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Study on the protection of workers' rights in subcontracting processes in the European Union - Italy∗

Giovanni Orlandini (University of Siena)

CONTENTS

Survey Report

A: Setting the scene A1: An overview of applicable rules ensuring the protection of workers' rights in subcontracting A2: Historical background B1: The rules 1.General rules 2. Rules for subcontracting in cross-border situations B2: The objectives B3: The instruments and provisions 1. Notions and definitions: client, contractor and sub contractor in the Italian legal order 2. Joint and several liability for wages 2.1. Personal scope: liable persons and protected workers 2.2. Objective scope: the “due wages” 3. Special rules in case of transnational contracts 4. Direct action (Article 1676 of the Civil Code) 5. Joint and several liability for contribution 6. Joint and several liability 7. Joint and several liability in case of injury

for withholding tax

8. Other safety requirements 8.1 Scope 8.2 Client’s and contractors’ obligations

9. Temporary work agency 8.3. Security obligations in temporary and mobile construction sites

10. Protection of workers rights in public procurements 10.1.Limits to subcontracting 10.2. Employment conditions and joint liability 10.3. Contribution Payment Certificate and control on labour costs ∗ Il presente studio è una versione parzialmente riveduta del rapporto redatto dall’autore come esperto nazionale del gruppo coordinato dall’Università di Ghent (Belgio), nell’ambito di un progetto finanziato dalla Commissione europea (Project No. VC/2011/0015). E’ strutturato in due parti: nella prima (survey report) si rende conto del quadro complessivo degli strumenti di tutela dei lavoratori impiegati nell’ambito degli appalti nell’ordinamento italiano; nella seconda (core report) si valuta la loro applicazione pratica (specie con riferimento agli appalti transnazionali), anche alla luce dell’opinione espressa da interlocutori privilegiati (relevant stakeholders). Il rapporto finale, sintesi dei rapporti nazionali, è stato curato da Yves Jorens, Saskia Peeters e Mijke Houwerzijl ed è consultabile sul sito web della Commissione tra gli studi . Il testo qui pubblicato non tiene conto delle riforme successive alla data di consegna del rapporto (settembre 2011); in particolare del D.lgs. 24/2012 in materia di somministrazione, dell’art.44 del D.L. 201/11 (c.d. decreto “salva Italia”) convertito in L. 214/11, che ha abrogato l’art.81, comma 3-bis D.lgs.163/06 (introdotto dal D.L. 70/11) relativo all’incidenza del costo del lavoro nei pubblici appalti e dell’art.21 del D.L. 5/12 (c.d. decreto “semplificazioni”) convertito in L. 35/12, che ha riformato l’art.29 comma 2, d.lgs.276/03 in materia di responsabilità solidale negli appalti.

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10.4. Regional legislation 10.5. Tenderers established in other Member State 11. Social clauses and workers’ protection in case of successive contracts 11.1 Social clauses in collective agreements 11.2. Succession of contracts and dismissal 11.3. Succession of contracts and transfer of undertakings 11.4 Social clauses required by law 11.4.1. The case of airport services 11.4.2 Other social clauses in National and Regional legislation 12. The economic treatment of “associate” workers in cooperative companies 13. Subcontractors established in third countries (non-EU Member States) B3.1 Preventive measures

2. Registration in the Local Construction Funds and exhibition of the DURC by foreign undertakings

1. The DURC

3. The certification as preventive measure B3.2 Sanctions 1. Non compliance with wages and contribution obligations 2. Exclusion from public procurements 3. 4. Mechanisms to lodge complaints

Other sanctions

B3.3 Soft law measures, such as codes of conduct 1. Corporate social responsibility 2. Transnational collective agreements 3. Systems of certification in public procurements and corporate social responsibility in Regional legislations 4. Sheltered workshops and protection for people with disabilities in public procurement 5. Promoters and role of social partners B4: The actors involved 1. Labour Inspection Authorities 2. Other inspective authorities 3. The role of the social partners Essential bibliography

Core Report

C. The interpretation, implementation and enforcement of the relevant national laws Part I. Subcontracting in general 1. Application in practice of the rules on subcontracting and cases 1.1 Unlawful contract and illegal labour supply (Article 29, paragraph 1, D.lgs.276/03) 1.2 Joint and several liability (Article 29, paragraph 2, D.lgs.276/03) 1.3 Social clauses on re-engagement (collective agreements and Article 29, paragraph 3) 1.4 Application of the collective agreements not generally binding by subcontractors 1.5 Health and safety 2. Control by the actors of the existing mechanisms 2.1 General framework Some practical examples of control activities by contracting undertakings 2.2 The control by inspectors on wages obligations: the “warning assessment act”

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(diffida accertativa) 2.3 The control by inspectors on unlawful contracting and illegal labour supply 2.4 The control on measures related to health and safety 2.5 The control on the application of collective agreements 3. Effectiveness of norms and instruments implemented 3.1 Effectiveness of the rules on unlawful contract 3.2 Certification of contracts 3.3 Effectiveness of the rules on joint and several liability 3.4 Effectiveness of the rules on health and safety 3.5 Effectiveness of the social clauses and of the rules on public procurements 3.6 Effectiveness of the DURC Part II. Cross-border situations 1. Cross- border subcontracting in Italy: the context 2. Enforcement of norms and instruments in cross- border situations 2.1 Collaboration with foreign actors/institutions 3. Difficulties regarding liabilities of the principal client/contractor 3.1Joint and several liability on wages 3.2 Employment conditions and applicable collective agreements 3.3 Contribution and tax joint liability 4. Reasons of the relative ineffectiveness of the existing measures 5. Mutual recognition to financial penalties 6. Positive issues, problems, deficiencies and shortcoming in interpretation application and enforcement of the rules 6.1 General framework 6.2 Inspections and sanctions 6.3 Illegal contract and false self-employment Practical cases 6.4 Agency workers A practical case 6.5 Registration on the Local Construction Funds and issue of DURC. 6.6 Case law on contribution to Construction Funds prescribed by law on public contract 7. Place and role of the measures on protecting workers’ rights in subcontracting chains D. Concluding remarks 1. Best practices, obstacles and problems 1.1 General framework 1.2 Measures contrasting bogus subcontracting and illegal contracts 1.3 Joint and several liability 1.4 DURC and preventive measures 1.5 Social clauses in collective agreements 1.6 Measures on health and safety 1.7 Bilateral bodies and cooperation between social partners 2. Proposals 2.1 Bogus subcontracting and qualification of undertakings 2.2 Joint and several liability 2.3 Social clauses and public contracts 2.4 Inspection activities 3. Alternative instruments 4. Developments going on

Relevant stakeholders and actors interviewed

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Survey Report

A: Setting the scene A1: An overview of applicable rules ensuring the protection of workers' rights in subcontracting The main measure to ensure workers’ protection in subcontracting processes within the Italian legal order is the joint and several liability rule established by Article 29, paragraph 2, D.lgs. 276/03 and extended to the whole chain of subcontractors. The joint liability binds all employers involved along the chain to pay the whole “economic treatment” of the worker, thus including all items considered as part of wages under Italian law (e.g. holiday payments). This obligation applies also to social security contributions and social funds payments provided by collective bargaining (where they exist, like in the construction sector). Health and safety law has also extended the joint liability to all damages suffered by the contractor’s or subcontractors’ employees and which have not been compensated by INAIL (National Insurance Institute for Industrial Accidents). On the other hand, the joint liability for tax obligation on wages, introduced by a 2006 reform, is limited to the relation between contractor and subcontractor. In case both the employer and the other guarantors jointly liable are unable to perform their obligations for wages and contributions, the worker my turn to the Guarantee Fund (Fondo di Garanzia) of INPS (National Social Security Institute), established to protect all employees in the event of the insolvency of their employers, pursuant to the directives 80/987/CEE and 2002/74/CE. Besides providing a joint and several liability for all employers involved in the subcontracting chain, Italian law prescribes specific obligations for the client and the contractor aimed at improving the health and safety conditions of the workers. For instance, they are both responsible for the coordination and implementation of prevention and protection measures and for the identification of potential risks specifically related to the execution of the contract. In particular, the client is charged with all preliminary checks on the reliability of the contracting undertaking and its compliance with obligations for workplace safety. In the construction sector and in temporary or mobile construction sites additional and specific requirements are set for the client and the contractors. Specially in case of service contracts, the protection of workers depends also on the legal requirements discerning “real” contracts from unlawful cases of labour supply. Although recent reforms have made the notion of “lawful” contract more flexible not to hamper contracts for labour intensive companies, the hiring out of workers is still generally forbidden as illegal form of labour supply, and punished with the transfer of the entitlement of the employment relationship to the final user and with criminal sanctions for both employers involved. In 2003 the equal treatment rule between contractor’s and client’s employees for contracts to be performed within the client’s undertaking (so called “internal contract”) was repealed. The rule survived (in a tamed form) only for the protection of temporary agency workers and for workers posted within a transnational contract frame; however,

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in this second case it is disputed whether the reforms of the general rule on subcontracting have left room for its implementation. The absence of legal mechanisms designed to extend the application of collective bargaining in the Italian legal order determined the creation of the main measure available for workers’ protection in public procurement1

. The obligation to apply sector and local collective agreements is in fact a general condition necessary to be awarded public contracts, as much as the fulfilment of contributions duties certified by a specific document issued by social security agencies (Single Insurance Contribution Pay Certificate; Italian acronym: DURC)

In the private sector, the DURC is mandatory to perform construction contracts under a building permit. Its issuing lies with the Local Construction Fund (Cassa edile), where all construction undertakings must be registered2

. This fact is important for workers protection, as in practice it means that all the employers in construction sector must abide to collective agreements, since the Fund is created and regulated by collective bargaining.

Besides the protection given by the law, the main sector collective agreements (Ccnl) contain clauses aimed at improving the protection for contract workers, often by imposing the client to require the contractor to apply the same CCNL. Some collective agreements (in sectors particularly subject to outsourcing, such as cleaning services or transport) contain an obligation in case of change of the contractor for the new contractor to hire the workers employed by his predecessor (so called “re-engagement clause”). Also the 1999 law concerning ground handling services at airports provided for the reinstatement duty in the event of change of the contractor. This provision has been the cause of the decision of the European Court of Justice to condemn Italy for violation of internal market rules. Similar social clauses are still alive in other national or regional laws. Each one of these workers’ protection measures will be analysed in the following pages. A2:: Historical background The current rules on joint and several liability was adopted in 2003, as part of the broadest reform of the labour market of the Italian history, made by the centre-right government of the time (so-called “Biagi” Reform: Law 30/03 implemented with the

1 In the Italian legal order the collective agreement is not universally applicable: it binds only organizations signing it and their members, on the basis of the general rules of the civil law on contracts. The Constitution (Article 39) provides for a method that make collective agreements universally applicable but the legislation implementing this method has never been approved. This makes constitutionally unlawful a law binding employers to apply collective agreements in another way

2 In construction sector with regard to blue-collar workers, holidays are paid by special funds (Casse edili) provided for in the sector collective agreement (with regard to white-collars, holidays are directly paid by the employer). The funds are financed by employers and (in lesser extent) by workers. They can provide as well for further different kind of benefits: additional health insurance, medical services, age and professional allowances, supplementary month pay, income allowance and others.

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D.lgs.276/03). It responds to a logic (behind the whole reform) to reduce constraints to business from the traditional labour legislation, no longer considered suitable for the characteristics of the modern production system

.

The reasons at the origin of the reform of the law on contracts (and, more generally, outsourcing) are described in the Government’s White Paper on the Labour Market, published in October 2001 (http://www.lavoro.gov.it/NR/rdonlyres/376B2AF8-45BF-40C7-BBF0-F9032F1459D0/0/librobianco.pdf), which stated that "with respect to outsourcing of workforce, the government deems it necessary initiate a process of comprehensive reform of the matter, so that instances of employment protection, which must be maintained with respect to parasitic forms of speculation on the supply of labour, do not affect the modernization of the labour market" (in the same terms also the Government Report accompanying the decree implementing the Biagi reform, http://www.civile.it/news/visual.php?num=26383). For this reason the law of 1960 (Law 1369/60) was repealed. This law contained a general prohibition of hiring out of workers based on presumptions of law (prohibition of “interposition in labour relationships”) and, in the case of so-called internal contract, it considered client and contractor jointly and severally liable for the application to employees of the latter of the same pay and conditions enjoyed by employees of the first (equal treatment principle). The rule was explained by the need to prevent dumping, a problem compounded by the fact that Italian collective agreements do not have erga omnes effect and therefore they could not be applied by the contractor and

subcontractors.

With the 2003 reform, the prohibition of supplying of labour has become less restrictive, particularly for service contracts. The principle of equal treatment, repealed in case of contracts, has been maintained to protect workers employed by temporary work agencies, the activity of which was facilitated by overcoming the restrictions laid down by Law 196/97, which had for the first legalized it into the Italian system. The Biagi reform wanted therefore to reduce the “substantial” protecting workers’ measures, while expanding the “procedural” ones: hence the extension of the rule of joint and several liability for wages and contributions in all cases of contracts of “services”. With the next 2004 reform this rule was then extended also to contracts of "works", yet admitting the possibility that collective agreements could change the liability rule (even lowering the protection). In 2006, the following centre-left government, while confirming the basic approach of the 2003 legislator, has further strengthened the regime by extending joint and several liability to the entire chain of subcontracting, prolonging from one to two years the time limit to act against the debtor and eliminating the possibility of derogation by collective agreements. The same government (with the so-called Decree "Bersani", from the name of the competent Minister) introduced the chain liability rule even for tax burdens and a series of obligations for the principal contractor to control the fulfilment by the subcontractors, which allowed the first to suspend payment of the work and that authorized to exclude her/his joint and several liability. These provisions (never been in force), however, were repealed by the subsequent new centre-right government, because of their (supposed) excessive complexity and problematic coordination with the rules set by the former D.lgs. 276/03.

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The 2003 reform was expressly inspired to the "European Employment Strategy" (quoted in Article 1, D.lgs.276/03 on principles), as well as the White Paper on the Labour Market of 2001 that preceded the reform. With regard to the provisions about contracts, however, it does not seem possible to find a direct basis in the European law sources, neither hard nor soft ones. Something different has to be said about health and safety rules within contracts, contained in D.lgs.81/08, a kind of consolidated act in which is collected the previous legislation (but not all), mostly as transposition of EC Directives (including, in addition to the 1989 framework Directive, Directive 92/57/EC). The transposition regulation, however, contains more stringent rules for undertakings compared to those provided by the directives, such as those relating to joint and several liability for injury or damage and to the documentation that the client must request to contractors and to subcontractors. The health and safety rules in contracts (and in general the whole H&S regulation) have been reformed several times in recent years. The Legislative Decree 626/94 (transposition of the Framework Directive) contained a specific discipline in case of contract, which had provided for the responsibility of the client for health and safety obligations, that until then had been imposed only on contractors. The law of '94 was reformed four times, from 2006 to 2009 (Law 296/06; Law 123/07; D.lgs.81/08; D.lgs.106/09); these reforms gave rise to the current framework. The D.lgs.81/08, by implementing the Law 123/07 (and mostly confirming what was already stated in the same law and by the previous 2006 reform) has extended the scope of the health and safety obligations, it has strengthened the joint and several liability rule, applying it also to injury damages, and it gave the client verification duties concerning the technical-professional qualification of contractors and information duties both on the specific risks associated with the activity played and on prevention measures to be taken. Obligations to cooperate for the implementation of preventive measures were strengthened regarding all undertakings involved in the chain of subcontracting; while already with the 1994 reform, the (not delegable) task to prepare a single document of assessment concerning risks of interference related to the contract (so called DUVRI) had been given to the client. In general (not just for contracts) sanctions, both criminal and administrative (eg. the exclusion from public procurements or the suspension of business) have been tightened. The D.lgs.81/08 was approved by the resigning centre-left government, just few days before the election won by centre-right coalition, in a context of growing public alarm for the frequent reports of fatal accidents at work. In particular, two episodes in the period before the reform were the subject of media attention and political debate: the death by asphyxiation of five workers in a tank in Molfetta (Puglia) and of seven employees for a fire at the plant of ThyssenKrupp, in Turin. The rapid approval of the decree has been strongly requested by the Unions, who for years have denounced the problem of high rate of workplace accidents, often fatal (between three and four deaths at work per day), while employers’ organizations (which have, however, contributed to the adoption of the decree) criticized particularly the tightening of sanctions, considered unreasonable. In a rather different perspective, the (few) changes to D.lgs.81/08 made by the next D.lgs. 106/09 (also implementing the Law 123/07) was approved by the centre-right government, more syntonic with the demands of employers. The most important innovation in matter of contracting has led to an easing of the burden of the employers

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involved, thanks to the restriction of the scope of the obligation to draft the DUVRI (in the case of “minor” contracts) that under the previous legislation did not admit exceptions. In general, the legislator occurred on the penalty system, reducing some penalties and restricting them to more serious offenses. The need to ensure transparency in public procurements is particularly felt in political and public debate, not only for the high rates of not declared work that characterize the Italian labour market, but also because of the phenomena of infiltration of organized crime, unfortunately widespread specially in the construction sector. For this reason, many measures introduced by the 2006 Code on public contracts for the protection of workers are more stringent than those laid down by Directives 2004/18/EC and 2004/17/EC, which the Code transposed in the Italian legal order. A typical instrument of protection for workers in public contracts is the “social clause”, that affects the award of any contract to the observance of collective agreements. This is a general rule by the Workers' Statute (Statuto dei lavoratori) of 1970, which implemented what was already stated in many previous sector regulations. The 2006 Code has further strengthened its application. The mechanism of the social clause has a fundamental importance in the Italian labour market, because it allows to extend (indirectly) the application of the collective agreement to all undertakings wishing to have relations with the Public Administrations. Social clauses are applicable even beyond the matter of contracts, because they are established by all the laws that provide for the granting of benefits or advantages for undertakings, and it is also for this reason that the majority of Italian employers apply collective agreements not universally binding. The rules on social clauses were not introduced in the Italian legal order on the basis of ILO Convention n.94; but the Convention is often recalled within the academic debate in order to confirm the full legitimacy of the social clauses provided by law, specially after Rüffert judgement made their justification debatable (Giugni, 2010). In the absence of collective agreements universally binding, an employer is free both not to apply any collective agreement and to choose the cheapest among the collective agreements in force. There are also “pirate” agreements, signed by organizations with low or no representativeness that, however, are fully valid and enforceable. The subcontracting chains then become a tool to reduce labour costs, by outsourcing the business to undertakings or (specially in the context of labour-intensive services) to cooperative companies non-members of the most representative employers organizations, which determines phenomena of dumping internal to national market. This problem is at the centre of the political debate and confrontation between the social partners in the areas most vulnerable to outsourcing (transport and services in the first place), as exemplified by the recent (14 May 2011) “common statement” adopted by the Inter-associations table of Services Enterprises (TAIIS)3

3 The TAISS was created in 2003 and it is composed by 13 employers’ association of the services sector representing 18.000 undertakings, which employ more than 870.000 workers.

and by the most representative trade unions. It states that organizations participating in the table should contrast "the use of collective agreements signed by organizations with minimal or no representativity, with the sole aim of justifying offers too low, in fact economically unsustainable for undertakings that operate with criteria of contractual, contribution and fiscal regularity"

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(http://www.taiis.it/?action=ultimi_aggiornamenti&id=159). This structural feature of the Italian bargaining system explains why the Code on public contracts have been included provisions aimed at countering competition played on labour costs and to impose the application of collective agreements signed by the most representative organizations. For the same reason social clauses seeking to ensure the application of the same collective agreement by the contractors and subcontractors are often included in the sector collective agreements signed by the most representative organizations. Constitutional constraints imposed by Article 39 of the Constitution do not allow to incorporate similar provisions in a law, to regulate private contracts. But such is the importance of the problem of “internal” dumping caused by the subcontracting chains to induce the legislator to force the same constitutional limitations. Evidence of this is the "micro" reforms by which, at the end of 2007, the centre-left government (acknowledging a common statement of the social partners) has imposed to cooperatives the respect of the economic part of the sector collective agreement signed by the most representative organizations. This reform significantly affects the regulation of subcontracting chains, since the service cooperatives operate exclusively as a contractor and subcontractor. B1: The rules 1. General rules The general rules providing for protection of workers within contract and subcontracting are laid down by Article 29 of the Legislative Decree (D.lgs.) 10 September 2003, n.276 “Enabling Act on employment and labour market granted by Law 14 February 2003, n.30” (G.U. 10 October 2003, n.235) The rule on joint and several liability is established in paragraph 2, as amended by Article 6 D.lgs. 6 April 2004, n.251 “Corrective provisions on employment and labour market” (G.U. 11 December 2004, n.239) and by Article 1, comma 911, Law 27 December 2006, n.296 “Provisions on annual and multi-year State budget” (G.U. 27 December 2006, n. 299 s.o. n.144/L). It states that: ‘in the case of the contracting of works or services, the client, businessperson or employer, is jointly and severally obliged, together with the (principal) contractor and with each and every subcontractor, to pay the wages and social security contributions of the workers within two years from the date of termination of the contract.’

A similar rule was previously established by Article 1676 of the Civil Code (adopted by King Decree, 13 March 1942, n.262 (G.U. 4 April 1942, n.79 e 79 bis), that provides the workers of the contractor for action in court against the client, in order to be paid within the limit of the credit of the latter towards the first. A special regulation on joint and several liability for wage tax obligations is provided by Article 35, paragraph 28 Law Decree (D.L.) 4 July 2006, n.223, “Urgent provisions for the economic and social revitalization, for the control and rationalization of public spending, and interventions on public income and on contrast of tax evasion” (G.U. 4 July 2006, n.153), converted into Law 4 August 2006, n.248 (G.U. 11 August 2006, n.186, s.o. n.183/L).

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The norms on health and safety are consolidated by the D.lgs. 9 aprile 2008, n.81 “Implementation of Article 1 of the law 3 August 2007, n.123 in matter of health and safety at work” (G.U. 30 April 2008, n.108). Article 26 provides for a general rules establishing obligations related with the execution of contracts and subcontracts; provisions of Title IV, section I (Articles 88-104) establish health and safety requirements at temporary or mobile construction site. Article 26 has been reformed by Article 16, D.lgs. 3 agosto 2009, n.106 “Supplementary and corrective provisions of d.lgs. 9 April 2008, n.81 in matter of health and safety at work” (G.U. 5 August 2009, n.180). Special provisions of D.lgs. 12 aprile 2006, n.163, “Code on public works, supply and service contracts implementing Directive 2004/17/EC and Directive 2004/18/EC” (G.U. 2 May 2006, n.100) apply to workers employed within public contracts. The Code was reformed several times, at last by D.L. 13 May 2011, n. 70, “European Semester- First urgent provisions for the economy”, the so called “decreto sviluppo” (“Decree for the growth”) converted into Law 12 July 2011, n.106 (G.U.12 July 2011, n.160). Article 118 of the Code provides for rules on employment conditions in case of subcontracting, imposing the application of sector and local collective agreements by the contractors and by any sub-contractors. A similar general principle is stated also by Article 36, Law 20 May 1970, n. 300, “Norms on protection of freedom and dignity of workers, trade union freedom and activity at work” (c.d. Statuto dei lavoratori) (G.U. 27 May 1970, n.131). The Code on public contract has been implemented by the Decree of the President of the Republic (D.P.R.) 5 October 2010, n.207 “Regulation on the execution and implementation of the d.lgs. 12 April 2006, n.163” (G.U. 10 December 2010, n.288); Title II (Articles 4-6) of the Regulation is dedicated to “Protection of workers and contribution payment”. The monitoring on compliance with contribution obligations by the contractor and by the sub-contractors is carried out by means of the Single Insurance Contribution Pay Certificate (DURC), mandatory in any case of public contracts (D.L. 25 September 2002, n. 210, “Urgent provision in matter of regularization of undeclared work and part time work”, converted into Law 22 November 2002, n.266 (G.U. 23 November 2002, n.275) and Article 1 Ministry Decree (D.M.) 24 October 2007 (G.U. 30.11. 2007, n.279); at last see also Article 6 D.P.R. 207/10) and, in the construction sector, also in case of private contracts (Article 90, paragraph 9, D.lgs.81/08). Several circulars and interpretative notes (“interpelli”4) was adopted by the Ministry of Labour in matter of protection of workers within contracts. The most important (and recent) is the circular 10 February 2011, n.5 “Legal framework of the contracts” (http://www.lavoro.gov.it/Lavoro/Notizie/20110211_Circolare_5_11022011.htm), in which a summing up of the rules on the matter, at light of case law, is made and solutions are proposed to some of the main interpretative issues. 4 The DG Inspective Activities of the Minister of Labour has the duty to reply with formal public notes to questions made by the social partners or by professional organizations (“Diritto di interpello” ex Article 9 of the Legislative Decree 23 April 2004, n.124 “Rationalization of the inspective functions on social security and labour’s matter, implementing Article 8 of the law 14 February 2003, n.30” (G.U. 12.5.2004, n.110). Like the circulars, this notes have not the value of sources of law (they are not legally binding), but they testify the official interpretation of the law by the Minister and they must be taken into account by the labour inspectors. They are all available on the website of the Minister of Labour:

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In paragraph B.3(11.1) sector collective agreements are quoted containing social clauses for the protection of workers’ conditions in subcontracting, specially in case of succession of subcontractors. The sector collective agreements are not officially published, because in the Italian legal order they are private acts without public relevance. They are available on the website of the CNEL (Economic and Labour National Committee) (http://portalecnel.it/Portale/homepagesezioniweb.nsf//vwhp/ ArchivioContratti?Opendocument). In paragraph B.3.3(1) are recalled the main CSR initiatives addressing the topic of workers’ protection in subcontracting chain. Further relevant sources, related with specific aspects of the subcontracting regulation, will be quoted within the paragraphs dedicated to their analysis. 2. Rules for subcontracting in cross-border situations Measures for the protection of workers posted within transnational contracts are provided by the D.lgs. 25 February 2000, n.72 “Implementation of directive 96/71/EC on posting of workers within the framework of a provision of services” (G.U. 30 March 2000, n.75), that establishes both the rules laid down by Italian law and collective agreements to be applied to posted workers (Article 3 paragraph 1) and a special rule on joint and several liability between the “Italian” recipient and the “foreign” provider (Article 3, paragraphs 3 and 4). The same provisions regulating national situations apply to workers posted by an Agency established in another Member State (Article 4). In order to clarify and interpret the ambiguous provisions of D.lgs.72/00 the Ministry of Labour- DG Inspective Activity recently adopted a note (interpello 12 October 2010 n.33/2010, http://www.lavoro.gov.t/Lavoro/Strumenti/interpello). The Minister in November 2010 also promoted the drafting of a «Vademecum for labour inspectors and for undertakings. The posting of workers within the European Union» (http://www.lavoro.gov.it/NR/rdonlyres/94673012-D332-4D64-BDB7-C809650E529A/0/Vademecumdistaccocomunitario.pdf)5

. The Vademecum suggests the correct interpretation of D.lgs.72/00 and it gives practical directions for the execution of the inspective activity on undertaking of other Member States.

B2: The objectives The objective pursued by the legislator through the introduction of the chain liability is twofold: on one hand to protect the workers’ claims (fighting non-payment and abuse of workers), on the other to adjust the decentralization of production. The employer should in fact be induced to outsource only for organizational purposes and not for the mere purpose of reducing labour costs.

5 The Vademecum is the result of a project financed by the EU and by the private Institute “G. Tagliacarne”, with the partnership of the Italian Ministry of Labour- DG Labour Market and DG Inspective Activities and of the Rumenian National Inspectorate of Labour (Inspectia Muncii).

The client and the principal contractor, on the basis of a cost-benefit evaluation, should use the contract only if necessary and after having proceeded to perform a check on consistency, reliability and economic organization of the contractor and its subcontractors (Speziale, 2006; Corazza, 2004).

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Given the spread of the phenomenon in the Italian labour market, these rules have also the (minimum) aim to contrast with non-regular employment.

The aim of the joint and several liability for contributions is to contrast the non payment to social security institutions, facilitating the recovery of contributions by them, both to protect their financial stability and, indirectly, to guarantee the social security rights of workers.

Also the regulation about documentation requirements imposed on contractors and subcontractors, especially those relating to DURC, answers to the aim to contrast contribution evasion. This legislation facilitates also the practical activity of labour inspectors on site.

The extension of joint and several liability for injury damages pursues the further objective of inducing the client to strengthen controls on the compliance of health and safety obligations through the whole chain of subcontracting (Izzi, 2008). Through the provision of other safety requirements, the legislator intends to identify and define more clearly the outlines of responsibilities of each person involved in the subcontracting chain and encourage the client to choice enterprises technically and socially more reliable (Lai, 2011).

In general, all the provisions that provide specific security obligations under the contracts also pursue the public interest to health protection (a fundamental right declared in Article 32 of the Italian Constitution).

Fighting bogus and fraudolent subcontracting is of course the objective of the rule on the distinction between contract and (illegal) supply of labour. This rule implements the general principle that the interposition in labour relations is prohibited, which is considered by scholars to be still present in the Italian system, although set in a less rigid way than in the past by the recent reforms (Del Punta, 2008). In imposing identity between the formal employer and substantial employer, its main aim is to ensure transparency in employment relations (De Simone, 1995) and to reduce the fragmentation of centres of liability for employers’ obligations in the same workplace, with benefits also for the fair development of industrial relations.

The constraints on the subcontracting in public contracts are due both to reasons of protection of safety and of contrast with non regular employment and, above all, to reasons of public order, which could be understood only by taking into account the historical and politic Italian context. The discipline has its origin in the need to prevent that, by subcontracting, behind the clean facade of the contractor, controlled or colluded with organized crime undertakings were hidden, crime who bases part of his power just on the ability to infiltrate the public procurement system.

The goal pursued with the rules requiring compliance with collective agreements in public contracts is to prevent that competition between the tendering for public contracts is based on lower labour cost (Ghera, 2001). These rules therefore also pursue an aim of public interest. As expressly recognized by the Constitutional Court (Corte Cost. 19 June 1998, n. 226, G.U. 24 June 1998, n.25, serie speciale), the social clause in tenders satisfies the principle of “best implementation of the public interest, according to the principles of competition between undertakings and equal treatment of competitors....; even the costs for the economic activity, arising from the obligation of ‘fair treatment’, contribute to the better identification of suitable tenderer”. For this reason, the rules

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provide that clause may be considered compatible with the protection of economic freedom recognized by Article 41 of the Constitution Through the social clause the legislator also pursues the objective of supporting collective bargaining (Mancini, 1972), promoting employers’ good practices. In an industrial system in which collective agreements are not generally applicable, it represents the main instrument of indirect extension of collective agreements.

With the social clauses provided by collective agreements social partners intend to obtain further protection for workers. These clauses, in fact, may provide both an obligation to apply the sector collective agreement signed by the most representative organizations (thus precluding the contractor the possibility of choosing the applicable agreement), and the duty for the contractor to hire the workers employed by the previous contractor. In this case, the objective aimed is to ensure stability and continuity of employment for workers employed by undertakings (or more often service cooperatives) operating primarily if not exclusively as contractors; in these contexts, the termination of the contract can in fact be a valid reason of dismissal for economic reasons.

The original aim of the special rules in the event of transnational contract was both to fight the non payment by the posted workers’ employer, and to strongly contrast social dumping, specially that one based on the non compliance with the standard laid down by collective agreements. The (possible) contrast of the Italian law on posting with directive 96/71/EC could induce to re-interpret its original sense in a way conform with the latter (see par. B3(3) and Core Report); obviously this would change its aim. B3: The instruments and provisions 1. Notions and definitions: client, contractor and sub contractor in the Italian legal order According to the definition of the Civil Code, the contract (in Italian “appalto”) “is an agreement by which one party assumes, with organization of the necessary means and with management at its own risk, the performance of a work or service for remuneration" (Article 1655). Subject of the contract is therefore a so-called “to do” obligation, which allows to distinguish it from the supply of labour which relates to a so-called obligation "to give", that consists in providing a user one or more workers (Ministry of Labour, circular n.5/2011). This fundamental distinction is further clarified in Article 29, paragraph 1, D.lgs.276/03, that provide for a definition of contract only for labour law purposes, necessary to distinguish the “genuine” contract from the illegal supply of labour (unauthorized, and so illegal). The rule confirms that the characteristic of the contract is the "organization of the means", but states that this "may well be, in relation to the kind of work or service executed, the exercise of organizational and directive power toward workers executing the contract

".

