Business intermediary and commissions: when the right to commissions is subject to the communication of commencement of activity
In a recent ruling, the United Sections of the Court of Cassation affirmed that a person who engages in the activity of business intermediary without having communicated the commencement of business is obliged to repay the commissions received to the contracting parties.
The Court's reasoning is very complex and tortuous due to a very tortuous and non-linear regulatory framework.
In order to understand the reasons that prompted the United Sections to affirm that a business intermediary's right to commissions is subject to the obligation to commence business, it is necessary to take a few steps back and retrace what has been the regulatory path governing a figure very similar to the business intermediary, namely the broker, and thus understand how such regulatory interventions may have had such serious repercussions on business intermediaries.
1. The abolition of the role of mediators.
Until 2010, the role of mediators was governed by Article 2 of Law 1989/39, which imposed compulsory registration on all persons who carried out mediation activities, even if on a discontinuous or occasional basis. The role was divided into three sections:
- one for real estate agents,
- one for commercial agents and
- one for agents with a mandate for pecuniary interest.
Art. 73 of Legislative Decree 26.03.2010, no. 59 repealed theArticle 2 of Law 1989/39, thus going to abolish roles listed above.
Following this legislative change, the performance of the activity of real estate broker is only conditional on the:
- DIA (Dichiarazione Inizio Attività) - now SCIA (Segnalazione Certificata di Inizio Attività) - accompanied by self-certifications and certifications proving possession of the requirements;
- verification of requirements by the territorially competent Chamber of Commerce and consequent registration of brokers in the RI (Register of Companies) if the activity is carried out in the form of a company, or in a special section of the REA (Register of Economic and Administrative News).
Given that Legislative Decree 2010/59 abolished the role of mediators, but did not repeal Law 1989/39 in its entirety, the question arose as to how Article 6 of this regulatory text, which subordinates the mediator's right to commissionto its proper registration. Article 6 reads as follows:
"only those who are registered on the rolls are entitled to the commission".
Majority Jurisprudence[1] has ruled, stating that only brokers who have reported the start of their activity to the competent Chamber of Commerce and have been duly registered in the business registers or directories kept by that body are entitled to receive the commission. It reads, in fact, that:
"Article 6 of Law No. 39 of 1989, according to which , must be interpreted as meaning that, also for mediation relationships subject to the rules laid down by Legislative Decree No. 59 of 2010, only mediators who are registered in the registers of companies or in the directories kept by the chamber of commerce are entitled to commission. "
2. Difference between business intermediary and broker.
That being clarified, the question arose as to whether only brokers should be subject to this reporting obligation, or also business intermediariesde facto brokering activities.
Before giving an answer to this question, it is necessary to briefly understand the distinction between mediator and business procurer. Pursuant to Art. 1754 of the Civil Code, mediatoris the one who
"brings two or more parties together for the conclusion of a transaction, without being linked to any of them by a relationship of collaboration, dependence or representation".
The mediator therefore carries out his or her activities without constraints and assignments, in a position of impartiality and autonomy.[2]
In contrast, the business procurer acts as instructed by one of the parties, thus lacking the requirement of independence. A 2016 ruling by the Supreme Court of Cassation, which confirms a well-established orientation, distinguishes the two figures by asserting that:
"mediation and the atypical business procurement contract differ in terms of the position of impartiality of the mediator than that of the procurer who acts on behalf of one of the parties involved in the conclusion of the transaction and from whom, although not linked to that party by a stable and organic relationship (unlike the agent), he may claim remuneration.
The Court goes on to analyse what these figures have in common, namely:
"the element of the provision of an intermediary activity aimed at facilitating the conclusion of business between third parties."
Case law has held that both the figures perform de facto activities of 'brokerage"has framed the business intermediary as an 'atypical' mediator, which is distinguished from the 'typical' mediator precisely by the character of 'partiality'.
Given the inclusion of the intermediary in the 'category of brokers', the following question consequently arose: must the intermediary also comply with theobligation to notify the start of activities? The question was not (and is not) without practical consequences, since, as mentioned above, the failure to report the commencement of activity to the competent Chamber of Commerce causes the broker's right to commissions to lapse pursuant to Article 6 of Law 1989/39.
On this point, the United Sections of the Supreme Court intervened, which with Judgment No. 19161 2017firstly confirmed to be:
"In addition to ordinary mediation, a so-called atypical mediation based on a contract for pecuniary consideration can also be configured with respect to only one of the parties involved (so-called unilateral mediation)."
Secondly, they also stated that:
"precisely because of its extrinsic nature as an intermediary activity, falls within the scope of applicability of the provision laid down in Article 2(4) of Law 39/89, which, precisely, also regulates hypotheses atypical mediation for the case where the object of the deal is real estate or companies."
Conversely, where the subject matter of the deal is the movables:
"the obligation to register exists only for those who perform the said activity in a manner not occasional and therefore professional or continuous."
Therefore, the obligation to register in the brokers' register also extends to all business brokers who broker real estate or companies (even occasionally), or movable goods (on a professional basis).
La penalty for failure to report is rather strict, and is governed by Article 8 L. 1989/39:
Anyone engaging in mediation without being registered shall be punished with the administrative penalty payment of a sum of between one million and four million lire and is liable to the return to the contracting parties of the commissions received."
3. Difference between commercial agent and broker.
At this point, it is considered appropriate to make a very brief analysis of the distinction between commercial agent and brokerwhich is thus summarised by the ruling of the United Sections under examination:
[the mediator] "acts in a third-party position with respect to the contracting parties in contact, in this respect differing from the commercial agent, who, on the other hand, implements a habitual and professional collaboration with another entrepreneur. "
The reason for drawing this distinction is to emphasise the fact that, although the commercial agent is also obliged to report the start of his activity (Art. 74 of Law 2010/59, repealed not only the role of mediators, but also those of agents), failure to comply with this duty does not entail the forfeiture of the right to commissionsis not foreseen in the Law 1985/204which regulates precisely the activity of commercial agents, a sanction similar or comparable to the one examined in this article.
- Read also: Differences between agency contract and business intermediary.
Bearing in mind this substantial difference between an agent and a broker (typical or atypical), it is advisable to check with one's advisor, in the event that a principal contests the payment of commissions to the intermediary for not being registered in the register of intermediaries, whether the activity carried out by the intermediary should actually be considered as such or, on the contrary, should be considered an agency activity 'disguised' as an intermediary activity.
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[1] On this point cf. Cass. Civ. No. 762 of 2014; Cass. Civ. no. 10125 of 2011, Cass. Civ. no. 16147 of 2010.
[2] On this point cf. Cass. Civ. No. 16382 of 2009.
The termination of the sales and/or distribution dealership contract. Brief analysis.
"The sales concession contract is not governed by Italian law and follows the general rules on contracts, with the application of certain principles regarding mandate and administration. If the contract is concluded for a fixed term, it cannot be terminated in advance unless there is a serious breach; if for an indefinite term, it can be terminated unilaterally with due notice. The notice period, if not agreed, is determined on the basis of the duration of the contract and the investments made; if the parties have agreed and contractually quantified notice period is discussed whether theThe judge can make assessments of its appropriateness.
Since the contract of sale concession is not expressly regulated by our law, the general principles provided for contracts apply to it, paying particular attention to the provisions provided for the contract of supply (1559 et seq. civil code) and mandate (1703 et seq. civil code), types of negotiation very close to the one under consideration.
If the concession contract was concluded at fixed-termit will last until its natural expiry and cannot therefore be unilaterally terminated early by either party, except in the case of (serious) breach.[1]
Conversely, if the sales concession contract is of indefinite duration, it may be terminated unilaterally, without the need to invoke just cause, but subject to the granting of a reasonable notice. Doctrine and jurisprudence reach this conclusion, both by analogical application of the principles dictated on the subject of administration (Art. 1569 of the Civil Code).[2] and mandate (Art. 1725 of the Civil Code),[3] but also relying on the general provisions of the law in the area of unilateral termination and applying the principles of good faith under Article 1375 of the Civil Code.
A major problem opens up concerning theidentification of the duration of the noticein all those cases where the parties have not contractually agreed to do so; this may occur not only where the parties have not thought of regulating this issue when drafting the master agreement, but also in the much more complex situation where the relationship between the parties, which started out as a simple buyer-seller relationship, has in fact over time 'transformed' into a full-fledged distribution contract (on this point, see the article Dealer, distributor or regular customer? Differences, characterising elements and interpretation criteria).
