Issue: June 2018

ITALY - Outsourcing and the Fragmentation of Enterprises

By: Antonio Loffredo

Starting from the effects of new rules about outsourcing (Speziale 2010, 5) in the Italian labour market, it is simple to note how this situation is different in comparison to that regarding Labour Law in the past century, in which the cases of decentralised production were rare. Act 1369/1960 was a symbol of that Labour Law, forbidding the employer to contract the execution of mere work performances and punishing this phenomenon with the establishment of an employment relationship with the real employer-user and not with the formal employer. For this purpose, the legislation introduced two principles: the joint liability between the formal and the real employer for credits claimed by workers and the principle of equal treatment between the client’s and contractor’s workers (Costa 2016). Article 85 of the Legislative Decree 276/2003 abrogated the latter principle which resulted in the devastating effect of creating two labour markets having different economic and legal conditions. The first one is for clients, with standard employment relationships stable and more protected; the other one is for contractors, which are under the economic authority of clients, often operating in labour intensive sectors and low-skills sectors with. The workers of these sectors are often hired with precarious contracts, the duration of which can coincide with the duration of the contracts between clients and contractors (Scarpelli 1999, 353). In this way the labour market has been polarised resulting in the perverse effect that a commercial contract concluded between two enterprises influences directly the initial duration or the termination of the employment contract between the contractor and the employee, bypassing the dismissal regulation.

This kind of outsourcing manages to guarantee a general decrease in the transaction costs, including the ones connected to the trade unions presence in the enterprise, by sharing them with other businesses through which strong collaborative relations are established; indeed the new formulas of outsourcing allow the contractor to maintain substantial control and to exercise their powers on the decentralised parties (De Simone 1995), although they have autonomy in management and in responsibility, maintaining their own specialisation in a certain activity.

Therefore, if Act 1369/1960 could be considered the symbol of a Labour Law aimed at protecting the workers, Legislative Decree 276/2003, which has completely abrogated Act 1369/1960, is the real paradigm of a law in which the organisational needs of the enterprises have prevailed strongly over the protection of workers. Finally, as we will see later, Act 183/2014, the so-called Jobs Act of Renzi’s government, is the clearest example of a precarised Labour Law in terms of salaries, stability and the power of employees and of trade unions.

Even the transfer of undertakings reform can be read in the same way. The modification of Article 2112 of the Italian Civil Code, also carried forward by Article 32 of Legislative Decree 276/2003, specified the notion of the “part of undertaking”, stating that a functional, independent division is “an organised economic activity, identified by the transferor and the transferee at the moment of the transfer”. This part of the regulation results in a serious risk of abuses, allowing the use of this regulatory scheme both to break enterprises into small-sized firms and to cut some non-profitable branches without having to follow the collective dismissals regulation (Gallino 2005).

Finally, the introduction of both temporary agency work and staff leasing in 2003, as well as the Renzi’s government reform of 2014 (the first step of the “Jobs Act”) that has liberalised temporary agency work, allows enterprises to fragment their productive organisations and their legal status too (Corazza 2004), using whichever scheme they prefer.

The principle of economic dependence between two enterprises could potentially be a useful tool to establish labour relationships formally belonging to contractors with clients and to try to reduce the proliferation of substantial subordinate enterprises, inside of which these second-class workers are mostly employed because of their low skills, even though they have the same dignity and deserve the same respect from the legal system.

Antonio Loffredo

University of Siena