A recent decision of Italian Supreme Court (namely decision no. 35962 of November 22nd, 2021) makes think once again on the issue of joint and several liability of the client in works/services contracts under Italian law.
The Supreme Court goes back to the topic regarding the differences between the provisions of article 1676 of the Italian Civil Code and those contained in article 29 of Legislative Decree no. 276/2003 (so called “Biagi Decree”) and reiterates the different field of application.
1. What is meant with the term: “Joint and several liability in works/services contracts”.
Joint and several liability means the situation whereby two or more parties are required to perform the same obligation.
Such definition is contained in article 1292 of Italian Civil Code, according to which “an obligation is joint and several whenever the debtors are all obliged to perform the same service, so that each debtor can be forced to perform in full and the performance by one of the debtors releases the other debtors”.
With the aim to protect the employees in the execution of a work/service contract, Italian law provides for a complex regime of joint and several liability of the client in case of non-performance on the part of the Contractor.
The above system of coverage regards the payment of salaries, (including severance pay) social security contributions as well as compulsory insurance premiums due to the Contractor’s employees and accrued during the period of performance of the contract.
2. Action provided for by article 1676 of Italian Civile Code.
According to article 1676 of Italian Civil Code, Contractor’s employees can directly sue the Client, in order to obtain payment due in execution of the work or service but only up to the amount owed by the Client for the consideration due by this latter to the Contractor.
The Client shall be liable only for unpaid remuneration of the employees and within the limits of its debt to the Contractor but not for any social contribution and mandatory insurance premiums.
Eventually, the Client has paid in full the consideration agreed for the work/service to the Contractor or, if the Contractor has paid all the wages to its employees, there is no more risk for the Client to be joint and severally liable.
The special rule provided for by article 29 of Legislative Decree no. 276/2003.
Article 29 of Italian Legislative Decree no. 276 of September 10th, 2003, introduced significant innovations relating to Client’s joint and several liability within the scope of the contract, further strengthening the protection for the Contractor’s employees.
Such provision provides that the Client shall be jointly and severally liable with the Contractor (as well as with each of the subcontractors) for two years from the end of the contract, to pay:
- the salaries and social security due to workers employed in the contract.
- the relevant portion of severance pay, and
- the compulsory insurance premiums, accrued during the period of performance of the contract.
Unlike article 1676 of Italian Civil Code, the Client is fully liable towards the employees for the mentioned two years term.
4. The relations between the aforementioned rules.
Decision referred to in the beginning states that the framework provided for by Italian Legislative Decree 276/2009, far from being an exceptional rule, aims at ensuring a broad and homogeneous protection for the Contractor’s employees.
On the contrary, according to article 1676 of Italian Civil Code, the Contractor’s employees are entitled to direct action against the Client only for the payment of salaries, and however, such action is subject to the existence of the Client’s unpaid amount towards the Contractor.
The Supreme Court clarifies that the above remedies have different scope and may be joined in the same proceeding.
In any event, the grounds of the decision show – albeit not explicitly – the residual nature of joint and several liability provided for by article 1676 of the Italian Civil Code and the related direct action.
Indeed, once the two-year limitation period has expired, any possibility of filing a claim pursuant to article 29 of Italian Legislative Decree no. 276/2003 is definitively precluded.
Therefore, after the expiry of the two-year period, direct action pursuant to article 1676 of the Italian Civil Code remains the only remedy that can be taken, provided that the Client still owes to the Contractor the unpaid amount due as contract’s consideration.
In such case, the Contractor shall have to necessarily give evidence of the existence of such unpaid amount.
Luca D’Addesio, B&C Legal and Compliance