In order to understand what is meant by adequate notice and, therefore, to give a time value to this term, reference must be made to the interests of the person who 'suffers' the withdrawal, since the withdrawing party must grant a term that will allow preventat least partially, the negative effects resulting from the termination of the relationship;[4] Therefore, the concessionaire must be able to recover part of the investments made (e.g. the disposal of inventories), while the grantor must have sufficient time to be able to buy back goods still in stock from the concessionaire, so that they can be reintroduced into the distribution circuit.[5]
To give a more practical slant to this issue, we list below some cases decided by case law where it has been held that[6]
- a deadline of 18 monthswith reference to a contract that lasted about 25 years;[7]
- not congruous a deadline of 6 months (later replaced by one of 12 months), for a contract of 10 years' duration;[8]
- reasonable notice of 3 months in connection with a 26-month contract.[9]
In other situations, case law has applied the period of notice required by agency regulations.[10]
If, on the other hand, the parties had agreed and contractually quantified notice periodThe majority of case law is in agreement that reference must be made to that term in any event, even if it is very short, holding that the judge cannot make any assessment of the appropriateness of the notice period agreed upon by the parties.[11]
With reference to this specific issue, i.e. with regard to the reviewability of the notice period agreed upon by the parties, it is certainly important to bear in mind a relevant ruling of the Court of Cassation of 18 September 2009,[12] which established a number of interesting principles. On the merits, the dispute was brought by an association set up by several former car dealers against the parent company Renault, which had terminated the contractual relationship with those dealers by giving one year's notice, in accordance with the contractual provisions; the dealers sought a declaration that the termination was unlawful because abuse of right. These proceedings were dismissed at first and second instance, but upheld at last instance by the Court, which held that it could not be ruled out whether the right of withdrawal ad nutum has been exercised in good faith, or, on the contrary, an abusive exercise of that right may be conceivable. The Supreme Court came to this conclusion through the use of the criterion of objective good faith, which must be considered as "general canon to which the conduct of the parties should be anchored."[13]
This orientation has been challenged by some doctrine,[14] which he considered should be "considered with the utmost caution". This is confirmed by the very fact that:
"at is to be hoped, that the notion of abuse of rights will continue to be applied only in extreme and justified cases."
In contrast, there is no doubt about the validity of the termination in trunkand thus without the grant of notice, in the event of just cause.[15]
As to the inclusion in the distribution contract of a express termination clausedoctrine and jurisprudence agree that it can be validly included in the agreement (contrary to the guidelines on agency contracts).
If the relationship is terminated without cause, the terminating party is obliged to compensate the damage to the person who suffered such an action. For the purpose of calculating damages, account must be taken of the profits that the dealer would have presumably obtained in the remaining part of the contract (on the basis of the turnover history) or of the expenses incurred by the dealer for the organisation and promotion of sales in anticipation of the longer duration of the relationship.
Instead, case law is unanimous in holding that thetermination indemnity in favour of the concessionaire must be excluded and cannot be applied to this type of contract. agency provisions.[16]
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[1] Cass. Civ. 1968 No. 1541; in doctrine Il contratto di agenzia, Venice - Baldi, 2015, p. 139, CEDAM.
[2] It is the unanimous conviction in doctrine that Article 1569 of the Civil Code, relating precisely to the contract of supply, according to which either party may withdraw from the contract without the need to invoke a just cause, may be applied analogically to this case (see on this point I contratti di somministrazione di distribuzione, Bocchini and Gambino, 2011, p. 669, UTET)
[3] Concession of Sale, Franchising and Other Distribution Contracts, Vol. II, Bortolotti, 2007, p. 42, CEDAM.
[4] In doctrine Il contratto di agenzia, Venice - Baldi, 2015, p. 140, CEDAM; In jurisprudence Court of Appeal Rome, 14 March 2013;
[5] I contratti di somministrazione di distribuzione, Bocchini and Gambino, 2011, p. 669, UTET
[6] Distribution Contracts, Bortolotti, 2016, p. 564, Wolters Kluver.
[7] Trib. Treviso 20 November 2015 in Laws of Italy.
[8] Trib. Napoli 14 September 2009 in Laws of Italy.
[9] Trib. Bologna 21 September 2011 in Laws of Italy.
[10] Trib. Bergamo 5 August 2008 in Agents and Sales Representatives 2010, No. 1, 34.
[11] See Trib. Torino 15.9.1989 (which considered a term of 15 days to be congruous); Trib. di Trento 18.6.2012 (which considered a term of 6 months for a 10-year relationship to be congruous).
[12] Cass. Civ. 2009, no. 20106.
[13] Cass. Civ. 18.9.2009 "On the subject of contracts, the principle of objective good faith, i.e. of mutual loyalty of conduct, must govern the performance of the contract, as well as its formation and interpretation and, ultimately, accompany it at every stage. [...] The obligation of objective good faith or correctness constitutes, in fact, an autonomous legal duty, the expression of a general principle of social solidarity, the constitutionalisation of which is by now unquestionable (see in this sense, among others, Court of Cassation Civ. 2007 no. 3462.)"
[14] Distribution Contracts, Bortolotti, 2016, p. 565, Wolters Kluver
[15] Court of Appeal Rome, 14 March 2013
[16] Trib. Trento 18.6.2012; Cass. Civ. 1974 no. 1888; Contratti di distribuzione, Bortolotti, 2016, p. 567, Wolters Kluver; Il contratto di agenzia, Venezia - Baldi, 2015, p. 153, CEDAM
The post-contractual covenant not to compete of the employee, self-employed person, director, partner and agent. A brief overview.
The post-contractual covenant not to compete is certainly a very delicate element in an employment relationship and one that, depending on the addressee of this obligation, has different requirements as to form and substance. The purpose of this article is to provide the reader with an overview of this institution by briefly analysing how and with what limits this bond may bind the employee, the self-employed, the administrator, the partner and the commercial agent.
- Employee
The employee's covenant not to compete is governed by Article 2125 of the Civil Code. This article expressly provides that the covenant must, on penalty of nullity:
- (a) be made in writing;
- (b) establish a constraint contained within certain limits of subject, place and time;
- (c) provide for a consideration in favour of the employee.
With reference to (a), there are no particular issues to be addressed. The pact shall̀ be undersigned (and preferably initialled on each page) by the employee. Moreover, although according to traditional case law, the non-competition agreement does not require a double signature pursuant to Art. 13.41 of the Civil Code.[1]However, it is prudently recommended that such a post-contractual undertaking be specifically approved in writing in order to avoid possible disputes, also in view of a possible change in the above-mentioned jurisprudential orientation.
As for point (b), the time limits of the post-contractual agreement are defined in the second paragraph of Art. 2125 of the Civil Code as 5 years for executives and 3 years for other cases. It should be emphasised that the terms set forth in Article 2125 of the Civil Code constitute the maximum limits for the duration of the covenant, and the payment of the compensation due to the employee must also be calibrated to the actual duration of the covenant agreed upon by the parties.
The evaluation of the adequacy of the place within which the activity is prohibited is in close connection with the object of the activity carried out by the employee and, to this end, the indication of an excessively broad space may lead to the nullity of the covenant itself. On this point, there are controversial case law precedents, with one part of the case law considering that the pact extended to the entire national territory is null and void, inasmuch as it excessively restricts the employee's possibility of re-employment.[2] Other pronouncements, on the other hand, have considered valid EU-wide covenants,[3] in that the activity had been precisely specified so as not to excessively restrict the employee's working and professional capacity.
About the quantification of remunerationcase law assumes as an assessment criterion the congruity of the same to the sacrifice borne by the worker in the individual case[4]in holding that the sum paid to the worker must be proportionate to it.[5]
Clearly, since the concept of fairness is a very abstract one, it is very difficult to apply objective criteria to it. In any event, although there is no unambiguous and objective criterion for establishing the congruity of the covenant, case law holds that a consideration in the region of 15%-35% of the gross annual remuneration may be considered congruous.[6]
Secondly, the quantum in addition to being congruous it must be predetermined and/or predeterminable. Jurisprudence has held null and void, insofar as it was indefinite, a covenant that provided in favour of the employee a tot euro for each month until the termination of the relationship, as this covenant did not allow the employee to determine ex antealready at the time the agreement was signed, a minimum amount.[7]
In order to find a solution to the problems illustrated above and in order to attempt to stipulate a non-competition agreement that is effectively valid and with a reduced possibility of being challenged, one could hypothesise to include as an indemnity recognised to the employee, a percentage sum whose value increases with the lengthening of the relationship and which is linked to the gross sums paid to the employee in the last year of the relationship or, in a more favourable case, in the twelve months following the signing of the agreement.
- Self-employed
The covenant not to compete signed by a self-employed person,[8] is regulated by Article 2596 of the Civil Code.
The limits provided for by this rule are as follows:
- must be proven in writing
- it is valid if confined to a specific area or activity;
- may not exceed a duration of five years.
As can be seen, points a), b) and c) are similar to those already discussed above, to which we refer in full.
The essential difference is that Article 2596 of the Civil Code, unlike Article 2125 of the Civil Code, does not provide for any sanction for the failure to provide for consideration in favour of those who contractually submit to competitive restraints. Therefore, the fact that the non-competition agreement does not provide for any consideration is of no relevance, being in this respect, in any event, valid, effective and unenforceable.
However, very often one encounters problems related to the incorrect classification of self-employed workers, who, due to the way they carry out their activities within a company, may not have been properly classified as employees. For these figures, the problem could arise whereby, once the relationship has ceased, they intend to bring an action before the Employment Court to ascertain the subordination of the relationship and, with it, the invalidity of the non-competition agreement, since it lacks one of the essential elements provided for by Article 2125 of the Civil Code (namely, remuneration).
In any event, it is emphasised that the provision of a paid non-competition agreement in favour of such persons could be used by them as a further element to prove the subordinate nature of the relationship.
- Company director
Like self-employed persons, the non-competition agreement signed by a director is also subject to the limits set forth in Article 2596 of the Civil Code and, therefore, there is no requirement that he be remunerated.
With reference to the director's non-competition in reporting courseit is solely regulated formerly Article 2390 of the Civil Code, for directors of joint stock companies, which provides as follows:
"[1] Directors may not be unlimited partners in competing companies, nor engage in a competing activity on their own behalf or on behalf of third parties, nor be directors or general managers in competing companies, unless authorised by the shareholders' meeting.
[2] For failure to comply with this prohibition, the administrator may be removed from office and is liable for damages."