As a consequence, if the contract of services does not involve the usage of a significant “hard means” of the undertaking (for instance in case of labour-intensive activities or in case of computer services), the contract is legitimate even if the contractor manages only the employment relationships of the workers involved within the contract. Lacking these conditions, the provision of workers is considered an unlawful form of labour supply and as such it is punished: the worker can require a founding of an employment relationship with the user (client or contractor, in case of subcontracting), who, like the

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(pseudo) contractor, pays the penalty provided by the law (ex Article 18, paragraph 1-bis and Article 28, D.lgs.276/03 ) (see infra par. B3.2(3)). Subcontract is not defined by the legislator, but it is only mentioned in the Civil Code (Article 1656), which conditions the legitimacy of subcontracting to an authorization given by the client. For the rest, the subcontract is nothing more than a contract drew up between the principal contractor and the sub contractor, and to which the same rules of the contract between the client and the contractor apply.

In the case of public procurement, the Code on public contracts defines subcontract as "any agreement relating to activities carried out anywhere that requires the use of workforce" which has a significant impact on the overall cost of the work (Article 118, paragraph 11, D.lgs.163/03). In this case the definition is necessary to apply the specific public procurement rules, which make its legitimacy under conditions not provided in the event of private subcontracts.

In light of these rules one may say that, just for labour law purposes, Italian system does not recognize the distinction between "client", "contractor" and "subcontractors". The relationship between principal contractor and subcontractor is not regulated differently from that one between client and contractor: they all are parts of a contract. What matters is instead the subject raised in the contract, that is the type of activity performed by the contractor (or subcontractor), in order to distinguish the genuine contract (or subcontract) from the illegal and fraudulent one (pseudo contract).

The contract must be distinguished from the agreement under which a worker (self-employed) is committed to perform an activity "mainly with his own work" (Article 2222 of the Civil Code). The employer can use his own employees but, unlike in case of contracts, their activities and the organization necessary to accomplish the work or service must not outweigh the self-employed’s personal activity.

The agreement named “appalto” must also be distinguished from other agreements that may also give rise to chains or forms of horizontal integration between different undertakings. Article 29, D.lgs.276/03, (like the other protection measures for subcontracting chains) only applies to the contract described as "appalto" in the Italian legal order. All the other contractual relations between undertakings carried out through various types of agreements remain outside the scope of the rule, such as sub-supply (“sub-fornitura”, regulated by Law 18 June 1998, n.192), network contracts (“contratto di rete”, regulated by Law 9 April 2009, n. 33), franchising, merchandising, consortium of companies. In what follows, therefore, the terms client, contract, and subcontract refer only to holders of the contract described as “appalto” in Italian (but see the recent case law on joint liability in the Core report C, part I, par.1.2).

With regard to the notion of worker and employer is necessary to undertake a diversified analysis according to different applicable rules analyzed (distinguishing in particular those on joint and several liability, from the ones in health and safety matter). The same goes for other profiles that characterize each workers protection measure.

2. Joint and several liability for wages Pursuant to Article 29, paragraph 2, D.Lgs. No. 276/2003, the client or contractor is jointly liable for payment of wages with regard to the employees of the principal contractor and any subcontractor(s) involved in the supply of work or services which are the purpose of the contract.

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Joint and several liability is defined in Article 1292 of the Civil Code: ‘An obligation is considered joint and several when each of a number of debtors involved in a single operation can be forced to comply on behalf of all the others and the compliance by one of the debtors frees the others from their obligation; or when each of a number of creditors has the right to request full compliance with an obligation and the compliance of one of the debtors frees all the debtors vis-à-vis all the creditors.’ 2.1. Personal scope: liable persons and protected workers The rule of joint and several liability applies to any case of contracts as previously defined and also when contract follows a transfer of an undertaking (Article 2112, paragraph 6, Civil Code) The joint and several liability does not apply, however, if the client (or one of the intermediary contractors) “is an individual who does not exercise professional or business activities” (Article 29, paragraph 3-ter). This rule should be read in the light of the preceding paragraph 2, which refers joint and several liability to “businessperson or employer”. This means that even the employer that is not an “businessperson” (“imprenditore”) under Article 2082 of the Civil Code6

is jointly and severally liable (provided, of course, of a “organization of the means” within the meaning of Article 29, paragraph 1): eg. a service cooperative, a political party, a trade union, a religious body, a lawyer that holds a law firm or a doctor holding a private practice. But a citizen who commissions a work for private purposes (such as a private citizen who drew up a contract for home renovation) is not jointly and severally liable.

All employers involved in the subcontracting chain (from client to subsequent contractors) are responsible for the wages claims of workers executing the contracts. The client is responsible for claims by employees of the principal contractor and of each subcontractor; the principal contractor and each subcontractor are responsible toward workers employed by subsequent subcontractors. Article 29 paragraph 2 does not clarify whether the joint and several liability is related only to the claims of workers performing the contract or to all employees of employers involved in the chain of subcontracting. But the prevailing view of doctrine (De Luca-Tamajo- Paternò, 2007; Carinci, 2010) tends to consider valid (and reasonable) the first option.

The notion of worker should be interpreted broadly. It includes not only employees (whatever is the type of contract with which they have been hired), but also the self-employed workers eventually executing the contract. This was recognized by the Ministry of Labour in the circular n.5/2011: “worker” has be considered every "person employed in the contract with different contractual types (eg. Semi-dependent workers and who works as associate)”. It seems that self-employed workers who are not in a position of economic dependence and contractual weakness (so-called para-subordinati) so that they could be considered substantially equivalent to dependent workers (subordinati), has to be excluded from the notion of “worker”. This latter anyway includes – for sure – the illegal and undeclared workers.

6 Article 2082 of the Civil Code defines as “imprenditore” (entrepreneur) “who exercises a professional activity with the purpose of the production and provision of goods or services”

The rule of joint and several liability does not apply if the contract is illegal, because in

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this case the employment relationship is attributed to a single employer (the actual user of the worker) with the exclusion of any liability of the (pseudo) contractor.

2.2. Objective scope: the “due wages” All workers involved in the chain of subcontracting may act against the client or any contractor within two years from the termination of the contract to receive the “due wages”. Even this notion has to be interpreted in the broadest sense: it is part of it any amount owed to the worker provided by the legislation (such as severance pay), by a collective agreement or an individual contract. It is unclear whether it includes compensation in case of unfair dismissal; case law seems oriented in this direction

(Tribunale Bologna 19 March 2007 in www.cgil.it/GIURIDICO/Giurisprudenza).

With the 2003 reform the contractor workers’ right to receive the same rates of paid of the comparable employees of the client has failed. As in the Italian system collective agreement has no erga omnes effect, this reform made possible not to include within due wages treatment all the element of the remuneration provided by the sector collective agreement (this hypothesis, before 2003, was configurable only when neither the client nor the contractor had applied the collective agreement). Anyway, even in case the contractor or the subcontractor does not apply the collective agreement, the part of the sector collective agreement that, according to the case law, identifies the minimum wage as a fundamental right guaranteed by article 36 of the Constitution7, will still be applied to every worker employed within the chain.

The Courts are not unanimous regarding the elements of the payment to be taken into consideration for calculating minimum wage: in some cases judges use only the “basic” pay (minimo tabellare), but in most cases also the age allowance and Christmas salary are included in the minimum wage “constitutionally” binding, considering that this part of the remuneration is generally provided by all sector collective agreements.

Frequently, however, the sector collective agreements include minimum wages social clauses for the benefit of workers executing contracts. Usually the minimum wage is identified with the one provided by the collective agreement of the sector of the client or contractor (or subcontractor). In the presence of a social clause legally binding (see below par.B.3(11.1), workers have the right to receive the economic treatments calculated according to the parameters specified by this clause, regardless of the collective agreement applied (or not applied) by their employer.

The reform of 2006 has repealed the clause contained in the first version of article 29 paragraph 2 that allowed collective agreements to change the rule of joint liability, even worsening it. It follows that, under current legislation, collective agreements may provide additional protection with respect to the law (as in case social clauses are provided), but in no way diminish the guarantees set out in it (for example by placing quantitative limits to the liability of the client or the contractor).

7 The clauses on minimum wage are the only part of a sector collective agreement that “in fact” bind all undertakings in Italy, thanks to the case law on Article 36 of Italian Constitution which recognises the fundamental right of workers to receive a pay “sufficient to ensure them a decent life”. Due to the lack of a Law on minimum wage, this right is guaranteed by the Courts, taking the minimum rates of pay fixed by the sector collective agreements as binding for every employer of the sector

If neither the debtor employer nor the guarantor are able to fulfil the obligations of pay, the employee may request the intervention of the Guarantee Fund of INPS established

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by Law 29 May 1982, n. 297 (G.U. 31 May 1982, n.147). The Fund, that originally guaranteed only the severance pay, takes care of the unpaid remuneration of the last three months, within the maximum limit provided by law, in addition to the unpaid contributions (D. Lgs. 27 January 1992, n. 80 "Implementation of Directive 80/987/EEC concerning the protection of employees in the event of insolvency of the employer" (G.U. 13 February 1992, n.36)). 3. Special rules in case of transnational contracts D.lgs.72/00 implementing Directive 97/71/CE provides for special rules on joint liability in case of transnational contracts executed inside the receiver’s undertaking (so called “internal contract”). Following the majority opinion, the contract is intended to be carried out “inside” the contracting undertaking in a “functional” and not merely “topological” sense; that is when there is a precise integration between the production cycle of the undertakings, and not only when the workers of the two employers have to perform their work coordinating each other in the same establishment (on the concept of “internal contract” see Cass. S.U. 20 January 1996, n.446 in Rivista italiana di diritto del lavoro, 1996, II, 705 ff.) The client/recipient of the service is jointly liable with the contractor/provider to guarantee to posted workers the same treatment regarding terms and conditions of employment as «comparable» workers employed by her/him (Article 3, paragraph 3). Posted workers can act against her/him within one year after the end of posting in defence of their rights (Article 3, paragraph 4). This norm is understandable considering the law in force when D.lgs.72/00 was adopted (Law 23 October 1960, n.1369) that imposed, as a general rule, the principle of equal treatment in case of “internal” contract. For this reason the same rule was stated in the event of transnational provision of services by D.lgs. 72/00. Law 1369/60 was abrogated in 2003 (by the D.lgs. n.276/03), but the rule on transnational posting stated by D.lgs. 72/00 remained, and it still remains, in force. This provision arises several interpretative problems, not solved by the judges because no case law exists on this matter (Orlandini, 2008 and 2011). The main problem is about the relation between the special rule laid down by D.lgs.72/00 and the general rules established by Article 29, paragraph 2 D.lgs.276/03. The Ministry of Labour (even if not facing directly with this question), has recently affirmed that both provisions are applicable in case of transnational contracts (interpello 12 October 2010, n.33/2010). This solution does not anyway solve all the problems related with the application of these rules. The general rule fixed by Article 3, paragraph 1, Dlgs.72/00 is even more problematic and questionable, establishing that in any case of transnational contract the provider shall apply to posted workers the terms and conditions of employment, “laid down by law, regulation or administrative provisions and by collective agreement signed by the trade unions and employers associations which are comparatively more representative at national level”, applicable to “national” workers that carry out “similar” work in the same place where foreign workers are posted. The letter of this provision is clearly not consistent with Posting of Workers Directive and for this reason a conform interpretation of it has been suggested by scholars and, at last, by the Ministry of Labour. On these complex and still unsolved questions, a deeper analysis will be done in the Core Report. 4. Direct action (Article 1676 of the Civil Code)

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In addition to Article 29, paragraph 2, D.lgs.276/03 in the Italian system another rule to protect workers' wage credit of employees executing a contract exists. Article 1676 of the Civil Code establishes that “those who, employed by the contractor, have given their activity to perform work or provide the service may take direct action against the client to achieve what is owed to them, until to the amount of debt that the client owes to the contractor at the moment when they take the action”.

Even this rule provides for a joint and several liability for labour credit between client and contractor (Rescigno, 1988). According to the majority opinion, it is still in force and has not been implicitly repealed by art. 29, paragraph 2, since the two cases do not coincide exactly (Carinci, 2010; Chieco, 2004).

Article 1676, in fact, does not provide a limitation period for legal action, so the worker can act within the normal deadlines for action against her/his employer (five years). The action could be accomplished in any case of contract, including those excluded by Article 29, paragraph 2 because of the legal nature of the client. But it is not valid for the workers who are not dependent employees, as the express reference to workers “employed by the contractor". A quantitative limit is also provided: a worker can act against the client only within the limits of the remaining debt the client has with the contractor when the action is proposed. Finally, most importantly for the purposes of this report, the liability does not extend to the entire chain of subcontracting, but only to the parties of a single contract (client and principal contractor, contractor and sub contractor so on). It is not clear how to configure the relationship between the two rules: some argue that they are contemporary applicable (Alvino, 2007; Carinci, 2010), so the employee would be free to act according to the discipline that, in this case, appears more convenient (this according to the different configuration that joint and several liability would have in two cases, in the light of the principles of the Civil Code: guarantee under Article 1936, in case of art. 29, paragraph 2, delegation of debt ex lege, in the case of Article 1676). According to the Ministry of Labour the norm would apply only outside of the scope of application of Article 29, paragraph 2: after two years deadline, the employee could act against the client (and only toward him) within the quantitative limits prescribed by the Civil Code (Circular 5/11; in literature Imberti, 2008

).

5. Joint and several liability for contribution Article 29 paragraph 2 extends the chain liability also to payment of “due contribution”. In this case the creditor is the Social Security Institute to whom contributions have to be paid (and not the worker as the law incorrectly states) and who can act against the client for contributions not paid by the contractor (and against both of them for contributions not paid by subcontactors), under the same rules established in case of obligations regarding wages. On the opinion of the Ministry of Labour (circular n.5/2011) the reference to “contribution” must be interpreted in a wide sense, including the kind of contributions that, under Italian Social Security law, are defined in a different way; as in the case of “premium” (premi) to be paid to INAIL, competent on injury insurance. The same Ministry (interpello 2 April 2010, n.3/10) has clarified that also amounts due for interest on contributions’ debt or for sanction of private nature are included within the scope of the chain liability rule. Amounts due to Social Security Institutes for other reason are excluded (e.g. additional debts or administrative sanctions). Some doubts remains on the applicability of joint and several liability for contribution to supplementary pension funds (but the scholars seem to be oriented in positive sense: Sgroi, 2008).

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Obviously the term of two years must be referred only to the action of the Institute against the guarantor, not to the action against the debtor employer, to which the ordinary five year term applies (in this sense Ministry of Labour, following the case law: Cass. 17 January 2002, n.1996). 6. Joint and several liability for withholding tax The joint and several liability is extended to tax obligations by Article 35, paragraph 28 D.L. 223/06 which states that

:

“the contractor is jointly and severally answerable together with the subcontractor for the retention and payment of withholding tax on income from dependent labour”.

This rule has survived the repeal of the other paragraphs of Article 35 which imposed specific obligations to the client and contractors, who were bound to verify subcontractors fiscal and contribution fulfilment. The joint and several liability for the tax obligations integrates the provisions of Article 29, paragraph 2, with some important differences. First, joint and several liability it’s just about taxes on “income from dependent labour”, so does not extend to the income of those workers self-employed protected by the joint and several liability in Article 29 paragraph 2. Secondly, the bond applies only to contractor and sub contractor, and does not extend to the entire chain of subcontracting. Especially is excluded the first link in the chain, the client; and for this reason, the norm is criticized in the literature (Carinci, 2010). The action is not subject to the limitation period of two years, but, in this case, there are normal time limit for the action in court

.

7. Joint and several liability in case of injury Pursuant to article 26 comma 4 D.lgs.81/08 the client (as any contractor) is also considered jointly and severally liable for injuries to the employees of the contractor or any subcontractor(s) not compensated by the National Insurance Institute for Industrial Accidents (INAIL) or by the Social Security Institute for Maritime (IPSEMA) (which guarantee special social security provisions). Even in this case the action is not subject to any limitation period but only to ordinary term (which for the damages claims is ten years), and it is limited to dependent employees (thus excluding self-employed workers). The rule applies only to employers who are businesspersons (“imprenditori” under Article 2082 of the Civil Code), and therefore it has a more limited scope than the liability for wage and social security claims (for a critic view, Chieco, 2007; Tullini, 2007): as a consequence Public administrations are not included. Joint and several liability for damages arises in respect of the conditions provided by law, to be ascertained on a case by case basis. First, the worker must have suffered health damages due to breach, by her/his employer, of provisions on health and safety. This means that the employer (principal contractor or subcontractor) has to be liable for intentional or negligent violation of the general safety obligation under Article 2087 of the Civil Code, or of the specific obligations contained in D.lgs.81/08 (Scarpelli, 2008). Other damages that the worker may have suffered in the execution of the contract are not included (eg. caused by employer's discriminatory behaviour). The client and the contractors are liable for any so-called “differential damages” (danni differenziali), i.e., those elements of damage not covered by the National Social Insurance for industrial accidents. This, in fact, compensates, on the basis of the tables

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set by the legislation, the so-called “economic damage” (danno partimoniale) for injury to earning capacity in excess of 16% (related to the worker's income) and the so-called “biological damage” (danno biologico) for injury to worker’s mental and physical health to a greater extent than 6% (without relation with worker’s income). The damage compensated by the INAIL, thus, does not correspond to the compensation the employee may obtain under the principles of civil law. The difference between the compensation paid by the National Institute and the “full” compensation possibly recognized in court is, in fact, the differential damage to which joint and several liability is applied. It covers not only the micro-lesions (below the compensation threshold), but all the different elements of damage that the case law leads to the notion of non-economic damage (see Cass. S.U. 11 November 2008, n.26972 in Massimario di Giurisprudenza del lavoro 2009, 49 ff.), as the existential, moral or biological “temporary” damage (Pasquarella, 2010). Article 26, paragraph 4, however, specifies that the joint and several liability does not apply to damages suffered by workers as a result of “specific risks”, related to the contractor’s or its subcontractors’ activity. This is a significant limit to the liability of the client (or subsequent contractors), which is not liable for damages caused to the employee in all cases in which, according to the type of activity covered by the contract, s/he is not objectively able to checks on compliance with safety standards because s/he lacks the technical expertise to do so (e.g. a contract for activities unrelated to the production cycle of the client) (Cass. Pen. Sez. IV 20 March 2008 n.12348, Diritto e Pratica del Lavoro 2008, 1057 ff.). The question of the applicability of this rule to contracts with foreign companies has never been placed in case law and has never been afforded in literature. For the writer's opinion, it should also apply to protect foreign posted workers, because it is referable to the matter of “health and safety” and it does not concern social security profiles (regulated by the home State law), but civil liability for damages from injury (to protect, in fact, the right to health of the worker). The “differential damages”, in this case, should be calculated taking into account the compensation paid by the social security system of the home State where the worker is registered and the damages to be compensated according to the principles of the Italian civil law, calculated by the courts. 8. Other safety requirements Article 26, D.lgs.81/08, also identifies a number of obligations, imposed on employers part of a contract or involved within a sub-contracting chain, that have the purpose of prevention of risks arising from intersection of two or more labour organizations. 8.1 Scope The client, as first link in the contracts chain, has specific obligations for preventing risks at work. The client in this case may even not be a businessperson, because law makes general reference to “employer”. This latter notion has a special meaning in the health and safety law, because it identifies not only the holder of the employment relationship, but any "person who, according to the type and stance of the organization in which the employee works, has the responsibility of the organization or unit of production, since s/he exercises decision-making and spending powers" (Article 2, paragraph 1(b), D.lgs. 81/08). According to this definition, in the same undertaking, possible multiple “employers” can coexist, each one responsible for compliance with safety standards,

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according to the logic of the multiplication of centres of charge that underlies the entire legislation on health and safety. Even the notion of worker is intended in a broad sense, to identify the beneficiary of the preventive rules: worker is any “person, regardless of the type of employment contract, who works within the organization of a public or private employer, with or without pay, even only to learn a job, art or profession, excluding domestic service and family workers” (Article 2, paragraph 1(a)). So, not only employees or self-employed are workers, but also who does volunteer work, members of cooperatives and mere trainees. The rules for contracts contained in Article 26 have a special scope (which does not apply to joint and several liability under Article 26 paragraph 4): these rules apply to contracts that are executed “within (the client’s) undertaking, or a single production unit of the same, as well as throughout the production cycle of the undertaking itself, provided always that (the employer) has the legal availability of places where the contract is carried out”. The functional profile of the contract has to be taken into account and the duties on health and safety are extended to all production processes necessary for the organization of the client (Lai, 2011). Contracts relating to activities totally unrelated to that one carried out by the client or held in places to which s/he has no right of access remain excluded. According to the opinion of the Ministry of Labour, the rule does not apply to activities merely preparatory and complementary to the object of the contract (circular 14 November 2007, n.24, http://www.lavoro.gov.it/Lavoro/SicurezzaLavoro/MS/Normativa/). Same obligations also apply in case of works contract signed with a self-employed worker (Article 2222, Civil Code), provided always that s/he carries out these activities using its own employees (i.e. he is an “employer” her/himself). Following part of the scholars, these obligations are also binding for employers bound by various agreements different from the contract (or from the work contract with a self-employed), which implement, however, forms of decentralization of production and which may involve a mixture of labour organizations, and organizational influences on the choices by the client on other undertakings in the chain (eg. franchising or merchandising) (Tullini, 2007; Scarpelli, 2008). Case law, however, has never addressed this matter. 8.2 Client’s and contractors’ obligations First of all, the client (and every contractor in the subcontracting chain) is held to check the “technical and professional qualifications” of the contractor. Pending the adoption of a ministerial decree on the subject (not yet adopted), this check is accomplished by acquiring the certificate of registration at the Chamber of Commerce (Camera di commercio) and the contractor’s self-certification about the requirements subsistence. Second, the client must inform the contractor about “specific risks” that exist in the workplace where the activity is carried out and about the preventive and emergency measures to be taken (Article 26, paragraph 1). All employers involved in the subcontracting chain must cooperate in the implementation of prevention and protection measures that have to be taken and coordinate their activities informing each other, also to eliminate or minimize the risks due to interference between the work of each undertaking (Article 26, paragraph 2). To this aim, the client, which should promote cooperation and coordination, is required to prepare the Single

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document of interferential risks assessment (DUVRI) which lists "accurately" (in this sense the Ministry of Labour, circular 5/2011) all measures taken to combat the risk of interference (Article 26 paragraph 3), to be adjusted in light of work evolution. Even in this case, client’s obligation does neither concern the “specific” contractors risks nor “minor” contracts (intellectual services, mere supply of materials or equipment or services, no longer than two days). The DUVRI has to be attached to the contract agreement (thus becoming an integral part of it) and a copy of it can be requested by the representative of employees for health and safety (so called RLS) of each undertaking involved in the contract (Article 50, paragraph 5). The contract agreement should also be entered with costs of preventive measures that have to be taken, these also open to the control by RLS and local bodies of trade unions more representative at national level. This requirement is functional to enable a control on the effective implementation of measures indicate in the DUVRI and its violation involves the nullity of the contract (ex Article 1418 of the Civil Code) (on this issue see Pasquarella, 2010). Contractor and subcontractor must then equip workers executing the contract with a special identification card, bearing a photograph, on which worker’s generality, the name of the employer (Article 26 paragraph 8), date of employment and, in case of subcontracting, the authorization (by the client) or date of its request (Article 5, Law 13 August 2010, n.136) result; the date may also coincide with the conclusion of the contract’s one (Ministry of Labour, circular 5/2011). The obligation also rests on the worker, that should be punished with administrative fine if he does not expose the card. Special security measures must be taken in case the contract is carried out in "areas suspected of pollution" and "confined spaces" (such as tanks, wells blacks, sewers, chimneys, ditches, tunnels) (Article 66). The high percentage of fatal accidents that occur in such contexts (according to data from the 2010 INAIL Annual Report, 790,000 incidents, of which 1050 fatalities in 2009), has prompted the Ministry of Labour to intervene to promote monitoring and controlling measures on contracts for cleaning and maintenance services in confined spaces and to strengthen the inspection activity, involving the competent public administrations and social partners (circular 9 December 2010, http://www.lavoro.gov.it/Lavoro/SicurezzaLavoro/MS/Normativa/ and 5/2011). All the rules on health and safety also apply to foreign undertakings that perform a contract in Italy. Some provisions may, however, give rise to specific problems related to their practical application, that are analyzed in the Core Report. 8.3. Security obligations in temporary and mobile construction sites Legislative decree n. 81/08 also identifies specific measures that have to be taken to protect workers’ health and safety in building sector and, in general, in temporary and mobile construction sites (implementing Directive 92/57/EEC). For the purposes of this report, the provisions laid down by Article 90 must be mainly considered, in particular those contained in paragraph 9, regarding the client’s or the project supervisor’s (identified by the same client) obligations of verification and control on contracting undertakings. Besides the obligation to establish technical and professional suitability of the latter (to be fulfilled in the manner provided for in Annex XVII to D.lgs.81/08), the client must ask the contractor the documents which show the average annual staff, distinguished by title, the fulfilment of contribution obligations towards the Social Security Institutes and the Local Construction Fund (certificated

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through the DURC issued by the same fund) and the application of the collective agreement signed by the most representative trade unions at national level. For the work of lesser importance and involving low risks, it is sufficient that the contractor presents the DURC. The DURC, acquired by the client must be sent, together with certification of fulfillment of the other documentation requirements, to the public authority responsible for issuing the building permit (the Municipality). From these provisions it is possible to understand as, in the construction sector, the registration at the Construction fund (set and regulated by collective agreement) and (indirectly) the application of the collective agreement, has become a condition that the contractors are required to meet to carry out works needing authorization. In other words, all construction companies are required to enrol in the Local Construction Fund even if the obligation of contribution is provided by collective agreement (see Ministry of Labour, circulars 5/2011 and 56/2008). This is confirmed by the mandatory rules on communications to the public employment offices (Centri per l’impiego), as recognised by the Court of Cassazione (Cass. 28 October 2008, n.25888 in Argomenti di diritto del lavoro 2009, 849): every employer must use forms which contain the commitment to implement collective agreements regarding the registration in the Construction funds, in order to declare the workers' employed. Although, technically, these are mechanisms of indirect extension of the collective agreement, such obligations represent a significant exception to the general principles that govern collective bargaining in Italy. 9. Temporary work agency Specific rules apply in respect of agency workers (Articles 20-28, D.lgs.276/03 on “Somministrazione di lavoro”). The contract with an agency is admitted if it is aimed at satisfying “technical, productive, organizing and substitutive” needs of the user. These reasons must be expressly quoted in the contract between the agency and the user and they can be also related with the ordinary activity of the user (Article 21, D.lgs. 276/2003), but they must be “temporary” as well (Tribunale Brescia 30 April 2008 in Argomenti di diritto del lavoro 2009, p.510 and Tribunale Bergamo 19 December 2008 ibidem 512). This means that the user can’t resort to temporary work in place of an open-ended contract. Staff leasing is admitted only for specific activities listed by the law (including in construction, transport and cleaning sector) or identified by the collective agreements signed at any level (Article 20, paragraph 3). It’s in any case prohibited to engage agency workers to replace workers on strike or workers dismissed or laid off in last six months (Article 20, paragraph 5) and the employer can’t use temporary workers if he hasn’t already implemented the risk evaluation imposed by D.lgs.81/08. If the contract between the agency and the user is void for infringement of one of these requirements, administrative and penal sanctions are applied and the worker can ask for being employed by the users, as in case of illegal contract ex Article 29, paragraph 1. Regarding the rate of pay for agency workers, the principle of equivalence is applied with the comparable workers employed by the user (Article 23, paragraph, D.lgs. 276/2003). The principle of equivalence is derogated when the agency provides “disadvantaged” workers (ex Regulation CE n.2204/2002, Article 2(f)) who benefit from social security treatments for unemployment, within projects oriented to their work placement approved by Local (Regional) Authorities (Article 13, D.lgs. 276/2003).

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The user and the agency are jointly liable for the payment of wages and social security contributions (Article 23, paragraph 3). The liability exists only between them, so that, in case the agency workers are involved in a subcontracting chain, they can’t act against the other employers composing the chain (the client or other contractors). The agency has the duty to inform the workers on the risk for health and safety related with the activity to be executed in the user’s workplace and it has to train them to use work instruments. The agency contract can provide for imposing these obligations on the user, that is also considered as the employer with reference to the other legal obligations on health and safety (Article 23, paragraph 5). Every contractual clause providing for limits (also indirect one) on the hiring of the worker by the user is null and void (Article 23, paragraph 8). 10. Protection of workers rights in public procurements The rules on the protection of workers in private contracts are applied also in case of public procurements (Cass. 10 March 2001, n.3559, in Giustizia civile mass. 2001, 464), but in this last case are applied also other stricter rules governing the awarding of contracting or subcontracting agreements. Specific rules exist for the protection of employment conditions of workers executing the public contract and for the selection of the contractors and subcontractors. These rules are laid down in the Code on public contracts (D.lgs. 12 April 2006, n.163) 10.1.Limits to subcontracting First of all quantitative and qualitative conditions limit the awarding of subcontracts. The subcontract must be authorised by the contracting authority, that, in order to do it, verifies (on the basis of the documents delivered by the contractor) the content of the contract, the kind of activity subcontracted and the qualifying requirements of the subcontractor (including the “anti-mafia” certificate imposed by D.P.R. 3 June 1998, n. 252) (Article 118, paragraph 2, 8 and 11, D.lgs.163/06). No more than 30% of the value of the prevailing work (“categoria”, that must be specified in the tender) for which the contract is to be awarded can be awarded to a third party (Article 118, paragraph 2) and a further subcontract is not admitted (Article 118, paragraph 9). 10.2. Employment conditions and joint liability About employment conditions of the workers involved in the public procurement a general obligation exists for contracting authorities, that is to designate only contractors that apply the terms and conditions of employment fixed by the collective agreement. The rule (s.c. social clause) is fixed by the '70 Statuto dei lavoratori (Article 36, Law 300/70): in all public contracts a clause requiring the contractor “to apply or make apply to employees working conditions that aren’t lower than those fixed in sector or local collective agreements” must be inserted. This obligation was reinforced and extended to the subcontractors by the Code on Public Contracts, that provides for an obligation of the contractor and subcontractor to apply the collective agreement. According to Article 118, paragraph 6, D.lgs.163/06: “The contractor must fully comply with the economic and legislative treatment established by the national and local collective agreements relative to the sector and area in which the work or services are supplied”

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This provision could be considered in contrast with the Constitutional principles (Article 39), because it makes the collective agreement binding by law (Alvino, 2010). The same does not occur for Article 36, Law 300/70 because it puts the obligation on the client public authority and not directly on the employer. In accordance with Article 4.1 of the 2010 Regulation (DL 207/10), the tenderer must now apply the collective agreement signed by the most representative trade unions and employers’ organization of the sector; an obligation that the Code on Public Contracts does not impose (for a differing opinion see Scarpelli, 2007). This provision increases risks of non consistency with constitutional constraints (art.39 Const.), as it makes the application of a “specific” collective agreement binding, thus limiting trade union freedom. As a consequence of these rules, the tenderer that does not apply the collective agreement is excluded by the tender (Consiglio di Stato, sez. IV, 13 June 2000, n.3288, http://www.giustizia-amministrativa.it/webcds/ElencoSentenze.asp; inter alia, T.A.R. Puglia-Bari sez. I, 20 June 2007, n. 1572; TAR Lazio – Roma, sez. I bis, 19 December 2006 n. 5610;

T.A.R. Toscana sez. II, 14 February 2000, n.173, http://www.giustizia-amministrativa.it/WEBY2K/ElencoSentenze.asp).

