Supreme Court finds that employees not granted right to continue employment with new contractor

Facts
Decision
Comment


In Decision 11247/2016, the Supreme Court stated that in the case of a change of contractor, employees of the previous contractor are not automatically granted the right to continue their employment relationship with the new contractor, as provided for by Article 2112 of the Civil Code, which relates to the transfer of an undertaking.

Facts

The case concerned the termination of a parking service contract by an Italian municipality, which had agreed a new contract with an in-house company. After the municipality had terminated the service contract, the previous contractor dismissed the employees assigned to the parking service. The employees challenged the dismissals as null and void.

The Supreme Court affirmed that the dismissals did not violate Article 2112(4) of the Civil Code, which prohibits dismissals due to the transfer of an undertaking in line with Article 4 of the EU Transfer of Undertakings (Protection of Employment) Directive (2001/23/EC). A dismissal based on the transfer of an undertaking is null and void only if the dismissed employee is granted the right to continue his or her employment relationship with the transferee of the undertaking, in accordance with Article 2112 of Civil Code and the EU Transfer of Undertakings (Protection of Employment) Directive. Instead, in the case of a change of contractor, the employee is not granted such a right if the new contractor acquires none of the tangible or intangible assets of the previous contractor. In such cases, the legal requirement for a transfer of undertaking will not be met.

Even if the national collective bargaining agreement applicable to the new contractor provides that the latter must hire the previous contractor's employees, this commitment does not constitute a transfer of undertaking as defined by Italian legislation.

The principle affirmed by Decision 11274/2016 follows Article 29(3) of Decree-Law 276/03, which excludes the application of the EU Transfer of Undertakings (Protection of Employment) Directive in the case of a change of contractor when the new firm has its own business structure. According to the Supreme Court, Article 29(3) of Decree-Law 276/03 complies with EU regulations because, under the EU Transfer of Undertakings (Protection of Employment) Directive, member states do not need to extend the safeguard of employees' rights to a change of contractor.

Decision

The Supreme Court stated that in the case of the transfer of part of an undertaking, the assets transferred to the transferee must be a functionally autonomous part of the business when the transfer takes place, without the possibility to create a new organisational structure when the transfer occurs.

In Supreme Court Decision 1316/2017, a call centre comprising furniture, 304 personal computers, phones, headsets, printers and network equipment and 268 employees was not considered to be part of an undertaking. According to the court, the seller's decision to retain the client's databases, the software to access and operate those databases and employees dedicated to the transfer of clients constituted an unlawful segmentation of a part of the undertaking and the employees could not be transferred to the transferee without their consent.

Comment

The principle affirmed by Decision 1316/2017 does not appear to comply with Article 2112(5) of the Civil Code, as amended by Decree-Law 276/2003, which allows a transferor and transferee to identify the part of an undertaking to be transferred at the moment of the transfer. Further, European Court of Justice Decision C-458/12 held that this provision complies with EU law, and that the regime governing the transfer of business units applies to parts of the company which become independent at the time of the transfer.

For further information on this topic please contact Andrea Stanchi at Stanchi Studio Legale by telephone (+39 02 546 9522) or email (a.stanchi@stanchilaw.it).