Network contract and double-employer regime

28 November 2022

Many companies work together daily on the same projects and through the same employees, so much so that it is not unlike that they all end up identifying as one. Such possibility is provided according to different terms and conditions and regulations to comply with within the so-called “double employer regime”; this article intends to deal with its main characteristics and most relevant features to take full advantage of it.

It is not unusual that two or more companies acknowledge that they have common interests in collectively providing the services they usually offer individually by exchanging them and/or jointly executing them without prejudice to their distinctiveness or autonomy.    

Pursuing such a scheme implies that all companies become one single entity, whose bigger size would allow it to better face the market, including foreign ones; this would also enable them to: expand their offer by splitting business costs, participate in tenders for the award of public contracts, enjoy tax benefits, and link companies located in different parts of Italy (or even abroad, as long as they carry out activities in Italy).

The companies connected by a network contract may decide to manage their relationship through, alternatively, the establishment of a shared capital fund or the provision of an annual budget, whose resources are bound to be used in favour of the achievement of the objectives, as set out in the network program (as defined below). Moreover, the companies could decide to establish a joint body for the execution of the contract or of one or more parts or stages of it (the agreement shall set out the management and representation powers conferred and the rules concerning its replacement).

The managing of a relationship as the one here described requires the execution of a "network agreement” in which indicating all companies involved, their strategic goals, its duration (which, by practice, should not exceed five years if the mentioned goals are average complex), information on how to join, the rules on the managing of the relationship, as well as the so-called “network program”. The latter is the core of the agreement at issue and, as such, it shall define all companies’ rights and obligations, the means of achievement of the common goals and, if one is provided, the measures and the criteria for the initial transfers to the capital fund, as well as its management rules. All the mentioned activities must be strictly functional to the goals the companies have set.     

Among the most interesting advantages granted to companies involved in a network in the terms at issue is the possibility of posting the employees with fewer formalities and hiring employees under a double-employer regime and according to the relevant regulations, as set in the network agreement.

More specifically, the latter allows the potential to involve all companies linked to the network, which, notwithstanding their connection to the network itself, are still permitted to freely choose to apply the double-employer regime to the employment relationships they manage. In such cases, they shall follow the so-called “rules of engagement”, specifically set and ancillary to the network contract that provides them, which define the practical implementation of the double-employer regime.

Moreover, new hires directly employed under the mentioned regime shall mandatorily designate a reference employer, which is burdened with the obligations to record the relevant performances on the LUL, as well as to notify their beginning, extension, transformation and termination of the employment relationship through the “Unirete” platform; additionally, the designated employer will be responsible for all the consequent social security and insurance obligations.

However, it shall be noted that just because the designated employer is indicated as such by the employees (and is, therefore, liable for any omissions thus connected), this does not necessarily mean that the latter shall acknowledge it as their only effective employer. All companies involved share a joint liability as they are each identified as substantial employers to every employee under a double-employer regime.

From a practical standpoint, if more companies choose to join the mentioned regime, they together become a subjectively complex part and, as discussed, are jointly liable with remuneration, social security and insurance obligations towards all employees (according to Section 1294 of the Italian Civil Code).       

Even under the double-employer regime, the employees are subjected to the application of Section 2103 of the Italian Civil Code; therefore, the latter shall be assigned to each co-employer to the same (or equivalent or higher) duties that they were initially hired. However, the network contract could justify possible changes and assignments to inferior tasks without prejudice to the employees’ right to preserve their original qualifications and current salary.  

The most representative NCLA is the one that shall be applied to relationships under the double-employer regime. However, in cases where the company that benefitted from the working performance provides a higher remuneration than the one granted by the reference employer for the same duties, the relevant monthly cost shall be adjusted to said amount. For such purpose, the so-called “single labour book” of the chosen company (“LUL”, which documents the status of each employment relationship) records every employee’s worked hours within each employer.    

Therefore, even when such a regime is applied, the employees are still safeguarded, provided that it is possible to grant them better conditions.

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