The same Article 118, paragraph 6 states that: “the contractor is also jointly and severally liable for ensuring observance of the aforementioned regulations by any subcontractors vis-à-vis all their employees involved in supplying the work or services which are the purpose of the subcontracting agreement”. As clarified by the Ministry of Labour in the circular n.5/2011, this provision implies that within public procurements a joint liability between the contract and the subcontractor “without any time or quantitative limits” exists, wider than the one established by Article 29, paragraph 2, D.lgs.276/03. With reference to the relation of the client authority with contractors and subcontractors, the general rules apply (both Article 29, paragraph 2, and Article 35, paragraph 2 and Article 1676 of the Civil Code: see Consiglio di Stato 1 February 1989 n.1281, in Consiglio di Stato 1991, I, 1402 ff. and Pret. Roma 26 March 1997, in Rivista Critica di Diritto del Lavoro 1997, 798 ff.). In literature the applicability of Article 29(2) to public procurements is debated, because all the provisions of the D.lgs.276/03 “are not to be applied to public administration and to public employees” (Article 2) (see, for opposite opinions, Carinci 2010 and Bianchi 2010). Such an interpretative doubt is going to be solved by the Labour Courts, that in the recent case law have confirmed the application of Article 29(2) to public authorities, considering that the latter acts as client and not as “employer” of the workers protected by the joint and several liability (Corte d’Appello Torino 22 September 2009; Tribunale Bolzano 6 November 2009; Tribunale di Pavia 29 April 2006, in Rivista Critica del Lavoro 2006, 538 ff.; Tribunale Milano 22 January 2010, in Note Informative n.1/10; the same opinion was expressed by the Ministry of Labour in the circular n. 5/11) . The contractor has to verify correct fulfilment of the legal obligations established in order to safeguard health and safety in the workplace. S/he is also jointly liable for the fulfilment by the subcontractor of the obligations on health and safety provided by the law (Article 118, paragraph 4, D.lgs163/06). The violation by the contractor or by sub-contractors of obligations concerning safety at work may cause the end of the contract (Article 135, D.lgs.163/06).

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Specific obligations bind the contracting authorities in case of non payment of wages or contribution by the contractors or subcontractors. If these latter don’t act in conformity with contribution duties (as certified by the DURC (see par.10.3)), the client authority (that is the official responsible of the procedure) have to pay directly the omitted contributions to the National Insurance Institute, deducting the equivalent by the amount due to the contractor (or subcontractor) as compensation for the works or services executed (Article 4, D.P.R. 207/10). If a delay in payment is ascertained, the client authority demand for payment within 15 days from the employer (with a written note). When the deadline expires, the client can directly pay the remuneration even during the execution of the contract, deducting the equivalent by the amount due to the contractor (Article 5, D.P.R. 207/2010). In case of formal dispute by the contractor, the Local Directorate of the Ministry of Labour (DPL) is informed for the consequent controls and verifications. 10.3. Contribution Payment Certificate and control on labour costs The same Article 118, paragraph 6, D.lgs.163/06 establishes also that: “Prior to commencement of the work, the contractor and, through him, the subcontractors shall provide the client with documentation confirming that the social security authorities, including the Local Construction Fund….. have been notified of the work and a copy of the plan of which in paragraph 7 [the plan on safety at workplace]. In order to enable payment of the amounts due on completion of various stages of the work and completion of the work as a whole, the contractor and, through him, the subcontractors shall provide the client authority or administration with a Single Insurance Contribution Payment Certificate (DURC)”’ Since 2009 the DURC is directly acquired by the client authority (Article 16-bis(10), D.L. 29 November 2008, converted into Law 28 January 2009, n.2 (G.U. 28 January 2009, n.22)). In public contracting arrangements, the DURC is thus a document necessary in order to enable the awarding of the contract, to enable the signing of the contracting agreement, to enable payment of the amounts to be remunerated on completion of each stage of the work and to enable the testing of the work and thus payment of the final outstanding amount (Article 6, paragraph 3, D.P.R. 207/10). Indeed, companies that are unable to furnish this certificate are excluded from participating in public calls for tender (on DURC see also infra par. B3(1.1.)). In the construction sector the DURC allows also the contracting authority to control the relation between labour costs and the activity object of the contract, thanks to the subsequent paragraph 6- bis of Article 118 (as substituted by Article 2, paragraph 1(a), D.lgs. 11 September 2008, n. 152) establishing that: “ For the purpose of contrasting the phenomenon of hidden and illegal labour, the Single Insurance Contribution Payment Certificate includes the verification of the congruity of the incidence of the labour supplied to the site related with the specific contract awarded. Such a congruity for construction works is verified by the Local Construction Fund, on the basis of the agreement signed at national level by the social partners signatory of the sector collective agreement, comparatively more representative at national level, and the Ministry of Labour”.

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Both the Code of public contracts (Articles 86, paragraph 3-bis, and 88, paragraph 7, D.lgs.163/06) and the D.lgs.81/08 (Article 26, paragraph 6) provide for another mechanism aimed at avoiding that the adjudication of a public procurement favours contractors who makes most economic tenders reducing labour costs and not applying collective agreements signed by the more representative trade unions. When the adjudication is based on the criterion of the lowest price (Article 55, Directive 2004/18/EC), the contracting authority has to assess that the economic value of the tender is “adequate and sufficient to the labours and safety measures costs” and if it’s “reasonable compared with the size and characteristics of works, services and supplies”. The “adequate and sufficient” labour cost is calculated on the basis of tables that are periodically compiled by the Ministry of Labour “based on economic values of welfare and social security rules provided for by collective agreements signed by the comparatively more representative trade unions”. A simple spread between the labour costs and the “medium” economic values is not symptomatic of an abnormally low tender and the tenderer can justify the reasons of it (Article 87, D.lgs.163/06). The values established by the Ministry are not binding for awarding the contract, but they are merely “indicative” values (Consiglio di Stato 7 October 2008, n.4847 and sez. VI, 21 November 2002 n. 6415, in http://www.giustizia-amministrativa.it/webcds/ElencoSentenze.asp). In other words, they are considered by the contracting authority in order to evaluate the congruity of the tender: the tenderer is excluded only when the labour costs are much lower than the medium values and the spread is not justified (Authority for the Supervision on Public Contract, determinazione 8 July 2009, n.6, G.U. 22 August 2009, n.194). The evaluation on the congruity of the tender should be made taking into account the possible contribution or tax reliefs provided by the law, particularly if they are provided in order to promote the activities of the cooperatives (Article 10 e 11 D.P.R. 29 September 1973, n.601). As stated by the Administrative Tribunals, the cooperatives can’t be damaged in awarding contracts because of the benefits they enjoy by law; this benefits reduce labour costs, even if equal payment is guarantee between workers employed by the cooperative and workers employed by the other tenderers. This statement is based on Article 45 of the Constitution that recognises an important social function to workers’ cooperation and mutualistic principles (in this sense, see T.A.R. Puglia 20 June 2007, n.1572, http://www.giustizia-amministrativa.it/webcds/ElencoSentenze.asp). A recent reform added a new general criteria for the awarding of the contractors in public procurements, further promoting the application of the sector collective agreement signed by the most representative social partners: the best tender (Article 53, Directive 2004/18/EC and Art. 55 Directive 2004/17/EC) must be selected net of “the labour cost, evaluated on the basis of the minimum rates of pay laid down by sector collective agreements signed by the comparatively more representative workers and employers organizations at national level, and of the measure adopted for implementing legal provisions on health and safety” (Article 81, paragraph 3-bis, D.lgs.163/06, inserted by Article 4, D.L. 70/11). 10.4. Regional legislation Provisions for the protection of workers in public procurements are laid down also by Regional legislation. When these are not “soft law” provisions (vd infra par. B3.3(3), problems of possible conflict with the State on the distribution of competence can arise on the basis of the Constitutional provisions (Title V of the Constitution). The matter of

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public procurement is not reserved to the State, but the State has the exclusive competence on matter on which the contract can affect; first of all, “competition” (Article 117, paragraph 2(e) of the Constitution) and “civil legal order” (Article 117, paragraph 2(l)); within this latter is included the whole (private) labour law system. On the basis of these Constitutional provisions, Article 4 of the Code on Public Contracts lists explicitly the matters on which the State has the exclusive competence, excluding any regulation by the Regions (among them, “qualification and selection of tenders”, “contract award criteria” and “subcontracting” are listed). A recent case of conflict on competence originated from the Regional Law 4 April 2011, n.4 of the Regione Marche (“Favourable criteria related with protection of health and safety at work within the tender for public contracts of regional interest”, in B.U.R. 14 April 2011, n.28),

challenged by the Government before the Constitutional Court. The Regional law added new criteria for the awarding of contracts in case of tenders by the Regional Administration. In particular, the provision challenged by the Government for incompetence of the Region, establishes that at least 20% of the points to be assigned for the evaluation of the tenders should be based on health and safety criteria (Article 2, paragraphs 4 and 5).

10.5. Tenderers established in other Member State No distinctions exists in the Italian law on public procurement between National and foreign tenderers referring with the provisions examined. The obligations provided for the first bind also the latter, including the duty to apply sector and local collective agreements. The question of the obligation to apply collective agreement was treated in the only judgement related with posted workers published in Italy (Consiglio di Stato, Sez. IV, 1 March 2006, n.928, http://www.giustizia-amministrativa.it/webcds/ElencoSentenze.asp, confirming T.A.R. Bolzano 19 April 2005, n.140 in Massimario di giurisprudenza del lavoro 2005, 658 ff.). The Italian Administrative Court evaluated the legitimacy of the term of a public contract (implementing a local legislation and in line with the national law) that imposes the contribution in the local construction fund as a condition for awarding a public contract (Articles 47 e 48 of the Provincial Law of the Province of Bolzano n.6/1998). This rule was opposed by an Austrian construction undertaking excluded from a public call for tender. On the opinion of Administrative Court the foreign undertaking may avoid to apply collective agreement’s provisions on the construction fund only if the protection level guaranteed by law and collective agreements in the country of origin is equivalent or similar. So the Administrative Court considered all kind of services provided by the fund in order to compare them with services already offered to posted Austrian workers. Then, it judged the local rules in contrast with Internal Market principle (Article 49 ECT, now Article 56 TFEU) since the local fund provides workers with the same or similar services guaranteed under Austrian Law. This statement of the Administrative Court will be more deeply analyzed in the Core Report. 11. Social clauses and workers’ protection in case of successive contracts 11.1 Social clauses in collective agreements Many sector collective agreements contain provisions aimed at protecting workers in subcontracting processes, limiting the economic freedom of the undertakings in several

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respects. Anyway the legal force of these clauses depends on the effectiveness of collective agreement in the Italian legal order, that binds only employers (clients or contractors) joining one of the signatory unions or voluntarily applying it. Some sector collective agreements (e.g. Article 9 Ccnl Metalworking Industry 20 January 2008; Article 10, Ccnl Food Cooperatives 22 July 2003) include an obligation not to contract certain works carried out in the undertaking or concerning the production cycle of this one (e.g. processing of products, ordinary maintenance of machinery). These clauses are aimed at safeguarding workers’ rights avoiding outsourcing and production decentralization. These terms are going to be get over, as evidenced by the fact that in some collective agreements they’re no longer included (e.g. Ccnl Retailing and Services 6 April 2011). Moreover the effectiveness of such clause is questionable, because their violation cannot have an effect on the contract that is validly concluded by the parties. Most common are the clauses providing for the obligation of the client company to ensure to contractors’ and subcontractors’ employees the application of the economic and regulatory measures established by the sector collective agreement signed by the most representative trade unions (e.g. Article 9 Ccnl Metalworking Industry 20 January 2008; Article 10 Ccnl Food Cooperatives 22 July 2003; Title V Ccnl Rubber and Plastics Industry 4 July 2008). Usually, this provision also extends to clauses contained in collective agreements at local level (if available) and to the registration requirement to the Local Construction Fund in construction sector (Article 14 Ccnl Construction Industry 19 April 2010). In the transport sector (Article 42 Ccnl Logistic, Freight Transport and Shipping 26 January 2011) it was provided also for requiring the client to terminate relationships with contractors and subcontractors who do not respect the collective agreement, ensuring the workers’ re-employment in undertakings applying it (for a comment on this provision, see Pallini, 2011). These clauses need to be incorporated in the contract to become legally relevant, that is to require the contractor to comply with the collective agreement and to guarantee her/his workers the right to keep it applying or the right to claim compensation for damages for its failure to apply (under Article 1411 of the Civil Code on terms of contract in favor of third parties). But if the collective agreement is not respected by the client, contractors’ employees are not entitled to demand respect for the social clause (in literature, see Aimo, 2007; Carinci, 2006). Many national collective agreements also provide for information and consultation obligations towards the union representative at plant level and/or the local trade unions on the undertaking that decides to contracting out the activities of the production cycle (e.g. Article 14, Ccnl Construction Industry 19 April 2010; Article 9, Ccnl Metalworking Industry 20 January 2008; Article 10, Ccnl Food Cooperatives 22 July 2003; Title V, Ccnl Rubber and Plastics Industry 4 July 2010; Article 25, Ccnl Private Security 6 December 2006; Article 219, Ccnl Retailing and Services 6 April 2011). The information usually concerns the type of activities carried out under contract, the contracting undertaking’s characteristics (e.g. number of employees) and the possible effects that the contract may have on employment levels. The national collective agreement in construction sector also includes the obligation to notify the Local Construction Fund the name of the contractor and its declaration of commitment to collective agreements. Particularly cogent obligations of information, designed to allow workers representatives and trade unions to verify the application of the national collective agreement by the contractor, have recently been provided for in the transport sector (Article 42 Ccnl Logistic, Freight Transport and Shipments 26 January 2011).

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These are typical clauses of “obligatory” nature, conferring rights to the signatory trade unions. Their violation may be an anti-union behavior, that the union (through its local body) can face activating the emergency procedure provided for by Article 28 of Law 300/1970. The Court may order the client bound by the clause to enable the consultation process, but also in this case the decision condemning the employer cannot produce effects in terms of contractual relationships between the parties of the contract, even if concluded in violation of the obligations of information. Sector collective agreements’ clauses that mostly restrict the employers’ economic freedom are those protecting the continuity of employment in the event of a change of contractor (e.g. re-engagement clauses). Many sector collective agreements applied by service undertakings provide for the requirement on the incoming undertaking to hire with no trial period all staff employed in the service by the outgoing contractor by a minimum of month (usually 4 to 6) and to guarantee them the maintenance of the economic and normative treatment previously enjoyed (Protocol on subcontracting-Ccnl Tourism/Confcommercio 22 January 1999; Article 7, Ccnl Subcontracted Postal Services 28 July 2005; Article 6, Ccnl Environmental and Territorial Services/ Federambiente 30 June 2008; Article 17, Ccnl Rail and Transport Services 14 September 2000; Protocol on the social clause in airline catering sector, 13 July 2006). In some cases it is expected that the social clause is applied only if the new contract is identical to the previous (same “contractual terms and performance mode”); if contract terms are different, the signatory social partners are asked to bargain in order to find an agreement (Article 4, Ccnl Cleaning Services Industry 25 May 2001). Sometimes it is expected that the obligation does not operate if the number of workers involved is under a certain threshold (Title XXXI-bis, Ccnl Cleaning Craft Industry 4 March 2005). In other cases the client company is obliged to include in the contract a clause by which the succeeding contractor commits itself to give preference in hiring, on equal terms, to employees of the outgoing contractor (Article 42-bis, Ccnl Logistics, Freight Transport and Shipments 26 January 2011). Obviously, the acknowledge of an economic and normative treatment that is not worse than the one previously enjoyed does not exclude the application of different conditions of employment associated with the new organizational context (e.g. those concerning assignment, workplace or working time) and the loss of age of service, as a result of the conclusion of a new employment contract. As above, the binding nature of the re-engagement clauses depends on the membership of the parties in the association signing the collective agreement (or on their voluntary application of the sector collective agreement), or (if the incoming contracting undertaking is not affiliated) on the insertion of the same clauses in the contract. In public procurement, the obligation to comply with the re-employment clause may result from the fact that the contractor and the subcontractor are required to apply the sector collective agreement as a condition for awarding the contract (see above par.B3(10.2)). On the opinion of part of the Labour Courts (Tribunale Bologna 5 July 2006 in Rivista Giuridica del Lavoro News 2006, 4, 12 ff.; Tribunale Milano 31 March 2004, in Rivista Critica di Diritto del lavoro, 2004, 316 ff.) and of the prevailing doctrine (Vallebona 1999; Aimo 2007; Carinci 2010), if the social clause is binding, the incoming contractor is obliged to contract and workers consequently have the right to be hired: workers can sue to obtain protection in the specific form (Article 2932, Civil Code), that is the conclusion of an employment contract. If the social clause does not identify the employment

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conditions with the precision required to obtain protection in the specific form (because the content of the new employment contract is not determined or determinable), workers can rely only on the mere protection through compensation (Article 1218, Civil Code) (Cass. 26 August 2003, n.12516 in Rivista Giuridica del Lavoro 2004, II, 607 ff.). If the social clause does not provide a real obligation to be re-employed but merely a commitment of the parties to negotiate in order to find solutions to employment problems posed by the termination of the contract, workers have no right enforceable in court (Cass. 13 December 1999, n.14001). Collective agreements do not address the problem related with the establishment in another State of the “new” contractor replacing the “Italian” one. For this reason, according to Italian law, shall be assumed that social clauses are applicable in this case too. Case law has never addressed the question of the possible contrast of the social clauses with the European rules on the functioning of internal market. 11.2. Succession of contracts and dismissal The successor contractor may dismiss for economic reasons the workers hired in implementation of the social clause (Article 3, Law 15 July 1966, n.604), if the dismissal is justified by his company's organizational characteristics (T.A.R. Puglia-Lecce, sez. I, 22 November 2007, n. 3956, http://www.giustizia-amministrativa.it/WEBY2K/ElencoSentenze.asp). The case law tends to exclude that the relationship with the outgoing company is extinguished for consensual resolution, because the signing of a new contract cannot be considered a cause of consensual resolution (Cass. 24 February 2006, n.4166 in Rivista Giuridica del Lavoro 2006, II, 440 ff.); which is why it’s necessary that the outgoing employer dismisses workers for economic reasons (to which the termination of a contract is referable). The most onerous procedure provided for by law in case of collective redundancies (Article 24, Law 23 July 1991, n.223) does not apply to the workers re-employed at “the same economic and regulatory conditions set by national collective agreements entered into by the comparatively most representative trade unions or as a result of agreements” signed by the same organizations (Article 7, paragraph 4-bis, D.L. 248/08 converted into Law 31/2008). Therefore, the protection provided by collective agreements is added to and it does not replace the one provided by law on individual dismissals: if the dismissal occurred in the absence of formal or substantive requirements provided for by the law, the employee (even after the re-employment by the new contractor) will be able to challenge it and (eventually) to get the reintegration at the previous company (obviously, this may be the case in which the employment conditions offered by the previous contractor are preferable). 11.3. Succession of contracts and transfer of undertakings The situation is different if the engagement of workers by the incoming contractor sets up a transfer of undertaking pursuant to Article 2112 of the Civil Code. Article 29, paragraph 3, D.lgs.276/03 would seem to exclude this hypothesis, establishing that “The acquisition of the workers already employed in the contract after the taking over of a new contractor, under the law, national collective agreement, or clause contract, doesn’t set up a transfer of an undertaking or business unit.” The meaning of the rule is disputed, but according to the interpretation that seems to prevail both in case law (Tribunale Roma 9 June 2005 in Rivista Giuridica del Lavoro 2006, II, 678 ff) and in the doctrine (Carinci, 2006), it does not introduce an exception to

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the general discipline on transfer of undertaking referred to in Article 2112, Civil Code, because that would conflict with the Directive 98/50/EC, as interpreted by the Court of Justice in Temco (C-51/00). Article 29, paragraph 3 must therefore be interpreted as merely confirmatory of the general principle for which the taking on of a group of workers already employed by the previous contracting undertaking does not constitute in itself a transfer of undertaking, which will occur only if, for the characteristics of activities covered by the contract (e.g. labor-intensive services), the group of workers taken on by the second undertaking may be considered an “economic entity” under Article 2112, Civil Code and Article 1(b), Directive 98/50/EC, as interpreted by the Court of Justice and by the “internal” case law (Cass. 30 December 2003, n. 19482, in Foro Italiano 2004, I, 1095 ff.). If then the hiring of the workers constitutes a transfer of undertaking, Article 2112 will be applied, even if the hiring took place in fulfillment of an obligation under the collective agreement (Cass. 8 February 1993, n.1518 in Rivista Italiana di Diritto del Lavoro 1993, II, 834 ff; Corte d’Appello Milano, 2 July 2003, in Giurisprudenza di Merito 2004, 106; but, in the opposite sense, see Tribunale di Napoli 21 June 2000, in Diritto del Lavoro 2001, II, 39 and Consiglio di Stato, sez. IV, 21 November 2002, n. 6415, in Foro Amministrativo 2002, 2962 that deny the application of Article 2112). Workers will share all the guarantees provided by this rule: continuity of the relationship, recognition of the length of service with the new employer, prohibition of dismissal, maintaining of the previous collective agreement until the date of its termination and joint liability between the old and the new employer for credits claimed by the worker at the time of transfer. 11.4 Social clauses required by law Social clauses are also contained in special national or regional legislation, which, in the processes of liberalization of services previously exercised as a public monopoly, fixes constraints on the part of concessioner. 11.4.1. The case of airport services A clause of this nature was contained in Article 14, paragraph 2, D.lgs. 13 January 1999, n.18 implementing the Directive 96/67/EC on access to the market of ground handling services at airports (G.U. 4 February 1999, n.28) which imposed “the transfer of personnel, identified in agreement with the trade unions, from the former operator of the service to the new one, in proportion to the share of trade or business acquired by the latter.” The European Court of Justice considered this in contrast both with the Directive 96/67/EC and with the principles of the internal market (former Article 49 ECT) (Commission v. Italy, C-460/02) (on which Pallini, 2006). Article 14 was then reformed by the D.lgs. 9 May 2005, n.96 and, in its current form, it establishes that the ENAC (National Civil Aviation Authority, the licensee of the service) guarantees “in case of transfer of assets concerning one or more categories of ground handling services, the application of social protection measures provided by law, favoring the re-engagement of workers in similar activities which require the possession of special security requirements by the staff.” The rule, however, refers to any “specific contractual provisions of protection”: and the sector collective agreement proceeded to reintroduce the old social clause censured by the Court of Justice (CCNL Airport Services, 26 June 2005, Annex 2). Article 13, D.lgs. 18/99 also provides that the Civil Aviation Authority must assess “the suitability of providers of ground handling services subject to compliance with the type of contract that regulates the employment relationship of management companies’ employees and airport ground handling services.” In doing so, the Civil Aviation

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Authority imposed, by resolution n.66/2006, to all handlers the respect of the sector contract statistically more common in the sector (CCNL Assoaeroporti). That decision was subject to censorship by the Antitrust Authority (Opinion 10 January 2008, Bollettino 48/2007, http://www.agcm.it/ bollettino-settimanale.html) and then repealed by the Administrative Court (T.A.R. Lombardia-Milano, sez.IV, 7 May 2008, n. 1329, http://www.giustizia-amministrativa.it/WEBY2K/ElencoSentenze.asp). The Administrative Court has based its assessment of illegality on the provisions of Directive 96/67/EC, and on the rules of the Italian Constitution that protect the economic freedom (Article 41) and which exclude that the law may make collective agreements generally binding without complying with the procedure laid down by the Constitution (Article 39). 11.4.2 Other social clauses in National and Regional legislation Within the local public transport, Article 26 of Royal Decree 8 January 1931, n.148, still in force, requires the service contractor to hire workers already employed in it, with the maintenance of acquired rights. This rule is expressly mentioned by Article 18, paragraph 2(a), Law 19 November 1997, n.422, “Conferment to the Regions and local authorities of functions and tasks in the field of local public transport, in accordance with article 4 of Law 03.15.1997, No 59” (G.U. 10 December 1997, n.287) that transferred functions in the field of local public transport from the State to Regions and local authorities. This rule sets a mandatory limit for local authorities (municipalities), so that it’s not even allowed to proceed to a different classification of the re-employed staff or to subject the hiring to an assessment of suitability. The violation of these obligations leads to the exclusion of the undertaking from the tender and to the unlawfulness of the act of service concession adopted by the competent authority (T.A.R. Lombardia-Milano, sez.III, 13 April 2004, n.1453, http://www.giustizia-amministrativa.it/WEBY2K/ElencoSentenze.asp ). A similar re-engagement clause is also present in the legislation on collection service agencies (Article 63, paragraph 4, D.lgs. 13 April 1999, n. 112). Re-engagement clauses can also be provided for in Regional laws regulating the concession of public services. One of these is the Regional Law 25 February 2010, n. 4 of the Regione Puglia (B.U.R. Puglia 2 March 2010, n.40), whose Article 30 was recently judged un-constitutional by the Constitutional Court, because it imposes to regional service contractors the obligation to hire with an open-end contract the staff employed by the previous contractor (Corte Cost. 3 March 2011, n.68, http://www.giurcost.org/decisioni/index.html). Censorship, however, is not based on infringement of EU rules on competition and internal market, but on the violation of Article 97 of the Constitution, that does not allow exceptions to the rule of public procedure for recruiting civil servants in public administrations: the norm of the Puglia, in fact, applies to contractor public companies, that the law equates to public administrations. The question of legitimacy of social clauses provided for by this legislation in terms of compliance with the rules of the Internal Market, has never been raised before a Court. 12. The economic treatment of “associate” workers in cooperative companies A special rule is established in order to counteract the dumping in subcontracting chains in labour-intensive services, although it does not directly regulate the matter of contract and subcontract. In fact, in this area mainly cooperative companies operate (regulated

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by Law 8 November 1991, n.381), which are subject to special rules governing “associate” workers’ labour relations (Law 3 April 2001, n.142, “Review of cooperative legislation, with particular reference to the position of associate worker” (G.U. 23 April 2001, n.94)). These workers are in conditions of great weakness, not only because they do not enjoy all the protections provided to “normal” employees, but mostly because they are maximally exposed to competition played on labour costs. Associate workers thus suffer the effects of dumping made within sub-contracting chains, even thanks to the fact that the cooperative can choice the most convenient collective agreement. This explains the provision of Article 7, paragraph 4, D.L. 31 December 2007 n., 248, converted into Law 28 February 2008, n. 31 (G.U. 29 February 2008, n.51), according to which cooperatives companies “apply to their associate workers overall economic treatments not worse than those fixed by collective agreements concluded by employers' organizations and trade unions which are comparatively more representative at national level in the sector” relating to their activities. The rule is currently subject to proceedings before the Constitutional Court because of its possible conflict with the constraints imposed by Article 39 of the Constitution on legislation extending the effectiveness of the collective agreement (Tribunale Lucca, ordinanza 14 April 2011). 13. Subcontractors established in third countries (non-EU Member States) The system of joint and several liability provided for by Article 3, paragraphs 3 and 4, D.lgs. 72/00 implementing Directive 96/71/EC applies also if the subcontractor is established in a third country (Article 1, paragraph 3). Other measures for the protection of workers employed in sub-contracting chains should always be applied, regardless of whether the subcontractor is established or not in an EU Member State. However, problems of compatibility with internal market principles should not arise in the case of an undertaking established in a third country. This means that, for example, the requirement to register with the construction fund, which is not required in the case of EU undertaking that has already entered into a similar fund in the country of origin, is not subject to exceptions in the case of non-EU undertaking (Ministry of Labour, Interpello 2 June 2009, n.6/2009). B3.1 Preventive measures:: “In private contract agreements, no legal requirement or incentive exists for the client and contractor to act in such a way as to avoid being held liable for failure by the contractor or any subcontractors to pay the wages, withholding taxes and social security contributions of their staff. Indeed, in this case the client may only be sanctioned by the effectiveness of joint and several liability. Thus, it is up to the initiative of the client to complete all the operations and implement all the verifications necessary – even in the case of the preparation, drafting and signing of contracting or subcontracting agreements – to avoid being involved in the effects of joint and several liability and thereby having to sustain high economic costs” (Report “Liability in subcontracting process in the European construction sector: Italy”, European Foundation for the Improvement of Living and Working Conditions) Preventive control obligations associated with exemption from liability were introduced in the Italian system by Article 35, paragraphs 28-34, D.L. 223/06 (so-called "Bersani Decree") and by the subsequent implementation Decree n.74/2008. But these rules were repealed by Article 3, paragraph 8, D.L. 97/08, converted into Law n.129/08, with the exception of paragraph 28, relating to tax liability. These rules provided for, on one hand,

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a special system of joint and several liability between contractor and subcontractors, on the other the exemption from liability for the contractor if he made preventive screening tests on the correct execution by subcontractor of a series of fiscal and social security requirements. These provisions represented a significant innovation in the Italian system of labour protection, traditionaly based on compensation tools and missing effective control and prevention tools. These were repealed on the grounds of not unduly burdening companies with bureaucratic duties. 1. The DURC The main tool provided by law to control wages and social security obligations of contractors and subcontractors is the DURC (Documento Unico di Regolarità Contributiva), issued by social security institutions (INPS and INAIL) and (in building sector) by Construction funds. It attests the occurred payment of social security contributions, and (in building sector) to Construction funds The requirement of possession of DURC has been generalized to all employers who want access to "legal and social security benefits on labour and social legislation" (Article 1, paragraph 1175 and 1176, Law 296/06) and in no case it can be replaced by other documentation confirming the payment of contributions (Consiglio Stato 25 August 2009, n.4035, http://www.giustizia-amministrativa.it/webcds/ElencoSentenze.asp). With a common statement signed by the most representative social partners (in 28 October 2010), which gave effect to the provisions of Article 1, paragraphs 1173 and 1174, Law n.296/06, from year 2012 (after a year of testing), building employers to acquire DURC from Construction funds would also have to demonstrate that the incidence of labour costs on the total value of the work is not inferior to the “fairness indexes” (indici di congruità) including social security contributions, set by the social partners8

In case of public procurement, public authorities acquire DURC directly by social security institutions (Article 16-bis, Law 2/09), before awarding the contract and the signing of the agreement and before issuing invoices payment for work progress and for final work (Article 6, D.P.R. 207/10).

. Fairness index applies to all works from the value equal to or greater than 70 000 euros.