In contrast, for limited liability companies, there is no explicit prohibition for directors to act in competition during their term of office [9]with the consequence that it is the articles of association of the company that may freely provide whether the director may or may not perform such activities.
- Partners of limited liability companies
S.r.l. partners are not required to refrain from activities that compete with the company in which they hold shares. Indeed, in the Italian system, competition is only prohibited formerly Article 2301 of the Civil Code to partners in general partnerships and general partners in limited partnerships
If a non-compete obligation is also intended for partners, it could be:
- have the partners sign a non-competition agreement;
- sign a shareholders' agreement, whereby all shareholders undertake not to engage in activities in competition with the company and whose contents are in any case those provided for in Article 2596 of the Civil Code.
It should be noted that the shareholders' agreement is also valid for a maximum of five years and must therefore be renewed upon its expiry.
- Agency contract
The agency contract expressly regulates the non-competition agreement in Article 1751-bis of the Civil Code.
This issue has already been dealt with in this blog, so please refer to the following article (The non-compete obligation in the agency contract: during and after termination of the relationship).
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[1] Traditional jurisprudence has ruled out the applicability to the non-competition agreement of the provisions relating to vexatious clauses, on the ground that Art. 2125 lays down more stringent conditions than those set forth in Art. 1341, and in view of the peremptory nature of the hypotheses contemplated in para. (2) of the latter provision (see Turin Tribunal, 8.2.1979).
[2] Trib. Monza 3.9.2004.
[3] Cass. 21.6.1995 no. 6976; Trib. Milan 22.10.2003.
[4] On this point Cassation 1998 No. 4891.
[5] Cass. Civ. 1998 no. 4891; Trib. Milan 27.1.2007.
[6] E.g., a consideration quantified in 15% of the total amount of the remunerations paid to the employee in the last two years of the relationship against a non-competition obligation of two years' duration was deemed congruous) Trib. Milan, 22.10.2003.
[7] Trib. Venezia 31.5.2014.
[8] IMPORTANT. In this category does not include the commercial agent, for which there is a separate discipline, regulated in Art. 1751-.encore, which is not subject of examination for this opinion.
[9] In fact, before the reform brought about by Legislative Decree No. 6 of 2003, Article 2475 of the Civil Code made explicit reference to Article 2390 of the Civil Code. Now the reference has been eliminated.
The probationary period in the agency contract: is it valid? The European Court of Justice gives its ruling.
In practice, it is very common for the parties to subject the agency contract to a so-called 'probationary agreement'; the purpose pursued by such an agreement is to protect an interest common to both parties, namely that of ascertain the cooperation relationshipthrough concrete experimentation.
By entering into this agreement, the parties are given the option, during the probationary period, to terminate the contract without observing any period of notice and without the need to state any reasons.
The probationary period should therefore be understood as a sort of preliminary phase of the contract in which the parties intend to mutually test the cooperation relationship, which would only assume a stable character once this period has been successfully completed.[1]
Although this institution is not expressly regulated in our legal system,[2] in principle, the probationary period must be considered admissible in the agency contract, irrespective of whether it was concluded for a fixed term or an indefinite term.[3]
Such a covenant responds to the need of the parties to verify the mutual convenience of giving stability to the contract, according to part of the doctrine,[4] during the probationary period, the parties may terminate immediately, without the need to give any notice period. This position has also been confirmed by less recent case law, which has upheld not only the legitimacy of the probationary period, but also the granting to both parties of the right to terminate during the probationary period with immediate effect, without just cause.[5]
As for the duration of the covenant, it must be limited "the time necessary and sufficient to carry out the evaluation".[6] To translate this principle into practical terms, it is necessary to consider the individual relationship on a case-by-case basis, taking into account, of course, the sector in which the parties operate, the type of products being promoted, and using good faith as a yardstick; in any case, to give an indicative time reference, one can consider reasonable a probationary agreement with a duration of between two and six months.[7]
With reference to the agent's right to obtain aseverance pay in the event of termination of employmentfor an act not attributable to the agent, the majority Italian jurisprudence has held in recent decades that:
"if the principal terminates the agency contract during the probationary period, the agent is not entitled to the indemnity for termination of the contract pursuant to Art. 1751 of the Civil Code."
However, on this issue, the European Court of Justice by judgment of 19.4.2018in which the Luxembourg judges decided a dispute, referred for a preliminary ruling by the Cour de Cassation French, concerning an authentic interpretation of Directive 86/653/EEC on commercial agents; specifically, it was asked whether or not the directive gives the parties the power to exclude the agent's right toallowance in the event of termination of the contract, during the contractually agreed trial period.
The dispute had originally arisen between an agent and a principal, both operating in France in the real estate sales sector, who had included in an agency contract a twelve-month trial period; during this period, the agent had also obliged itself to conclude the sale of twenty-five houses.
Approximately five months into the relationship, as the agent had only managed to conclude one sales contract, the principal terminated the relationship with immediate effect, confident that, as the relationship was still in the "experimental"No notice or indemnity was due to the agent.
The agent, on the other hand, was of a different opinion. He contested the termination without just cause, considering that, although the relationship was still in the probationary period, he was nevertheless entitled to receive the termination indemnity, as well as compensation for damages, provided for by French law.
The issue, after having been decided differently at first instance and on appeal, was referred by the Cour de Cassationto the Court of Justice.
The European Court, as a preliminary remark, noted in its reasoning that although the directive not contains no reference to the notion of "probationary period", this omission cannot be interpreted as a prohibition to the use of that instrument by the contractors.
The judgment then went on to analyse the function that the directive had conferred on the severance pay, noting that this institution did not so much pursue a sanctioning purpose but, rather, one of indemnify the agent
"for services performed, from which the principal continues to benefit after the termination of the contractual relationship, or for charges and expenses incurred for the purpose of such services."
The Court goes on to note that Article 18 of the directive itself expressly regulates the cases in which the indemnity is not due and that this list is to be interpreted restrictively,[8] the probationary period is not included.
On the basis of the elements summarised above, the Court therefore held that:
"l'the interpretation that no indemnity is due in the event of termination of a commercial agency contract during the probationary period is not compatible with the mandatory nature of the rules established by Article 17 of Directive 86/653. In fact, such an interpretation, which would result in making recognition of the indemnity conditional on whether or not a probationary period was agreed in the commercial agency contract, without taking account of the services rendered by the agent or of the costs and expenses incurred by him, contrary to Article 17 itself, constitutes [...] an interpretation to the detriment of the commercial agent, who would be denied any indemnity on the sole ground that the inter partes contract provided for a probationary period.
This ruling will certainly have a very strong impact on what will be the use of the probationary covenant in the agency contract; indeed, although the Court does not delegitimise the possibility of the parties to provide for a probationary covenant in the agency contract, in fact, makes it less interesting to use such an instrumentthe parties will no longer be able to exclude the agent's right to receive the termination indemnity.
Thus, what was the founding assumption and the purpose that always prompted contracting parties to enter into a probationary agreement, i.e. to agree on an initial period of the relationship, in which the parties can test each other, without worrying about the consequences, in case they do not intend to make the relationship stable, falls away.
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[1] On this point - VENICE - BALDI, The Agency Contract, 2014, p. 344 ff.
[2] Without prejudice to Article 2096 of the Italian Civil Code, which regulates the probationary period in subordinate employment and which, due to its special nature, cannot be applied analogically to the agency contract - On this point see VENEZIA - BALDI, Il contratto di agenzia, 2014, p. 344 et seq. Reference is instead made to the probationary agreement in some collective economic agreements and specifically: in the contract between Federagenti and CNAI of 22.4.2013, (statement in the minutes art. 10), a trial period of a maximum duration of 6 months is provided for; AEC commercio 2009, art. 2 and AEC industria 2014 art. 4, where it is provided that, in the event of one or more renewals of the agency contract, the principal may establish a trial period only in the first contract.
[3] On this point see Trib. Grosseto 30.11.2004; Trib. Firenze 2.10.2003; Trib. Milano 18.12.1986; In doctrine PERINA - BELLIGOLI - Il rapporto di agenzia, 2014.
[4] TRIONI - Contratto di agenzia, in Commentario del Codice Civile, Bologna, 2006.
[5] Cass. Civ. 1991 no. 544.
[6] Trib. Turin 7 July 2004.
[7] VENICE - BALDI, The Agency Contract, 2014, p. 344 ff.
[8] In this sense, Court of Justice, 28.10.2010, Volvo Car Germany, C-203/09.
Is the principal liable for damages caused by the agent to third parties?
In the agency relationship, it may happen that the agent, in the performance of his duties, causes damage to a third party; in such a case, the question arises as to whether the principal may be held liable for the damage caused to the third party and, therefore, be held indirectly liable formerly Article 2049 of the Civil Code for damage caused to the third party. This rule provides that:
"masters and principals are liable for damages caused by the wrongful act of their servants and committed in the performance of their duties."
From a reading of that article, it is understood that the constituent elements of the liability of the "master and principal" are:
- the existence of a wrongdoing which resulted in damage to a third party;
- the fact that the damage was caused by a supervisor (which is not necessarily an employee relationship);
- that the damage was caused (or otherwise facilitated) in the performance of duties to which the supervisor had been assigned.[1]
According to case law, liability under Article 2049 of the Civil Code is of an 'objective nature'.[2] and this implies that the principals not may propose any clearance test of their liability, with the consequence that they are indirectly liable for the actions of others, irrespective of whether they were at fault in the choice or supervision of the supervisor.[3] In short, there are two persons (the principal and the principal), distinct from each other, responsible for the damage, even if only one of them was the author of the harmful act.
