Italian Employment Trends: Focus on the (Growing) Protections Favouring Workers

The year 2025 marked a turning point for labour law in Italy, with important regulatory and jurisprudential changes that directly impacted crucial employment topics such as, inter alia, service contracts, the consequences of unlawful dismissals and supply of workforce.

Nowadays, Italy-based companies must take into account (and comply with) the increasing protections provided by legislators in favour of the workforce, as confirmed by recent reforms. Below is an overview of the main reforms.

Service contracts and joint liability of the principal company

The joint liability of the principal company within service contracts (contratto di appalto di servizio) has been crucial for many years, partly due to the key role played by the service contract in the context of Italy’s economy and productivity.

One of the main principles of the relevant legislation establishes that the principal company is jointly liable with the contractor company – as well as the subcontractors, if applicable – with respect to the remuneration and social security contributions of the contractor’s employees, with consideration of the period of performance of the contract and within two years of the termination of such contract.

This rule clearly represents an example of enhanced protection in favour of workers employed in increasingly fragmented production chains, where the risk of non-compliance by the contractor (and in turn by subcontractors) increases with greater fragmentation of the production chain. The rationale is to ensure employees can take direct action against the principal company, which does not (and cannot) choose the contractor’s personnel while benefitting from their work activities.

What’s new: extension of the scope of the contractor’s joint responsibility

One of the most significant changes in service contract execution is the recent extension of the principal company’s responsibility with respect to the national collective bargaining agreement (NCBA) or the territorial collective bargaining agreement applied by the contractor company. In fact, as a result of recent reforms, the principal company may be held accountable not only if the contractor does not guarantee appropriate economical treatment of its employees in accordance with the bargaining agreement applied, but also in the case where the contractor does not apply a bargaining agreement signed by the most representative national trade union in the sector and area most closely connected with the activity covered by the contract.

In summary, the principal company must stay alert regarding the type of collective bargaining agreement applied by the contractor, since any claim brought against the latter by its employees based upon the application of an incorrect bargaining agreement (eg, one giving rise to worse economic treatment compared to others or one that is not consistent with the relevant sector) can potentially involve the principal itself as a jointly liable subject. As a matter of fact, the contractor’s employees may directly bring such claim to the principal even without involving the contractor itself, as is usually the case, given that they normally have a greater chance to satisfy their demands vis-à-vis the principal rather than the contractor.

The rationale behind this principle is clearly to prevent the principal company from benefitting from contractual dumping of the contractor, and to uphold the constitutional right to fair and proportionate remuneration for the contractor’s employees regardless of the fact that their work is substantially carried out for a company different from their “paper” employer.

The abrogative referendum: nothing new

The topic of joint liability of the principal company has been the focus of recent debates, in part due to the repeal referendum held on 8–9 June 2025 in Italy. In fact, one of the referendum items proposed the repeal of paragraph 4-bis of Article 26 of Legislative Decree 81/2008, which excludes the principal company from liability for work accidents resulting from risks specific to the contractor’s activity. However, the referendum did not meet the legally required quota, and the principal’s joint responsibility has thus not been extended (yet).

The Jobs Act and its interpretation by the Italian Constitutional Court

Structured as a multi-decree piece of legislation, the 2015 Jobs Act guaranteed the so-called growing safeguards (tutele crescenti) for employees employed under employment agreements signed by its date of effectiveness.

Such regulation provides for the employee’s right to claim unfair dismissal, together with a range of indemnities by way of damage compensation for the employer’s illegitimate termination. More specifically, said range of indemnities amounts to between six and 36 monthly salaries for employees of large companies (at least 16 employees) and between two and six monthly salaries for employees of small companies (15 employees or less).

Against this background, with Judgment No 118 of 21 July 2025, the Italian Constitutional Court declared the illegitimacy of the maximum limit of six monthly salaries by way of compensation in cases of unlawful dismissal at smaller companies, stating that such amount should be assessed by the judge on a case-by-case basis and not fixed.

More specifically, the Constitutional Court found that the limit would violate the principles of proportionality, adequacy and the deterrence value of the sanction, limiting the judge’s power to assess the specific case. As a consequence, although no new regulation has been issued yet, the judge can now adjust the compensation between three and 18 monthly salaries, making the protection more “customised” according to the case without the six-month cap.

This ruling is part of a trend towards case law processed by the Italian Constitutional Court progressively dismantling the rigidity of the Jobs Act, restoring the central role of the judge and effective protection of employees against the limitation of responsibility on a company in case of unlawful dismissal. In this process of dismantlement, the Constitutional Court has also been questioning the Jobs Act purpose of providing employees with damage compensation as a primary consequence of unlawful dismissal, limiting the possibility of reinstatement to certain hypothetical cases.

