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:

  1. 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;
  2. 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;
  3. 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:

  1. Cancellation of the agent from the National Register of Agents referred to in Law No. 48 of 7 February 1979;
  2. Death;
  3. Total invalidity;
  4. Age limits;
  5. 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:

  1. 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;
  2. termination of the undertaking without stating reasons, in which case the discipline set out in Art. 12-.ter;
  3. 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:

  1. 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;
  2. 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;
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.

_____________________

[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 allowancescalculation 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).

(cf. also Collective bargaining. Origins, value and enforceability. And if a contractor is a foreigner, do they apply or not?)

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.

_________________________

[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]

_____________________________

[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.


Single or multiple agent? What are the principal's contribution obligations?

When speaking of 'single agency' it is important to emphasise the difference between the single-agent agent and the agent operating 'on an exclusive basis'; the latter, in fact, is the person who, on the one hand, undertakes not to engage in any competing activities and, therefore, to act as an agent for other competing principals, but who, on the other hand, reserves the right to work as an agent for other principals who do not operate in different sectors (multi-agent agent).

In Italian law, the agent's exclusivity constitutes a natural element of the contractArticle 1743 of the Civil Code, in fact, prohibits the agent from taking on the task of handling, in the same area and for the same branch, the business of several competing undertakings. In the agency contract, exclusivity therefore constitutes a right and a normatively regulated obligation, provided for both in favour of and at the expense of each of the parties[1] and which is normally included in agency contracts.

A different figure from that of the exclusive agent is that of thesingle agenti.e. the agent who works for only one principal and who, therefore, undertakes to not to take on any other agency assignment,[2] also with reference to non-competing sectors other than that in which the principal operates.

The distinction between single and multiple agents has a strong relevance in the event of the application of ERM, which provide a more advantageous regime for the one-firm agent in several respects, such as, for example, longer notice periods and more favourable ways of calculating the severance payment and the indemnity for the post-contractual non-competition covenant.

Regardless of the applicability of AECs, this distinction certainly has great relevance from a point of view social securityas there are provisions for the one-firm agent of the higher contribution ceilings than the multi-firm agent.[3] The reason for this difference is essentially related to the more difficult exercise of the activity, resulting from the prohibition of it for any other principal.[4]

With reference to the existence or non-existence of a single-mandatory relationship, jurisprudence is not unequivocal in considering whether it must result from an express written agreement between the parties, or, on the contrary, may derive from a mere factual situation. This contrasting jurisprudence essentially concerns the correct interpretation of the legislative text and, more precisely, the interpretation of Ministerial Decree 20.2.1974, Article 4(c), which provides as follows:

"The principal within three months of the start date of the relationship must provide, using the appropriate forms prepared by ENASARCO or by other means, the following information for each agent or sales representative: (c) thepossible commitment of the agent or sales representative to carry on business for only one principal"

According to a first orientation the agent's right to receive the (higher) social security contribution as a single agent cannot result from a mere factual situation; on this point, the Supreme Court states that

"the contribution ceiling is reserved only for those agents or commercial representatives who have undertaken to exercise their activity vis-à-vis a single principal; this can be proved by the fact that, within three months of the commencement of the relationship, the principal has communicated that exclusive undertaking to ENASARCO, as well as by any other means of proof of the existence of a contractual undertaking or obligation with only one principal, as it is not sufficient merely to ascertain the factual modalities with which the relationship actually took place"[5]

The Supreme Court therefore held that "committed' means 'obligated', with the consequent irrelevance of the performance of an agency relationship with a single principal, but without the assumption of an actual obligation of exclusivity resulting from a written agreement between the parties.

Contrary, based on a second orientation of the Supreme Court, the right of the one-man agent to the contribution on a higher ceiling:

"arises as a function of the actual exercise of the activity for a single principal, irrespective of a finding of formal assumption of a specific obligation vis-à-vis that principal."[6]

_____________________

 

[1] Baldi, Il contratto di agenzia, Milan, 2001, 70.

