Decree-Law 131/2024 and the New Rules on Fixed-Term Contracts

The recent Decree-Law 131 of September 16, 2024, known as the “Infringement Safeguard Decree,” introduced significant changes regarding compensation for the abuse of successive fixed-term contracts. The updates, outlined in Articles 11 and 12, affect both the public and private sectors, with differentiated regulatory approaches.

Updates in the Public Sector

For the public sector, the decree amends Article 36 of Legislative Decree 165/2001, introducing two main changes:

• Increase in Compensation Range: The compensation is now set within a range of four to twenty-four months of the last salary. The specific amount depends on the severity of the violation, including the number of successive contracts and the total duration of the employment relationship.
• Employee’s Right to Prove Greater Damage: While a flat-rate compensation is provided, the worker has the right to demonstrate additional harm, which will be subject to specific evaluation by the court.

These measures address explicit requests from the European Union as part of infringement procedure 2014/4231, which highlighted deficiencies in Italy’s compliance with Directive 1999/70/EC on fixed-term work, particularly in the public sector.

Private Employment and Regulatory Changes

For the private sector, the regulatory framework undergoes less significant changes. The limits of the lump-sum compensation established by Article 28, paragraph 2, of Legislative Decree 81/2015 remain unchanged, ranging from 2.5 to 12 months of the last salary. However, a new provision allows judges to award higher compensation if the worker demonstrates greater damages.

Another change is the repeal of paragraph 3 of the same Article 28, thereby eliminating the reduction in compensation in cases where the parties sign stabilization agreements through unions. This decision raises questions about the consistency of the regulation with the goal of balancing worker protection and corporate flexibility.

Challenges and Uncertain Outcomes in Private Employment

The regulation on private employment is not free from criticism. The provision for damage compensation, in addition to lump-sum payments, risks reintroducing dynamics already resolved by the automatic conversion of unlawful contracts into open-ended ones, as stipulated in Article 32 of Law 183/2010 and deemed legitimate by the Constitutional Court (ruling no. 303/2011). This mechanism served as an effective deterrent against the misuse of fixed-term contracts.

The reintroduction of unlimited compensation could once again encourage prolonged legal disputes to increase the claimable damages, undermining the need for legal certainty.

The European Issue: Public vs. Private Employment

A fundamental issue is that the European Union’s concerns, which prompted the decree, pertain almost exclusively to public employment (teachers, healthcare staff, and other categories). In the private sector, Italian regulations already provide for the conversion of contracts as the primary remedy against abuse—a solution consistently considered adequate and compliant with European directives by the judiciary.

Extending these measures to the private sector could, therefore, be excessive in relation to the EU’s requirements. It is worth noting that converting fixed-term contracts into open-ended ones is the most effective measure to deter opportunistic behavior by employers, as reaffirmed by the Constitutional Court.

Conclusions

Decree-Law 131/2024 introduces significant changes to the regulation of fixed-term contracts, addressing European requirements but potentially creating regulatory imbalances. While the changes appear more justified for the public sector, given the violations identified by the European Court of Justice, the reform raises questions about its coherence with the existing framework in the private sector.

Although driven by EU obligations, the legislative intervention may have overreached by pursuing a generalized adjustment, risking the balance between worker protection and corporate flexibility. It remains to be seen whether Parliament will introduce amendments during the conversion process to mitigate the identified challenges.