In private construction contracts, contractor and subcontractors must acquire it before work beginning and then they must transmit it to the competent authority (Article 90, paragraph 9, D.lgs.81/08). Outside of construction sector, DURC should not be compulsorily acquired, but it can be requested by the client (as usually it happens). The DURC is valid for three months since its release (Ministry of Labour, circular 8 October 2010, n.35, http://www.lavoro.gov.it/Lavoro/Notizie/20101008_Circolare35.htm and INPS, circular 17 November 2010, n.145). It follows that through it the client can just verify the contractor’s contribution correctness when awarding and concluding the contract and, if it lasts more than three months, in successive phases of execution of it. As mentioned, the Code on public contracts subordinates the payment of work progress and the final state of work to the presentation of DURC by contractor and, through her/him, by subcontractors. In private contracts such a requirement has failed with the repeal of Article 35 paragraph 29, D.L. 223/06. The client can, however, as a form of 8 With reference to public contracts see Article 118 bis, paragraph 6, D.lgs.163/06 (par. B3(10.3) above)

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self-defending, suspend the payment of the work if the contractor does not produce the DURC or otherwise s/he does not certify the fulfilment of obligations and pay contributions in respect of workers employed in the contract and subcontracting chain (Ministry of Labour, circular 5/11). 2. Registration in the Local Construction Funds and exhibition of the DURC by foreign undertakings Employers established in another Member State have not to exhibit the DURC, as they are registered at the Social Security System of the home State. Obviously, Regulations n.883/04 and n. 988/09 apply. A question arises about the duty to contribution to Local Constructions Funds, as these latter are instituted and regulated by collective agreements and they provide measures that have also a remuneration nature (first, payment of holidays). The law does not make any distinction between national and foreign undertaking with reference to the registration at the Local Construction Funds and the consequent duty to exhibit the DURC. The Ministry of Labour (DG Inspective Activities) repeatedly asserted in its notes (interpelli) that a requirement to register exists for those foreign undertakings that “haven’t already fulfilled, with a public or private body, obligations aimed at securing workers the same protection standards guaranteed by provisions imposed by collective agreements in Italy” (Interpelli 6 february 2009, n.6/2009; 3 September 2007, n.24/2007; 23 February 2006). In other words, the foreign undertaking has to pay contributions in construction funds if there is no equivalence between benefits granted by them and the benefits enjoyed in the country of origin. It follows (for instance) that Rumanian undertakings can’t be exonerated from registration, because in Romania there isn’t any fund equivalent to Italian construction funds. According to the Ministry of Labour, the obligation to registration concerns “all” benefits (allowances, integration of the remuneration, social security benefits or other kind of services) granted by the funds (see footnote 2 above). So it can also concern additional elements of remuneration not included in minimum rates of pay and further matters not listed by the Posting of Workers Directive. 3. The certification as preventive measure The client may limit the liability associated with the execution of the contract through certification (certificazione), introduced into Italian law by Articles 75 et seq., D.lgs.276/03 and recently reformed by Law 4 November 2010, n.183 (so called “Collegato Lavoro”) (G.U.9 November 2010, n.243) to promote its use, so far very limited. Certification is a procedure that can be activated, upon request, at the special public or private bodies, authorized by the Ministry of Labour (Certification Commissions), which certify the nature and content of the employment contract or the “authenticity” of a contract (Article 84, D.lgs.276/03). The Commission shall verify that the contract is lawful (ex Article 29 paragraph 1), namely that it is signed with a “real” employer that organizes and directs the workers and that not merely supplies workers to the client. The legality of the certificate contract agreement may be challenged by the employee in the labour court contesting certification, because of consent defect or discrepancies between negotiation program and subsequent execution of it (Article 80, paragraph 1). The effects of the certification are produced in particular in respect of inspection bodies, the activities of which must address the non-certified contracts (Directive of the Ministry of Labour 18 September 2008

, G.U. 12 November 2008, n.265).

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Certification is therefore a tool that allows the client to check in advance with the help of a competent third party, the organizational characteristics of contractors and their financial reliability, and this especially if (as indicated by the Ministry of Labour in circular 5/11) the Commission's investigation is not made on “purely documentary basis, but also through public statements and acquired by the parties during the hearing in the course of the certification process”. In the presence of a certificate contract agreement the client could reduce the risk of legal actions by workers (under Article 29, paragraph 3-bis) and (mostly) avoid complaints of violations (punished also with criminal sanctions) from inspection authorities. The certification has not any legal effect on joint and several liability. The client, in fact, is anyway exposed to it in the event of contractor and subcontractors are insolvent. B3.2 Sanctions: 1. Non compliance with wages and contribution obligations In the event of non payment of wages, the worker can equally claim for due remuneration either from his own employer or one of the other subcontractors, in compliance with the rule of joint and several liability. There is no obligation for discussion about who the principal debtor is. The same considerations are valid for social security contribution and fiscal obligations: INAIL, INPS and the Inland Revenue shall take direct action against the client or contractor. In addition, and with reference to workers’ wages, the client may be required to pay the interest in arrears and appreciation of the wage credit. Social security authorities and the Inland Revenue, besides demanding payment of social contribution and tax credits, can also require the client or contractor to pay the penalties and interest in arrears related to late payment of these credits. After making payment, the client or contractor has the right to have recourse – through a recovery action – against the non-fulfilling contractor and any subcontractors. In this way, the non-compliant party is forced to fully reimburse any amounts disbursed by the client in favour of the non-compliant party’s employees, as well as the Inland Revenue and social security authorities. The aim of this type of action – which must be brought before the ordinary civil court – is to recover the amount paid by the client in order to comply with the obligations of the contractor and any subcontractor. Such action must nevertheless be based on provisions of the Italian Civil Code and not the content of Legislative Decree n. 276/2003 (see Report on Liability in subcontracting process in the European construction sector: Italy, European Foundation for the Improvement of Living and Working Conditions). In private contracting, all other safeguards established in contracting agreements are valid. Thus, the parties in a contracting or subcontracting agreement are free to include any type of safeguards they wish in the contract with regard to penalties, refunds or insurance cover. If the principal contractor or the subcontractors miss payment of wages or contributions, work suspension by the client is justified. The DURC – who is necessary in any case of public procurement or private contracts in the building sector - can’t be released in case of serious violations on contribution obligation. The DURC can be released to the guarantor jointly liable who didn’t fulfil his duties in regard of workers of the subcontractors (Ministry of Labour, Interpello n. 3/2010). Therefore, the insolvent jointly liable contractor is not excluded from public contract or contract in the building sector.

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2. Exclusion from public procurements Employers who have committed “serious violations duly verified of norms on health and safety and of any other duty concerning employment contract” (Article 38, paragraph 1(e), d.lgs.163/06, as amended by Article 4 D.L. 70/11) or in the social security field (paragraph 1(i)), are excluded from tender process of public contract. Undertakings can obtain the certification of regularity in this field from the competent public body (authorized by the monitoring Authority for the Supervision on Public Contract) (Article 40, D.lgs.163/06) (see par. B3.3(3) below). The contribution regularity is certificated by the DURC. Tenderers not established in Italy have to attest the absence of causes of exclusion by providing the documents required by public clients, which may ask the cooperation of the competent authorities of the home State. In case of failure to submit documents or certificates, an affidavit is a sufficient evidence (under the law of the home State) or a declaration made in front of a qualified authority under the law of the home State (Article 38 paragraphs 4 and 5, D.lgs.163/03). As mentioned, in public procurement the public client is required to carry out periodic checks on contractor and subcontractors fulfilment of wages and contribution obligations and to stop payment of the work in the event of non-compliance (Article 118, paragraph 6, D.lgs.163/06). A mere contribution irregularity is not sufficient to exclude or to revoke the award of the contract, being necessary that the contractor has committed “serious violations” (according to Italian or State of establishment law) and that these have been “definitively proven” (Article 38, paragraph 1(i), D.lgs.163/06), or that the contractor has concluded any complaints against acts of verification of the debt (TAR 6104/06 Puglia, Lazio 45/07 TAR Calabria 537/08; Authority for the Supervision on Public Contracts, Resolution 2 June 2007, n.28). An undertaking is also excluded from public tenders in case of not compliance with the rules on the protection of the right to work of disabled people (Article 38, paragraph 1(l), as amended by D.L. 70/2011), which requires to reserve a share of assumptions for handicapped persons registered in special lists at the local employment offices (Law 12 March, 1999, n. 68). This obligation must always be fulfilled, regardless of whether or not it is specified in the tender (Consiglio di Stato, sez.V, 19 June 2009, n.4028). Nothing is required by law in case of an undertaking not established in Italy. One can suppose that the obligation, in this case, is not valid, or it can be replaced by a declaration of regularity with respect to legislation for disabled people protection in the home State. Again in the ambit of public procurement, if the contractor (or each of the subcontractors) doesn’t fulfil collective agreements, the contract could be terminated and "in more serious cases and in case of repeated", the tender could be excluded for up to five years to any public contract (Article 36, paragraph 3, Law 300/70). 3. Other sanctions In case of non genuine contract or subcontract an illegal form of labour supply occurs, and the parties of the (unlawful) contract shall be punished with the penalties provided by D.lgs.276/03. A fine of 50 Euros per worker and a working day is imposed to the client and to the contractor (Article 18, paragraph 5-bis). Another fine of 20 Euros a worker is imposed if the contract is stipulated to evade mandatory labour law rules (Art. 28 which imposes a penalty in case of a “fraudulent” provision of workers, that however

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is very difficult to prove). In case of hiring out of minors, the penalty is the arrest till 18 months and the fine increased till six times (Article 18, paragraph 5-bis). In terms of civil liability, if the user is a private employer, the worker may take legal action to request the establishment of an employment relationship at her/his dependence (Article 29, paragraph 3-bis)9

Administrative and criminal sanctions arise from violation of health and safety rules (Article 26, D.lgs.81/08 and, in mobile construction sites, Articles 85 et seq., D.lgs.81/08). The breach of health and safety duties could also block the issue of DURC for a certain period of time (Article 9, D.M. October 24, 2007).

. In this case, however, there is no a mechanism of joint liability to protect the worker's credits, which exists only in the presence of a “genuine” and lawful contract. As interpreted by case law several times (most recently, Cass. S.U. 26 October 2006, n.22910, in Rivista giuridica del lavoro, 2007, II, 23 ff.), dealing with a case of intermediation in labour relations, who used the worker must be considered the sole employer owner of the obligations connected with the employment relationship, while the interposed person (the pseudo-contractor) is a third party, such as free from any obligation. What the latter has paid to the employee it is sufficient to release the real employer/user for the corresponding amount (Article 27 paragraph 2, D.lgs.276/03).

In case of using not declared workers in a proportion higher than 20% of the total number of workers present in the workplace and in case of “serious and repeated violation of the rules on health and safety”, labour inspectors could adopt a suspension of work act, revocable with the regularization of working conditions. The suspension act is sent to the Authority for the Supervision of Public Contract and to the Ministry of Infrastructure and Transport, which adopt a preemptive measure to the participation in public tenders by the undertaking (Article 14, D.lgs.81/08). 4. Mechanisms to lodge complaints Workers can claim their rights provided by the law or by the applied collective agreements acting against the employer before the Labour Courts, on the basis of the general procedural law on labour dispute (Articles 429 ff of the Civil Procedure Code). The worker acts in court directly and not through designated third parties. Trade unions can assist the workers acting before a court through their legal counseling and litigation offices, or their welfare agencies called patronato (regulated by the law). Trade unions have often special offices for legal support of foreign workers. A recent reform repealed the obligation to attempt a preventive reconciliation procedure that conditioned the action in court (Law 183/2010); anyway this obligation didn’t apply to workers posted by an undertaking established in another Member State (Article 6, paragraph 2, D.lgs.72/00). The conciliation can be attempted by the parties through a dispute resolution committee established at the Local Labour Directorate (DPL) and composed by representatives appointed by most representative trade unions at national level (Articles 410 and 411 of the Civil Procedure Code). Possible agreement brings controversy to an end (Art. 2113, paragraph 4, Civil Code). The committee, if the parties agree, can also act as an arbiter and adopt a binding decision (lodo).

9 In this case the action in court against the public user is prevented by the Constitutional principle on the mandatory public procedure to be hired in Public Administrations (Article 97, paragraph 3 of the Constitution)

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The parties can also defer the decision to a court of arbitration regulated by collective agreements or composed by experts on labour law on the basis of legal rules which also regulates the details of the proceedings (Article 421 ter and quater of the Civil Procedure Code as reformed by Law 183/10). These rules, recently amended, are extremely complex and they can hardly be considered understandable by foreign workers and employers. A mechanism aimed at strengthening the right of worker to act against the employer in case of non payment has been introduced by the 2004 reform of the system of labour inspectorates. Article 12, D.lgs. 23 April 2004, n.124 (G.U. 12 May 2004. n.110) establishes that if the employer has failed to comply with payment obligations, the labour inspector can adopt a “warning assessment act” (diffida accertativa) against him; the employer can pay or ask to open a conciliation procedure before the DPL in order to find an agreement with the worker on the payment. Otherwise, after 30 days, worker can start an executive judicial procedure against the employer upon the inspector assessment. Even if the law on inspections does not explicitly admit it, on the opinion of the Ministry of Labour the “warning assessment act” can be adopted and notified also against the jointly liable client or contractor. As observed by the Ministry, in case of transnational contract this makes the national undertaking aware of the non-payment by the subcontractor and the worker posted by the latter of the existence of the jointly liability provided by Italian law (Interpello 12 October 2010 n.33/10). B3.3 Soft law measures, such as codes of conduct:

1. Corporate social responsibility Soft law mechanisms related with corporate social responsibility are adopted both by transnational Italian companies and by undertakings acting at national or local level. Many of the initiatives in corporate social responsibility involving Italian companies, even of medium size, has its origins in projects supported and funded by the EU and they are part of Corporate Social Responsibility Europe Strategy. In Italy too, Responsible Supply Chain Management (RSCM), as part of a company’s Corporate Social Responsibility strategies and policies, has become a key part of the strategy of many companies. Many large Italian companies that operate at international level adopt codes of conduct, standards, guidelines and principles developed with a supply chain focus and international scope, like the Guidelines for Multinational Enterprises of the Organisation for Economic Co- operation and Development (OECD); the United Nations Global Compact (UNGC); ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration); and a wide variety of initiatives focusing on specific issues (like the Ethical Trading Initiative (ETI) focusing on improving working conditions) and others focusing on specific sectors (like the code of conduct for the electronics industry initiated by the Electronic Industry Citizen Coalition (EICC)) (see at last, the report commissioned by the European Commission, CREM-SOMO, Responsible Supply Chain Management, Social Europe, 2011). Some of the major Italian industrial groups are members of the European business network for corporate social responsibility (Enel, Intesa San Paolo, Pirelli, Telecom, Monte dei Paschi). In addition, many companies adhere to certification systems. Italy is the country in the world with the highest number of companies provided with the ethical certification Sa8000 (800, 34% of global total) and it is third in number of workers involved (Social Accountability Accreditation Services - Saas data).

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A recent example of an European project involving Italy (along with other four Member States) is the “BRC- Bulding Responsible Competitivness” funded by the Commission DG- Enterprise and Industry, with the aim of adopting guidelines (also) on the theme of “responsible management of the supply chain”. The project, based on the Porter’s model of the social chain (Porter, Kaplan, “Strategy & Society - the Link Between Competitive Advantage and Corporate social Responsibility”, Harvard Business Review, December 2006), has highlighted a number of cases of Italian undertakings’ best practices. The labour law guidelines concern in particular the development of criteria for selecting subcontractors and monitoring their behavior, especially in relation to compliance with rules to protect workers’ health and safety. To facilitate the supervision on the subcontracting chain, the client company is called to establish stable and lasting relationships with subcontractor undertakings, proactively involving them through training actions and improvement of communication and information flows, and limiting the maximum number of subcontractors, that allows greater transparency in the relationship. 2. Transnational collective agreements Transnational agreements containing specific provisions on supply chains are less common. An interesting example is the agreement signed on 17 June 2008 by Italcementi (the fifth largest cement producer in the world, based in Bergamo) with the Building and Wood Workers' International (BWI) and its Italian affiliates (Filca-Cisl, Feneal-Uil and Fillea-Cgil) with the aim to secure trade union and individual rights of employees working on Italcementi project worldwide. The company agrees to pay decent wages (that is “more favourable than minimum standards fixed by national law and collective agreements”), to be open to trade union activities, to provide training and development opportunities to employees. The Group commits itself to promote the same principle and secure the same rights within its subsidiaries, contractors, subcontractors and suppliers and “encourages contractors and subcontractors to comply with obligations towards all workers, under the laws and standards on labour and social security”. A special provision is included on the promotion of health and safety culture towards suppliers, contractors and subcontractors. Also the Impregilo group (the Italian first general contractor that deals with projects of great works in the public sector and civil construction) signed on 4 November 2004 an international framework agreement with Fitbb and its Italian affiliates, adopting a code of conduct based on ILO Conventions and OECD Guidelines. On the basis of this agreement, union representatives visited construction sites of the group to verify the compliance with safety standards (for example, recently in Iceland, on a construction site for the building of a dam, where 1100 workers of different nationalities were employed). 3. Systems of certification in public procurements and corporate social responsibility in Regional legislations Within public procurement, the function of the soft law sources and the corporate social responsibility should be reduced compared to the private sector, due to the fact that the contractors’ control over working conditions is guaranteed by specific law requirements, whose failure to comply will result in the exclusion from the dealings with the public client. To take part in public tenders, companies must be qualified through a certification system implemented by specific bodies of private law (SOA) authorized by the Authority for the Supervision on Public Contracts (Articles 38 et seq., D.lgs. 163/06; title III, D.P.R. 270/2010). These agencies have the task to testify:

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- The possession of the certification of quality system in accordance with European standards UNI EN ISO 9000 and with national rules, issued by bodies accredited by European standards Series UNI CEI EN 4500 and Series UNI CEI EN ISO / IEC 17000; - The possession of all the general, technical and organizational, economic and financial requirements, required by law to participate in public tenders.

Among the general requirements there is also the absence of serious breaches of the obligations on work conditions and contributions (see par. B3.2(2)). The qualification (allowed under the same conditions required for Italian companies) isn’t a necessary condition for undertakings established in other Member States to take part in public tenders, because they are able to qualify themselves by producing the documentation complying with their national legislation, if appropriate to demonstrate that they meet the requirements provided for by the Italian law (Article 47 and Article 38, paragraphs 4 and 5, D.lgs.163/06). Despite the constraints of hard law under the regulations on public procurement, in recent years the focus on corporate social responsibility issues has strengthened even within public administrations, notably through the regional legislation. The Emilia Romagna Region is particularly active in this respect and thus provides an example of how Regions can intervene in the matter. The Regional Law 2 March 2009, n. 2 “Protection and safety at work on construction sites and civil engineering” (B.U.R 2 March 2009, n.33) seeks to promote socially responsible companies, issuing economic incentives for undertakings that provide higher levels of safety than those required by D.lgs. 81/08 and which choose contractors in accordance with the corporate social responsibility principles (on the genesis of this law see Draghetti 2009). The next Regional Law 26 November 2010, n.11 “Provisions for the promotion of legality and simplification in the construction industry with public and private clients" (B.U.R. 26 November 2010, n.162) gives the Region the function to adopt “guidelines, best practices and procedures aimed at simplifying, unifying and supporting the activities of contracting authorities and operators in the sector, and enhancing social responsibility” (Article 6, paragraphs 3(l)). The same law also provides for the possibility for tender to contain award criteria that give priority to “solutions, objectively measurable and verifiable, that reduce the risks at work, compared to what is already required by existing legislation and plans and that increase security and safety at workplace” (Article 9, paragraph 1). An important role in promoting corporate social responsibility in this Region was held by the Nuova QUASCO, a non-profit company owned by the Region itself and other local authorities, which has among its main functions the promotion of “quality in management public procurement procedures” in the building sector. It is to this society the creation of a computer program for real-time monitoring of public procurement (adopted by other Regions too) and in particular a computerized information system for detection and control of attendance of employees and operators who are previously accredited on construction sites (REPAC): an instrument for preventing the use of irregular workers or work time in excess of those permitted by law and collective agreements. The Regional Law 11/2010 gives the Region the power to identify the circumstances in which the adoption of an information system of control and automatic recording of unauthorized presences on the site is mandatory (Article 3). 4. Sheltered workshops and protection for people with disabilities in public procurement The Code on public contracts (Article 52, D.lgs. 163/06) implements the provisions of the

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Directives 2004/18/EC (Article 19) and 2004/17/EC (Article 28) in relation to “reserve contracts” concerning handicapped persons. The provision raises special problems in terms of its relation to previous legislation regarding social cooperative companies (Law 381/91), which is expressly preserved by the Code. First, the Law 391/1991 enables public authorities to award directly to “work placement cooperatives (type “B”)” contracts below the threshold set by European legislation, so apart from the public procedures. This norm is considered still in force, as it has not been expressly repealed by the Code. Secondly, it is unclear whether the cooperatives of type “B” may be classified as “sheltered workshops” under Article 52, D.lgs. 163/06, so to be “automatically” included in the reserve provided for by the rule. The problem is relevant because the “B” cooperatives are characterized by the use of at least 30% of disadvantaged workers (not just disabled), while the EC directives require the use of the “majority” (so the 50% plus one) of handicapped workers. The doubts are caused by ambiguity in the formula used by the Italian legislator transposing the directive, which seems to relate the requirement of “a majority of handicapped” only to “employment programs” (objective scope of application of the reserve) and not even to “sheltered workshops” (subjective scope). To clarify the matter, the Authority for the Supervision on Public Contracts has intervened with its determination 23 January 2008, n.2 (G.U. 19 February 2008, n.42) stating that any entity (including cooperatives) must employ a majority of disabled workers to access the reserve pursuant to Article 52. The issue is not closed, either because the acts adopted by the Authority have no prescriptive value since they are merely acts of soft regulation (Article 6, D.lgs. 163/06), and because Regions are claiming the competence on the matter, having sometimes adopted legislations that expands the opportunity to access to procurement reserved to cooperatives, regardless of whether that employ the majority of people with disabilities (see e.g. Article 25, paragraph 1, Regional Law Veneto 3 November 2006, n. 23 (B.U.R. 7 November 2006, n.96 )). 5. Promoters and role of social partners Soft law measures are usually installed and promoted by private bodies, such as foundations, working in collaboration with public institutions, which are often among the founders and promoters of these bodies too. A recent example of synergy between public bodies and private institutions is represented by the “EXPO 2015. Control of the supply chain in the perspective of health and safety at work”, activated by the Foundation I-CSR in collaboration with INAIL. The project aims to identify the critical aspects of managing the procurement of works planned for the Milan Expo in 2015 and to adopt guidelines for the selection of involved companies. The Foundation was created by the INAIL, the Ministry of Labour, Bocconi University and UNIONCAMERE (Representative of Chambers of Commerce). The attention and involvement of trade unions in the planning and implementation of soft law measures varies in different organizations. Traditionally the CISL is more involved than the CGIL, more suspicious (because of the different cultural background) to forms of regulation which are alternative to law and collective agreements. For the same reason, also the approach of trade unions towards certification procedures applied to labour relations is different; they are promoted and supported by CISL and UIL also through the involvement of bilateral bodies. However, the trade unions’ proposals on the matter move in a perspective aimed at making binding companies’ systems of quality assurance. The FILCA-CISL (CISL

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building sector union), for example, supports the need to establish a “license” required for anyone who wants to open a construction company, founded on corporate social responsibility principles (Domenico Pesenti, FILCA Secretary General, www.cislveneto.it/2011/pesenti-filca-cisl-la-responsabilità-sociale-riguarda-tutti) B4: The actors involved 1. Labour Inspection Authorities The labour inspectorate is responsible for monitoring all working conditions and it is spread around Italy by way of Local Labour Directorates (Direzioni Provinciali del Lavoro). Each DPL acts at provincial level within the coordination framework of Regional Labour Directorates (DRL). Provincial and Regional Labour Directorates are decentralized bodies of the Ministry of Labour (DG Attività Ispettive: General Directorate for Inspective Activities), which promotes general coordination of all inspective activities at national level. The autonomous provinces of Trento and Bolzano have a special statute and proper competencies concerning labour market, whereby they rule independent inspective bodies. Labour Inspectorate also acts as criminal investigation department and it has the power to notify to the employer the violation of law which brings administrative (by “atto di diffida” ex Article 13, D.lgs.124/04: “warning act”) or penal sanctions (by “atto di prescrizione” ex Article 15, D.lgs.124/04: “prescriptive act”); in the latter case labour inspectors have a duty to forward the offence notice to the Public Prosecutor's Office. During the inspection, labour inspectors can also initiate a mediation proceedings, which extinguishes the inspection (“conciliazione monocratica” ex Article 11, D.lgs.124/04). In case non-payment of wages is ascertained by the inspector, s/he can order the employer to pay adopting a “warning assessment act” (“diffida accertativa”), that has executive value before the court (Article 12, D.lgs.124/04) (see par. B3.3(4). Inspection activities are generally coordinated at central (regional) level and every year a modus operandi is established for interventions in particular sectors on the basis of specific priorities. At national level documents aiming to annual planning of inspection activity are arranged by the “Central Committee for the coordination of inspection activities” established at the Ministry of Labour (Article 3, D.lgs. 124/04). Inspection activity gets started from the own initiative of the authority involved or because of a specific request of intervention from who (normally, unions or workers) complaints the breach of rules the authority is due to control. Inspections can also take place in response to a request from the judicial authorities. The last years praxis demonstrates a trend in reducing the interventions “on demand”, instead of implementing forms of programmed intervention. Such indications are contained in an important act of the Ministry of Labour tended to steer mode for carrying out inspections (Directive 18 September 2008).

In this document, in particular, inspectors are invited to disregard the “anonymous requests submitted by mail, email, fax or phone”. The Ministry also recall the inspector to investigate only on contracts not been certificated by the special Commissions instituted by D.lgs.276/03.

2. Other inspective authorities As regards compliance with health and safety rules, the ASL's (local health authorities) are also involved with their own inspectors (“servizio prevenzione e sicurezza”: “service of prevention and safety”). Provincial Labour Directorates (DPL) should in advance

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inform ASLs about their inspective actions, in order to avoid double control activities (Article 13, D.lgs. 81/08). Controls on social security contributions are up to inspectors of Social Security Institutes (INAIL for the Nationl Insurance for Industrial Accidents, INPS for other social insurances). Provincial Labour Directorates are also responsible for the coordination and direction of those inspectors, in order to avoid double intervention and in order to establish uniform methodologies (Article 5, D.lgs.124/04). Inspections are undertaken also by “Guardia di Finanza” (Financial Police, a body of police officers responsible for border control and for investigating financial fraud), which has the power to verify omitted contribution to the social security system. The financial police cooperates with other inspective bodies taking part - on demand - to inspective actions and sharing inspective outcomes. The financial police can also ascertain the unlawfulness of the contract under Article 29, paragraph 1, D.lgs.276/03; as these breaches of the regulation imply that workers are regarded as employees of the user employer, consequently the latter is prosecuted for tax and contribution evasion. Public Security Officials (Carabinieri and Policemen) inquire into criminal acts (notably in the matter of health and safety in the workplace) and they also monitor compliance with law on immigration from non-EU Countries (therefore workers posted from those Countries are included). In each Provincial Labour Directorates there is an Inspective Unit of “Carabinieri” composed by posted officials with the same functions of Labour Inspectors. Their presence is due to the necessity to employ armed staff in inspections that could be dangerous for the inspector’s safety (especially where criminal organizations are strong and control works sites). 3. The role of the social partners Trade unions perform their ordinary monitoring and checking on employment conditions by trade union representatives (RSA), established in undertakings which employee more than 15 workers (Article 19, Law 300/70) and, in the matter of health and safety at work, by workers' health and safety representative (RLS) (Articles 47-50, D.lgs. 81/08). These bodies cooperate with Labour Ispectors whom they inform about breaches of law. In the building sector, which is mainly composed of small firms, local trade union representatives often enter construction sites and they notify Labour Inspectorates of possible irregularities. There is an ongoing union practice in monitoring employment conditions of workers posted within transnational contracts.

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Essential bibliography

Aimo M.P. (2007), Stabilità di lavoro e tutela della concorrenza. Le vicende circolatorie dell’impresa alla luce del diritto comunitario, Lavoro e diritto, 417 Alvino I. (2007), Il regime delle responsabilità negli appalti, Giornale di diritto del lavoro e di relazioni industriali, 507 Alvino I. (2010), Appalti nelle pubbliche amministrazioni e tutela dei lavoratori dipendenti da appaltatori e subappaltatori, in Carinci M.T, Carabelli U. (eds.), Il lavoro pubblico in Italia, Cacucci, Bari Bianchi L. (2009), Responsabilità solidale negli appalti pubblici, Note informative 44/09, 69 Carinci M.T. (2006), Gli appalti nel settore privato e la distinzione tra appalto e trasferimento d’azienda ed il trattamento dei lavoratori impiegati negli appalti, Il diritto del mercato del lavoro, 425 Carinci M.T. (2010), Utilizzazione e acquisizione indiretta del lavoro: somministrazione e distacco, appalto e subappalto, trasferimento d’azienda e di ramo, Giappichelli ed., Torino Chieco P. (2004), Somministrazione, comando, appalto. Le nuove forme di prestazione di lavoro a favore di terzo, WP “Massimo D’Antona”, n.10/2004 Chieco P. (2007), Lavoro e responsabilità solidale negli appalti: dalla legge Bersani alla finanziaria 2007, Lavoro nelle giurisprudenza, 467 Corazza L. (2004), “Contractual integration” e rapporti di lavoro. Uno studio sulle tecniche di tutela del lavoratore, Cedam, Padova Del Punta R. (2008), Le molte vite del divieto di interposizione nel rapporto di lavoro, Rivista italiana di diritto del lavoro, 129 De Luca Tamajo R.- Paternò F. (2007), Art.29, in De Luca Tamajo R.- Santoro Passarelli G. (eds), Il nuovo mercato del lavoro, Cedam, Padova De Simone G. (1995), Titolarità dei rapporti di lavoro e regole di trasparenza, F.Angeli, Milano Draghetti L. (2009) La genesi della l.r.2/2009. Tutela e sicurezza del lavoro nei cantieri edili e di ingegneria civile, Le istituzioni del federalismo-Suppl.1, 29 Ghera E. (2001), Le c.d. clausole sociali: evoluzione di un modello di politica legislativa, Diritto delle relazioni industriali, 133 Giugni G. (2010), Diritto sindacale, Cacucci, Bari Imberti L. (2008), Responsabilità solidale negli appalti e subappalti dopo il D.L. 97/2008: una disciplina in continuo movimento, Lavoro nella giurisprudenza, 659

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Izzi D. (2008), La tutela del lavoro negli appalti, Lavoro e diritto, 439 Lai M. (2011), La sicurezza del lavoro negli appalti, Rivista degli infortuni e delle malattie professionali, forthcoming Mancini G.F. (1972), Sub art.36, in Statuto dei diritti dei lavoratori. Commentario al Codice Civile a cura di Scialoja e Branca, Zanichelli, Bologna-Roma. Orlandini G.(2008), Considerazioni sulla disciplina del distacco dei lavoratori stranieri in Italia, in Rivista italiana di diritto del lavoro, 59 Orlandini G. (2011), Il recepimento della direttiva sul distacco transnazionale in Italia. L’impatto del caso Laval, Giornale di diritto del lavoro e di relazioni industriali, 405 Pallini M. (2006), Diritto del lavoro e libertà di concorrenza: il caso dei servizi aeroportuali, Rivista giuridica del lavoro, 21 Pallini M. (2011), Dalle parole ai fatti, Il lavoro nei trasporti, 10 Pascucci P. (2011), 3 agosto 2007-3 agosto 2009. Due anni di attività legislativa per la salute e sicurezza dei lavoratori, Aras ed., Fano Pasquarella V. (2010), La responsabilità nel sistema degli appalti, in Zoppoli L., Pascucci P., Natullo G. (eds.), Le nuove regole per la salute e sicurezza dei lavoratori, Ipsoa, Milano. Pessi R. (2010), L’appalto di opere e servizi, in Persiani M. (ed.), I nuovi contratti di lavoro, Utet, Torino Rausei P. (2011), Il lavoro negli appalti. Linee guida ministeriali, Inserto di diritto e pratica del lavoro n.15/2011 Rescigno P. (1988), Appalto. Diritto privato, EG Treccani, Utet, Torino Scarpelli F. (2006), Regolarità del lavoro e regolarità della concorrenza: il caso degli appalti pubblici, Rivista giuridica del lavoro, I, 753 Scarpelli F. (2008), La responsabilità del committente negli appalti e il contrasto al lavoro nero: nuovi interventi del legislatore, Note informative 40, 27 Sgroi A. (2008), Obbligazione contributiva e responsabilità solidale, WP Adapt 58/2008 Speziale V. (2006), Appalti e trasferimento d’azienda, WP “Massimo D’Antona.IT” 41/2006 Tullini P. (2007), Sicurezza e regolarità del lavoro negli appalti, Argomenti di diritto del lavoro, 890 Vallebona A. (1999), Successione nell’appalto e tutela dei posti di lavoro, Rivista italiana di diritto del lavoro, II, 217

