation are not available between contractual parties. Consequently, any waivers of the sums due are not relevant for the purpose of determining social security contributions.

The company, therefore, despite having consensually terminated the employment relationships under the conciliation agreement that followed the notice of dismissal, is required to pay the contributions relating to the compensation in lieu of notice that should have been paid in the absence of an agreement.

The Bologna Court of Appeal, according to the Court of Cassation judges, did not apply the principles of law mentioned above. In fact, the appeal judgment spoke of “consensual termination of the relationship” and of “waiver of the right to compensation in lieu of notice”, without considering that while this is relevant to the employment relationship, it is not relevant to the separate social security relationship, since the settlement, and therefore the waiver of the right, is unenforceable against the INPS.

The Court of Cassation also observed that the INPS did not request the payment of contributions on the sums paid in compliance with the settlement. Instead INPS demanded, based on the rule of the minimum contribution to which the remuneration due according to law is relevant, the payment of “sums that would have been due specifically under the law (Article 2118 of the Italian Civil Code) and arising from the employment relationship, regardless of what the parties later established in the settlement“.

In conclusion, and accepting the INPS’s appeal, the Court of Cassation ruled that the Bologna Court of Appeal should have established whether, given the company’s desire to withdraw, the compensation in lieu of notice had been due to the workers, regardless of the fact that this was not paid because the aforementioned workers accepted sums in a different capacity, that is, as a voluntary resignation incentive.

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