[2] Saracini, Toffoletto, Il contratto di agenzia, Milan, 2002, 213.

[3] http://www.enasarco.it/notizie/minimali_e_massimali_2017.

[4] Perina - Belligoli, The Agency Relationship, Turin, 2015, 55.

[5] Civil cassation 1994, no. 1302; see also Civil cassation 2000, no. 14444.

[6] Cass. Civ. 2007, no. 17080; Cass. Civ. 2002, no. 699; Cass. Civ. 2000, no. 4877.


The principal's bankruptcy. For what amounts can the agent be filed as a debtor?

Article 2751-encore c. c., confers in favour of the agent a general lien on movable property that is placed in accordance with Article 2777 of the Civil Code immediately after legal costs and employees' claims. That article reads as follows:

"Claims relating to: [...] the following have a general lien on furniture commissions arising from the agency relationship due for thelast year of performance and the allowance due for termination same."

This rule constitutes one of several indications of the legislative tendency to assimilate the agent to the employee; by virtue of this provision, the agent may claim a general lien on the debtor's assets both for commissions accrued in the last year of performance and for indemnities due as a consequence of the termination of the relationship itself.

It should be noted that in 2013 the United Sections[1] have definitively established that the principle that the general privilege provided for by the provision under comment does not assist claims for commissions due to the corporation exercising the activity of an agent.

As for the annual deadline provided for in Art. 2751-encore c.c. it is referable to commissions and not to other indemnity items; moreover, according to doctrine[2] and case law[3]this last year does not start from the date of declaration of insolvency, but since the termination of the relationship, since in the explicit letter of the rule, reference is made to the "last year of service" and not to the last year in respect of the bankruptcy. It should be pointed out that, according to the majority case law, if the agency relationship was still in existence at the date of bankruptcy, this annual period should be considered to coincide with the date of the declaration of bankruptcy itself.[4]

It is very important to point out that Article 1748 of the Civil Code provides that:

"The agent shall be entitled to commission on business concluded after the date of termination of the contract if the proposal is received by the principal or the agent at an earlier date or the business is concluded within a reasonable time after the date of termination of the contract and the conclusion is predominantly attributable to the agent's activity."

In the light of this normative dictate, therefore, the privilege includes business promoted by the agent before the termination of the relationship and concluded both before and after the termination[5] even if they have not yet been performed by the principal.[6]

On the contrary, the recognition that Article 2751-bis(3) makes of the privilege relating to the indemnities due for the termination of the relationship is independent of any reference or temporal limitation.[7] The same cannot be said for thesupplementary customer allowancewhich is of a contractual and not a regulatory nature (governed precisely by the ERM) and therefore non-returnable in the exhaustive list provided for in the rule under analysis.

On the basis of the foregoing, in the event the contractual relationship is terminated for reasons not attributable to the agent and, following the termination of the relationship, the principal enters into bankruptcy, the agent will have the right to file a claim for the commissions relating to the last year of business and severance indemnities pursuant to Article 1751 of the Civil Code and, in the event of termination ad nutumcompensation for lack of notice.

A much-discussed issue concerns the effects of bankruptcy on an ongoing agency relationship at the time of the declaration of insolvency itself. In fact, in the silence of the law, the question arises as to whether, in the event of the principal's bankruptcy, the agency contract should be governed by the general rules set forth in Article 72 of the L.F. and therefore its performance should be suspended until the liquidator, authorised by the committee of creditors, declares to take over or dissolve the relationship, or should the rule dedicated to the mandate (Article 78 L.F.) apply, with the consequence that if the principal goes bankrupt, the contract itself is automatically dissolved.

This issue has great practical relevance, in fact, should Article 72 of the Bankruptcy Law be deemed applicable, the contractual relationship is not dissolved following the mere declaration of bankruptcy, but rather remains suspended in a sort of quiescent phase, until such time as the liquidator opts for the continuation or termination of the relevant contractual relationship, with the consequent right, in the latter case, of the agent to severance indemnities. Otherwise, i.e. application of theArticle 78 F.L., the dissolution operates as of right, with the consequent exclusion of the agent's right to payment of indemnities due for the termination of the relationship.