The classic example of the application of this rule is the employmentIn such a case, the principal is liable for the wrongful act committed by its employee, by virtue of the assignment conferred upon him. In any event, it is important to note that majority case law has long held that for the purposes of the application of liability formerly Article 2049 of the Civil Code, it is sufficient that the person in charge acts on behalf of the principal by virtue of a subordination bond understood in a broad sense.[4] In fact, we read that:
"In order for the liability regime enshrined in Article 2049 of the Civil Code to operate, it is sufficient that the perpetrator of the tort is included, even if temporarily or occasionally, in thebusiness organisation and acted, in this context, on behalf of and under the supervision of the entrepreneur."
Given that the agency relationship is a relationship of the very nature parasubordinate and, as such, potentially qualifying as employment of subordination 'in the broad sense', the question arises as to whether liability under Article 2049 of the Civil Code also applies to this type of contract.
According to an authoritative doctrine[5] the provisions of Article 2049 of the Civil Code cannot be applied to the agency relationship, since that institution presupposes for its application a relationship of dependence and subordination, even if of a merely occasional or temporary nature; that relationship of dependence is not to be found in a contractual situation such as the agency contract, the agent being configured rather as an independent collaborator of the principal.
In contrast, some case law[6] held that the principal is vicariously liable for the agent's wrongful act if the agent acts in the capacity of representative. On the point:
"the activity of the agent, who is an agent of the principal, constitutes a source of indirect liability of the principal, within the meaning of Article 2049 of the Civil Code, only when the agent has availed itself of its capacity as representative to commit the tort. "
This orientation expands the limits of the principal's liability, even in cases where the agent (imp! always acting as a representative), acts culpably with ways other than those given to him, or even beyond the limits given to him.[7] A fundamental point is the fact that the person in charge, by exercising the task to which he is assigned, albeit in a manner different from the principal's instructions or even beyond the limits thereof, has caused the unjust damage to others.[8]
We read a more recent orientation of the Supreme Court, which does not exclude the applicability of Article 2049 of the Civil Code even where the agent has acted without any power of representation:[9]
"For the purposes of joint and several liability under Article 2049 of the Civil Code of the principal, a relationship of necessary occasionality between the harmful act and the duties performed by the principal is sufficient, which exists when the wrongful act was performed by exploiting the duties performed by the principal, even if he acted beyond the limits of his duties and even if he violated the obligations imposed on him."
The judgment goes on to state that:
"It is not necessary for there to be a stable employment relationship between the two parties, it being sufficient that the perpetrator of the tort/delict is linked to the principal even only temporarily or occasionally and that the task performed has led to a situation that facilitates or makes possible the tort/delict and the harmful event.
"In particular, that of the principal is a liabilitỳ of an objective nature inspired by rules of social solidaritỳ, intended to attribute - according to the theory of the distribution of costs and profits - the burden of risk to the one who avails himself of the work of third parties. [...] In this perspective, civil jurisprudence, in more recent times, has come to recognise the responsibilitỳ of the principal for the illegal activity carried out by the'agent even without power of representation, requiring in that sense only that the commission of the offence was facilitated or made possible by the tasks entrusted to it and that the principal had the opportunity to exercise powers of direction and supervision'.
If one follows this last jurisprudential orientation, it may be said that the agency contract is not, per se, outside the scope of Art. 2049 of the Civil Code, not even if its content is that of a mandate without representation.
As noted above, liability under Article 2049 of the Civil Code is an objective liability, with the consequence that it is not conferred on the principal the possibility of providing exculpatory evidence based on the absence of fault in the principal's choice or supervision of the principal; it follows that the principal may defend its position, demonstrating only that the prerequisites for the application of the rule under examination do not exist, and therefore prove:
- that there is no preposition relationship with the offending party;
- that there is no causal link between the tasks entrusted and the commission of the offence;
- the absence of the tort.
On the contrary it will be burden of the damaged demonstrate that:
- a wrongful act causing damage has occurred;
- the supervisory relationship between principal and agent;
- the event giving rise to the damage is causally connected, or at least necessarily occasional, with the performance of the duties for which he was employed.
Finally, we briefly point out that in principle the agent can be held liable under Article 2049 of the Civil Code for the actions of a sub-agentIf the court's investigation establishes that the sub-agent is effectively integrated into the organisation of the agent's undertaking, the agent is entitled to supervise and control the sub-agent.[10]
__________________
[1] Cass. Civ. 2002 No. 26503; on this point see Gualtierotti, La responsabilità del preponente per fatto illecito dell'agente, in Agents & Sales Representatives - No 4/2014.
[2] Cass. Civ. 2001 no. 8381; Cass. Civ. 2000 no. 3536.
[3] On this point see Commentary Civil Code, 2009, Art. 2049, p. 84 ff. COMPORTS, GIUFFRE PUBLISHER
[4] On this point, see Commentario breve al codice civile, CIAN TRABUCCHI, art. 2049, CEDAM, 2016.
[5] BALDI - VENEZIA, In contratto di agenzia, p. 306 ff., Giuffrè Editore.
[6] Cass. Civ. 1995 No. 12945
[7] Cass. Civ. 2014, no. 23448 "The principle of the appearance of entitlement, through which the innocent reliance of a third party who has contracted with a person who appeared legitimately entitled to bind others is protected, is operative on the twofold condition that there exists the good faith of the person invoking its application and at least culpable conduct on the part of the person who gave rise to the situation of appearance. (Cassa con rinvio, App. Bologna, 21/01/2011)." In the contrary sense BALDI - VENEZIA, In Contratto di agenzia, p. 306 ff., Giuffrè Editore. "It is worth noting, however, that since pursuant to Art. 13939 of the Civil Code the third party who contracts with the agent may always require the agent to justify his powers of representation, since such powers cannot be presumed, the third party cannot invoke a liability on the part of the principal if the agent exceeds the limits of the powers conferred on him, or acts in reliance on powers of representation that he does not have.
[8] On this point see Commented Civil Code, Plurisdata, Art. 2049 Civil Code, 2014 Wolters Kluwer Italia Srl.
[9] Cass. Pen. 2016, n. 7124.
[10] Cass. Civ. 2014 no. 23448; Cass. Civ. 2012 no. 7634.
Ex-agents: right to work for the competition, but within the limits of 'loyalty'.
Whereas the obligation not to compete during the contract is a normal burden imposed on the agent, the covenant of post-contractual non-competition is permissible only where there is a specific agreement between the parties and, in any event, within the narrow limits provided for in Art. 1751-encore c.c.
In absence of such a covenantonce the contractual relationship is dissolved, nothing prohibits the agent to start an activity in competition with the former principal, since the mere status of former agent is not sufficient to render unlawful an activity that does not in itself have any independent unfairness.
The discipline of unfair competition is regulated in Article 2598 of the Civil Code, which provides as follows:
"Without prejudice to the provisions concerning the protection of distinctive signs and patent rights, any person commits acts of unfair competition:
- uses names or distinctive signs capable of producing confusion with the names or distinctive signs legitimately used by others, or slavishly imitates products of a competitor, or performs by any other means acts likely to create confusion with the products and business of a competitor;
- disseminates news and appreciations about a competitor's products and activities that are likely to determine its discreditor appropriates the merits of a competitor's products or enterprise;
- makes direct or indirect use of any other means not in accordance with the principles of the professional fairness and likely to damage the business of others."
The provision in question outlines, in paragraphs 1 and 2, the typical cases of unfair competition, including in point 1 all acts "likely to cause confusion with the products and the activity of a competitor", and in point 2, acts of denigration and appropriation of the merits of others.
The case of the 'confusion"is constituted by the conduct of the entrepreneur who addresses to the public of potential purchasers a message capable of generating the false belief that his products and/or activities can be traced back to a competing entrepreneur; on the other hand, there is "imitation servile" in the case of the development of a product by infringing a competitor's patent and/or with the aid of technical information of a confidential nature owned by the principal.
Point 3 of Article 2598 of the Civil Code, on the other hand, provides for the general clause of the professional fairness as a rule that entrepreneurs must adhere to in order to avoid damaging competitors and engaging in unfair competition.
Although in the absence of a valid post-contractual covenant not to compete, it is perfectly permissible for the former agent to carry on an activity in competition with the former principal following the termination of the relationship, some case law[1] considers, on the assumption that the former agent's competition is more 'dangerous', that there is a special emphasis on the duty of professional loyalty and probityas well as a special duty of discretion and non-aggression towards the home company.
Thus, the difficulty of balancing what are, in fact, two opposing interests is evident: on the one hand, the right to conduct business in competition with the principal in the absence of a post-contractual non-compete agreement, and on the other hand, the agent's duty to act in accordance with professional loyalty and within the limits imposed by Article 2598 of the Civil Code.
As a matter of principle, the duty of professional correctness is manifested, in the case of the former agent, principally in the management of the relations he/she establishes with the clients of the former principal.
On this point, case law[2] has repeatedly pronounced itself, stating that:
"the benefits, in terms of goodwill and clientele, that accrue to the principal from the promotional activity carried out by the agent, remain vested in the principal, even after the termination of the agency relationshipas an asset belonging to his company, protectable against any acts of unfair competition, even if coming from the agent himself after the termination of the relationship; with the consequence that the diversion of customers by the former agent [...] of a company, making use of the confidential knowledge acquired in the previous report or, in any event, in a manner that cannot be justified in the light of the principles of professional fairness, constitutes unfair competition within the meaning of Article 2598(3) of the Civil Code'.
