Italy: The Distinction Between Genuine Service Agreements and Unlawful Supply of Workforce

According to the Court of Catanzaro ruling dated 10 December 2024, the service agreement is not authentic when the service provider does not have any substantial organisational autonomy since the directive/organisational powers over the employees and the work, including the disciplinary power, are exercised by the client company. In this case, the Judge can establish the existence of an employment relationship between the service provider’s employees and the client company.

The Court of Catanzaro recently reaffirmed that when the service provider is lacking substantial organisational autonomy and the directive/organisational power over the employees – even the disciplinary power – is exercised by the client company, the typical requirements of a genuine service agreement are not met, but instead it is unlawful workforce supply.

The case involved two employees, both employed by the service provider, claiming the subordinate nature of their employment relationships with the client company due to the unlawfulness of the service agreement. They claimed that, on the one hand,  the service provider’s personnel were subject to the precise and detailed instructions by the client company, and, on the other hand, that the service provider’s employees were subject to the approval of the client company, which could request their immediate replacement (and thus, in substance, their dismissal) at any time, as expressly provided for in the service agreement.

In order to correctly qualify the employment relationships, the Court first recaps the relevant jurisprudential context. In particular, it clarifies that recent case law, both in the territorial courts and the Supreme Court, in cases perfectly comparable to the present one, has excluded the possibility of identifying the essential elements of a genuine service agreement, as outlined by Legislative Decree No. 276 of 2003, Article 29, paragraph 1, when the client company plans the activities and controls  the work performed by the service provider. In other words, according to the prevailing interpretation, it is necessary to verify that the contractor was entrusted with achieving a result, through an effective and autonomous organisation of the work, with genuine subordination of the employees to its own directive and control powers, with its own resources and business risk.

In the case examined, from the analysis of both the elements found during the investigation and the actual conduct of the employment relationships, the Court concluded that there was a total and indiscriminate subjection of the service provider’s personnel to the directives of the client company, as well as to its arbitrary approval, elements that are certainly indicative of the non-authentic service agreement. Therefore, the Court of Catanzaro declared the service agreement to be unlawful and, consequently, established the existence of regular subordinate employment relationships between the two employees and the client company.

Key Action Points for Human Resources and In-House Counsel

Practical Points

• According to the ruling of the Court of Catanzaro dated 10 December 2024, when the service provider has no substantial organisational autonomy and the directive-organisational-disciplinary power over the employees is exercised by the client company, the typical requirements of an authentic service agreement are not met. It is an unlawful supply of workforce instead.
• As a consequence, the Court found the service agreement to be unlawful and ruled in favour of the two employees who claimed for the existence of a regular employment relationship with the client company.