The majority case law on this point holds that:

"with reference to the agency contract, by virtue of the peculiar fiduciary nature of the relationship of principal, in the event of bankruptcy, the new general rule contained in Article 72 of the Bankruptcy Law is not applicable, and indeed the contract is terminated ope legis, with the exclusion of the agent's right to payment of the indemnity for termination of the relationship and lack of notice precisely as a consequence of the operation of the termination of the contract for a cause independent of the will of the parties."[8]

On the contrary, if the general rules of Article 72 of the Bankruptcy Law are deemed applicable and the liquidator opts for the continuation of the relationship, the agent's claims accrued as a result of the performance of its activity during the bankruptcy are lodged in prededuction for the activity performed after the declaration of insolvency pursuant to Article 111(1)(1) of the Bankruptcy Law.[9]

Finally, it should be noted that, with regard to contributions paid to the institute ENASARCO since they are neither compensatory nor commissionable in nature, they are not covered by the privilege under Article 2751 encore Civil Code, nor can they fall under the provision of Article 2753 of the Civil Code, which is exclusive to subordinate employment.[10]

 

_________________________________

[1] Cass. Civ. Sec. Un. 2013 no. 27986.

[2] Venice - Baldi, The Agency Contract, p. 299, 2015, Milan.

[3] Trib. Perugia 30.12.1991; Trib. Rome 19.9.2007.

[4] Trib. Prato 18 January 2012, in Bankruptcy 2012, p. 583, with a brief note by COMMISSO, Dissolution ex lege of the agency contract in the event of the principal's bankruptcy.

[5] Venice - Baldi, The Agency Contract, p. 300, 2015, Milan.

[6] Cass. Civ. 2011, no. 9539.

[7] Trib. Rome 19 September 2007.

[8] Trib. Prato 18 January 2012, in Bankruptcy 2012, p. 583, with a brief note by COMMISSO, Dissolution ex lege of the agency contract in the event of the principal's bankruptcy

[9] Practical Memento, Business crisis and bankruptcy, p. 435, no. 3100, 2016, Ipsoa.

[10] Venice - Baldi, The Agency Contract, p. 299, 2015, Milan


How is the contract termination indemnity calculated according to the 2014 Industry AEC?

Article 10 of the 2014 Industry AEC (see also , divides the severance pay into three components:

  • 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).

Para. (3) of Article 10 also provides that the indemnity is to be calculated on all sums, however denominated, received by the agent in the course of the relationship, as well as on sums in respect of which at the time of termination of the relationship the right to payment in favour of the agent or agent has arisen, even if they have not been paid in whole or in part.

This implies that these allowances (on this subject see also calculation of indemnity pursuant to art. 1751 of the civil code., calculation of former AEC 2009 allowances, calculation of ex ANA allowances 2003) should also be calculated taking into account:

  • non-commissionable remuneration, such as reimbursement of expenses and/or ancillary activities;
  • amounts accrued but not yet received and/or paid to the agent at the date of termination.

(cf. also Collective bargaining. Origins, value and enforceability. And if a contractor is a foreigner, do they apply or not?)

I. FIRR

The FIRR is set aside at ENASARCO by the principal and, upon termination of the relationship, is due to the agent regardless of any increase in clientele and/or business. On the other hand, it is not paid in the event of termination of the relationship at the initiative of the principal, justified by the following conduct on the part of the agent: undue withholding of sums due to the principal, unfair competition, violation of the exclusivity obligation for a single firm.

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

According to majority case law, AECs represent a guaranteed minimum treatment for the agent,[5] such indemnity will be paid to the agent upon termination of the relationship and will be due to the agent regardless 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).