The Court also ruled on this point, clarifying that:
"constitutes unfair competition for the diversion of customers the systematic use by former employees of confidential information acquired in the previous relationship, such as the customer list, and having proposed more favourable contractual conditions to them."
In the same judgment, the Supreme Court states that:
"constitutes an act of unfair competition, contrary to the rules of professional fairness (Article 2598, no. 3, Civil Code.), the diversion of customers carried out by a former employee of a company who, making use of confidential knowledge acquired in the previous employment relationship (and relating to customers and the economic conditions of ongoing contractual relationships), undertakes similar business activity by systematically acquiring the competitor's customers (through the preparation of cancellation letters of pre-existing contracts, the sending of the same by him within the contractually agreed terms, the consequent conclusion of new contracts)."[3]
Other precedents are to be found in case law, mainly related to unfair competition activities carried out by former employees for which more case law is available both in the literature and in case law. However, some of these precedents are listed here in view of the applicability of general principles announced therein also to the category of commercial agent.[4]
- He commits unfair competition who "offers an exclusive tool supplier the former employer to supply him with the same utensils; b) in advertising to the former employer's customers he flaunts his status as the former employer's employee; c) in the advertising of his undertaking to the former employer's customers he makes an explicit comparison between the latter's products and prices and his own. (see also: Obligations of the Agent. Is a simple propaganda activity sufficient?)
- "An act of unfair competition is committed by a former employee who, by using not only the lists of customers, but also knowledge of the terms and conditions of the individual employer's contracts, once the employment relationship is terminated, divert some of the customers by offering lower rates and preparing and sending termination letters for the former employer's contracts in due time."[5]
- "It is an act of unfair competition to use a database containing names of potential customers, provided and processed informatically by the former sole director of the former user company, by a competitor company to which the database was provided by the same person in the context of a subsequent cooperation relationship."[6]
- "It constitutes unfair competition lthe former employee's use of notions concerning the specificthe particular needs of the former employer's individual customers, in order to offer each of them products precisely tailored to meet their needs, where such tailored products required the former employer to make repeated contacts with individual customers in order to identify their wishes and expectations and to gradually arrive at the optimum solution. [...] The unlawfulness of this conduct is accentuated by the fact that the former employee flaunts to the customers the identity of the products offered, envisaging a continuity of production merits in the sense of meeting the wishes of each individual customer, as compared with the production of the former employer."[7]
Without prejudice to the foregoing, it must also be emphasised that the prohibition of unfair competition cannot be extended to such an extent as to prevent the agent from making any use of experience gained in previous employment. Regarding the inadmissibility of such a conclusion, a historical (and still relevant today) ruling of the Supreme Court has stated that:
"The dismissed employee cannot be prevented from exploiting his technical capacity, even if it is acquired in the performance of tasks to which it was assigned and for which it was bound to secrecy, and even if that capacity constitutes a personal asset of the employee and is used to provide the latter with the means of subsistence, is carried out in activities and products similar to those of the employer. Therefore, it does not constitute an act of unfair competition within the meaning of Article 2598 no. 3 of the Civil Code, the use, by an employee, after termination of employment, of technical knowledge even if acquired in the performance of the duties to which he was assigned. "
This principle applies whether the former agent has taken up employment with another company or has gone to work for himself.[8]
However, according to prevailing case law, in the former agent's freely usable knowledge and skills specific information on the needs of individual customers contacted during the previous work period cannot be includedsince acquired knowledge does not fall within the concept of corporate information and experience;[9] usable technical knowledge is thus contrasted with non-usable information learned in the previous employment relationship.[10]
In conclusion, it can be reasonably assumed that the former agent it is not prevented from developing products in competition with the former principal and also offering them to the latter's customers; however, the relationship with these customers is very delicate and must be handled with the utmost caution and professional loyalty, since the agent may not carry out targeted sales campaigns against such persons and make use of company information and news about specific needs of specific customers, which have accrued in the course of the previous employment relationship.
Concluding it can be stated that:
- the agent can carry out any competing activities with the principal as a result of the employment relationship;
- i limits competition are dictated by the acts of unfair competition which are identified, in the case of the agent, mainly in:
- slavish imitation and confusion of the products it develops for the competing business it operates;
- denigration of the products sold by the former principal;
- diversion of customersthrough the launch of targeted sales campaigns towards customers of the former principal, and making use of company information and news about specific needs of specific customers, which had accrued during the previous employment relationship.
______________________
[1] See UBERTAZZI, Commentario breve alle leggi su proprietà intellettuale e concorrenza, art. 2598, CEDAM.
[2] Cass. Civ. 2004 no. 16156.
[3] Trib. Turin 11.1.2008; Cass. Civ. 2004 no. 16156.
[4] Trib. Di Milano 1974; Court of Appeal Florence 27.9.1987.
[5] Trib. Turin 28.12.1973.
[6] Trib. Turin 28.12.1973.
[7] Trib. Genoa 19.6.1993.
[8] Court of Appeal Milan 5.6.1987.
[9] Trib. Milan 25.9.1989.
[10] Trib. Florence 26.11.2008.
The agency contract and the employment relationship: distinguishing criteria and evaluation parameters.
When speaking of an agency, it is safe to say that this figure should be included in the category of the self-employed.
In fact, although in the definition of commercial agent formulated in Article 1746 of the Civil Code there is no reference to the independence of the agent's work activity, European legislation 86/653/EEC (on which the Italian model is based) had made specific reference to the agent as a worker independenthowever obliged to "adhere to the reasonable instructions given by the principal."
Already from a first reading of the regulations it is clear that the agent, although independent and carrying out its activities independently, must nevertheless comply with the provisions of the principal, who is in charge of deciding the company's commercial policies. This relationship of interdependence, which is very delicate, is more clearly regulated by the AEC Commerce 2009 and Industry 2014, which in Art. 1 para. 3 provide as follows:
"[The agent [is] obliged to direct the principal's distribution policies in accordance with the instructions provided by the principal. The principal decides in broad strokes what the agent is to do, without being able to interfere in the manner in which the agent intends to achieve the required result. "[1]
From the combined analysis of the above-mentioned rules, it is clear that:
- On the one hand, the principal may not impose obligations on the agent that are incompatible with its autonomy;
- on the other hand, the agent, although operating under full autonomy, is nevertheless obliged to follow in broad strokes the directives of the principal.
If, on the other hand, the relationship has characteristics similar to those of a subordinate job, it can be qualified as an employment relationship, regardless of the nomen iuris with which the parties have qualified the relationship.[2] According to a constant orientation of the Supreme Court, the distinguishing element between the two figures is characterised by the:
"subordination of the worker to the organisational, managerial and disciplinary power of the employer."[3]
It follows, therefore, that the cooperation provided by the agent must be carried out under a regime of autonomy, whereas that provided by the employee is carried out under a regime of hierarchical subordination, with the employer organising the employee's energies[4] (cf. also The natural person agent, parasubordinate work and the employment rite). In fact, while on the one hand the agent must exclusively coordinate with the principal on the activities to be performed, the employee, pursuant to Art. 2094 of the Civil Code, performs work activities that are organisationally coordinated in time and space by the employer, who may from time to time intervene in the performance of the service by specifying the manner in which it is to be performed, to which the employee must necessarily conform (c.d. obligation of obedience).[5]
However, it is not always easy to delineate to which category a worker belongs, given that both the figures of both the employee and the commercial agent are characterised by the stability of collaboration[6] (precisely this element, i.e. 'stability', distinguishes the agent from the business procurer, on this point see Art. What is the difference between an agency contract and a business intermediary?).
This complexity is further exacerbated in certain sectors where, due to the way the activity is carried out, the agent is de facto required to strictly follow the directives and timetables imposed not so much by the principal, but rather the market in which it operatesFor example, consider the figure of an agent promoting sales at a car dealership, who, in fact, is bound to promote sales in a certain display area and during the shop's opening hours.[7]
Since there is no single, 'decisive' element that makes it possible to understand whether a given relationship is to be qualified as agency or employment, it will have to be considering the different typical elements in the individual case of subordination (such as, for example, lack of decision-making autonomy, absence of risk, inclusion in the organisation of the company, obligation to comply with fixed timetables and itineraries fixed by the principal), bearing in mind that none of these alone allows the relationship to be considered subordinate, but rather an overall assessment of all of them must be carried out.[8] On this point, the Supreme Court ruled that:
"the agency relationship, the autonomous nature of which cannot be questioned, is not incompatible with the subjection of the staff member's work to directives and instructions as well as more or less intense and penetrating administrative and technical controls in relation to the nature of the business and the interest of the principalnor with the agent's obligation to visit and instruct other employees, nor with the principal's obligation to reimburse certain expenses incurred by the agent, nor, finally, with the principal's obligation to report daily to the principal."[9]
To give a practical slant to this article, however, it can be reasonably assumed that, by way of example, the principal may not:[10]
- impose the daily list of customers to visit (but he may ask to visit certain customers or categories of customers he cares about);
- programming the itineraries which the agent must follow (but may require the agent to organise the visits in such a way as to cover its area of competence adequately);
- decide theinternal organisation of the agency (but to demand certain standard quality of personnel, suitability of premises and number of employees according to the agent's promotional activity);
- impose detailed statements on the activities carried out by the agent (but ask report on market trends).[11]
A final issue, of great practical relevance, is that of the compatibility of the fixed remunerationwith the typical autonomy of the contractual relationship under consideration.