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Core Report

C. The interpretation, implementation and enforcement of the relevant national laws

Part I. Subcontracting in general 1. Application in practice of the rules on subcontracting and cases 1.1 Unlawful contract and illegal labour supply (Article 29, paragraph 1 and 3-bis, D.lgs.276/03) Several times the courts have dealt with the rules on unlawful contract and illegal supply of labour. The case law is very rich and complex. Many decisions concern the legislation of 1960, in force before the 2003 reform. The latter is (still) a matter of judgments mainly from the lower courts. The principles developed in interpreting the old rules are however considered largely still valid. Recently the Court of Cassazione (Cass. 23 November 2009, n.24625, Diritto e pratica del lavoro 2010, Insert 7/2010) ruled on the application of legal requirements of legitimacy of the contract. The judgment is useful to recall the consolidated principles on the matter. The Court states that “it is not lawful the contract whose object is making available the job performance for the client, leaving to the contractor-employer only administrative tasks linked to the labour relationship (salary, holidays, certainty of the continuity of the performance by appropriate substitutions), but without a real organization of the performance itself aimed at obtaining the productive result”. The Court of Cassazione considers as indication of an unlawful contract the exercise of the employer’s prerogatives by the client, who then must deal with a contractor’s responsible and not directly with her/his workers, in controlling the job execution. It is an indication of unlawfulness also the compensation for the contract determined on the basis of the labour costs actually supported by the contractor. An effective business organization possessed by the contractor is not enough if it is not used in performing the contract; while the use of instruments owned by the client does not imply the unlawfulness of the contract if this doesn’t make the contribution of the contractor’s organization irrelevant (on this point see Ministry of Labour, interpello 22 October 2009, n.77, according to the consolidated case law). The Ministry of Labour has intervened several times to solve problems arising from the practical application of these principles in different sectors. A note of 2007 clarified the conditions of legitimacy of contracts for nursing services, pointing out the need that the activity is performed by the contractor “at his own risk”, which is not when her/his activity is limited at the preparation of work shifts and at the management of wages (Ministry of Labour, note 27 November 2007, n.15749); similar indications have been provided in relation to catering, banqueting and restoration held by “consortium” of undertakings (Ministry of Labour, interpello, 20 February 2009, n.16). Another important clarification on the practical consequences of the rule on unlawful contract is derived by a 2006 judgment of the Court of Cassazione (Cass. S.U. 26 October 2006, n.22910, Diritto delle relazioni industriali 2007, 503), in which the joint and several liability is excluded when the worker obtain by the Labour Court the recognition of the employment relationship with the user. The nullity of the contract under which the

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worker was engaged by the provider (pseudo-contractor) excludes the existence of any legal relationship between them: the latter is then not liable for credits accrued by the former. Even the Administrative Courts have dealt with the proper interpretation of Article 29, paragraph 1, recognizing its applicability in the case of public contract (inter alias, T.A.R. Piemonte 27 June 2006, n.2711, Diritto delle relazioni industriali 2007, 467) The protection for the worker however is limited in this case by the impossibility to request the establishment of the employment relationship with the public client under Article 29, paragraph 3-bis. The question on the lawfulness of the contract (on the opinion of the actors involved) is relevant mainly when the subcontractor is a “cooperative” providing services, capable to offer to the client a lower labour cost. The vagueness of the legal criteria to identify a lawful service contract and the resulting uncertainty of their application when the service requires little or no use of “hard” assets, facilitates contracts with such organizations, but it also involves a high risk of litigation. Many actors consider the activity of some cooperatives a form of “modern” illegal hiring and exploitation of labour supply (“caporalato”). Even in the construction and transport sectors, unions denounce the widespread use of illegal hiring and false self-employed workers; in both cases the phenomenon is associated with the extreme fragmentation that characterizes the structure of these economic sectors. The situation is particularly alarming in some regions in the South, where percentage of undeclared work is very high (especially in construction and agriculture) and where the activities of illegal hiring of immigrants is sometimes controlled by organized crime. The legal rules in these contexts are widely disregarded and workers are hardly able to act to obtain the legal status for their employment relationships. A recent case occurred at Nardò, in Calabria, where a strike (the first of its kind) was called by non-EU workers irregularly hired, mainly of African origin, who claimed the right to be employed directly by farms producing tomatoes they work for (Il Manifesto 20 August 2011). Despite the emergence of the use of fictitious contracts and the rich case law, all the actors interviewed say that very few actions are taken in court by workers claiming the application of Article 29, paragraph 3-bis. In fact the action is rarely taken on the initiative of an individual worker, especially with low qualification (as workers of the cooperatives are). The question of the lawfulness of a contract is raised (as well as by inspection authorities) by the unions, whose action is directed to “regularize” workers in both contractual and legal frame: then, these often remain employed by the “contractor”. The apparent contradiction between these data and the numerous judgments published on the topic can be explained in the first place considering the widespread diffusion of contracts and subcontracting chains in the Italian labour market: indeed the numerous judgments concern a very small percentage of workers, potentially involved (in the opinion of the stakeholders) in unlawful contracts. Secondly, many judgments do not concern hypothesis of contracts that alarm more the actors: in other words those who act more frequently before a court are not unskilled workers engaged by cooperatives in transport and services areas, but workers with higher qualifications and skills (such as those working in the computer industry). 1.2 Joint and several liability (Article 29, paragraph 2, D.lgs.276/03) Most of the judgments (of the lower courts) relating to the joint and several liability concerns the question of the applicability of Article 29, paragraph 2, D.lgs.276/03 to the client public authority; question answered affirmatively by the prevailing case law (survey

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report B3, par.10.2). Nevertheless uncertainties still remains on this issue, as confirmed by some interviewed stakeholders which have the opposite opinion. Some cases dealt with issues specifically relating to the scope of the rule. The Court (Tribunale) of Bologna (19 March 1997, Diritto e pratica del lavoro 2008, 517) included the compensation for dismissal in the “treatments” covered by the joint and several liability. In the more recent cases law however the lower courts have clarified that the joint and several liability exists only with relation to the activity executed under the contract, and not for sums owed by the subcontractors for other reasons (Tribunale Venezia 21 January 2010 and Corte d’Appello Bari 9 December 2010, 554, not jet published). Other judgments deals with the issue of the qualification of the contract; this is an important question because the “letter” of Article 29 limit the application of the joint and several liability only to contracts defined “appalto” in the Italian system. In a case decided by the Court of Milan (29 November 2007, Rivista critica di diritto del lavoro 2008, 262) a contract for the supply of dishes and cutlery for food service, involving activities like delivery, collection, cleaning, sanitation and return, was classified as a service contract (with the consequent application of joint and several liability) and not as “renting” because the performance was mainly to “do” and not “give”. Despite the letter of the norm, the same Court of Milan confirms in the subsequent case law the interpretive orientation which bring to an extension to joint and several liability to contractual relations different from the “appalto” (Tribunale Milano 27 October 2009, Rivista critica di diritto del lavoro 2009, 1019; see also Corte d’Appello di Milano 16 October 2008, Rivista critica di diritto del lavoro, 2009, 212 in this case with reference to a “consortium” of undertakings). On the other side, the same Court of Milan, in a recent case, limited the scope of Article 29, paragraph 2 excluding the liability of the client regarding workers of a subcontractor because the former expressly asked the contractor not to subcontract (Tribunale Milano 25 November 2010, Rivista critica di diritto del lavoro 2011, 174). As evidenced by the trade unionist interviewed, the workers rarely need to take legal action against the jointly liable client, especially when the contractor/employer doesn’t contest the claims by her/his workers (as in case of crisis or undertakings close to bankruptcy). The dispute often involves the union, which is the bearer of the claims of workers, advancing the payment request to the guarantor. Specific forms are normally used, prepared and sent by the same union (so-called “substitution powers”) which communicates to the client the kind and extent of the insolvencies, inviting her/him to pay the workers directly and (in the case of public procurement) to suspend payment to the contractor for the works done (according to Article 118, paragraph 6, D.Lgs.163/06: survey report B3, par.10.3). The need to act in court is especially evident when the insolvent employer does not cooperate with the union or it has disappeared: in these cases payroll could be missed, by which to quantify the amount of credit, then to be demonstrated by witnesses. These disputes do not implies significant issues in terms of interpretation, but only in terms of evidence. Usually, the union itself is still cautious in pushing the workers promoting court proceedings, especially if even the client’s undertaking is in a state of economic crisis. Furthermore, in public contracts, trade unions want often to avoid aggravating the economic situation of the contractor with the suspension of payments by the client authority. The main interest is not to make irreversible the insolvency of the undertaking, with adverse effects right on workers employment.

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1.3 Social clauses on re-engagement (collective agreements and Article 29, paragraph 3) In the case law judgments are reported relating to the succession in the contract and to the re-engagement obligations settled down by collective agreements. The lower courts have dealt with the interpretation and application of Article 4 of the Cleaning Services Industry, providing for a clear re-engagement clause (survey report par.11.1) (Tribunale Milano 31 July 2007; Tribunale Milano 30 December 2006; Tribunale Milano 31 March 2004, Diritto e pratica del lavoro, Insert 26/2010). Failure to comply with the re-engagement obligation by the incoming undertaking is been considered an anti-union behaviour (under Article 28, Law 300/70), with the consequent recognition of the right of workers to be engaged by her/him without a trial period and under the same conditions enjoyed under the outgoing contractor. The takeover of labour relations established with the previous contractor/concessionaire will be instead automatic (ex lege) when the re-engagement clause is required by legislation: this is what the Court of Cassazione has established under the application of Article 23, D.P.R. 43/1988 (now repealed by D.lgs. 112/99: survey report B3, par.11.4.2) on local services of tax collection (Cass. 12 February 2004, n.2735, Archivio Civile, 2004, 1487). Even in the absence of a social clause, the behaviour of the incoming contractor that contacts, with the purposes of re-engagement, only the Italian workers, excluding non-EU workers, has been regarded as discriminatory on grounds of ethnicity/race/nationality; the latter, however, has not been granted the right to be engaged, but the mere damages compensation (Tribunale Varese, 2 July 2008, Diritto e pratica del lavoro, Insert 26/2010). The practical relevance of Article 29, paragraph 3, D.lgs.276/03 (excluding transfer of undertakings rules: survey report B3, par. 11.3) seems to be little, considering the first case law on it. According to the principles of EU law, the engagement of the staff employed by the predecessor can integrate a case of transfer of undertakings (2112 of the Civil Code), although the Italian norm seems to assert otherwise (Tribunale Roma 9 June 2005 Diritto e pratica del lavoro, Insert 26/2010). The succession of contracts, however, does not constitute a transfer when neither the predecessor nor the client have sold or made available to the successor goods, tools or anything that identifies the undertaking, or if the kind of service is modified or reduced and the customers changed (Tribunale Roma 5 July 2006, Diritto e pratica del lavoro, Insert 26/2010). 1.4 Application of the collective agreements not generally binding by subcontractors In view of all the actors interviewed collective agreements are usually “formally” applied by all the employers involved in the subcontracting chain. This does not mean that in practice all workers involved in a chain performing the same activities receive homogenous treatments. Firstly, because the collective agreement is often disregarded in practice, especially in the lower part of the chain. Secondly (and especially) because contractors may apply collective agreements different than those signed by the most representative organizations, which are not universally applicable; this happens in particular when cooperatives providing labour intensive services operate within the chain. The problem is the origin of the 2007 reform on the economic treatment of the working members of cooperatives, appealed before the Constitutional Court (survey report B3, par.12). A recent highly controversial case concerned the “Multi Services” collective agreement

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signed in 2004 by two organizations not member of the most representative confederations (the employers’ UNCI and the CONSFAL union); this sector collective agreement has been applied by many service cooperatives instead of the one signed by the most representative organizations. Even in case the latter is applied, outsourcing to cooperatives is however still convenient, because the wages and the conditions of employment of a worker-member of a cooperative are worse than that due for the same work to the employees of the client/contractor. According to trade unions, even in the construction sector the real problem is not the application of the collective agreement as such (in this case provided by the construction funds system), but the application of “cheaper” collective agreements by contractors working in the building site. “Contractual shopping” is favoured by the transformations of the economic system, that enable the contractor to employ a few workers, subcontracting most of the work to “specialized” companies. The latter, more and more frequently choose to apply a collective agreement different from the construction sector one (metal workers, carpentry, transport ...), depending on the activity they perform. This practice is widespread because the construction sector collective agreement is the most onerous, especially due to contributions to the Local Construction Funds. A phenomenon of “escape” from the sector agreement occurs: from the data available, trade unions show that only 40% of the undertakings working on construction sites applies the construction collective agreement. The Ministry of Labour dealt with this problem, stating that undertakings which apply an agreement different from the construction one, if depending from their prevalent performed activity, are not required to register into the Local Construction Fund (interpello 23 December 2008, n.56 and circular 30 January 2008, n.5). The absence of collective agreements generally binding signed by the most representative unions has led to a further problem, reported by the interviewed trade unionists. In some regions so called “anomalous” funds have been created by “less representative” organizations, which leads to lower social security contributions. These funds are authorized to release the DURC although they don’ t deliver all the benefits guaranteed by “normal” funds. A scenario of “escape” from the sector collective agreement is taking shape even in the transport sector, where big multinational companies operate through the core business outsourcing all the rest, mainly through contracts with (again) cooperatives that deal with the logistics and movement of goods (so called “porter cooperatives”). Collective agreements (applied instead of the transport ones) change depending on the type of activity outsourced: e.g. many contractors of ANAS (the national agency that deals with road maintenance) apply the collective agreement of concierge services, much cheaper than transport collective agreement. Social clauses in the collective agreement are the instruments to contrast this practice. 1.5 Health and safety According to labour inspection authorities rules on health and safety are frequently violated. The rules mostly infringed are those on professional and technical requirements for sub-contractors, on the coordination between clients and contractors and on documents relating to health and safety, in which often the presence of sub-contractors in the building site is not registered. Also frequent breaches of the obligations on training and on preventive medical visit of workers occur, as well as violations of the measures provided for mobile sites. The elusion of the rules of health and safety is greater in small and micro undertakings,

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where often the representative of the workers for health and safety is lacking. The case law on health and safety (related with subcontracting) mainly concerns the legislation previous to D.lgs.81/08. In particular, the Criminal Courts have repeatedly recognized the responsibility of the client (exclusive or in concourse with the contractor) because of his omission of control (culpa in eligendo), or for her/his interference in the work, or for having allowed work’s performance despite the presence of dangerous situations (inter alias, Cass. Pen. 11 and 20 November 1996, Igiene e sicurezza del lavoro 1997, 143). These case law’s principles still remain valid to recognize the criminal responsibility of the client, while with reference to civil liability Article 26, paragraph 4, D.lgs.81/08 has extended and generalized (making it objective) joint and several liability for the damages suffered by the employees of the contractor. Uncertainties arise from the case law regarding the recipients of the obligations of “detailed information” about the risks associated with the execution of the contract, charged to the client from Article 26, paragraph 1 (b), D.lgs.81/08 (already included in the Legislation of 1994). In the past Court of Cassazione stated that the information did not concern individual employees, recipients of the information obligations imposed on their employer (under Article 36, D.lgs.81/08) (Cass. Pen. 5 December 1998, Igiene e sicurezza del lavoro 1999, 96); more recently it has recognized the right to be informed to every worker inside the workplace (Cass. Pen. 20 August 2010, Igiene e sicurezza del lavoro 2010, 602). Many judgments (by Criminal Courts) deal with the obligation of “cooperation and coordination” among the client, the contractors and the subcontractors to implement prevention measures (Article 26, paragraph 2) (among the latest, Cass. 22 September 2009 , Igiene e sicurezza del lavoro 2009, 631). Such an obligation involves an active behaviour of interference by the client, the lack of which exposes her/him to criminal liability. According to this case law Courts have also clarified what does the notion of “specific risks” of the activity of contracting undertakings (which is excluded from the obligation of cooperation) mean (Article 26, paragraph 4). In the recent “Fincantieri” (a public company leader in the shipbuilding sector) judgements (Cass. Pen. 3 February 2011 and 21 December 2010, Igiene e sicurezza del lavoro 2011, 172) the Court of Cassazione defines as “specific risks” those which “impose precautions dictated by rules requiring a specific sector and technical skill, generally lacking in those who work in different areas or that involve the knowledge of specific procedures or the performance of specific techniques” According to this definition, the client was judged responsible for the fall from a roof of an employee of the contractor, caused by the fragility of the slabs of cement. Furthermore, several times Courts recognized the nullity of contractual clauses relating to exemption and transfer of client’s liability (Cass. Pen. 21 June 2006, Igiene e sicurezza del lavoro 2006, 699, and 17 January 2007, Igiene e sicurezza del lavoro 2007, 279). 2. Control by the actors of the existing mechanisms 2.1 General framework Control over working conditions by the inspection staff of DPLs is held according to D.lgs.124/04. In particular, Article 13, D.lgs.124/04 (recently reformed by Law 183/10) regulates the “first access” to workplace, defining the procedure that inspectors must follow to contest the infringements and to verbalize the acts. The documentary check is carried out through an examination of the “Libro Unico del Lavoro” (Single Labour Document) (introduced in 2008 to replace the previous social documents) in which the

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elements that characterize the employment relationship are recorded, including fixed and variable elements of the remuneration. Inspectors from social security institutions verify both the lawfulness of the contract, in order to determine the employer bound to pay contribution (below par.2.3), and the proper payment of it. For this reason, like the labour inspectors, they have the power to access the undertaking, to control the documents and to contest violations, even the criminal ones (in more severe cases of contribution evasion). As the Dublin report (Liability in subcontracting process in the European construction sector: Italy, European Foundation for the Improvement of Living and Working Conditions) points out “As a result of its handling of a considerable portion of workers’ salaries – holiday pay, Christmas bonuses and seniority allowances – the Local Construction Fund also performs additional verifications regarding the correct fulfilment of wage obligations by employers. Furthermore, should a subcontracting company fail to comply with such obligations, the Construction Fund sends the offending company a copy of all the correspondence between the parties”. The inspection system is generally considered ineffective and this favours elusive practices and the use of illegal labour. The fragmentation of the industrial system and the volatility of undertakings makes the situation worse; controls often interests the best-known companies, which are more often in compliance with the law and collective agreement. According to the common opinion of the social partners (unions and employers), the less known undertakings usually escape the controls; these frequently change their names, they use fictitious locations and formally employ 2 or 3 workers (but actually they use many more). As observed by the President of ANCE Toscana (National Association of Construction Undertakings) “The real problem is not the law, the problem is the check and the way in which it is made: inspectors control who is known and who is regular at 90%, applying penalties on their 10% of irregularities. Who is acting completely out of rules, remains undisturbed”. Trade unions obviously plays a central role in daily monitoring compliance with the law and collective agreements by clients and contractors, through their local structures and representatives in the undertaking (where present), including the representatives for health and safety. The activity of the union is far less effective in small companies (fewer than 16 employees) where there aren’t representative bodies and where often also the health and safety representative is missing. Clients generally carry out checks on contractors’ and subcontractors’ conducts, both prior and during the execution of the contract, to avoid the consequences of joint and several liability. The absence of mechanisms for exemption from liability induces many companies to require documentation not requested by the law, in order to minimize the risks of legal actions by workers. According to a well-established practice, clients insert in the contract an obligation for the contractor to submit, at least quarterly, the DURC related to her/his own employees and to any employees of her/his subcontractors. However the DURC is rarely considered a sufficient guarantee, so the client undertakings normally require additional documentation.

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Some practical examples of control activities by contracting undertakings

The practice followed by the ICET Industrie S.p.A. can provide a significant example of the type of documentation that clients may require in order to avoid the consequences of the joint and several liability. The ICET is a medium-sized company operating in Tuscany in the construction and electromechanical sector, very careful in selecting contractors respectful of the obligations laid down by law and collective agreement. A specific office is competent to follow the fulfilment of labour law obligations by the contactors. Altogether, considering both the documents required by law and by contractual obligations, the contractors are required to present about 40 documents (original or certified copy), including: a registration document from the chamber of commerce (camera di commercio) certifying that the company has not been subjected to bankruptcy proceedings over the past 5 years; the DURC; a statement of the average annual manpower and of the collective agreement applied; a detailed list of equipment and tools to be used; accident register, stamped and signed on each page; copy of the LUL (the Single Social Document); the list of personnel who will enter the site, with relative recruitment communication note to the Employment Office (Centro per l’impiego); medical certifications on suitability to perform the job of the staff present in the site; the minutes of the election of the workers’ representatives; certificates of participation to training courses for workers and designated workers for protective and preventive activities; appointment of the foreman for each subcontractor; statement of worker’ representative declaring s/he has viewed the security plans drawn up by the contractor (the ICET) and the clients. Monthly, ICET requires the complaint to Local Construction Fund referred to each worker (by name) and the copy of the forms presented by the contractor (and subcontractors) to social security institutions (now, Uniemens) and to Tax Agency (F24 form). These latter documents are useful to obtain information about the contributions and tax payments made monthly and the total number of workers and working hours reported (data which can not be assessed with the DURC). Usually the company periodically requires a copy of the receipt of payment of wages to the workers, by bank transfer, bank draft or other item objectively confirming the payment.

Similar checking activities are taken by INDESIT, of Merloni Group, leader in domestic appliances’ production. The company, especially when the contract is terminated before the deadline, use conditioning the payment of the contractor to the presentation of a statement by the employees to have been paid regularly (a receipt). Sometimes the company spread the payment to contractors by instalment, delayed over time and conditional to the absence of claims by workers.

These practical examples, even if they are related to “virtuous” companies, reflect the result of widespread practice guidelines provided by organizations (as confirmed by ANCE, relating to construction sector). 2.2 The control by inspectors on wages obligations: the “warning assessment act” (diffida accertativa) In case of missed or partial fulfilment of wage obligations by the employer, the inspectors can adopt the “warning assessment act” under Article 12, D.lgs.124/04. If confirmed by the Director of the Regional Directorate for Labour (DRL), the act can be enforced as an executive judicial title (survey report B3.2, par.4). Although the law identifies the

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employer as the only recipient of the act, the Ministry for Labour has recently instructed the inspectors to notify it also to the jointly liable guarantor (circular n.5/2011). As correctly reported by an interviewed inspector: “the recent Ministerial intervention wanted to fill a clear deficiency of the law which, aiming at guaranteeing a wider protection to the workers of the contractor, forces them to take an action in court against the jointly and severally liable client; the enlargement of the legal provision on inspections by the circular, even though not fully consistent with the hierarchy of the sources of law, relieves the workers from this burden, entrusting them with a more complete protection” (DPL Bologna). It may be however difficult for the inspector to enforce the warning assessment act, due to the legitimacy requirements prescribed by the law. Inspectors have difficulty to exactly valuate the amount of labour credits. According to Article 474 of the Civil Procedure Code (concerning enforceable judicial acts), the warning act can be enforced only if the inspector acquired evidence of a credit “certain, liquid and payable”, deriving from “noncompliance with contractual scheme”. As clarified by the doctrine, “the warning assessment act can be enforced concerning the sole case of noncompliance to express contractual clauses immediately ascribing certain economic rights, i.e. endowed with the character of actuality and definiteness, or, in any case, of definability” (M. Cinelli, Gli articoli 11 e 12 d.lgs. 124 del 2004, Rivista di diritto della sicurezza sociale 2005, 318). The warning act is the only tool the inspectors can use to ascertain and guarantee the fulfilment of wage obligations, deriving from provisions of the collective agreements and not from the legislation. Broadly, inspectors are not competent to impose sanctions for the breach of collective agreements, since the obligations based on them have merely private nature (below par.2.5). 2.3 The control by inspectors on unlawful contracting and illegal labour supply The control exerted by inspection bodies primarily focuses on the nature of the contract, in order to exclude it involves illegal labour supply. The inspector ascertains that the contractor really holds “an organisation of the means” necessary to execute the work or to provide the service and that business risk is borne on her/him (Article 29, paragraph 1, D.lgs.276/03). In practice the control is performed through observation (and consequent verbalization) of the activities performed by the workers found during the inspection, through collection of general information from them and, also successively, from the legal representatives of the companies involved in the contract, and through the examination of the social documents. Requested documentation includes also the contract, the invoices paid according to the contract and any further documents which may be useful with regard to the investigation, e.g. registration certificate from the chamber of commerce (from which the technical and professional requirements of the undertakings are inferred, besides the specific activity performed by it), income situation, register of goods that can be amortized, documents proving the property and/or the possession of the means eventually used to perform the contract (lease, leasing contracts, free loan, etc.). In order to assess the existence of the business risk on the contractor, the control focuses on the existence of a possible negative cost-benefits balance deriving from the activity, i.e. mainly that the payment agreed with the contractor is not commensurate to the time spent by the workers to perform the job, but it is correlated to the effective realization of the work or service scheduled by the contract. When contracts involve labour intensive companies (especially cooperatives), in order to

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apply Article 29, paragraph 1 inspectors ascertain that the organizational and control power over the employees is exerted only by the contractor, or by the person appointed by her/him, and that the client need to relate only to these reference persons (and not directly to the workers). Inspectors also check whether the contractor works for more clients or for a single-one and whether the activity has been habitually performed before the award of the contract (both the circumstances are recalled by the circular of the Ministry of Labour n.5/2011). In the presence of an unlawful contract, the inspector adopts the act of “mandatory prescription” (Article 15, D.lgs.124/04) notifying the criminal infractions. The Ministry of Labour (circular n. 5/2011) gave instructions to the inspectors to order the client, together with the prescription, to “lawfully engage the workers”; the inspectors are then invited to notify the warning assessment act to the client in order to force her/him to pay the worker the eventual wage differential between the amount paid by the contractor and the amount due to the worker, calculated as if he had been employed by the client since the beginning of the activity. These instructions are questionable, since in contrast with the provisions set by the legislation, which leaves to the worker the decision to take (legal) action for establishing an employment relationship with the client (Article 29, paragraph 3-bis, D.Lgs.276/03). The ministerial instructions do not settle doubts about the possibility to adopt the warning act against both the employers involved in the unlawful contract, on the basis of the joint liability. This should cease to exist when the employment relationship is charged to the user/client, as explained by the courts (see par.1.1 above). The practice shows that the inspectors (also before the possible action of the worker) notify the warning act both to the user and the provide, since until the judge’s decision the contract is considered valid and thus the joint liability between client and contractor can be applied. The twist of the law by the Ministry may be explained with the will to solve a coordination problem between inspection activities of social security and labour inspectors emerged in practice (confirmed by the DG Inspection Activities of the Ministry). Indeed, if social security inspectors ascertain an unlawful contract, they always register the worker at INPS (the National Social Security Institute) as an employee of the user, which is then required to pay contributions; no matter if worker claims before a court. If the inspector of the DPL does not proceed in the same way, in the absence of action by the worker, the entitlement of the employment relationship split in two, attributed to the user/client under social security law and to the provider/contractor under labour law. The question acquires a special relevance when the contractor is established in another Member State (part. II, par.6.3 above). 2.4 The control on measures related to health and safety To monitor compliance with legislation on health and safety inspectors verify the proper and complete drafting of the documents requested by the law (the Single Document of Interferential Risks Assessment /DUVRI and, for construction companies, the Operative Plan for Security/POS), the measures taken for prevention and protection, the content and effectiveness of the training and information given to workers on the risks of interference, the organization of the emergency system and the use of the identification card. A fundamental role in the daily control of the legislation is carried out by the representative of the workers for health and safety. Monitoring duties for the clients are prescribed by the law (D.lgs.81/08). To fulfil these obligations many of the larger companies provide a special Health and Safety Directorate responsible to monitor

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closely the implementation of legislation, including by the contractors and subcontractors. 2.5 The control on the application of collective agreements As above observed, the enforcement of collective agreements is not a matter for the control of the inspectors, given their purely private nature. Also for this reason, in relation to cooperatives that did not meet standards fixed by collective agreements, the inspection activity is often directed to the investigation of possible illegal supply of labour. A different situation occur when the legislation refer to collective agreements in order to admit a depart from the legal minimum standards (eg. for exceeding the contractual limits on part-time or respect for the working week and daily). In these circumstances, the breach of the collective agreements becomes punishable by inspectors. Unions, through their local structures and representative bodies, have to control whether and which collective agreement is applied in the subcontracting chain, and possibly enforce it. In the construction sector, trade unions (and both the social partners, through the Local Construction Fund) also act to ensure that construction companies do not apply collective agreements of different sector in order to avoid the contribution to the funds. A special attention is also paid in this case to the application of the local collective agreement, which regulates the Construction Fund and on which depends more than 20% of the salary. Of course the role of clients in monitoring compliance with collective agreements in the subcontracting chain can be various, depending on production and market strategies adopted. The companies contacted have fair relations with the unions and with workers’ representatives, they always require the application of the collective agreement by contractors and they monitor their effective implementation. 3. Effectiveness of norms and instruments implemented 3.1 Effectiveness of the rules on unlawful contract The opinions of the stakeholders on the rules about the limits of lawfulness of the contract are various. Substantially positive by employers: the rule would adequately identify the criteria needed to prosecute those who merely carries out activities of illegal supply of labour. As a matter of fact, in case of service contracts legislation leaves significant margins of uncertainty, but the problem is not considered particularly relevant. Trade union expresses strong doubts about the same utility of the current legislation, which would not allow an effective contrast to the use of fictitious contracts. In the field of transport services the current rules would make nearly impossible to prove the unlawfulness of the contract; the appointment of a foreman would be sufficient to avoid the risk of disputes over illegal contract in construction sector as well. On the other hand, the penalties provided by law are considered negligible (50 Euros a day per worker). The opinion of the inspection bodies is more complex. On the one hand they express an opinion substantially positive, even underlining that the legislator has just incorporated the guidelines followed by the case law, which has adapted the previous law to the changed economic and industrial context; on the other hand they report many other critical elements. They complain in particular the difficulty of performing investigations in the case of “contracts which do not require significant material assets and which imply merely - and sometimes neither significant - the organization of labour by the contractor (eg, services, porter, cargo handling, cleaning and services in general). Also the “fragmentation” of undertakings involved in the chain hinders the inspection activity, as it often does not

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allow inspection bodies to easily identify the persons responsible to the workers” (DRL Veneto). This occurs at the highest level when the contractor is a consortium of cooperatives, which in its turn performs the contract subcontracting its execution. Problems related to the concrete control activities are amplified by the lack of clarity in the law. Concerns are in particular relate to the relationship between the case of unlawful contract (Article 29, paragraph 1, D.lgs.276/03) and the case of irregular agency work (Article 27), since in practice they overlap. The case of fraudulent agency work (Article 28) further complicates the situation: in the opinion of some inspectors indeed, this hypothesis is the only that may justify the entitlement of the employment relation with the user, without the action in court by the worker, because the breach of the rule would make the contract void (unlike in the case of “irregular” agency work): but it’s not clear when such a crime could be challenged, because it requires the willing to elude mandatory law provisions (the so called “specific intent” under criminal law). Stakeholders (trade unionist and inspectors) complain also of the lack of appropriate documentation, especially documents proving the number of the days actually worked; a prerequisite for determining the penalty prescribed by law. As a consequence the penalties are often very low, as they are proportional to the working days and they are reduced (up to a quarter) if paid after the “prescription act” adopted by the inspector (survey report B4, par.1). Also the complex procedural constraints prescribed by law (D.lgs.124/04) to adopt both the inspection acts and the sanctions “do not allow to contest the infractions with the agility needed in such a problematic situation, where swift and immediate incisive actions would be appropriate” (DPL Bergamo). Neither adequate means to contrast with non-cooperative behaviours of employers are available: the penalties for failure in delivering all the documents are clearly not sufficient, if it may happen that employers (client and contractor) do not show what is required and this way prevent the possibility to make an exhaustive investigation. The inspection activity is also frequently hampered by the evasiveness and/or incomplete statements of the workers themselves in case of inspection (or in case they are subsequently convened by DPL); they often are afraid of giving unfavourable declaration regarding their employer, or they ignore the specific content of both the employment contract and the contract (especially when they are not Italian). The inspection can also occur when the activity under the contract is already concluded, with obvious consequent difficulties to ascertain how it was executed. The data (confirmed by all stakeholders) on the low number of legal actions by the workers based on Article 29, paragraph 3-bis is an indicator of the ineffectiveness of the rule or, at least, of the “private” sanctions consequent to its breach. A restraint to legal action may results from the length of the judicial proceeding and from the uncertainty about its outcome, given the vagueness of the legal criteria for distinguishing the genuine from the illegal contract. The uncertainty is reduced only in the presence of an inspection act not disputed by the employer. Also the fear of negative consequences from the “future” or (if unsuccessful) the existing employer is a reason for giving up action in court. Moreover, in the construction sector the sanction (the entitlement of the employment relation with the user/client) is almost useless because often the worker is engaged just to perform the work under the contract, after which the client or contractor may dismiss her/him for economic reasons (“justified objective reason” under Law 604/66). At last, the exclusion from the joint liability when the employment relationship is ascribed to the user concurs in discouraging the worker's legal action. This unreasonable reduction of the guarantees for credits accrued under the provider, can induce the worker not to challenge the unlawfulness of the contract in order to benefit