It will be recognised at the following rates:

3% on the total amount of commissions and other sums due
0.50% additional on commissions accrued from the fourth year (up to a maximum annual limit of € 45,000 in commissions)
additional 0.50% on commissions accruing from the sixth completed year (up to a maximum annual limit of € 45,000 in commissions)

This indemnity shall be due in all cases where the termination of the relationship is not due to a fact attributable to the agent (whether in the case of a fixed term or open term contract). No facts attributable to the agent shall be deemed to be facts:

  • resignation due to established serious breach of duty by the principal,
  • resignation as a result of permanent and total disability,
  • resignation due to infirmity and/or illness that does not permit continuation of the relationship,
  • resignation following the attainment of the ENASARCO old-age or early old-age pension,
  • resignation following the attainment of an old age or early old age pension INPS.
III. MERITOCRATIC ALLOWANCE

The AEC Industry 2014 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 depending on the agent's status as a sole or multiple agent and the duration of the relationship, according to the following table:
Type and duration Years
Multi-firm agent with a term of 5 years or less 2,00
Single agent with a term of 5 years or less 2,25
Multi-firm agent with a term of more than 5 years and less than or equal to 10 years 2,50
Single agent for more than 5 years and less than or equal to 10 years 2,75
Multi-firm agent for more than 10 years 3,00
Single agent for more than 10 years 3,25
  • The initial figure is made homogeneous with the final figure by applying to it the Istat revaluation coefficient for labour credits.
  • The rate of migration of customers according to the following table:
Type and duration percentage
Multi-firm agent with a term of 5 years or less 27%
Single agent with a term of 5 years or less 15%
Multi-firm agent with a term of more than 5 years and less than or equal to 10 years 22%
Single agent for more than 5 years and less than or equal to 10 years 20%
Multi-firm agent for more than 10 years 37%
Single agent for more than 10 years 35%
  • For the first year of the prognosis period, the aforementioned rate of migration is subtracted from the value of the increment referred to in point 1. For the subsequent years of the prognosis period, the same migration rate is subtracted from the value determined for the previous year of the prognosis period. The results thus obtained are added together.
  • The amount obtained is reduced on a lump-sum basis by a variable percentage equal to:
    • To 10% for contracts of 5 years or less;
    • To 15% for contracts with a duration of more than 5 years and less than 10 years
    • At 20% for agency contracts exceeding 10 years.
  • Compare the meritocratic indemnity calculated according to the preceding points with the maximum value of the indemnity provided for in the third paragraph of Art. 1751 of the Civil Code.
  • The termination indemnity and the customer indemnity are deducted from the meritocratic indemnity obtained.

[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).


The social security obligation of the Italian agent and the foreign principal.

The ENASARCO Foundation is the National Assistance Board for Agents and Sales Representatives and was established in 1938. Since 1973[1] ENASARCO has become an entity governed by private law that pursues purposes of public interest through the management of supplementary compulsory forms of pensions in favour of Commercial Agents and Representatives and whose public control is entrusted to the Ministry of Labour, Health and Social Policies and the Ministry of Economy and Finance.

ENASARCO's activities, legal nature and the tasks that the Foundation pursues are governed by the Regulation of Institutional Activities, which was recently amended on 1 January 2012.

Articles 1 and 2 of the Regulation impose the obligation of registration and consequently of contribution to the ENASARCO Foundation on all agents (whether in individual or company form) operating on the national territory on behalf of Italian principals or foreign principals having their head office or any .

There is nothing in the 2012 Regulations on the obligation of registration of agents operating in Italy in favour of principals from the European Union who do not have a head office or dependency in Italy. This regulatory 'gap' has been filled by a circular of ENASARCO[2] and an interpellation by the Ministry of Labour[3] which also extended the obligation to register to the following categories:[4]

  • for agents operating in Italy and abroad, provided that the agent resides in Italy and performs a substantial part of its activities there;
  • for agents operating in Italy and abroad who do not reside in Italy, provided that the agent has its centre of interests in Italy (assessed by reference to the number of services rendered, the duration of the activity, and the will of the person concerned);
  • for agents who habitually work in Italy and who go to perform activities exclusively abroad, provided that the duration of such activity does not exceed twenty-four months.