Although the European directive does not exclude the reconciliation of this method of remuneration with the figure of the agent, Italian jurisprudence (criticised by part of the doctrine[12]) declared itself against this thesis[13]In such a case, the agent, who would only receive a fixed remuneration, regardless of the results he or she brings, would not assume any entrepreneurial risk, a characteristic that distinguishes this figure.
In any case, case law considers forms of mixed remunerationunder which a fixed component is combined with a variable component. Such a solution whereby the agent is assured a "guaranteed minimum"is considered lawful and compatible with the agency employment relationship.[14]
_______________________
[1] BORTOLOTTI, The Commercial Agency Contract, Vol. I, p. 86, 2007, CEDAM.
[2] Cass. Civ. 2004, no. 9060.
[3] Cass. Civ. 1990 no. 2680.
[4] BALDI - VENEZIA, In contratto di agenzia, p. 33, Giuffrè Editore.
[5] PERINA - BELLIGOLI, The Agency Relationship, p. 27, Giappichelli Editore
[6] Trib. Milan 8 March 20210, in Agents and Sales Representatives 2012, No 3 p. 31. The Court of Milan states on this point that "the agent's obligation consists in visiting, on a stable and continuous basis, all possible customers and making a predetermined contractual proposal (predetermined by the principal, as to its essential aspects) to the principal.
[7] On this point see also Cass. Civ. 2009 no. 9696. In the present case, the S.C. held that the territorial court had correctly ruled out the existence of a relationship of subordination since, on the one hand, since the person concerned carried out the activity of propagandist or promoter for the sale of educational equipment for schools and universities his working hours necessarily had to coincide with the opening hours of those institutions and did not constitute a decisive indication, while, on the other hand, he had repeatedly qualified himself, in the course of the relationship, as an agent and not as an employee, his contract had been concluded in order to replace another previous agent and he was under no obligation to justify his absences.
[8] BORTOLOTTI, Distribution Contracts, p. 129, 2016, Wolters Kluwer.
[9] Cass. Civ., 1990 no. 2680, Cass. Civ. 2001, no. 11264. In this judgment, the Supreme Court therefore held that "an agency relationship had existed between the parties, irrespective of the length of time over which it had lasted, in that the agent, although having to give an account in a daily report of the work performed and although having to follow an itinerary predetermined by the principal, did not lose the agent's autonomy with the possibility of choosing customers within the area assigned to him and with the possibility of adopting the working methods considered most suitable."
[10] BORTOLOTTI, The Commercial Agency Contract, Vol. I, p. 88, 2007, CEDAM.
[11] On this point it is important to note that the AEC Commerce and Industry, which provide in Art. 1 para. 3 that the agent is "obliged to keep the parent company constantly informed of the situation on the market in which it operates, it is not, however, obliged to report at predetermined intervals on the performance of its activities'. It is therefore important to emphasise that the principal may not demand from the agent periodical reports on the performance of the agent's activities (e.g. reports on visits made), but may instead ask him to be informed, even periodically, of market conditions and relevant data (names of customers visited and results of visits).
[12] PERINA - BELLIGOLI, The Agency Relationship, p. 27, Giappichelli Editore; Saracini-Toffoletto, p. 327 ff.
[13] Cass. Civ. 1986 no. 3507; Cass. Civ. 1991 no. 10588; Cass. Civ. 2012 no. 12776. The latter judgment went so far as to admit that "in the agency relationship the parties may provide for a form of remuneration for the agent's services other than a commission determined as a percentage of the amount of business concluded (such as a fixed sum for each contract concluded), but without going so far as to acknowledge that remuneration in the form of a commission can be entirely replaced by a fixed remuneration.
[14] See on this point Cass. Civ. 1975 no. 1346; Cass. Civ. 1980 no. 34; Trib. Di Milano 9 September 2011.
How is severance pay calculated for insurance agents? The parameters set out in the ANA 2003.
The calculation of the severance payment provided for by theNational Agent Agreement 2003is rather articulate and complex and is regulated in Articles 12 et seq.
First of all, it is important to emphasise that Section 18 ANA provides that in the event of termination of the agency contract due to termination by the undertaking or the agent for just cause:
- no notice is due;
- if the terminating party is the enterprise, the agent shall be entitled to the termination indemnities set out in Arts. 27 to 33 (examined below); if the agent terminates, it shall be entitled to the termination indemnities provided for in the case of termination by the undertaking.
That being said, according to Section 12(I) ANA, the agency contract may be terminated by:
- Cancellation of the agent from the National Register of Agents referred to in Law No. 48 of 7 February 1979;
- Death;
- Total invalidity;
- Age limits;
- Termination for cause.
Para. (II) of the same article also provides that the agency contract may be terminated either by withdrawal by the undertaking or by the agent. Termination by the undertaking, in turn, is divided into three types:
- Withdrawal with an indication of the reasons and possible recourse to the Arbitration Board, in which case the rules set out in Art. 12-.encore;
- termination of the undertaking without stating reasons, in which case the discipline set out in Art. 12-.ter;
- withdrawal of the undertaking with application of Art. 12-quater for eligible agents.
If the termination is effected by the agent, the provisions of Art. 12-.encore
Para. (III) provides that the termination indemnities payable to the agent are set forth in Articles 14 to 19.
However, para. (4) of Art. 12 provides that in the event of termination of the contract due to death or total invalidity of the agent, an additional sum shall be due to the terminated agent or his heirs, in addition to the indemnities referred to in Articles 14 to 19, as follows:
| Scales of commissions
(Euro) |
Seniority
|
|
| Up to 5 years old | Over 5 years | |
| up to 20,500.00
from 20,501.00 to 26,400.00 from 26,401.00 to 38,000.00 from 38,001.00 onwards |
20%
15% 15% 15% |
30%
25% 20% 15% |
| This additional sum may not be less than EUR 8,800.00 or more than EUR 29,300.00. | ||
Article 12A then provides for detailed rules with a precise scheme of reference for the calculation of any additional sum due to the agent under the 2003 NAA, viz:
| Scheme of reference and discipline under Art. 12A | ||
| on the first | € 103,291.00 in commissions | 65% |
| on subsequent | € 103,291.00 in commissions | 40% |
| on subsequent | € 154,937.00 in commissions | 15% |
| on subsequent | € 154,937.00 in commissions | 10% |
| on how much it exceeds | € 516.457,00 | 5% |
| This additional sum may not be less than EUR 8,800.00 or more than EUR 29,300.00. | ||
Art. 12-bis provides that within 20 days of receipt of the notice of termination, the other party may have recourse to an informal arbitration procedure; the modalities of access to this procedure are expressly regulated in Art. 12-.encore itself.Article 12-encore regulates termination by the company with an indication of the reasons.
Article 13-ter regulates, on the other hand, the hypothesis of termination by the undertaking without giving any reason. In this case the notice due to the agent, pursuant to Article 13, will start only after the thirtieth day following the notice of termination by the undertaking. Within that term, the Agent may choose between the payment of the indemnities and the release of the portfolio managed by the agency, by sending the undertaking a notice to that effect. If the parties agree to opt for the liberalisation of the portfolio, this must be done by signing the attached text in Annex A to the ANA 2003 agreement.
It is important to note that, according to case law, the liberalisation of the portfolio is considered a legitimate alternative to the payment of severance payments.[1]
In the event of the agent's failure to exercise the option and in any event in the event of the agent's failure to sign the deed of liberalisation referred to in the preceding paragraph, the undertaking shall be obliged to pay the agent the indemnities referred to in Articles II and III of Art. 12-ter and the contract is terminated as of right by the agent:
- the treatment set out in Article 13 of the ANA (governing the notice period);
- termination indemnities set out in Arts. 25 and 33;
- as well as to an additional sum equal to 50% of that calculated for the agency on the basis of the reference scheme and rules set out in Article 12A.
Art. 13 para. III lays down as notice periods:
| 1 month | for the first year of management; |
| 2 months | for the second year of management |
| 3 months | for the third year of management |
| 4 months | for the fourth year of management |
| 5 months | for the fifth year of management |
| 6 months | for the sixth year of management |
Para. (IV) of Art. 13 provides that the undertaking may replace all or part of the notice due by an indemnity determined as follows:
- if the agent started the first year of management but did not complete it: in lieu of one month's notice, 1/42 of the commissions;
- if the agent has completed the first year of management but has not started the second year of management: in lieu of one month's notice, 1/10 of the commissions;
- if the agent has started the second year of management but has not completed it:
- in lieu of 1st month's notice, 1/15th of the commissions;
- in lieu of 2nd month's notice, 1/20th of the commissions.
- if the agent has completed the second year of management but has not started the third year of management:
- in lieu of 1st month's notice, 1/10th of the commissions;
- in lieu of the 2nd month's notice, 1/12 of the commissions.
- if the agent has started its third year of management but has not exceeded four years of management:
- in lieu of the 1st month's notice, 1/12 of the commissions;
- in lieu of 2nd month's notice, 1/18th of the commissions;
- in lieu of the 3rd month's notice, 1/24 of the commissions;
- in lieu of the 4th month's notice, 1/42 of the commissions.
- if the agent has started the fifth year of management but has not completed the fifteen years of management:
- in lieu of 1st month's notice, 1/15th of the commissions;
- in lieu of 2nd month's notice, 1/20th of the commissions;
- in lieu of the 3rd month's notice, 1/25th of the commissions;
- in lieu of the 4th month's notice, 1/30 of the commissions;
- in lieu of the 5th month's notice, 1/35 of the commissions;
- in lieu of the 6th month's notice, 1/40th of the commissions.
