Very often both employers and employees confuse contract, subcontracting and contract assignment. The confusion is due to the idea of changing the contract and the parties involved in the contractual relationship between the client and the contractor. This post from our Business Law Professional Corporation helps you clarify for all stakeholders who are entitled to entrepreneurship or reinstatement in the event of a change of contract.
Procurement, subcontracting, change of contract, absorption of staff, recruitment
- Procurement is a type of contract whereby a contracting authority appoints a contracting entity to carry out a work or service, for an established or to be established financial compensation. With the procurement contract, the contractor becomes the owner, assumes the risk and responsibility of concluding the work or service covered by the contract, with his own organization and with the necessary means.
- Subcontracting: Subcontracting is a contract whereby the contractor, in charge of carrying out a work or a service by the client, in turn entrusts another party with the performance of the same works. In essence, it is a kind of delegation to the execution of the works ordered by the client. The subcontractor shall also carry out the service or work covered by the contract by its own organisation and means. The subject of the subcontract is the same as the procurement contract. The only constraint is that the delegation of the work or service by the contractor to the subcontractor must be authorised by the client. The procurement contract and subcontracting remain 2 separate contracts. In the event of non-compliance with the contractual obligations, the contracting authority may rely on the contractor, thanks to the contract that binds the two parties and thelatter on the subcontractor, thanks to the subcontracting contract.
In summary, the joint and several obligations and responsibilities that bind the principal to the contractor are the same as those that bind the contractor (subcommitter) to the subcontractor. The client (and subcommitter) is responsible for:
- jointly and severally with the contractor, pursuant to art. 1676 of the Italian Civil Code, for what is due to the contractor’s employees for the activity performed in the contract (salaries, indemnities, reimbursements, etc.), within the limits of the debt that the client owes the contractor at the time they propose the request, but without time limits;
- jointly and severally with the contractor and subcontractor, pursuant to art. 29, paragraph 2 of Legislative Decree 276/2003, for the payment of remuneration and for the payment of social security contributions and insurance premiums, with a time limit of two years from the termination of the contract, but without limitation of amount;
- jointly and severally with the contractor and subcontractor, pursuant to art. 26, paragraph 4 of Legislative Decree 81/2008, for compensation for damages suffered by the employee of the contractor or subcontractor as a result of an accident at work or occupational disease, for the part not subject to compensation by the compulsory insurance institutions.
Therefore, the contractor assumes the same legal position vis-à-vis the subcontractor as the client assumes vis-à-vis the contractor.
Assignment or change of procurement contract, recruitment or absorption of personnel
In the event of a procurement contract transfer, a new contractor shall take over. But in this case, the work or service covered by the contract is not only carried out by the organisation and by its own means by the successor contractor. In these cases, the new contractor must acquire the personnel already employed in the execution of the work or service subject to the contract from the previous contractor and guarantee employment levels. On this point, however, there are two conflicting interests, both subject to constitutional protection:
- Freedom of economic initiative;
- The social purpose of the economic initiative and the safeguarding of work activity.
Precisely because the two interests are opposed and both protected, there is no exact law to regulate them, but they are subject to negotiation between the parties involved in the change of contract. Basically, the two interests are negotiated with the social clauses.
The social clauses of contracts in the event of a change of procurement contract
The social clauses are provided for in contracts for the transfer of procurement contracts. As a general rule, they serve to bind the new employer to the protection of the rights of workers employed in the execution of the work or service to which the contract relates. In some cases, they also serve to the recruitment or absorption of workers employed by the previous contractor.
Reabsorption and reinstatement in the event of a change of procurement contract
Social clauses are a very important aspect of contracts. In the case of private contracts, social clauses do not have a well-defined legislative framework. As far as the employer is concerned, in some cases they may compress the opening up of the markets by discouraging potential new entrants, since they could be obliged to hire all workers already employed in the contract by imposing personnel costs that are not left to their business choices and by compressing their freedom of enterprise. As far as workers are concerned, they must guarantee them continuity of work, even if the law does not provide for the automatic absorption or re-recruitment of the worker from one employer to another.
Therefore, in the case of a contract assignment, the interests protected by the social clause are:
- continuity of employment;
- the protection of the business needs of the outgoing and the successor contractors.
In short, on the one hand, the social clause cannot impose on the new contractor choices incompatible with his corporate interests. On the other hand, the outgoing undertaking must not automatically renounce workers for whom it has an interest in continuing the employment relationship. Conversely, the successor undertaking is not bound by the reabsorption or reabsorption of workers but is bound only for workers:
- whose employment relationship with the outgoing contractor is terminated;
- for those that are necessary for the continuation of the economic activity of the contract subject to the sale.
In short, the social clause mustbe regulated in such a way as to protect workers who lose their jobs as a result of the transfer of the contract, by providing for their reinstatement or reabsorption if they are made redundant by the old contractor and are necessary for the continuation of the economic activity of the contract being transferred.
In the case of an international contract assignment, the clauses of the international contract for which you can.
READ MORE HERE: The international commercial contract. Clauses, Applicable Law