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from the advantages of the rules on "genuine contract". 3.2 Certification of contracts The certification procedure (survey report B3.1 par.3) has not been diffuse and it is still very little known by both the workers and the employers. This is also because of the conflicting opinion between trade unions. CISL and UIL are favourable to its reinforcement, in order to make possible a preventive control on subcontracting chain and a greater awareness for workers about their rights. CGIL looks to the institute with suspicion, as a possible obstacle for inspection activity and for the enforcement of workers’ rights. From employer side, the certification is assessed as a useful tool to reduce litigation (which is considered excessive); nevertheless, as observed, it is used very rarely. Inspection bodies have different opinion on its usefulness: some consider it as an instrument to promote legal certainty and transparency in the labour relationship, while according to others it could be dangerous because it hinders and inhibits inspection activity. Anyway the certification does not exclude the unlawfulness of the contract. In fact a certified contract may be challenged in court, as if it is performed not in compliance with the certification as if the contract has defects itself, like a recent judgment by the Court of Appeal of Brescia stated (3 April 2011). 3.3 Effectiveness of the rules on joint and several liability As reported by the Dublin Report “The effectiveness of the joint and several liability of the customer established in Section 29, Subsection 2 of Legislative Decree No. 276/2003 lies in the weight of burden imposed on the client by the joint and several constraint and the range of its effect – including wages, social security and damages, for example. This provision is extremely burdensome for the client or contractor, which is expected to assume almost unlimited responsibility in some scenarios. The legislation establishes no quantitative limit – such as the total value of the contract – to the client or contractor’s responsibility; in fact, the decree aims to maximise their responsibility”. In other words, the effectiveness of joint and several liability comes from its way of operate “objectively” and without limits; hence the impossibility for the client (and for each contractor) to avoid it. The extension of joint and several liability to the entire subcontracting chain entails the multiplication of persons liable regarding employees of subcontractors. Such an extension is useful to force the client (the first link of the chain) to use the highest level of attention in the choice of contractors and in the choice of subcontractors by them; this level of attention is to be used not only in awarding the contract but during the entire period of its execution. This is the reason why the chain liability, as settled in the Italian law, is considered extremely effective for the purpose it was adopted. Among employers the usefulness of the instrument of several and joint liability is acknowledged, because it encourages greater attention on the selection of contractors, penalizing less transparent undertakings. However, many employers complain about the objective nature of the joint and several liability, which exposes clients to the risk of claims notwithstanding checks carried out before and during the contract. The contacted companies, for example, report that, despite the checks, they are currently involved in legal litigation (that goes on for years) relating to dating back and ignored events. In this way, it is observed, the risk is that such rules discriminate against virtuous companies. The need to reduce the resulting risks from the mechanism of joint and several liability requires the adoption of a complex structure, appointed to monitor the contractors

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activity, which of course weighs down the procedures for awarding the contract. The very intrusive monitoring in the management of the staff of contractors can cause problems with compliance with the law on the protection of personal data. This is also why control can never be absolute (in addition to the objective impossibility to constantly monitor the behaviour of each contractor). Again on the employers’ opinion, the legislation would not be sufficiently clear about the limits of joint liability, since the client can be claimed by workers and by Social Security Institutions for activities not related to the subject of the contract. Once established a payment omission by the contractor, INPS frequently asks the client for the payment of contributions regardless of whether they are related to the employee and working days made to perform the contract. And this despite recently the lower courts have ruled quite the opposite (above par.1.1.) This rules on several and joint liability causes particularly negative effects on the undertakings awarding public contracts. First, the block of payment (state of works’ progress) by the client authority follows to the lack of a regular DURC even if it is due to a mere delete or deferment. Secondly, any omission by the sub-contractors determines the immediate blocking of the payment; and that happens even if the sum to be paid to the contractor is higher than the disputed several and joint debt. For instance situations are reported where the payment of one million Euros was blocked by the client authority because of 100 thousand Euros of contribution not paid by a subcontractor . Further deficiencies of the existing rules are identified by inspectors in the period for taking legal action (shorter than expected for the action against the employer), and in the exclusion of the client from the several and joint liability for the payment of withholding tax by subcontractors. Inspectors also indicate that the mechanism of joint liability often is not used because many workers ignore its existence. Both inspectors and trade unionists note the existing rules are inapplicable when the service is not provided under a contract (“appalto”). For instance, in the transport sector the law is less effective, because many contractual relations with transport companies are not formalized as contracts. The recent case law of the lower courts (mainly of the courts of Milan) related to the applicability of Article 29, paragraph 2 is ambiguous. If on the one side it goes in the direction to extend the scope of application of Article 29, paragraph 2 (including also relations between undertakings not based on contracts), on the other side it excludes the joint and several liability in case the contract is executed by workers engaged by subcontractors not accepted by the client (par.1.2). Once consolidated, this latter interpretation could have a significant impact in reducing the effectiveness of the rule. Especially in case of contracts with cooperatives, trade union reveals that the mechanism of several and joint liability is not used, because of uncertainties about the exact determination of the remuneration due by the contractor. This problem would be caused by the frequent changes of the entitlement of the employment relationship, result from succession in the contract. Often the employer replaces himself, simply changing the name of the company or cooperative. In this way s/he can apply more convenient collective agreements and working conditions. Workers engaged by the “new” contactor will sign a final discharge and release concerning previous credits, and they will have a lower wage level. The uncertain situation would be caused by the fact that Article 2112 of the Civil Code (which guarantees continuity of employment and the maintenance of the previous conditions of employment), according to the union members interviewed, would never be applied in case of succession in the contract, because of Article 29, paragraph 3, D.lgs.

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276/03. Similar critical evaluations on this provision come from the inspection bodies, on the assumption that it (despite the interpretation given by the courts: above par. 1.3) would preclude the possibility to apply Article 2112 in case of contract succession and, as a consequence, the several and joint liability between the outgoing and the incoming contractor. According to trade unions even the rules on liability for contribution do not always work properly. Indeed cases of inertia of the INPS would not be rare, lacking workers complaints. For example, special caution (on the opinion of some trade union officials) would be reserved to Italian Post Agency (Poste Italiane), because of its precarious financial situation, already endangered by several legal disputes in which it is involved (but of course this is a mere guess). Despite the above listed limitations, the unions believe that the rule on joint liability represents an indispensable instrument for protecting workers’ rights, balancing the situation of extreme fragmentation of the economic system which characterizes both the labour intensive services and (even more) the building and transport sectors. 3.4 Effectiveness of the rules on health and safety The opinion expressed by the actors on the security rules is generally positive, in the sense that the planned measures are considered necessary and useful to reach the aim for which they are adopted. However, the measures provided by law are not enough to ensure effective safety at workplaces, especially because the contract is often used to reduce labour costs, with inevitable impact on the compliance with health and safety obligations. The issue of using contracts to reduce labour cost is strongly highlighted by trade unions; within public contracts, this issue is ascribed to the awarding criteria that actually favour undertakings which compete reducing labour costs (and thus also safety costs). The rules of the Code on public contracts aimed at imposing the compliance with health and safety obligations by the contractors would not be enforced due to the absence of effective controls by contracting authorities. The effectiveness of safety rules is reduced dramatically by the large presence of micro-undertakings. In this kind of undertakings the violations of the obligations by employers are favoured by the lack of the workers’ representative, that has a key role to ensure the implementation of the measures laid down by law. Especially in small undertakings (but not only there) legal obligations are fulfilled just through the formal drafting of the documents requested by the legislation (DVR, DUVRI and POS), thanks to the services of private legal consultants. Legal obligations to be performed are often pointed out by the client to contractors and to subcontractors, that sometimes ignore them. Inspection bodies report, as a problem, the spread of standardized documents, “written in a generic form, without specific reference to the particular service/work executed” (DPL Milan), that inhibit to perform control on the behaviour of undertakings involved in the subcontracting chain. Also the fragmentation of competence between the several responsible persons for health and safety makes the assessment of legal requirements difficult to ensure by the inspectors. Inspectors again report that frequently in the building sites “almost exclusively self-employed and family workers, often charged directly by the client” work, regarding which the provisions on health and safety are less rigid and more easy to avoid. Furthermore the legislation loses effectiveness “when a worker is working (for instance to replace colleagues on sick leave or on holidays) in a site where s/he has never been before; the lack of knowledge of the workplace exposes the worker, although regular employed, to

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concrete danger since s/he wasn’t trained about the real risks arising from the site” (DPL Bologna). The employers’ organizations criticized the 2007 reform for the excessive tightening of the sanctions introduced. However, an adverse opinion on the rules on health and safety don’t result from the relevant stakeholders interviewed: the existing measures are considered harsh but basically necessary to spread a culture on safety within the workplaces. On the other hand, the unions think some sanctions on the violation of procedural requirements are ineffective (such as those related with the information and consultation of workers’ representatives). In fact even the most serious breaches of health and safety obligations are punished only when an injury occurs. In conclusion, the actors bring out the belief that the problem of lack of safety in the workplace does not depend on legislation (overall satisfactory), but from an economic and industrial context that leads to infringe it. 3.5 Effectiveness of the social clauses and of the rules on public procurements Social clauses are considered indispensable measures to avoid (or at least to limit) that undertakings which do not respect the collective agreements may be favoured in awarding public contracts. This aim is pursued through the obligations settled down both by the Law 300/70 (Statuto dei lavoratori) and by the Code on public contracts. The effectiveness of this mechanism is limited by the extreme chaos and “anomia” of the Italian industrial relation system, which makes possible the coexistence of different collective agreements in the same sector. Interviewed trade unionists report that in practice, especially in labour-intensive service sector, contractors and subcontractors sometimes apply collective agreements signed by organizations other than the most representative; these are primarily (though not exclusively) cooperatives. To contrast these practices the reference to most representative social partners was introduced by the 2010 Regulation. All the provisions of the Code on public contracts aimed to promote the compliance with collective agreements and with standards established by the legislation on health and safety, in the unanimous opinion of the trade unionists, can not however effectively ensure the workers’ rights as long as the criteria for the award of contracts will continue favour those who submit the lowest price. Also the employers criticize the current legislation for regulating the lower price awarding criterion. In particular they believe that the possibility to justify abnormally low tenders enables undertakings to operate out of market conditions; therefore these latter almost inevitably circumvent law and collective agreements, this damaging “virtuous” undertakings. In practice the contracting authority never assesses the tender unjustified, regardless the entity of the price (which sometimes is lowered to 40/50%); this happens not only because official responsible for the procedure want to avoid risks of litigations but also because (considering the peculiar Italian context) the reject of the tender would expose her/him to the inevitable suspicion of “favouritism” or even “corruption”. On the opinion of social partners, some provisions of the recent reforms of the Code on public contract go in the right direction but they are not considered sufficient to contrast social dumping within public procurements. Article 4, D.L.70/2011 gives to the public authorities the power to provide for automatic exclusions of abnormally low tenders, if under the threshold fixed by EU law (5 million of Euros); this anyway is a temporary provision (valid until December 2013) and it’s difficult to predict if and how it will be applied.

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Also the norm establishing that the tenders must be selected at net of “the labour cost, evaluated on the basis of the minimum rates of pay laid down by sector collective agreements signed by the comparatively more representative workers and employers organizations at national level, and … the measure adopted for implementing legal provisions on health and safety” (Article 81, paragraph 3-bis, D.lgs.163/06 inserted by D.L. 70/2011: survey report B3 par.10.3) risks to be ineffective because of the lack of mechanism enabling to control on the labour cost actually incurred by the contractor. If the latter declares a certain level of labour costs, this does not mean that notwithstanding s/he can economise on that costs in executing the contract. Trade union tends to consider the same public contracting authorities the main responsible for the failure to enforce collective agreements and for the circumvention of the rules on health and safety, not only because the award criteria promote such behaviours. Despite the formal constraints imposed by the legislation, on the opinion of many actors (primarily trade unionists), contracting authorities do not carry out effective checks on contractors, nor they verify the respect of the laws and collective agreements by them. Both social partners denounces also the chronic delay in payment by the public clients (which can reach up to 200 days and more), which is the cause of crisis situations for contracting undertakings that obviously have an impact on workers’ rights and employment. In service sector, FILCAMS (the services sector union of the CGIL) reports a recent case where the Ministry of Interior called for a public tender on cleaning services in the barracks, by activating specific award session for each barrack, rather than one at national level that would have over exceeded the “European” threshold amount for the public contracts (a practice called “unwrapping”): in this way the Ministry awarded contracts to less reliable small and micro contractors (mostly cooperatives). Mainly in the case of construction contracts, trade unions underline that the fragmentation of undertakings working in the site reduces the effectiveness of the social clause and of the limits on subcontracting prescribed by the Code on public contract. Sub-contractors are generally considered “specialized” undertakings and thus they can avoid the threshold of 30% of the value of the “prevailing work” fixed as a limit to subcontracting (Article 118, paragraph 2, D.lgs.163/06: survey report, par.10.1); as “specialized” undertakings they may apply collective agreements other than the construction sector one. With reference to social clauses in collective agreements, their widespread use testifies that the social partners (obviously trade unions first) consider them necessary to prevent strategies of dumping (especially by cooperatives) through subcontracting chains, and to ensure employment. This does not imply that this kind of clauses have a high degree of effectiveness: it is limited by purely “private’’ nature of the obligations based on the social clauses, which cannot be enforced if they are not translated correctly in the contract. In the construction sector, the trend towards specialization of the activities on the site (which bring to the application by subcontractors of collective agreement other than construction’s) reduces the possibility of claiming the enforcement of the clauses. The same problem arises in the transport sector, despite the strict constraints laid down by the sector collective agreement (survey reports B3, par.11.1). The main general problem (highlighted in particular by CGIL trade unionist) is the lack of legal rules on collective bargaining, which allows undertakings not to apply the sector collective agreement or to choose the most convenient one. This is one of the factors that in Italy favours the outsourcing and the fragmentation of the economic system. The

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lack of erga omnes effect of the collective agreements, in the construction sector also weaken the system of local funds, whose functioning is based on uncertain rules mostly contained in administrative acts; this just for the difficulty of regulating by statutes a matter resulting from collective bargaining. 3.6 Effectiveness of the DURC Even about the DURC as a measure of preventive control, the opinions of the actors involved are conflicting. On the one hand, in the opinion of all the stakeholders interviewed the DURC is an important novelty in the Italian regulatory framework and it is an useful instruments for controlling “in advance’’ that contractors and subcontractors are in compliance with social security obligations and, for this reason, that they are reliable undertakings. The usefulness of DURC is demonstrated by the fact that, by practice, in the private context it is commonly requested by clients and contactors even if not required by law (eg.: outside of building sector). The effectiveness of DURC as an instrument to ensure the fulfilment of social security obligations by the contractor, however, is limited by the fact (highlighted by all actors, including the employers) that it just attests the regular contributions in relation to workers who the contractor (or subcontractor) declare to use. For this reason the DURC does not enable the client to have a substantial control over workers employed in the chain and therefore it does not represent an effective measure to contrast undeclared employment. Just to make an example: a contractor could be in compliance with the DURC declaring 2 workers employed, even if s/he uses 10 workers; or if s/he declares part-time workers employing them full time. It is not a coincidence that in construction sector, since the DURC was introduced by legislation, days of holidays, unpaid leaves and part-time (10% of staff employed) have grown considerably; given the characteristics of activities on construction sites, this is a clear indicator of undeclared work. Another problematic element must be considered. The DURC is valid quarterly from the moment of its release (Ministry of Labour, circular 8 October 2010, no.35 and INPS, circular 17 November 2010, n. 145). So the client trough the DURC can only verify the fulfilment of contribution obligations by the contractor at the time of award and signing of the contract and, if it lasts more than three months, in successive phases of its execution. Similarly, the remuneration due to the workers can be inferred from the DURC, but the contractor could omit the payment after its release. Furthermore, the DURC does not even guarantee that the remuneration have been fully paid before its release. Trade unionist reports that in construction sector it may happen that the employer, if in economic crisis, pays the contributions to the Local Construction Fund just in order to obtain the DURC, but s/he does not pay the wages for workers. In sectors other than construction trade unions have an even more critical opinion, because in the construction sector the Local Funds play a more effective control than that ensured by social security institutions (indeed INPS and INAIL release the DURC with the mechanism of “silent-consent”). Among union officials interviewed, thought most of them think that the introduction of DURC must be judged as positive, someone believes that its keeping by the contractor “is no use, definitely” (FILCAMS and FILT unions’ officials). The introduction of the “fairness indexes” (“indici di congruità”) (survey report B3.1, par.1) should strengthen the effectiveness of the DURC. Thanks to them it should become possible to assess whether a correspondence exists between the number of workers employed by the contractor and entity of the work to be carried out. In the opinion of trade unions (that have signed the agreement which has introduced and

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defined them) the indexes are however still too broad, and so only the most significant mismatches infringe them. Furthermore, the contracts under the threshold amount of 70.000 Euros are excluded from the evaluation on “fairness”. At last, according to trade union again, the indexes would be less useful in the labour intensive service contracts, where the fairness evaluation is not based on objective data, because the absence of the “hard” assets. An undertaking awarding a contract on the basis of the lower price criterion can in any case declare to be able to offer high productivity works and to need for executing the contract a few workers. Part II. Cross-border situations 1. Cross- border subcontracting in Italy: the context It’s difficult to have a clear picture of subcontracting in cross-border situations in Italy, also because no official data are available. As it will be described in the following pages, the system of protection of posted workers’ rights is weak and (on the opinion of all the actors interviewed) not efficient. Nevertheless contractors and subcontractors established in other Member State are still few and they are present only in some specific sectors: mainly in construction sector. In transport sector workers are often posted by an Agency or within a group (so, not on the basis of a contract) and most of the other relationships with foreign undertakings are based on transport contracts to whom rules on protection of workers’ rights in subcontracting chain do not apply (or at least their application is questionable). Also workers providing health and care services are posted by Agencies (mainly from Romania). In some sectors the cross- border posting of workers is almost totally lacking. This is the case for labour intensive services (as cleaning and catering). On the opinion of trade unions the reason of this situation is to be found on the structural feature of the Italian labour market and economic system. In labour intensive service sector most of the economic actors are cooperatives which benefit by a very low labour cost, thank to a favourable legislation and to the opportunity to apply convenient collective agreements. As a trade union official of FILCAMS affirms: “labour cost in service sector is so cheap that foreign undertakings prefer establishing in Italy”. The opportunity to exploit from “internal” social dumping explains why in other sectors too a low number of foreign undertakings operates. In construction sector for example the client subcontracting to a self employed or to a craftsman benefits by a reduction of labour costs equivalent to that obtained by (legally) subcontracting to an undertaking established in Romania. For the same reasons, a foreign undertaking could consider easier and more convenient to establish in Italy and to register into the local chamber of commerce, exploiting the dumping offered by the Italian economic and industrial system, than to provide services from another Member State. In this way s/he avoids costs related with posting and the risks coming from the uncertainty of the Italian legislation implementing Directive 96/71/EC. This latter, on the other hand, imposes the application of the collective agreement signed by the most representatives organizations. It is not a case, in such a context, that many contracts with undertakings from the Eastern Member State are illegal forms of labour supply, done by letter box company often created by Italians (as denounced also by ANCE): lawful subcontracting is often not profitable . Foreign undertakings posting workers in Italy within public contracts are fewer than in

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private sector. In practice undertaking established in other Member States very seldom take part to a call for public tender. Usually these are big firms mainly not coming from Newcomers, which create branches or subsidiaries in Italy and which employ workers from the Italian labour market, posting only the management or high skilled workers (the core of the firm). This practice depends also on the procedural requirements (less strict than in many other Member States) for the registration into chambers of commerce and for getting the qualification (SOA, valid for 5 years with verification after 3) requested for awarding public contracts. For example, recently an important public contract for railway works was awarded by the Spanish company “Ferrovial”, which registered into the Milan chamber of commerce, it got the SOA qualification and it is still executing the contract using workers engaged in Italy. Probably for this reason, even after Rüffert judgement, no public tender imposing the application of collective agreement was contested before a court by an undertaking established in another Member State. 2. Enforcement of norms and instruments in cross- border situations The inspection competent authorities act against undertakings posting workers in Italy on the basis of their normal powers. The inspection activity is however obstructed by the lack of clear rules on keeping social documents by the contractor providing services from another Member State. The Italian rules on social documents (payslip and Libro Unico del Lavoro) are not applicable to undertakings established in another Member States. The law implementing Posting of Workers Directive traces no provisions imposing to the service provider to designate a representative, or to hold and keep social documents in Italy. The only document that s/he has to keep on the basis of the existing legislation is the E-101 form (now A-1), which attests its registration on the social security system of the home State. Rules on other social documents and on controlling activities by competent authorities can only be inferred by the general law on labour inspectorates (D.lgs. 124/04). From the “general” Italian legislation on labour inspectorates activities, it can be inferred that, in case of lack of documents proving the condition of employment of posted workers, the competent authority can adopt an act (“disposizione”) asking the provider to produce documents equivalent to LUL (and to payslip) translated in Italian, kept in the State of origin (ex Article 14, D.lgs. 124/04). In case these documents aren't produced or are not satisfactory, the inspector should impose administrative sanctions to the foreign employer (fines range from 515 to 2.600 Euro, ex Article 11 D.P.R. 520/55 and Article 1, paragraph 1177, Law 296/06). Otherwise the inspector could ask the employer for a self-executed affidavit (ex Art.1, paragraph 1, lett. h), D.P.R. 445/2000), which brings penalty if such declaration is not accurate and complete. This interpretation of the existing law is endorsed by the Ministry of Labour. A check list of documents which are to be requested by inspectors to the posting employer when the inspection starts (under Article 13, D.lgs.124/04), is annexed to the 2010 Vademecum (survey report B1) aimed at giving guidelines to the actors involved. In addition to E101-102 or A1 forms, the inspector can ask the exhibition of the subsequent documents:

1. list of posted workers, with the indication on length of the posting 2. previous communication of the posting, in case the law of the home State

provides for it (Italian law prescribes a communication only for TCPW) 3. proof of identity of workers 4. letter or written contract of employment as prescribed by Directive 91/533/EC

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5. communication to the competent public employment offices, where prescribed by the law of the home State

6. certificate of the company registration by the competent authorities (equivalent to chamber of commerce) in order to verify the technical and professional qualification of the undertaking (under the legislation of the home State)

7. contract within which the posting is executed 8. all the documents requested by the Italian law on health and safety (including

DUVRI, identification card and health certificate testifying the suitability to work issued eventually by the competent doctor of the home State).

9. payslips, subscribed by the workers 10. register of the presence at work 11. eventual authorization by competent authority in case of Agency work 12. invoices issued by the client for the works done under the contract

On the opinion of the Ministry, the client/recipient should register the workers posted

from another State in the LUL. The name and the qualification of the posted worker, the level of payment and (in case of temporary agency work) the name of the Agency should result from the registration. In case the provider is established in Italy, the duty is limited to posting from Agencies and to posting outside the framework of a provision of services (Ministry of Labour, circular 21 August 2008, n.20 and circular 9 April 2009, n.13), probably because in this case the employee is already registered in the LUL of contractor. Anyway, this procedure is not provided for by legislation; it’s enforced by ministerial circulars and it can be gather from ratio legis. Since breaches are not sanctioned, it is rather ineffective.

If the inspector ascertains an infringement of the existing legislations by the foreign contractor, s/he adopt the acts prescribed by the general law on labour inspectorate. In case of breach sanctioned with administrative fine, inspector adopts a warning note against the employer, who can “regularize” its status by paying a reduced fine (Article 13, D.lgs.124/04). Otherwise, the inspector shall impose the payment of the fine with an order of injunction that the employer can challenge before the court (Articles 18 and 22, Law 689/81) within 30 days from notification. The order of injunction can be appealed before the DPL or DRL within the same terms (Article 16, D.lgs.124/04), that are therefore suspended. Both appeals do not automatically suspend the enforceability of the order, but the suspension may be decided by the court on request from the claimant. If the penalty is a criminal sanction (in most cases punishable by fine) the inspector charges against the infraction by an act of “mandatory prescription” (prescrizione) which allows the employer to extinguish the crime by paying a reduced penalty (Article 15, D.lgs.124/04). Otherwise the criminal proceedings before the court is started. In the 2010 Vademecum the Ministry of Labour gives instructions to inspectors on the notification and enforcement of the sanction to employers established in other Member States, in accordance with the rules of the Civil Procedural Code and of the International Conventions on the matter (Annex to section 1 of the Vademecum). With reference to administrative sanctions, the Strasbourg Convention n.149/83 (signed by Austria, Belgium, Estonia, France, Germany, Italy, Luxembourg and Spain) applies: the act is notified to the Authority designated by the signatory State as competent to receive it or directly through an “international registered mail” to employer’s office, then to her/his residence and domicile. The “normal diplomatic way” is followed (Articles 30 and 75, D.P.R. 5.1.1967, n.200) in the other cases: two copies translated into the language of the State of destination (or

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into English or France) are sent to the Italian consulates. If the address of the employer is unknown, the notification is impossible to execute. In case of penal sanction decided by the Criminal Court, the judgement is notified to the home State if the employer is absent during the criminal proceeding and it should be enforced in accordance with Regulation Brussels I. No sanction is provided by the law in case of non-compliance with minimum rates of pay fixed by collective agreements, because of the private nature of the latter. Also in the event of cross- border contracts, the inspector can anyway adopt the warning assessment act (diffida accertativa), both against the employer and the guarantor established in Italy (Ministry of Labour, interpello n.33/2010 and 2010 Vademecum, 23). As the Ministry observes, through this act a double aim is pursued: “from one side, the undertaking established in Italy is able to fully acknowledge, since the beginning, the procedure in which it is involved as jointly liable, on the other side workers are informed on the existence of the several and jointly liability, as a further protection for their wage credit” . The posted worker often ignores not only the fact that the rules on chain liability exist, but also the amount of the wage credit for which s/he can claim the guarantor as a consequence of the posting. Thanks to the warning act the worker can get an executive legal title and s/he can act against the guarantor without previously taking an action in court. 2.1 Collaboration with foreign actors/institutions The Labour Market Directorate of the Ministry of Labour (“DG Mercato del lavoro”) is the liaison office performing centralized functions (Article 5, paragraph 1, D.lgs.72/00). The Inspection Activities Directorate (“DG Attività Ispettive”) is the office that carries out management and coordination of DPL and DRL. The latter have the function of responding to the “justified requests of information” made by the competent authorities of other Member State (Article 5, paragraph 2, D.lgs. 72/00), according to the instructions from the DG of the Ministry. The cross-border cooperation between inspection authorities takes places very differently in any local context and it depends on the State the workers are posted from. The cooperation with foreign authorities after posting, if any, are aimed to the notification of acts adopted during the inspection and of the sanctions applied.