- if the agent has completed or exceeded 15 years of management:
- in lieu of the 1st month's notice, 1/12 of the commissions;
- in lieu of 2nd month's notice, 1/18th of the commissions;
- in lieu of the 3rd month's notice, 1/24 of the commissions;
- in lieu of the 4th month's notice, 1/30 of the commissions;
- in lieu of the 5th month's notice, 1/36 of the commissions;
- in lieu of the 6th month's notice, 1/42 of the commissions.
In calculating the replacement indemnity, account shall be taken of the commissions paid to the agent in the entire year preceding the termination of the contract or, failing that, in the last 12 months of operation.
With regard to the termination indemnity for the Theft, Fire, Accident, Illness, Third Party Liability, Motor and Watercraft Liability, Miscellaneous Risks, Glass and Crystal, and Miscellaneous Risks classes, three indemnities are envisaged, calculated in accordance with the rules set out in Articles 25, 26 and 27 below.
Article 25 (allowance on increase of premium income) applies to agents who have been in business for at least two years and consists of a percentage, as set forth in para:
| Staggers | Percentages | |
| up to euro 35,100.00 6.30 | 6,30 | |
| from euro 35,101.00 | to euro 70,200.00 4.80 | 4,80 |
| from euro 70,201.00 | to euro 105,200.00 3.38 | 3,38 |
| from euro 105,201.00 | to euro 140,300.00 2.63 | 2,63 |
| over euro 140,300.00 1.65 | 1,65 | |
For agents who have been in management for at least one year, the allowance is payable at the rate of 75%.
Article 26 recognises a second allowance, relating to receipts. It too consists of a percentage on agents with at least two years of management and its reduction, to 75%, after the first year of management). Paragraph II provides for the following percentages:
| Staggers | Percentages | |
| up to euro 87,700.00 | 1,25 | |
| from euro 87,701.00 | to euro 251,400.00 | 0,90 |
| from euro 251,400.00 | 0,45 | |
Art. 27 governs the third indemnity (also extended to the Credit and Cautionary lines of business), which consists of a percentage fixed by para. IV on the annual average of the commissions paid to the agent in the last three financial years and described in the following table:
| Seniority | Percentages |
| Up to 2 years | 2,5 |
| Over 3 years | 3,5 |
| Over 4 years | 5 |
| Over 5 years | 7 |
| Over 6 years | 8,5 |
| Over 7 years | 11,5 |
| Over 8 years | 13,5 |
| Over 9 years | 16 |
| Over 10 years | 20,5 |
| Over 11 years | 26 |
| Over 12 years | 29,5 |
| Over 13 years | 35 |
| Over 14 years | 40,5 |
| Over 15 years | 50,5 |
| Over 16 years | 56 |
| Over 17 years | 57 |
| Over 18 years | 58,5 |
| Over 19 years | 59,5 |
| Over 20 years | 60,5 |
| For each subsequent completed year of management, the percentage is increased by 0.50 | |
| If the management period is less than 12 months, the indemnity shall be calculated by applying the percentage 2.5 to the amount of the commissions actually paid during the management period, without prejudice to the provisions of paragraph III above | |
| If, during the periods referred to in the preceding paragraphs, portfolio reductions have been made for which the indemnity provided for in Article 8 bis (3) has been paid, the amount of the commissions, to be taken into account in determining the average, shall be reduced by the amount of the commissions for which the aforesaid indemnity has been paid. | |
The following specific provisions regulate the indemnity for Life (Art. 28), Capitalisation (Art. 29), Livestock (Art. 30), Hail (Art. 31), Transport (Art. 32) and the branches not covered by Art. 24 and 32 (Art. 33). For which reference is made in full to the ANA 2003 attached hereto.
Lastly, Article 35 regulates the termination indemnity in the case of co-agencies, providing that, notwithstanding the joint nature of the co-agency assignment, the termination of the agency agreement with respect to one or some of the co-agents is not in itself cause for termination with respect to the other co-agent(s), who retain to all intents and purposes their accrued management seniority.
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[1] On this point, see Court of Cassation Civ. 2006 No. 1286, which provided that, unless otherwise agreed between the parties, "upon termination of the insurance agency relationship, the outgoing agent is not entitled to dispose of the agency's client portfolio, which is owned by the principal, since he is only entitled to the treatment provided for by collective bargaining in connection with the termination of the contract, in part commensurate with the increase he brought to the portfolio. (In the present case, the S.C. upheld the judgment on the merits, condemning the principal to pay the agent the indemnity in lieu of notice and other termination benefits, and rejecting the agent's request to acquire the portfolio, holding at the same time that the same terminating company had legitimately failed to pay the agent the indemnity in lieu of notice, although it was due, in respect of the agent's failure to return all the material inherent to his assignment, relating to the portfolio of customers owned by the undertaking, an obligation that the agent had fulfilled following an appeal pursuant to Art. 700 of the Code of Civil Procedure against him).
How is the indemnity for the termination of a contract calculated according to the AEC Commerce 2009?
Article 13 of the 2009 AEC trade, divides the severance payment into three components (on this point see also calculation of indemnity pursuant to art. 1751 of the civil code., calculation of former AEC 2014 allowances, calculation of ex ANA allowances 2003):
- termination indemnity, set aside by the principal in the ENASARCO fund (FIRR) (Chapter I);
- supplementary customer indemnity paid to the agent or representative even in the absence of an increase in customers and/or turnover (Chapter II);
- merit-based allowance, linked to an increase in customers and/or turnover (Chapter III).
I. FIRR
The FIRR is set aside with ENASARCO by the principal and, upon termination of the relationship, is due to the agent irrespective of any increase in customers and/or business.
The obligation to set aside the FIRR only exists if the AEC apply to the relationship. The AEC are only applicable to the contract if both parties (principal and agent) are members of the contracting trade unions, or, otherwise, the parties have expressly referred to the AEC in the contract, or have provided for their implicit application in the course of the relationship (e.g., where the principal has provided for a spontaneous, constant and uniform application of certain provisions of the AEC).[1] This implies that in the event of non-application of the AEC, the principal is not required to set aside the FIRR, but only to pay social security contributions to Enasarco.[2] (on this point cf. the social security obligation of the Italian agent and the foreign principal).
It is important to note that case law[3] and doctrine,[4] unequivocally hold that the claim for payment of the FIRR must be made against Enasarco and not against the principal, except for any sums not set aside by the latter.
This allowance is calculated annually as follows:
ONE-MAN AGENT
- 4% on the portion of commissions up to € 12,400 per year
- 2% on the portion of commissions between € 12,400 p.a. and € 18,600 p.a.
- 1% on the portion of commissions exceeding € 18,600 per year
MULTI-FIRM AGENT
- 4% on the portion of commissions up to € 6,200 per annum
- 2% on the portion of commissions between € 6,200 p.a. and € 9,300 p.a.
- 1% on the portion of commissions exceeding € 9,300 per year
II. SUPPLEMENTARY ALLOWANCE
It will be recognised at the following rates:
| 3% | on commissions accrued in the first three years of the agency relationship |
| 3,50% | on commissions accrued from the fourth to the sixth completed year |
| 4,00% | on commissions accrued in subsequent years |
This indemnity shall be due in all cases where the relationship has been in force for at least one act and where the resignation of the agent is due to
- permanent and total disability;
- for infirmity and/or illness for which he cannot reasonably be required to continue the relationship;
- attainment of Enasarco and/or Inps old age pension;
- for circumstances attributable to the principal (Art. 1751 of the Civil Code);
- in the event of death. In that case, the indemnities shall be paid to the legal or testamentary heirs.
In any event, in addition to the above cases, since according to majority case law, AECs represent a guaranteed minimum treatment for the agent,[5] such indemnity is granted to the agent upon termination of the relationship, irrespective of proof by the agent that it has developed the principal's business and/or clientele, as is the case with the civil law indemnity under Art. 1751 of the Civil Code (on this point see severance pay in agency contracts).
III. MERITOCRATIC ALLOWANCE
The AEC Commerce 2009 provides for a rather structured calculation to quantify the meritocratic allowance, which will only be paid to the agent if it is higher than the sum of the two allowances analysed above (FIRR + supplementary).
The calculation of the meritocratic allowance is as follows:
- Determination of theincrease in customersconsisting of the difference between the commissions received by the agent at the beginning and at the end of the relationship, bearing in mind that the prognosis period will vary according to the duration of the relationship, according to the following table:
| DURATION OF THE RELATIONSHIP | PERCENTAGE INCREASE IN TURNOVER | PERCENTAGE OF INDEMNITY WITH RESPECT TO THE MAXIMUM VALUE DETERMINED PURSUANT TO ARTICLE 1751 OF THE CIVIL CODE (FROM WHICH INDEMNITY F.I.R.R. AND SUPPLEMENTARY CLIENT INDEMNITY ARE DEDUCTED |
| Up to 12 months (1st year) | 0 to 5% | - |
| 5 to 30% | 25% | |
| 30 to 60& | 30% | |
| 60 to 150% | 40% | |
| Beyond 150% | 100% | |
| 12 to 24 months (2nd year) | Up to 30% | 30% |
| 30 to 60% | 35% | |
| 60 to 150% | 40% | |
| Beyond 150% | 100% | |
| 24 to 36 months (3rd year) | Up to 30% | 35% |
| 30 to 60% | 40% | |
| 60 to 150% | 45% | |
| Beyond 150% | 100% | |
| 36 to 48 months (4th year) | Up to 30% | 40% |
| 30 to 60% | 45% | |
| 60 to 150% | 50% | |
| Beyond 150% | 100% | |
| 48 to 60 months (5th year) | Up to 30% | 45% |
| 30 to 60% | 50% | |
| 60 to 150% | 55% | |
| Beyond 150% | 100% | |
| From 60 months onwards | Up to 30% | 50% |
| 30 to 60% | 55% | |
| 60 to 150% | 60% | |
| Beyond 150% | 100% |
- In order to identify the real value of the increase in turnover provided by the agent, the turnover volume, understood as the volume of sales made by the principal in the area or for the clientele entrusted to the agent, will be taken into account.