An item at the abrogative referendum held on 8–9 June 2025 in Italy mentioned this topic as well, but with no practical consequences for the legal framework due to the lack of a quota requirement.

In any case, it should be highlighted that, nowadays, Italian employers must deal with the uncertainty of the consequences of an unlawful dismissal, whereby (i) no limit of six monthly salaries can apply in case of compensation paid by smaller companies, and (ii) no reinstatement obligation can be excluded a priori.

Workforce supply and a new EU-driven trend

The legal framework of workforce supply (somministrazione) has been amended and reformed numerous times since its introduction into the Italian legal system. As a recent example, last year, new regulations provided for many new outputs regarding, for example, the maximum number of temporary workers with respect to the number of employees at the user company, as well as several stronger protections for temporary workers themselves, who must be treated without discrimination relative to the user company’s personnel.

The end of 2024 was deemed to represent a turning point for workforce supply regulation, especially due to the work of the Court of Justice of the EU and its focus on the right of the employee not to be supplied on an open-ended basis (through so-called staff leasing) in favour of the user company.

Staff leasing under scrutiny

The legitimacy of staff leasing – that is, temporary employment with open-ended assignment to the user company – has been subject to many jurisprudential and doctrinal assessments with respect to its potential conflict with the EU legal framework.

In fact, according to the European principles under which this type of contract has been regulated, since the ordinary form of employment relationship is represented by the bilateral employer–employee structure, with an open-ended basis, the workforce supply and its trilateral structure (which adds the supply agency as the third subject) should be an exception, thus requiring several limitations to its usage.

Above all, a limit to staff leasing duration should be considered given the inherent so-called temporary nature of workforce supply. However, strange as it seems, no such express limitation is provided for in the European regulation – nor does such limitation exist in Italy, where in theory the work of an employee can be supplied on an open-ended basis to the same user for the execution of the same tasks.

However, notwithstanding the lack of such express limitations, many Italian tribunals have followed the European trend and thus have questioned the legitimacy of staff-leasing relationships, although this type of workforce supply would not expressly conflict with any applicable Italian piece of legislation.

Very recently, the Court of Reggio Emilia referred a staff-leasing-related matter to the Court of Justice of the European Union (CJEU), asking whether the absence of limits on the duration of the assignment and the use of workforce supply for permanent needs could comply with EU law. Many other Italian tribunals have also taken part in the initiative, posing several questions on staff leasing relationships to the CJEU.

A CJEU decision is expected in the coming months and could have disruptive effects on the Italian (and European) legal framework: if staff leasing were declared unlawful, the ruling may pave the way for the conversion of a staff leasing relationship into a subordinate form of permanent employment with the user company. This should also prompt the Italian legislator to finally set specific criteria regarding the duration of workforce supply in Italy and staff leasing discipline.

In the meantime, certain caselaw of the Italian courts is already anticipating this trend. Several rulings have recognised the invalidity of staff leasing (carried out through repeat assignments) and have determined that the relationship should be converted into a direct employment agreement with the user, while other rulings based on the absence of a legal requirement concerning the temporary nature of staff leasing have ascertained the legitimacy thereof. Stay tuned for more on this matter.

Conclusions

To summarise the above concepts, recent times – and specifically 2025 – were marked by a strengthening of labour protections for employees. With specific reference to jurisprudential work, the following legal developments are worth mentioning.

• Enhanced accountability for the principal company in the execution of service agreements, in which the principal cannot (and must not) take anything for granted on the contractor side and shall carry out a detailed due diligence with regard to the treatment of the contractor’s personnel. Otherwise, it risks being liable for any and all breaches of the employment relationship made by the contractor vis-à-vis its own workforce in the execution of the service agreement.
• Removal of the cap of six monthly salaries by way of indemnity due in case of unlawful dismissal by small companies increases the amount that can be claimed by employees. On the one hand, companies must be alert to the potential risk of litigation on the workers’ side and to the difficulty of “budgeting” a redundancy without being certain that they can actually “afford” it. On the other hand, employees are granted stronger protection, aimed at satisfying their economic demands following unlawful dismissal; there is also a possibility of reinstatement.
• The EU-driven push towards stabilising employment relationships in the workforce supply context and the growing risk for the user company, which bears the risk of requalification of temporary workers without breaching (in theory) any legal norm.

In conclusion, Italy-based companies are being called upon to review their contractual and employment strategies in an increasingly complex regulatory environment, which focuses on protecting workers while sometimes placing economic burdens on enterprises.