Coordination at present is provided only through the initiative and availability eventually manifested by local inspection authorities, not being provided for a systematic cooperation to be implemented in accordance with procedures established at national level. In particular, cooperation with Eastern Countries is unsatisfactory and in case of doubt on the legitimacy of posting, inspectors normally proceed without activating contacts with the authorities of the home State. The difficulties are increased by the non homogeneous functions performed by the competent authorities of the different countries (eg. in Romania part of the functions of the DPLs are ascribed to the Ministry of Finance). Even with British Authorities the cooperation is quite difficult. Considerably better is the situation at the border with Slovenia (in Friuli-Venezia Giulia). Although not formalized and again dependent on the initiative of the single inspectorate, there are cooperation practices and exchange of information between labour inspectorates and the competent authorities of both countries. A different situation exists in the western Regions, particularly in the frontier area with France, where the cooperation involves Italy more as sending State than as receiving State, because of numerous construction undertakings and self-employed

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subcontracting in France. Among Italian and French inspectorates a cooperation has been developed on the basis of a Protocol (“Common Statement”) signed on 19 February 2008 by the Ministers of Labour. On the basis of this document an experimental period of cooperation started, involving inspectorates of Italian and French border regions (for Italy: Piemonte, Liguria and Val d’Aosta; for France: PACA and Rone Alpes). This allowed the improvement and formalization of procedures for exchanging information on both working conditions and workers’ status one hand, and on the lawfulness of the posting on the other, made on the basis of appropriate forms. The cooperation led to the creation of joint teams of inspectors from both countries working jointly in border areas. Cooperation has been effective, even if it is limited to activities against not-declared work and to monitoring the respect of rules on health and safety. The development of effective modalities for information exchange should be aimed to formalize cooperative relations with countries posting workers to Italy. To this end, contacts with the competent authorities in Romania have been activated thanks to the “Empower Project” (financed by the EU), that bring, as first result, to the adoption of the 2010 Vademecum (section 2 of which is designated to give information on the Romanian legal framework on posting). In November 2010 the Italian and Romanian Ministers of Labour signed a Protocol on the administrative cooperation in matter of inspection activity on Romanian workers posted in Italy. Such a cooperation (as Article 3 of the Protocol establishes) could bring to controls on the posted workers’ conditions of employment where the posting is executed and also in the headquarter of the posting undertaking, in order to verify its real structure and its activities in the home State. This is a very ambitious objective, very far to be achieved. Strengthening the cooperation should come also by the implementation of other projects involving inspectorates and financed by the EU. For example, with reference to international road transport, many seminars for inspectors from different Member States have been organized and scheduled. The improvement of the cooperation is also expected from the IMI system that should make available data on posted workers within the EU. Very few cases of collaboration between social partners exist (or at least, they have been reported), apart from some cases in frontier regions (as between local organizations of Friuli Venezia-Giulia and Slovenia). On trade union side, the collaboration is stronger where an International Trade Union Council operates (the most active have been instituted with Slovenian and Croatian trade unions: see the ETUC 2009 report, http//www.etuc.org/IMG/pdf_Brochure_CSIR_IT-2.pdf) 3. Difficulties regarding liabilities of the principal client/contractor 3.1Joint and several liability on wages The application of the rules on chain liability in cross-border situations requires the solution of a preliminary interpretative problem in order to understand the relationship between the special rule on joint liability laid down by D.lgs. 72/00 (Article 3, paragraphs 3 and 4) and the general regulation of Article 29, paragraph 2, D.Lgs.276/03. The first question deals with the applicability of the latter rule to foreign contractors/ subcontractors who post workers in Italy. The Ministry of Labour has expressed his opinion on this question: incidentally in the response to the interpello 33/2010 and explicitly in the 2010 Vademecum (page 24), which affirms that the inspectors should consider Article 29, paragraph 2 applicable “even to contracts in which workers posted in

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our Country by a company located in another Member State are involved”, because “this provision establishes the joint and several liability on the part of any employer”. In the same document the opinion is legally based on Article 9 of the Rome I Regulation (page 34): the rule on joint and several liability would be an “overriding mandatory provision” that always applies, whatever the applicable law (for this reason it also applies to agency workers, pursuant to Article 23 paragraph 3, D.Lgs.276/03). To the argument followed by the Ministry (actually not very articulate), the subsequent observation could be add: the rule imposing the responsibility to the client established in Italy does not concern the employment relationship which is on the part of the foreign employer; it is just a measure designed to protect workers’ credit and not to regulate the content of an “international” contract. This conclusion is confirmed by the fact that Article 12 of the Rome I Regulation, in defining the scope of applicable law, does not include the “joint liability” (which is regulated, in another perspective, by Article 16). Hence the conclusion that the rule “follows” the law regulating employment credit and, in the case of posting of workers, it applies to credit that the worker has towards his employer, to the extent that these derive from rights based on Italian legislation and collective agreements (under Directive 96/71/EC). Following the ministerial opinion and considering both provisions of 2000 and 2003 theoretically applicable to foreign workers posted to Italy, understanding how their relationship is concretely set up is needed. The problem would be solved considering the norm of 2000 repealed by that occurred in 2003. In this way, foreign and domestic workers would enjoy the same rules protecting their wage credits. However, it is not easy to justify such a conclusion, having regard to the “special” nature of the provisions laid down by D.Lsg.72/00, which should always prevail on the general regulation. The survival of the rule of 2000, as a special rule, would lead to the conclusion that a dual system of joint liability co-exists, depending on whether the contractor/sub contractor is established in Italy or in another Member State (some inspectors express this opinion). However, such a conclusion would imply an unjustified unequal treatment between domestic and foreign workers (and undertakings). In fact, the rule of joint liability would be less favourable to workers posted from another Member State, since it would not apply to foreign workers not employed in “internal” contract, it would imply a shorter period for taking action in court (one year instead of two) and, most importantly, the responsibility of the client/contractor established in Italy for the debts of subcontractors would be excluded (survey report B3 par.3). These “disadvantages” would be only partially “balanced” by the fact that the rule laid down by D.Lgs.72/00 provides for equal treatment (which in turn, however, should be interpreted in the light of the limits laid down in Directive 96/71/EC: par.3.2 below) and it extends joint and several liability to any employer's credit (and not only to wages). The Ministry of Labour seems to adhere to a different solution: both the joint and several liability regimes coexisting in the Italian legal system can be invoked in case of cross-border contract (interpello n. 33/2010). However, even following the Ministry position (expressed in non-binding sources), interpretative problems are not solved. The 2010 Vademecum (pages 24-25) states that Article 3, paragraph 3, D.Lgs.72/00 should be read “in light of the general principle of joint liability in Article 29, D.Lgs.276/03”, but it is unclear what this implies in terms of practical application of the two norms. Two alternatives seem possible, none of them entirely convincing: either one thinks that both of the provisions can be invoked by

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foreign posted workers or one thinks that the general provision applies in the absence of the conditions required by the special one, that is it’s applied by subcontractors and in case of contracts to be performed outside the recipient’s production structure. In any case, an unreasonable regulation follows that would need to be reformed (see D) par.2.2 below). The above shows that in Italy there is an unresolved problem of interpretation concerning the joint and several liability system applicable to cross-border situations. In practice, however, this problem does not seem to be the subject of special attention by the stakeholders interviewed. This is confirmed by the same way the Ministry of Labour addresses the issue (without actually resolving it). In most cases, inspectors and social actors act “as if” the norm of 2000 does not exist (or it has been implicitly repealed) and Article 29, paragraph 2 is the only rule that should be applied in any case of (national or cross-border) contract. Regardless of the applicable regime, the practical application of joint liability in case of cross-border contracts shows many problems, as evidenced by the fact that (in the opinion of actors interviewed) its use by workers posted in Italy is nearly zero. The reasons for that will be dealt with in paragraph 4 below. As the Ministry of Labour stated, to facilitate and promote the posted workers' action against the guarantor established in Italy the warning assessment act (“diffida accertativa”) must be notified not only to the employer but also to the client/contractor jointly liable (part. I par. 2.2 above). The adoption of this act by the inspector however is not always easy in cross-border situations. Not only because, as mentioned, the very legitimacy of the adoption of the act against the guarantor is doubtful, but mainly because the inspector hardly is able to have the proof on “certain, liquid and payable” when disputed credits are related to the pay gap between the wage paid and the pay due under the national collective agreement in force in Italy. The technical assessment of the quantum due to the posted worker is difficult to achieve, because the inspector is not often able to gain the documentary evidence of the wages that were not actually paid. S/he must acquire at least a credible payroll showing the wage paid to the worker and s/he must assess whether and to what extent it is materially different from the “minimum wage” computed on the basis of the applicable collective agreement. Moreover, the determination of “minimum rates of pay” in the light of current legislation is uncertain. In other words, despite the opinion of the Ministry, because of the vagueness of the Italian legislation implementing the Directive 96/71/EC, the judge (and therefore not the inspector) seems to be the competent body to define with certainty the quantum of remuneration payable to the worker posted in Italy. 3.2 Employment conditions and applicable collective agreements Further interpretation problems arise from Article 3, paragraph 3, D.Lgs. 72/00 which states that the client is jointly liable with the contractor to ensure posted workers “a mandatory minimum wage… and an employment treatment that’s not less than that due to his (client's) employees”. The reasons of conflict with EU law are twofold: on one hand foreign undertakings are required to comply with higher standards of protection than those allowed by Directive 96/71/EC; on the other side, this provision could create a discrimination between national and posting undertakings, because the first is not bound by the same rules as the latter, due to the repealing of the Law 1369/60, that imposed as well equal treatment in case of “national” contracts and that the 2000 rule repeated literally. Article 3, paragraph 3, D.Lgs. 72/00 reinforces the obligation imposed in general terms

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by the previous Article 3, paragraph 1, under which the contracting undertakings posting workers in Italy shall guarantee, during the posting, the (same) terms and conditions of employment, “laid down by law, regulation or administrative provisions and by collective agreement signed by the trade unions and employers associations which are comparatively more representative at national level”, applicable to “national” workers that carry out “similar” work in the same place where foreign workers are posted. In the case of internal contract, on the basis of the subsequent paragraph 3, it is not sufficient to apply the sector collective agreement, but equal treatment with respect to workers employed by the client (or the contractor, in case of subcontracting) must be guaranteed. This provision could be interpreted in conformity with Article 3, paragraph 1, Directive 96/71/EC and with the principle of non-discrimination, in order to consider it consistent with EU law. The Ministry of Labour seems to be oriented in this sense (albeit only with reference to Article 3, paragraph 1, D.Lgs.72/00), having recently stated that the obligation to ensure to posted workers “the same working conditions” as Italian workers should in fact be read “in conjunction with article 3 of the Directive 96/71, concerning the “hard core” of protective rules to be applied to posted workers” (interpello n. 33/2010 and Vademecum, 20). It follows that equal treatment between domestic workers and posted workers would be referred only to matters listed by Article 3, paragraph 1 of the Directive (inspectors interviewed express this opinion), first the “minimum rates of pay”. Furthermore, in the case of internal contract, the collective agreement to be applied is the one of the posting contractor sector and not that of the recipient sector (as stated by Article 3 paragraph 3). The solution proposed by the Ministry solves the problems of consistency with the Directive 96/71/EC, but it goes beyond the letter of the national legislation: it is a sort of contra legem interpretation, difficult to justify as an interpretation conform (at last, under C-555/07, Kücükdeveci, par.48) and that still leaves room for uncertainty in the application of the rules. In particular, it is still necessary to establish what does “minimum rates of pay” mean in the Italian legal system. The reference should be to the clauses on minimum wage of the sector collective agreement that “in fact” bind all undertakings in Italy, thanks to the case law on Article 36 of Italian Constitution which recognises the fundamental right of workers to receive a pay “sufficient to ensure them a decent life” (“fair pay”). According to the Ministry (which does not provide a comprehensive response about it), “first of all” this includes the basic pay and the age allowance. In the construction sector the minimum rates of pay laid down by the local (provincial) collective agreements should be also applied (again on the opinion of the Ministry), as they are to be considered generally binding: this also includes the economic provisions from the Local Constructions Funds (2010 Vademecum, pages 22-23). Considering case law on Article 36 of the Constitution, also the Christmas salary should be included (but it is more doubtful). Even in this case, in practice the mentioned problems don’t seem to be the subject of particular attention by the actors involved. In the opinion of the stakeholders, workers posted in Italy are entitled to the same economic treatment provided by collective agreements for Italian workers performing the same job. In fact, addressing the complex and unresolved interpretation issues mentioned above, inspectors believe that the foreign company is required to pay “all grants of an economic nature due to the employment relationship, as set by collective agreements” (DPL Milan). 3.3 Contribution and tax joint liability According to the Dublin report, there is no doubt that “foreign inland revenue and social

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security authorities will be able to demand payment by Italian contractors, bound by the constraint of joint and several liability, of contributions and taxes owed in relation to work and services supplied pursuant to contracting and subcontracting arrangements in Italy”. This would be stated by D.L. 223/2006 (Article 35, paragraph 28 of the called “Bersani” decree). In fact, neither the D.L. 223/06 nor Article 29, paragraph 2, D.Lgs.276/03 refer to the cross-border situations in prescribing the joint and several liability for unpaid contributions. On the other hand, the D.Lgs.72/00, introducing the special regime of joint and several liability, limits it to claims for payment by the worker. The application of the general rules in the case of transnational contracts depends on the solution given to the question about its scope. Even in this case the rules can be considered applicable as they concern the liability of the client/contractor established in Italy. However, further doubts are legitimate than for payment of wages, since the social security system of the home State remains applicable, to whom the joint liability rule is strictly connected. Precisely the lack of reference to the contributions in D.Lgs. 72/00 would confirm that this is the right conclusion. There are no official position taken by the Ministry on the issue, even if, in summary table annexed to the 2010 Vademecum on rules applicable to workers posted by an undertaking established in another Member State, the client's joint and several liability for social security obligations of contractor is excluded. Even more reasonable doubts (in the opinion of the writer) raise about the application of joint and several liability for withholding tax, which is a matter of public law. Furthermore, it applies only to the relationship between contractors and subcontractors, and it certainly excludes the client established in Italy. Actors interviewed tend to consider the client always jointly liable (at least with reference to contributions), as Article 29 would be fully applicable in the case of cross-border contracts. Even adhering to this view, however, there are obvious problems in terms of practical application of the rule (as some inspectors underline). It is up to social security institutions with which the worker is enrolled to determine the extent of the contribution, according to the regulations of the home State, and to act against the Italian employer. This (in the opinion of actors) is highly unlike to happen, since the foreign authority is almost always unaware of the Italian rule. So, if the rule on contribution joint liability is considered valid in cross-border situations, the effects would be virtually zero, because the social security institutions (especially in Eastern Countries) would never demand payment to the guarantor. Furthermore, it is not clear on which legal basis the Italian client can pay the contributions due by the foreign employer, if the law of the home State doesn’t legitimate her/him to do so. At last, the employers’ organizations claim that the difficulty of ascertaining the solvency of the subcontractors may expose domestic employers to high economic risks in public contracts. At the end of the contract the subcontractors may disappear, often with the workers. This involves particularly serious effects, because the law provides that the payment by the client authority depends on the presentation of documents proving the payment of contribution by subcontractors.

The Ministry of Labour has dealt with a further question connected with the fulfilment of contribution obligations. The element of the wage subject to contribution (the “contribution base”) depend on the law of the home State, even if the remuneration is calculated according to the Italian collective agreements (Ministry of Labour, interpello

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n.33/2010). However, since the social security obligations fall within the competence of the authorities of the home State, Italian inspectors are not able to control the compliance with them (also with regard to the determination of the amount of contribution to be paid). The overall impression of the stakeholders is of a widespread avoidance. In any case, the social security contributions, especially in Eastern Member States, are considerably less burdensome than in Italy and this is the main reason for the dumping that foreign companies posting workers benefit of. In this respect, trade union notes that precisely the possibility to freely determine the composition of the wage subject to contribution easies the dumping by foreign employers, which ascribe to that only the minimum wage provided for by laws and collective agreements in the home State, even when they pay the total remuneration prescribed by Italian collective agreements. 4. Reasons of the relative ineffectiveness of the existing measures Based on the above remarks, the following general reasons for which the effectiveness of legislation to protect workers in cross-border situations is reduced may be listed. First, the lack of clarity in the legislation, which results in substantial doubts about its applicability in cross-border situations. The problem of lack of coordination between D.Lgs. 72/00 and D.Lgs. 276/03 is a clear example of this. Some inspectors blame the uncertainty of the regulatory framework even to the recent developments in the case law of the European Court of Justice, especially since it doesn’t allows to understand whether and how universally applicable collective agreements must be met by posting undertakings. Particular problems concern the road transport sector, because of doubts about the applicability of the legislation itself (and of Directive 96/71/EC) in the relationships between undertakings that are not clearly based on a contract (that is, an “appalto” under Italian law). Most of the foreign transport companies operating in Italy elude all the rules on posted workers. For this reason it is increasingly common to find Italian carriers that are (formally) established abroad while continuing to provide transport services in Italy. Secondly, the absence of provisions concerning inspections, related both to the documentation that the foreign contractor must keep and to the powers that the inspector may exercise. The difficulty of ensuring the enforcement of existing instruments derives also from the absence of an obligation to submit a prior declaration to the competent authorities by the posting employer and to identify a responsible representative against whom a legal action in court could be taken. Such a framework increases the level of inefficiency of inspection controls, problem generally identified as the main reason of the ineffectiveness of existing rules. The enforcement of existing rules is made extremely difficult even by the low level of coordination between the competent Italian authorities and those of other Member States. Under Italian law, the inspection process properly ends with the notification of the acts abroad: the Italian inspector is not responsible for what happens after that. It follows that infringements, even when ascertained and contested with the notification to the responsible employer, often are not enforced, or at least, the Italian authorities (in view of what inspectors interviewed said) have no control over the sanctions’ enforcement in the State of establishment. Other reasons for the ineffectiveness of the rules mentioned above are of an “objective” nature, namely they derive from the fact that the worker to be protected is not part of the

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domestic labour market, with reference to which the rules to be applied are designed. This is evident if one thinks about the protection regime established for the worker illegally posted under an unlawful contract. The main sanction (added to the administrative and penal one, pertaining to the inspection authorities) is the establishment of a labour relationship with the user, resulting from an action in court taken by the worker. This kind of sanction is irrelevant for the posted worker, since s/he usually has no interest in getting engaged by an employer of another Member State. Especially since the worker loses the benefit of joint and several liability in the case of the establishment of an employment relationship with the user (Part. I, par.1.1). The reasons that reduce the effectiveness of rules on joint and several liability are of different kind, but still related to the “objective” reasons mentioned above. As already observed, in theory this rule is very useful for posted workers because of the difficulty of ensuring the fulfilment of contractual obligations by the employer established in the home State. The possibility for the inspector to use the warning act even against the jointly and severally liable “Italian employer”, with the consequent notification of it to the worker, should strengthen the effectiveness of the measure. However, in practice, foreign workers does not use such tools, and certainly there is no trace of that in case law. It is sufficient to bring the words of an inspector interviewed to explain why this happens: “There is a queue in Romania to come to Italy. Posted workers have no intention to cause trouble to their employer nor to the Italian client”. The same argument obviously applies to other Member States where labour costs are significantly lower than in Italy. The average salary of a Romanian worker is about €. 300,00 a month, that is about one fourth than that of an Italian worker. Even in case of failure to pay part of the salary or in case the wage is lower than that theoretically guaranteed by the Italian collective agreements, the worker is not interested to ask for what is due to her/him, thus exposing her/himself to the risk not to return to Italy. In the opinion of trade unions, almost all posted workers from the Eastern Member States have no knowledge of existing instruments and rules and (most importantly) they have no trade union consciousness. The posted workers are almost never unionized and “they feel privileged because they work in Italy” (FILCA CISL and FILT CGIL). Even when they are contacted by the union, they refuse to act against both the employer and the jointly liable contractor. Considering this, it is clear that even the adoption of the warning assessment act doesn’t change the situation, also because often, at the end of inspections, posted workers have already returned to their Country of origin. This explains the behaviour of those clients companies that, despite the rigor of the law, outsource to foreign undertakings that clearly violate the minimum standards of protection (including remuneration) or that illegally supply labour. 5. Mutual recognition to financial penalties The relevance of the existing EU level cross-border legal instrument (such as Council Framework Decision n.2005/214/JHA) in the field of sanction on labour infringements is almost none. The existence itself of the Framework Decision is ignored by many contacted inspectorates. As observed by an inspector, this occurs because the EU instrument can be relevant only in the case (very rare) the inspector ascertains that a crime listed as an infringement in the Decision was committed. With reference to sanctions adopted by inspectors, their application and enforcement should be guaranteed on the basis of the procedures and obligations arranged by the

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signatory parties of the 1977 Strasbourg Convention (part. II, par.2 above). The Italian-Jugoslavian Convention on judiciary and administrative cooperation of 3 December 1960 (G.U. 20.09.1962, n237) is still in force, regulating the relations with the State of the ex-Jugoslavia, including Slovenia (Vademecum 2010, 57). 6. Positive issues, problems, deficiencies and shortcoming in interpretation application and enforcement of the rules Problems posed by the rules on joint liability in terms of its interpretation and its application have already been highlighted (part. II, par.3). The following pages will deal with the general questions that characterize the application and enforcement of existing rules and with issues related to specific rules (different from that on joint liability) identified by the actors and emerging from the case law. 6.1 General framework Almost all the stakeholders have highlighted the structural problems of a general nature reducing the effectiveness of the existing measures (causes of effectiveness, as above mentioned). First, the fact that the rules are of dubious interpretation, also because they are too numerous and fragmented. The continuous reformation, transformation and amendment of the legislation in force, in the recent years, create a framework of great uncertainty for actors that have to respect and enforce these rules. The uncertainty increases with cross-border situations, even for the complexity of the European law which must be taken into account to interpret and apply national law. Problems arising from the ineffectiveness of the inspection system must be added to the uncertainty of the regulatory framework; these problems are caused by the lack of tools that enable an effective control over foreign companies and working conditions of posted workers and by the fact that the enforcement mechanisms are weak and unable to provide an adequate deterrent effect. The presence of various competent bodies badly coordinated with each other (D.P.L.’s inspectors, social security officials, local health units, financial police, police and army corps “carabinieri”), further complicates the exercise of inspection activity. The general structural deficiencies of the system explain why, with almost unanimous opinion of the actors interviewed, a widespread circumvention of the law and collective agreements occurs, especially by foreign undertakings established in Eastern Member State. A situation of substantial impunity due to the lack of controls is described mainly by trade unionists interviewed, especially in the transport sector: “The real problem is that posted workers are uncontrollable” (FILT). In some local contexts, the same inspection personnel have the perception of a complete circumvention of the regulations: “No foreign company applies the law, with the complicity of complacent clients”(DPL Bergamo). The most frequent avoidances concern both the treatments laid down by the legislation (particularly as regards working time and health and safety) and wages, especially in relation to elements different from the basic pay (eg. compensation for overtime or, in the construction sector, the remuneration provided by provincial collective agreement and the contribution to the Construction Fund). Moreover, the fact that the contractor applies the Italian national collective agreement does not guarantee, in the opinion of trade unionists, that the posted workers actually receives the same wage as the nationals. It seems a common practice that the employer, when the posting ends and the worker comes back, detracts from his remuneration the part exceeding that fixed by the collective agreements in the home State, by way of reimbursement of expenses for accommodation and travel.

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6.2 Inspections and sanctions One of the main deficiency of the existing system of protection of workers’ rights is related with the lack of specific provisions on controlling and inspection activities. Due to the lack of obligation of previous communication and documentation for undertaking established in another Member State, the inspection activity is not scheduled and many undertakings are not controlled. The existing instruments and powers (apart from having an uncertain legal foundation) are not sufficient and they don’t permit an effective control, especially when the foreign employer does not cooperate and the workers themselves don’t give any relevant information, because of languages reasons or they simply don’t want to do it. Even if an infringement is ascertained, there are significant difficulties in the practical application of sanctions, especially against employers established in the Eastern Countries that haven't relevant activities nor stable interests in Italy. This kind of employer, in case of inspections and consequent disputes, sometimes ceases the activity and disappears. None of the inspectors interviewed is aware of cases of enforcements on the employer’s assets in her/his own Country of origin, resulting from sanctions by the Italian authorities. In practice inspection authorities are able at the most to execute the procedure against the employer, notifying the sanction adopted (with the difficulties underlined above), which however is never applied (at least on the opinion of the inspectors interviewed). The effectiveness of penal sanctions is further reduced by the duration of the criminal procedures. Almost always the criminal proceedings against foreign employers expire (end for “prescrizione”), given the long duration of them and the short time frames provided for the most of penalties (two years). For the above mentioned reasons the only instrument having a minimum of effectiveness, on the opinion of the inspection authorities, is the warning assessment act, notified also to the guarantor jointly liable; and this not because posted workers use it as an executive instrument (considering that they in practice never act against the guarantor), but because if the warning act is notified to the Italian employer, s/he often decides to pay voluntarily. 6.3 Illegal contract and false self-employment In cross- border situations specific difficulties arise in the application and enforcement of the rules on unlawful contract and illegal labour supply. Practical cases Same cases described by the stakeholders (trade unions and inspectors) are useful for clarifying which are the main questions related with cross-border subcontracting and in which way they are contrasted and (if possible) solved. The first case (reported by F.Lauria, Pratiche di distacco transnazionale in Italia. Dall’approccio giuridico all’azione sindacale, in M.Cilento (ed.), I percorsi della solidarietà, Roma, 2009, 153), concerning the posting of Romanian workers, drew the attention of the media at local level. A Romanian undertaking (Romplanet) promoted on the web the posting of Romanian workers in construction and cleaning sector according to the conditions required in Romania (5 euro/hour). The workers (most of them already resident in Italy) were “formally” engaged by the employer established in Romania and supplied to the user established in Italy. The undertaking shut down the web site, after an action taken by local trade union (which brought the case to the attention of the labour

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inspectorate), and in consequence of an article published in an important newspaper (Corriere della sera- ed. Lombardia, 12 September 2008). Two more cases has been described by the inspectors interviewed. The first concerns eight Polish workers engaged to carry out cleaning and maintenance work at various offices and buildings. The Polish contractor company, upon inspection, has produced self-employment contracts named “umowa zlecenia” under the Polish Civil Code and substantially related to the category of contracts under the Article 2222 of Italian Civil Code. None of the workers had started a business in the home State, nor they were able to demonstrate the existence of any structure, staff or equipment that could possibly describe the activities carried out in Poland. By the statements given, inspectors have found instead that the workers were recruited in Italy specifically for the performance of cleaning tasks and the wages were hourly paid. The services provided by the workers were, in practice, qualified by inspectors as dependent labour, because of the presence of additional elements (single-client, continuous working activity, daily monitoring of attendance by the “costumer”) that revealed a total lack of autonomy of organization. The second case concerns the posting of Portuguese workers in Italy by an undertaking established in Portugal, which used (in part) vehicles leased by an Italian company. The content of the lease has attracted the attention of the inspection bodies. It didn’t seem to be coherent (though there is no specific prohibition in this regard) that the costs of the use of the leased asset (cost of fuels and lubricants, road tolls) and costs attributable to its ordinary maintenance (eg. replacement or maintenance of tires), were met by the owner – lessor (the Italian transport company) and not by the user (the Portuguese transport company). An exclusivity clause appeared even more suspect; under this clause it was agreed that transport operations were substantially determined and managed by the Italian undertaking, while the Portuguese undertaking's only obligation was to transfer the goods from one place to another. The analysis of labour and tax documentation has allowed to demonstrate the artificiality of the lease: the vehicle would never have entered into the complete availability and economic management of the Portuguese employer, who had simply to provide a driver to be used driving the vehicle, while commercial aspects of the use of the vehicle were in every respect determined and managed by the Italian undertaking. The assessment on the real nature of the contractor undertaking and the relationship between her/him and the posted workers is indicated as the greatest difficulty by the inspectors, given the diversity of regulation between States and the absence of collaboration with the competent authorities in the home State. This specially happens in case of workers posted from Eastern Member States. Trade unions also point out that the inability to control the employment relationship and the activity performed by contractors in the home State is the biggest problem. Difficulties in applying the rules on unlawful contracts derived from the uncertainties that still characterize their interpretation. “In theory” a legal problem concerning the applicable law primarily arises, to determine what is the regulation under which the legitimacy of the contract should be assessed. This in theory, because for the actors involved (first inspectors) is undisputed that the Italian law is applicable. Neither doctrine nor Labour Courts have ever examined the problem concerning the applicability of the requirements of Article 29, paragraph 1, D.lgs.276/03 to a contract concluded with a contractor (or subcontractor) not established in Italy. In the writer's opinion (shared by the DG Inspection Activities of the Ministry of Labour) they are applicable to cross-border contracts as “overriding mandatory provisions” under article 9

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Rome I Regulation, because of the criminal nature of sanctions provided for their violation. This view is confirmed by the 2010 Vademecum, in which the opinion that the provisions of D.Lgs. 276/03 punishing illegal and fraudulent temporary agency work and unlawful contract (Articles 18, 27 and 28) are also applicable to contractors and subcontractors established in another Member State is issued. Similar problems arise from the use of false self-employed providing services for an Italian customer. In this case, doubts arise about the applicability of the Italian law having a merely private relevance (Articles 2094 and 2222 of the Civil Code), even considering that the Court of Justice is oriented to conclude that the law of the home State is applicable. Precisely this Court's case law is criticized by the European social partners (criticism strongly confirmed by the “national” trade unionist interviewed), because it prevents an effective fight against the phenomenon of pseudo self employed by the competent authorities of the host State. Hence the request in the Joint Proposal of the European Social Partners in the construction industry for improving the application and enforcement of the posting of workers directive of the 13 July 2011, to recognize that the nature of labour relation of those who provide a service from another Member State can be defined by the law of the State where the service is provided. The problem of lack of coordination between social security legislation and labour law in case an unlawful contract is ascertained (Part. I, par.2.3) becomes even more significant if the contractor (or subcontractor) is established in another Member State, because the posted worker never acts to request the recognition of the employment relation with the client. The labour inspector contesting the illegal labour supply adopts the warning act against both the user and the provider; at the same time the user has registered into the social security system as the “sole” employer. In this way a situation in which the worker is simultaneously registered into two social security schemes is set up, leading to a double contributory imposition: one charging to the client, as an employer enrolled with the INPS, the other charging to the contractor, entered as employer by the competent authority of the home State. It is unclear whether the latter is informed of this situation, but it looks like this (usually) does not happen. In terms of practical application of the legislation, problems caused by deficiencies in social security documents and in powers of inspection bodies are highlighted, which are particularly relevant in the assessment activity on the lawfulness of posting. The E-101 (now A1) is the only document that undertakings have to keep, but sometimes it is not produced and this has no consequences because such conduct is not punishable. The E-101 form is anyway considered completely useless by most of the actors interviewed; on the opinion of some of them (both trade unions and inspectors) it is even counterproductive, because it provides a sort of presumption of lawfulness of the posting for an extremely long time (up to 24 months), without enabling any control over the real nature of the employment relationship between the contractor/provider and posted workers. 6.4 Agency workers The posting of agency workers is increasing in the last years, mainly in the road transport sector and in health and care services (Romanian nurses). Some posting cases regarding predominantly Romanian workers drew the attention of the media (D.Apolloni, Camionisti in affitto dall'est, Sole 24 Ore, 10 May 2010).

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A practical case It is for instance the case of an Agency created in Romania by an Italian citizen (“Arenajobs”: from Verona, as the name itself shows!) posting about 150 drivers in Italy. The Agency promotes the posting of Romanian drivers, highlighting the different labour cost compared to that of Italian drivers (9 Euros/hour opposed to about 20). This event caused the protest of the employers’ organization FAI (Federazione degli Autotrasportatori Italiani) and of the trade unions. The former contest the unfair competition by Italian less structured undertakings, not members of the representative organizations. Social partners request the Government an intervention in order to limit and contrast this phenomenon. In absence of an effective response, the FAI threatens to leave its policy and to start suggesting its members the use of these kind of posting. The main problem related with the interpretation and application of the rules on Agency work concerns the requirements requested for lawfully posting workers in Italy. These requirements lacking, sanctions are applicable both to the user and the provider and the worker can act in order to be considered engaged by the first. Article 4, paragraph 1, D.lgs 72/00 provides for a document equivalent to the “authorization” requested by the Italian law on Agency work, to be obtained by the posting employer in home State. The practical application of this norm is doubtful, because the criteria for the evaluation of equivalence by the competent authorities (first, inspectors) are not established by the law. Any administrative act adopted by the competent authority in the home State should be valid, but no specific prescriptions have been given by the Ministry of Labour. Many inspectors report that foreign employers often show unintelligible documents in their own language, probably even not authentic or, anyway, by which they are not able to infer that the employer is acting in full compliance with the law of the home State. The situation created by agencies established in State where no authorization exists, is even more doubtful; in these cases the 2010 Vademecum suggests the inspector to ask for document equivalent to the registration title of the chamber of commerce (which certifies the nature of the agency). More general problems (strongly reported by the officials of the DG Labour Market of the Ministry of Labour) come from the gap (in some cases huge) between the financial requirements requested by the Italian legislation and by the legislation of other Member State; this problem creates a situation of social dumping legitimated by the EU itself. In the 2010 Vademecum Article 5, paragraph 2, D.lgs.276/03 is recalled as a norm applicable to foreign agencies, so that, during the first two years of activity, the agency must have a caution money for 350.000,00 Euros with an Italian bank or with a bank established in another Member State. This opinion is questionable because the caution is imposed for entering the National Agencies’ Register, which does not concern agencies established in other Member States. Practical problems come also from the application of the rules regulating employment conditions of agency workers. Agency workers have the right to “economic and employment conditions not lower, as a whole, than that applied to workers employed by the user”, which is again several and jointly liable for payment and contribution (Article 23, paragraphs 1 and 3, D.lgs.276/03). The comparison between the different treatments could be difficult, because it must be done “as a whole” and not considering the single matters and element of the contract of employment. In practice, inspectors don’t give a great relevance to this problem and they tend to apply to agency workers the same rules provided for workers posted within a contract (this approach can be inferred also from the interpello n. 33/2010).