- For the determination of the percentage increase, the values of the turnover volume, understood as the volume of sales made by the principal in the area or for the clientele entrusted to the agent, at the beginning of the relationship (initial value) shall be compared with the values of the turnover volume, understood as the volume of sales made by the principal in the area or for the clientele entrusted to the agent, at the end of the relationship (final value), as follows
| Duration of relationship | Initial value | Final value |
| For the first year of the relationship | Average turnover for the first 3 months | Average turnover over the last 3 months |
| For the second year of the relationship | Annual average of turnover volume for the first 2 quarters | Annual average turnover volume of the last 2 quarters |
| For the third year of the relationship | Annual average of turnover volume for the first 3 quarters | Annual average turnover volume of the last 3 quarters |
| From the beginning of the fourth year to the end of the sixth year of the relationship | Annual average of turnover volume for the first 8 quarters | Annual average turnover volume of the last 8 quarters |
| From the beginning of the seventh year to the end of the ninth year of the relationship | Annual average of turnover volume for the first 12 quarters | Annual average of turnover volume over the last 12 quarters |
| From the beginning of the tenth to the end of the twelfth year of the relationship | Annual average of turnover volume for the first 16 quarters | Annual average turnover volume of the last 16 quarters |
| Beyond the 12th year of the relationship | Annual average turnover volume of the first 20 quarters | Annual average turnover volume of the last 20 quarters |
- Finally, the initial figure is made homogeneous with the final figure by applying to it the Istat revaluation coefficient for labour credits.
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[1] See Bortolotti, Distribution Contracts, 2016, Wolter Kluwer, p. 87 ff.
[2] Trib. Rome 14.1.2010.
[3] Trib. Bari 2.5.2012.
[4] Bortolotti, Distribution Contracts, 2016, Wolter Kluwer, p. 365 ff.
[5] See on this point Cass. Civ. 2014 no. 7567. However, it should be noted that the European Court of Justice, in a judgment of 23 March 2006, challenged the legitimacy of the supplementary client indemnity as provided for by the AEC, which allows the agent to receive a termination indemnity in any event, even if the agent has not actually developed the principal's clientele and the latter benefits from it even after the termination of the relationship; in line with this orientation there is a minority direction of the case law on the merits, which has held the AEC inapplicable to our system and has therefore not recognised the agent's entitlement to the rules set out therein as a guaranteed minimum (Tribunale Treviso 29 May 2008. Tribunale Treviso 8 June 2008; Tribunale di Roma 11 July 2008).
Collective bargaining. Origins, value and enforceability. And if a contractor is a foreigner, do they apply or not?
A peculiarity characterising the Italian regulation of the agency contract is the centrality and importance of collective bargainingwhich makes the commercial agent, especially if he acts as a natural person, a figure that in several respects resembles an employee (cf. The agency contract and the employment relationship: distinguishing criteria and evaluation parameters).
In Italy, collective bargaining for commercial agents has a long tradition, dating back as far as the corporative law of the 1930s, thus even before the enactment of the Civil Code of 1942, which, with reference to the regulation of agency contracts, was inspired by the contents of collective bargaining itself. To be exact, the first regulation of the commercial agent took place with the stipulation of the Corporative Economic Agreements (CEC) of 26 May 1935.
Later, after World War II, with the abolition of the corporations, a new collective agreement was drawn up on the basis of the provisions of the Constitution. Indeed, Article 39(4) of the Constitution provides that:
"Registered trade unions have legal personality. They may, represented jointly in proportion to their members, conclude collective labour agreements with mandatory effect for all members of the categories to which the agreement relates."
The Constitution intended to give trade unions legal personality and the power to enter into collective agreements with effect for the entire category, a power that, however, has remained unimplemented to date. In any case, given the non-implementation of Art. 39 para. 2 et seq. of the Constitution, a transitional law was passed in 1959,[1] which de facto gave the State the temporary power to transpose by legislative decree certain collective agreements entered into before the law came into force and giving them effect erga omnes. The aim pursued by the legislator was precisely that of guaranteeing minimum working conditions on the national territory that were not mandatory by the will of the parties.
To date, apart from collective agreements with effect erga omnes briefly mentioned above, collective agreements are entered into by trade unions and employers' representative organisations, which continue to take the legal form of unrecognised associations under private law. For this reason, the collective agreement, despite its undoubted centrality as a 'source' for regulating individual labour relations, took on the legal nature of an act of private autonomy of 'common law', i.e. not unlike any other civil law contract and as such subject to the rules on contract law in general set forth in Art. 1321 et seq. of the Civil Code. [2] It should be noted, however, that in doctrine,[3] than in jurisprudence,[4] However, an attempt was made to better protect the dispositive effectiveness of collective agreements themselves by introducing the principle of derogation only in melius.
With regard to agency, the following AECs are currently in force in Italy erga omnes:
- AEC 20 June 1956 on Agents of Industrial Enterprises;
- AEC 13 October 1958 on agents of commercial companies.
and the following main common law collective agreements:
- AEC 16 February 2009 for commercial agents in the trade sector;
- AEC 10 December 2014 for commercial agents in the craft sector;
- AEC 10 December 2014 for commercial agents in the industry sector.
As to the applicability of collective bargaining, the general rule is that collective agreements apply only to workers who are members of the stipulating trade unions (Art. 1387 et seq. of the Civil Code). However, over the years case law and the legislature have intervened to try to extend the subjective effectiveness in the absence of worker membership.[5] Therefore the Common law AEC will be applicable as often as:
- both sides (i.e. both the agent and the principal), adhere to the contracting trade unions;
- there is a express reference to the AEC in the agency contract;
- there is a unspoken calli.e. whether the continuous and consistent application of the AEC rules by the contractors can be inferred.[6]
With reference to this last point, the Supreme Court in Italy has repeatedly held that AECs are binding:
"not only for members of the stipulating trade union associations, but also for those who explicitly or implicitly adhere to them"[7]
In the case of international agency agreementgoverned by Italian law, there is the double problem of the applicability of both common law AECs and collective agreements with effect erga omnes.
In the first case, the general principles of Italian law set out above are deemed to apply. This implies that if he is not a member of any Italian association of commercial agents, the Common law AEC will not be applicablenot even if the Italian principal (or agent) is a member of the unionunless there is an express or tacit recall to collective bargaining or .[8]
With reference to the AEC erga omnesthere are currently two jurisprudential orientations. The majority one, which holds that, the AEC erga omnes should not apply to agency relationships subject to Italian lawbut to be performed abroad, since collective bargaining applies and does not have transnational force.[9] The minority orientation, on the contrary, considers that only those contractual institutions, which in the intention of the social partners should have international validity, can be applied abroad.[10]
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[1] Pending the implementation of the constitutional dictate, Law No. 751/59, known as the Vigorelli Law, was enacted in 1959: it delegated the government to issue legislative decrees with the aim of identifying the mandatory minimum economic and regulatory treatment valid for all members of the same category, conforming to what had already been established by collective agreements, so-called erga omnes collective agreements.
[2] G. Giugni, Diritto Sindacale, Cacucci, Bari, 2001, 58 ff; Le fondi del diritto del lavoro tra stato e ragione, Trojsi, Giappichelli, 2013, 82 ff; Il diritto del lavoro alla svolta del secolo, Atti delle Giornate di studio di Diritto del Lavoro. Ferrara, 11-12-13-May 2000, Giuffrè, Milan 2002, 49 ff.
[3] Rotondi, Codice commentato del rapporto di lavoro, Milan, 2008, 33; Persiani, Saggio sull'autonomia privata collettiva, Padua, 1972, 7
[4] Civil Cass. 4850/2006; Civil Cass. 41/2003; Civil Cass. 8097/2002; Civil Cass. 4570/1996; Civil Cass. 13351/1991; Civil Cass. 2198/1991.
[5] Cass. Civ. 1996 no. 319; Cass. Civ. 1993 no. 1359 ""collective labour agreements not declared effective erga omnes [...] apply only to individual relationships between persons who are both members of the stipulating associations, or who, in the absence of such a condition, have expressly adhered to the agreements by means of a conclusive conduct, which may be inferred from a consistent and prolonged application of the relevant clauses to individual relationships".
[6] Cass. Civ. 1993 No. 1359, In this case, the Supreme Court held that the AEC was applicable to the agency contract, even though the principal was not a member of the trade union association and there was no express reference in the contract: instead, it recognised the existence of a consolidated company practice over time of the principal's compliance with the collective legislation.
[7] See footnote 9; Cass. Civ. 1999 no. 368
[8] See footnote 9; Bortolotti, Il contratto di agenzia commerciale, CEDAM, 2007.
[9] Cass. Civ. 1993 no. 4505; Bortolotti, Il contratto di agenzia commerciale, CEDAM, 2007.
[10] Cass. Civ. 1988 No. 5021.