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The Ministry of Labour considers the rule on several and joint liability fixed by Article 23, D.lgs.276/03 as an “overriding mandatory provision” under Article 9 of the Roma I Regulation, and for this reason always applicable in cross-border situations (2010 Vademecum, 27). Regarding several and joint liability the same interpretative problems underlined above with reference to contracts arise. 6.5 Registration on the Local Construction Funds and issue of DURC. According to social partners, the duty for foreign undertakings to entering the Construction Funds and to certify this by means of DURC (that, in this case, certifies just the contribution to the Fund and not to National Social Security Institutes) entails remarkable practical problems. On the opinion of the Ministry of Labour a duty to register and to keep the DURC exists for those foreign undertakings that “haven’t already fulfilled, with a public or private body, obligations aimed at securing workers the same protection standards guaranteed by provisions imposed by collective agreements in Italy” (survey report B3.1.2). According to social partners, only undertakings established in France, Austria and Germany are dispensed from the registration, in virtue of mutual recognition agreements stipulated by CNCE (National Joint Body of Construction Funds) and foreign national bodies representing funds that carry out similar duties. According to these agreements, a procedure of information’s exchange between Funds of various Member States has been created and the employer must activate it before posting workers, just to be dispensed from registration in the receiving Country. This confirms that registration is required to undertakings established in Member States that haven’t signed a mutual recognition agreement. This opinion is officially assumed by CNCE that, on the basis of the obligation to equal treatment sanctioned by D.lgs. 72/2000, asks the Local Construction Funds to consider that registration requirement can be derogated only by undertakings established in France, Austria and Germany (CNCE, communication 3 July 2008, n.358, www.cassaedile.it) . Nonetheless, foreign undertakings often don't join the funds nor observe collective agreements, as it’s frequently testified by the inspections made specially on Romanian undertakings. There are also widespread practices aimed at evading the duties on contribution payment. Trade unions testify that some undertakings register in the construction fund only one of their workers, just to obtain the DURC, and then employ not enrolled workers to carry out the contract. This practice confirm what underlined above with reference to the DURC, as a document which certifies just what the employer declares and which does not make possible an effective control on workers’ conditions. In order to contrast such a practice, the “fairness indexes” will be applied also in case the DURC is issued by the Local Construction Funds to foreign undertakings; in this case (as with tables on labour costs adopted by the Ministry for awarding public contracts: survey report B3.1 par.1) the evaluation on “fairness” must be done taking into account the contribution paid in the home State. Trade unions are active in order to persuade undertakings posting workers in Italy to join the funds. The union action does never bring to a call before the Labour Court, because of the uncertainty on the obligation to pay the contributions (under EU law), that is well known by trade unions themselves. A significant recent case can be reported, concerning an important public contract for works on highway: the undertaking established in another Member State refuse to register into the Local Construction Fund and trade unions took an action against the “Italian” client, which at last paid the

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contribution for posted workers in place of the foreign employer. Also employers’ associations deem the registration of foreign undertakings on the Construction Funds as necessary. The ANCE criticized the Ministry of Labour’s notes concerning registration requirement on the funds. It noticed that, in practice, it’s really difficult to compare benefits provided for by funds in other Member State, in the absence of a stable cooperation and exchange relation with them (ANCE News 5 September 2007, n. 3920, www.edilizia.ance.it). In practice, with the object of minimizing risks of joint and several liability, the ANCE asks its members to demand foreign contractors the DURC as a requirement to sign the contract (ANCE News 10 February 2009, n.156, available on www.edilizia.ance.it). 6.6 Case law on contribution to Construction Funds prescribed by law on public contract In the only judgement dealing with a transnational contract, the Italian Administrative Courts (T.A.R. confirmed by Consiglio di Stato) evaluated the legitimacy of the term of a public tender that (implementing a local legislation) imposes the contribution to the Local Construction Fund as a condition for awarding a public contract (survey report B3, par.10.5). The Court didn’t apply the Italian legislation on posted workers (D.lgs.72/00), but simply ignored it; it considered the law clearly in contrast with Article 49 ECT (now Article 56) because of the applicability of the entire system of Italian labour law to posted workers it provides. Nor it evaluated the relevance of the national rules on public contracts because of the special competence on the matter reserved to the Autonomy Province of Bolzano, that excludes the application of State legislation. The judgement of the Administrative Tribunal implicitly confirmed that the duty established by a social clause to comply entirely with national and local collective agreements binds also foreign tenderers. Therefore, this obligation is extended to non-economic clauses of the collective agreement not universally applicable, regardless matters ruled by the agreement and the guaranteed protection level. This indirectly means that, in case of public contracts, the duty is also related to all legal provisions (even beyond Article 3, paragraph 1 of the Posting of Workers Directive), because the full application of the collective agreement presupposes the compliance with mandatory provisions laid down by the legislation. On the opinion of the Administrative Court the foreign undertaking may avoid to apply collective agreement’s provisions only if the standard of protection guaranteed by law and collective agreements in the Country of origin is identical or similar. And this, at last, was the case of the tenderer Austrian undertaking, already registered in an equivalent Austrian Fund. In principle, the Court ruled the duty imposed by the legislation on public contracts to respect the local collective agreement not generally binding compatible with Article 49 ECT; so, the arguments of the Italian Court was not totally consistent with Rüffert judgement. It should be recalled that, anyhow, in the construction sector, all the undertakings in fact are registered into the Local Funds, even if the obligation is provided for in a collective agreements not universally applicable. It should also be noticed that the law was evaluated by the Court under Article 49 TCE and not under the Directive 96/71/EC.

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7. Place and role of the measures on protecting workers’ rights in subcontracting chains

In order to understand the role of the measures on protecting workers’ rights in subcontracting chain in the Italian legal order one has to keep in mind the characteristic of the national economic and industrial system. Just to consider the sectors where subcontracting chain are mostly spread, in transport sector more than 200.000 undertakings are active (most of them employing less than 10 workers), and in construction sector about 800.000 undertakings are registered, employing more than 1 million and 900.000 workers: an average of about 2 workers for each undertaking. In such a context pseudo-self employed, craftsmen and factitious undertakings, which evade labour and social security obligations, proliferate. In a construction site usually workers engaged by many different employers operate; each employer applied a different collective agreement, and in some case no one. This situation is due first to the lack of legal rules regulating collective bargaining, which depends on the sole dynamics of the collective autonomy of social partners. Anyone can create an undertaking which, if not member of an employer association, is free to ignore the collective agreement or to apply the most convenience one; then s/he can enter into the market providing services on a very competitive conditions. In short, contracts and subcontracts are instruments which are very easy to be used in order to reduce the labour costs. This is the reason of their great spread. The role of the measures protecting workers’ rights in contracts and in subcontracting chain in the overall national system of labour law is therefore very important. Through these measures, in different ways, a sort of unification and harmonization of conditions of employment is pursued, in an industrial and economic context which allows a great diversification of them and which favours social dumping and competition based on labour cost. For these reason, such measures advantage not only workers, but also “virtuous” undertakings which acts respecting fair and correct labour and industrial relations. The peculiar economic context explains the need to adopt a strict regulation of the joint and several liability and a mechanism that enables the worker to be engaged by the user in case of contracts executed in a way not consistent with the rules laid down by law. These measures balance the increasing power of the employer to outsource relevant parts of the production cycle. Specially the role of rules on liability is underlined by the doctrine in literature, considering their strengthening by the recent reforms: these rules are interpreted as a signal of the evolution of labour law in the post-fordist era, which responds to the transformation of the economic system by introducing forms of joint-entitlement (“co-datorialità”) aimed at making each undertaking, to whom work is directly or indirectly performed, liable to workers. Social clauses are based on the same logic and they are too a quite important measure in the overall Italian system of labour law. This is especially true with reference to social clauses established by the legislation on public contracts; mainly tanks to them in Italy undertakings apply collective agreements, even if they are not bound to do so by the law. Considering the role played, on the opinion of all the actors involved existing measures must be respected by undertakings established in other Member States. Enabling a foreign employer to avoid the obligations that bind Italian undertakings would mean to weaken the whole system of protection of workers’ rights, which has its justification just on the need to contrast social dumping caused by the structural deficiencies of the Italian economic and industrial relation system.

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D. Concluding remarks 1. Best practices, obstacles and problems 1.1 General framework All stakeholders highlight the problem of lack of clarity of the existing rules, mainly due to the overlapping of legislations that are often not coordinated with each other. Above all, employers complain that they need to “rebuild” the legal regulation, composing different provisions in order to know the obligations to which they are bound as clients; and this is not enough because the risk of uncertainty still remains. The ambiguity of the legislation is also confirmed by the oscillating case law, the conflicting opinions expressed by the doctrine and the frequent “clarifying” interventions of the Ministry (though not binding). This problem also applies to contracts with companies established in Italy, but it gets amplified in contracts with foreign undertakings. Similarly, the inefficiency of the inspection system is amplified in cross-border situations and it often turns into powerlessness, because of a totally inadequate national legislation and the absence of co-operation with the authorities of many Member States. According to the union, the most relevant problem anyway does not concern the existing regulations, but the characteristics of the industrial system, too fragmented and “pulverized”. In the construction sector almost half of the workforce at construction sites are self-employed workers and micro artisan undertakings; many of the latter are created by migrants, who in this way more easily obtain and maintain the immigrant permit (see also Dublin Report, 16). It follows that a great part of persons working on construction sites are not guaranteed by the rules to protect workers within subcontracting chain. In transport sector, the problem of micro-undertakings adds up to the fact that the typical transport contract is not ascribable to the notion of contract of services (“appalto”), therefore measures protecting workers’ right don’t apply. Employers’ associations too denounces the problem of the excessive number of firms, due to the fact that “anyone can open a company in Italy and sign the register at the chamber of commerce” (President of ANCE Toscana). Fragmentation and “dwarfism” of the Italian economy can therefore be indicated as one of the main problem causing the ineffectiveness of the protection measures required by law. Also because of the described features of the economic system, all stakeholders (albeit with significant differences) agree that the discipline of joint and several liability is an important instrument to protect workers and to impose on clients a responsible conduct in the choice of contractors and subcontractors and in monitoring their activities. Taking into account such a problematic framework, with reference to various institutions analyzed and in the light of opinions expressed by actors involved, the following items to be valued as best practices and problems to eliminate can be specified. 1.2 Measures contrasting bogus subcontracting and illegal contracts In the opinion of the inspection bodies, the attribution of the employment relationship to the user in case of unlawful contract is a necessary and effective measure to fight against bogus subcontracting.

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However, the evaluation given by the actors involved on current regulations are conflicting. According to some of them (specially employers), the criteria used to distinguish the genuine from the illegal contracts, due to judicial interpretation, serve to ensure the transparency of the labour market and they are (thanks to the reform of 2003) flexible enough not to be a hindrance to the activity of undertakings that work mainly, if not exclusively, through contracts (like in labour-intensive services). This view is not shared by the unions (who complain about the excessive elasticity of the criteria) neither by inspection bodies. The latter criticized especially the lack of clarity in the law, which on one side does not specify in an adequate way the criteria to identify the unlawful contract and on the other it lays down several hypothesis of illegal labour supply (unlawful contract, irregular and fraudulent temporary agency work, posting of workers) that end up overlapping, further complicating the activities of inspectors. A problematic element of the rules, that reduces their effectiveness, is then identified in the fact that even in the presence of a contract found illegal by the inspector, the worker is not considered an employee of the user if s/he does not act in court. It follows that the use of unlawful contracts (especially in cases of transnational contract) often ends up not being effectively sanctioned, failing the “deterrent” of the creation of an employment relationship on the part of the user. The financial penalty imposed by the inspector, even though criminal in nature, may in fact be very limited in amount. The system of penalties provided for in case of fraudulent agency work (Article 28, D.Lgs.276/03) is considered more effective, because it is stronger and it would involve the creation by law of an employment relationship on the part of the user, but it is difficult to implement, because it requires the demonstration of the will of the parties to “circumvent the mandatory provisions of law”. This profile of the penalties for unlawful contract has led to a further problem, which is considered necessary to solve (particularly important in cases of transnational contract): that of double entitlement of the employment relationship both on the part of the “Italian” user (under social security law) and on the part of the “foreign” contractor/provider (under labour law). 1.3 Joint and several liability Regarding the current system of joint liability, the actors' rating is generally positive. In the opinion of trade unions, it is the most effective instrument for the protection of worker within subcontracting chains, because it objectively operates and it induces the client to be at the utmost careful in the selection of contractors and subcontractors. This also applies to the joint liability provided for in case of injury, particularly effective when applied to foreign posted workers (although there are still doubts about its applicability: survey report B3, par.7), because it ensures full coverage of damages suffered by the worker, regardless of the level of compensation paid by the social security system in the home State. Also according to inspection bodies, the discipline of joint liability (which is enhanced by the instrument of warning assessment act) is the most effective measure for protecting workers in contract and subcontracting chain, although there are those who recognized that it implies heavy burdens on contracting employers. On the contrary, a widespread opinion among the employers is that the discipline of joint liability is inadequate, imposing an excessive burden on undertakings. The law does not determine which documents are to be requested by the client and by the contractor, except the DURC in public procurement and in construction sector. However, the DURC is not sufficient to verify the correct fulfilment of obligations by contractors and subcontractors and to avoid liability; for this reason many other documents are

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requested by the client. Any document is requested, it is impossible anyway to limit or avoid liability for contributions and pay claims, nor for damages suffered by the worker. Even the fact that no limit to the client’s liability is established by law is considered disproportionate to the aim pursued by the rule, especially considering the effects that the claim by workers or by the social security institutions causes in public procurement (immediate block of the payment of the state of progress of work). 1.4 DURC and preventive measures The DURC is widely regarded as a positive and indispensable tool. Thanks to its introduction, the percentage of undeclared and irregular workforce involved in contracts has been significantly reduced. For this reason, it may be identified as a best practice (see also Dublin report, 17). However, all the actors showed its limits as a mean for certifying the compliance with contribution obligation by the contractor. It should therefore be considered as a useful document, but not able to fully ensure the achievement of the purpose for which it was introduced. On the other hand, the procedural requirements associated with the release of DURC can sometimes be too rigid, especially in the context of public procurements. The DURC, in fact, is denied also in case of contractor’s temporary cash deficiency: a perverse mechanism caused by the stop of payments follows, which in some cases seems to cause more damages than advantages for workers as well. The “fairness indexes” (indici di congruità) are considered by the social partners a quite important measure to contrast undeclared work and to counter the abuse of subcontracting chains to reduce the labour cost. However, in the opinion of trade unions, it is a measure that deserves to be further refined and enhanced through the identification of most stringent indexes calibrated on the type of activity performed by the undertaking. Both DURC and the fairness indexes lose most of their relevance in case of cross-border situations, because of the exception to the principle of territoriality in social security matters. The DURC maintains its value only in the construction sector, limited to the certification of contributions to Local Funds. 1.5 Social clauses in collective agreements According to trade unions, the instrument of social clauses is essential to ensure uniformity of economic treatment in subcontracting chains. Their importance in the private sector is evidenced by the tendency of the social partners to make the application more stringent and binding (as evidenced by the recent transport sector collective agreement: survey report B3, par.11.1) It's true that, in light of the Rüffert case, these mechanisms of protection of workers can configure an unjustified obstacle to the provision of services by undertakings established in other Member States. However, the role they play in the particular both legal and economic Italian context must be taken into account: a role considered essential and indispensable by the actors involved, making these measures best practices to be preserved and strengthened. In Italy, the Constitution itself has so far hindered the adoption of legal mechanisms that would make collective agreements universally applicable. Their general applicability depends primarily on the strength and compactness of the action of the most representative trade unions. In some areas this is not sufficient; given the extreme fragmentation of the production cycle that characterizes them, just in these sectors (construction, labour intensive services and transport in particular) spread of

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subcontracting chains aimed at reducing labour costs is utmost. In such a context, the social clause (by law and by collective agreements) is the only means to counter opportunistic behaviour of undertakings and to limit the social dumping played first by “national” undertakings. It's, in other words, the mechanism which enables to ensure the general application of collective agreements and which thus compensate for the absence of legal mechanisms making them universally applicable. In the construction sector, this aim is pursued further by the obligation to be entered into the Local Construction Funds and to acquire the DURC, so that, as mentioned, virtually all undertakings in the sector apply both local and the sector collective agreements. In a transnational approach, all the actors involved are convinced that it is not justified that a foreign undertaking avoid the obligations that (should) bind all Italian undertakings. A different conclusion would risk undermining the entire system of protection of workers in subcontracting chains, triggering race to the bottom processes. 1.6 Measures on health and safety Among the measures on health and safety, as well as joint and several liability for damages from injury, the DUVRI is identified as an extremely important tool for employers, by requiring the client a control on the activity actually performed by contractors, enabling thus her/him to identify and reduce risks. The regulation could however be improved under the aspect of the verification and the updating of the documents, specially of the POS (Operative Plan for Security) in constructions sites. Trade unions recall as an important instrument the norm recognising the right for bilateral bodies (enti bilaterali) to request a copy of the prior notification to the Local Health Unit (ASL) that the client (or the project supervisor) must take before starting work on a construction site (Article 99, paragraph 3, D.Lgs. 81/08). Thanks to this norm, the union may have information on the exact “composition” of the construction site. According to this rule, agreements between unions and ASLs were made for the transmission of the notification by electronic means, in order to establish a database accessible to the union. This practice is believed to be widespread. 1.7 Bilateral bodies and cooperation between social partners Finally, best practices are considered all those experiences of cooperation between the social partners, aimed at ensuring transparency in subcontracting chains and to counter opportunistic and abusive practices of the companies. The Construction Funds are now setting up a consolidated and efficient example of a bilateral body which exercises control over the behaviour of employers and which ensures the homogeneity of the remuneration in a highly fragmented sector, as the construction one is. For this, the action of the most representative trade unions and employers associations aimed at imposing the registration of all undertakings operating in the sector is very strong. In the service sector the activities of TAIIS (survey report A2) deserves to be highlighted. It is a place of permanent confrontation between the social partners to counter abuses in subcontracting chain and to propose solutions to existing problems through the adoption of common guidelines. Other bilateral agencies are active in setting guidelines for client undertakings and in countering the circumvention of the law and of the collective agreements in sub-contracting chains (eg. the ONBSI: National Bilateral Body on Integrated Services). 2. Proposals 2.1 Bogus subcontracting and qualification of undertakings

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Trade unions suggest to increase criminal sanctions in case of bogus subcontracting, creating a specific crime of “exploitation of labour supply” (caporalato). The reform which is going to be adopted by the conversion into law of D.L.n.183/2011 partially receipt this proposal (par. 4 below). The repressive instruments should be made more efficient, providing for example that an undertaking is delayed from the register at the chamber of commerce if the employer infringes several times the rules on contracts; this also in order to prevent the employer from circumventing the existing constraints by creating a new company with a different name. In the same perspective, social partners propose to introduce a “licence with penalty points” for construction undertakings on which infringements of labour law rules are registered, specially in matter of health and safety and which is needed for the enrolment in the public registers. This kind of measures could be introduced also for certifying the behaviour of undertakings not established in Italy, even if they are not registered at the local chamber of commerce. The need to create more stringent and regulated system of qualification for undertakings also within private contracts is upheld by both the social actors. In order to reduce the number of active undertakings in the market, the registration at the chamber of commerce should be limited to real undertaking consisting in an effective organization of means, able to guarantee the solvency of workers’ credits and the application of the existing rules laid down by law and by sector collective agreements. Also economic incentives for “fair” employers more confident with social rules could be introduced; for example, as suggested by employer’s side, in the construction sector a reduction of contribution to the local Construction Fund would be introduced. On the opinion of the trade union, a measure that could limit the multiplication of subcontracting undertakings within the construction site could be the qualification (by law) of the latter as a unique “workplace”; this in order to make applicable to every workers employed there the same conditions of employment. The law should provide for equal treatment within the construction site referring to special collective agreements enabled to adopt the criteria for the evaluation of equivalence between the different existing agreements applied by each contractor. Also strict limits on the number of subcontracts admitted and more clear and rigid criteria to identify unlawful subcontracting and pseudo-self employed should be introduced. As a general reform, still on the opinion of trade unions, the increase of the labour cost (contributions) for self employed is needed in order to make less convenient their use in place of dependent workers. In order to make the protection of workers more efficient in case of bogus subcontracting, some inspectors suggest to provide for the entitlement by law of the labour relation with the user or, as an alternative, to introduce a mechanism for extending the effect of the act verifying the unlawfulness of the contract (if not contested) to every workers who are interested in being employed by the user; in this way, the need to act in court for each worker could be avoided and at the same time the will of the worker would be respected in case s/he doesn’t want to change the employer. 2.2 Joint and several liability Both trade unionist and inspectors agree on considering that the scope of application of the rules on joint and several liability should be extended to include expressly contractual relationships different from the contract defined as “appalto” in the Italian

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legal order. Special provisions should clarify that the existing rules are applicable also to transport contracts and to the relationships between employers within a “consortium” of undertakings. In case of unlawful contract, on my opinion, joint and several liability should be maintained between the user and the provider pseudo-contractor, even if the former become the employer in place of the latter. The warning assessment act is adopted and notified also to the client/contactor jointly liable on the basis of an interpretation by the Ministry of Labour, although Article 12 D.lgs.124/04 does not provides for it. On my opinion a reform of this norm in line with ministerial instructions should be useful, also in order to regulate in a clearer way the procedure for giving the worker the executive title to be used against the guarantor. Some inspectors argue that the joint and several liability would become more effective if the law provides for previous binding information to each worker involved in the subcontracting chain. Also a legal duty for the client to investigate whether the contractor is in compliance with the law should be introduced, specifying the documents to be requested to the contractor. Administrative sanctions should be established in case the client does not comply with legal obligations. The procedural constraints laid down by the “Bersani” reform of 2007 are indicated by some trade unionist as a good model. As the legislation is still ambiguous on this matter, some actors (by trade union side) suggest to explicitly extend the application of Article 29, paragraph 2 to public authorities awarding public contracts. The uncertainty on interpretation and application of the existing rules in cross-border situations should be overcome deleting Article 3, paragraphs 3 and 4, D.lgs.72/00 and providing expressly for the application of Article 29, paragraph 2, D.lgs276/03 in any case of contracting and subcontracting. More generally, the whole D.lgs.72/00 should be reformed in the light of Directive 96/71/EC so that the rules laid down by legislation and by collective agreement to be applied to posted workers are clearly identified. Every actors involved agree on the need to clarify the existing regulation on posting of workers in Italy. Social partners (trade unions more strongly) believe that such a clarification shouldn’t imply the opportunity for foreign employers not to apply and respect the entire sector collective agreement and, in construction sector, even the local one regulating contribution to Construction Funds. Regarding collective agreements not universally binding (apart from the constitutional problems related with the Italian legal order), in the writer’s opinion, clarification at European level would be necessary. In the same way, in the opinion of social partners too, a clarification at European level is needed on the application of Posted Workers Directive in transport sector. At last, a new regulation of joint and several liability for contributions should solve the existing doubts and problems on the application of the general rules in cross-border situations. In case the legislation would “explicitly” recognise that the client is liable also for contribution not paid in the home State (that is not the case at the moment), it should also clarify the procedure to be followed by the client/contactor established in Italy in order to pay contribution in another Member State. A regulation of the matter is mostly needed considering the effects that non compliance with contribution obligation produces within public contracts (the block of payment to the contractor). The rules on joint and several liability for contributions in cross-border situations interfere with the rules on coordination of social security systems and for this reason would be

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better regulated at EU level. 2.3 Social clauses and public contracts On the opinion of trade unions the enforcement of social clauses should be strengthened in order to preclude undertakings from choosing the most convenience collective agreements. Within public contracts the violation of the obligation to apply collective agreements signed by the most representative organizations should be sanctioned more hardly. Article 29, paragraph 3, D.lgs.276/03 should be abrogated, still on the opinion of trade unions, and the law should clarify in which case the re-engagement by the incoming contractor of workers employed by the previous is to be qualified as a transfer of undertaking. At least in case of succession of cooperatives the application of the rules on transfer of undertakings (Article 2112 of the Civil Code) should be always guaranteed. The problem of the “contractual shopping” is underlined also by some inspectors, which believe that the existing uncertainties on collective agreements applicable should be solved by law, in order to better contrast the practice of “pirate” agreements, specially within cooperatives. With reference to public contracts, both trade unions and employers’ organizations propose to re-define the awarding criteria, first the “lower price” one considered the main reason of the violations of legal and contractual obligations by the contractors, specially on health and safety matter. Social partners in construction sector agree on the need to delete the criteria of lower price, fixing by law mechanism of “automatic” (binding) exclusion of the abnormally low tenders. This is the official opinion expressed also by the President of ANCE Paolo Buzzetti, which has publicly expressed the opinion that “the lower price criteria has been destroying the construction market”. According to trade unions the “fairness indexes” should become more rigid and a binding “named” documentation should be introduced, which makes possible the identification of payment by contractor with reference of each single worker involved in the contract. Regarding undertakings established in other Member States a specific documentation taking into account the labour cost and the contribution paid in the home State would be necessary. 2.4 Inspection activities In order to make more efficient the control system on foreign undertakings the existing deficiencies in legislation on inspection activities are to be solved, specially with reference to procedural obligations and documentation to be taken in Italy. The absence of the requirement to submit a prior declaration to the competent authorities is the most obvious gap in Italian law to be filled, on the opinion of the actors involved. The declaration could be submitted to public employment offices (“Centri per l’impiego”), like for national workers, or directly to the DPL. Trade unions find also appropriate the provision of a legal obligation of information by the user to the workers' representatives (or to local units) in each case of posting of workers. Another necessary measures would be the requirement to identify a responsible representative of the posting employer, and to keep social documents translated into Italian, stating the working conditions and certified from DPL (to avoid the risk of falsification). Inspection authorities consider also very helpful to include expressly by the legislation

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the obligation (with appropriate sanction) for the user to register in the LUL the posted workers during the period of posting; this in line with the ministerial guidelines, not already supported by the law. On the opinion of some inspectors, the enforcement of sanctions in home States would be possible only if a Protocol on execution of inspection acts adopted by the competent authorities in each Member State would be signed, providing for the mandatory translation of the acts. 3. Alternative instruments According to undertakings and employers’ associations, in order to reduce problems caused by the actual rules on joint and several liability, the legislation should list the documentation to be requested by the client and regulate the subsequent control to be done on contractors and subcontractors. This in order to limit or avoid the joint and several liability in case of compliance with legal obligations. The computerization of the documentation to be controlled and a creation of a date base available by the client and the contractor, would dramatically reduce the existing cost that the latter have to support. Still in the employers’ opinion, clear limits should be fixed by law on joint and several liability for the client and the contractor, both relating with wages and contribution obligations. The law should first clarify that the client is liable only for wages and contribution credits related with the execution of the contract. The block of payment in public contracts should be limited within the sum due on the basis of the joint liability, allowing the client authority to pay the sum exceeding the credits of workers involved. On the opinion of many relevant stakeholders (excluding CGIL trade unionists) the “certification procedure” could favour more transparency within subcontracting chains, reducing risks of disputes and actions in court for undertakings. In order to improve the certification of contracts the existing procedures are to become simpler and available for foreign workers and employers (as until now in fact they are not). Some inspectors suggest to introduce mechanisms favouring the conclusion of contracts (both public and private) with undertakings which obtained the certification and which, for this reason, will more probably act in compliance with the law and with the collective agreements. At European level employers’ organizations have proposed the creation of a Fund for the payment of wages in case of insolvency by the subcontractor, as an alternative instrument to several and joint liability. Italian trade unions are strongly opposed to this proposal, because it would made employers negligent and no more induced to control the behaviour of the undertakings involved in subcontracting chains. This in fact is the main function of the rules on chain liability. An organic regulation on the documentations to be taken by undertakings established in another Member State would be a general measure helpful to reduce problems and obstacles created by the rules in force, favouring the transparency of the labour market. On one side this would make more efficient the inspection activities, on the other it could ease the development of exchanges within the EU: the possibility to receive trustable (and translated) documents on wages, contribution and fiscal duties from the contractor would help the check on the solvency of the employer established in another Member State, reducing the risk of an action for joint liability. Obviously, more the cooperation among the competent authorities of the Member States

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is strengthened, less an intrusive control on undertakings by Italian inspectorates and by the clients is needed. In Italy the model of cooperation to be generalized is the one already activated with the French labour inspectorates, based on exchanges of informations, use of common forms, and coupling of inspectors of different nationalities in border areas. The role of the UE under this perspective is crucial and it should be strengthened. Both from inspection authorities and trade unions IMI is considered a quite useful instrument in order to permit the exchange and circulation of information on posted workers between different Member States. The obligation for agencies posting workers in Italy to be entered in the National Register at the same conditions established by the law of the home State, would be a simple and not onerous measure in order to better control the presence of posted workers within the territory. This proposal is suggested by the officials of the Directorate on Inspection Activities of the Ministry of Labour, considering that Administrative Tribunals excluded the registration of foreign agencies under the existing law. 4. Developments going on A reform which is going to be approved by the Parliament could have an impact on the system of protection of workers’ rights in subcontracting chains. Article 8 of the D.L.13 August 2011, 138 that is to be converted into Law before the end of September, establishes that collective agreements signed at local or plant level are able to regulate many matters, including “the rules on several and joint liability in contracts”. This norm enables social partners at firm and local level to change the regulation on chain liability laid down by the legislation, even limiting the responsibility of the client or the contractor. It is difficult to predict if and in which way this provision will be implemented; in particular it is not clear how a plant collective agreement could be able to modify the legal rules on chain liability which (by definition) are to be applied to different undertakings, each one eventually signatory of a different collective agreement. Article 8 as a whole is a very contested norm, that bring the CGIL to call for a general strike in 6 of September. In fact this article potentially brings to a total decentralization of the system of collective bargaining and to a “fragmentation” of the system of labour law as such, allowing the local and plant collective agreements to depart from the sector collective agreements and to lower even the minimum standards of protection laid down by the legislation. Also the subsequent Article 12 of the D.L.138/2011 could have an impact on the overall system of protection. This norm introduces a new crime into the Penal Code (Article 603-bis) punishing the “illegal labour supply and exploitation of workers” that is defined as following: “recruitment of manpower or organization of work activities characterized by exploitation, through violence, threat or intimidation, abusing of the state of need of the workers”. Similar provisions were strongly asked by trade unions and by centre-left parties that submitted also their own proposal on the matter (DDL n.2584 of 26 July 2011). This new crime should permit to contrast in a more efficient way the activities of pseudo-undertakings supplying illegally labour force (even if it is not phrased very clearly). Another relevant development could come from the adoption of the law on qualification of construction undertaking (DDL n.2663 of 30 March 2011). This proposal is awaited to be approved by the Parliament. If approved, it should provide for stringent requirements on suitability and “honourableness” (lack of penal condemnations) and on professional

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qualification of the construction undertakings. This in order to enter in a new section for construction undertakings of the local chamber of commerce. The new law should be applicable also to undertakings established in another Member State (Article 1.3) With reference to posted workers from other Member State, the Ministry of Labour could adopt a circular in order to further clarify problems related with Agency works, as since many years social partners and inspectors are waiting for it.

Relevant stakeholders and actors interviewed

Ministry of Labour Gennaro Gaddi, DG Attività ispettive (DG Inspection Activity) Davide Venturi (DPL Bologna, consultant of the Ministry of Labour on posting of workers) Labour inspectorates DPL Milano (Paolo Weber, Francesco Panuccio) DPL Trento (Sergio Vergari, Alessandra Manzana ) DPL Bologna (Emanuela Cigala, Giovanna Carosielli, Fabio Pulvirenti) DPL Bergamo and DPL Sondrio (Mariarosaria Simonelli) DPL Genova (Paolo Vettori) DRL Veneto (Michele Monaco, Ornella Agosti) and DPL Venezia (Franca Cossu) Trade unions Europe Secretariat-CGIL (Giulia Barbucci) FILLEA (construction federation)-CGIL (Romano Baldo) FILCA (construction federation)-CISL (Lanfranco Vari) FILCAMS (services federation)-CGIL (Elisa Camellini) CGIL- Area reti e servizi (Area networks and services) (Rosario Strazzullo) FILT (transport federation)-CGIL (Michele Azzola) Employer’s associations and companies ANCE (construction sector association)- Toscana (Carlo Lancia) ANCE- Friuli Venezia-Giulia (Fabio Millevoi) CNA-FITA Toscana (transport sector association of small and medium undertakings) (Rossana Paccagnini, Franco Coppelli, Emilio Vezzani) FAI-CONFTRASPORTI (transport sector association) (Stefano Montiroli) CONFAPI (confederation of small and medium undertakings)- Udine (Federica Tessitori) ICET INDUSTRIE SpA (Antonella Napoli, contracts office) INDESIT (Danis Cipressa, legal attorney) Others Antonio Piacentini, Labour law advisor of CNA-Pistoia (small and medium undertakings) Federico Ventura, Legal Attorney of FILLEA-CGIL (construction union) Further opinions of inspectors are reported from the PhD thesis of Davide Venturi

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(L’ispezione del lavoro e la Certificazione dei contratti di lavoro come strumenti di regolazione del mercato del lavoro. I problemi dell’effettività e dell’equità in particolare per i lavoratori non standard e per le catene di appalto, University of Modena and Reggio, 2011)