As to the annual amount to be set aside by the principal in the FIRR, it is quantified by the AEC industry 2014 as follows:[5]

"Single agent or sales representative in

  • 4% on the portion of commissions up to Euro 12,400.00 per year;
  • 2% on the portion of commissions between Euro 12,400.01 per year and Euro 18,600.00 per year;
  • 1 % on the portion of commissions exceeding Euro 18,600.00 per year.

Agent or multi-firm representative:

  • 4% on the portion of commissions up to Euro 6,200.00 per year;
  • 2% on the portion of commissions between Euro 6,200.01 per year and Euro 9,300.00 per year;
  • 1 % on the portion of commissions exceeding Euro 9,300.00 per year."

The compulsory social security rates, which the principal is required to pay annually to ENASARCO, are regulated in Article 4 of the Regulation and are equal to:

2012 2013 2014 2015 2016 2017 2018 2019 2020
13,50% 13,75% 14,20% 14,65% 15,10% 15,55% 16,00% 16,50% 17,00%

 

Contributions are calculated on all sums due to the agent for any reason in connection with the agency relationship, even if not yet settled, including advances and premiums (art. 4 of the Rules), but within the mandatory limit of € 37,500.00 per year if the agent is engaged in business for a single principal and € 25,000.00 for each principal of a multi-firm agent (art. 5 of the Rules).

In the event of failure to pay contributions on the part of the principal, Article 36 of the Regulation imposes as a penalty the payment of a rate of 5.5% per annum on the amount of contributions not paid by the due date, with a cap of 40%.

It is important to emphasise that although the obligation to pay contributions is borne equally by the principal and the agent, it should be noted that the principal is solely responsible for the payment of contributions, even for the part borne by the agent, and that such payments must be made '.with a maximum periodicity of three months, in relation to sums owed to the agent for any reason."

As for the limitation period of ENASARCO's right to claim payment of contributions, it is five years.[7] On the other hand, the prescriptive term of the agent's action for damages for failure to pay or insufficient payment of ENASARCO contributions is ten years, commencing from the time when the agent, having reached retirement age, loses the relative right or sees it reduced by reason of the omission.[8]

As already mentioned in the introductory part of this article, to which we refer,[9] the pension scheme managed by ENASARCO represents a unique case not only in Europe, but also in Italy, since it is supplementary to the pension that agents are obliged to pay personally to INPS.[10] Representatives and commercial agents are therefore obliged to pay contributions to two bodies: on the one hand, personally to Inps and, on the other hand, to ENASARCO, whose contribution, as we have seen, is paid by the principal as withholding agent.[11]

As regards the quantification of INPS contributions, a variable rate of approximately 20/23% is envisaged. It should be noted, however, that on the portion of income exceeding € 100,324.00 for those enrolled after 01.01.1996 (and € 76,718.00 for those enrolled before that date), there is no obligation to pay INPS.

[1] Pursuant to Law No. 12 of 2 February 1973

[2] AIS Circular No. 2/2012 protocol number AIS/46.

[3] Ministry of Labour Interpretation No. 32/2013.

[4] See also Baldi-Venezia, The Agency Contract, 2014, GIUFFRÈ.

[5] The FIRR provided by the 2014 AEC industry is given as an example; however, it is noted that the FIRR provided by the other AECs in force to date are generally in line with this collective agreement.

[6] Article 7, Law No. 12 of 2 February 1973.

[7] Cass. 1983 No. 5532.

[8] Cass. Civ. 1983 No. 5532.

[9] See § 1 of this article.

[10] See footnote 1

[11] The recognition of this special status of the Fund dates back to Law 613/1966 and has remained unchanged to this day.


The agent's right to commission: when is the principal obliged to pay?

Commission is normally the agent's main means of remuneration, consisting of a percentage related to the value of the business promoted by the agent. The Civil Code regulates the right to commission in Art. 1748 of the Civil Code. Specifically, para. (1) of that article provides that:

"For all business concluded during the contract, the agent is entitled to the commission when the transaction has been concluded as a result of its intervention. "

Moreover, the fourth paragraph of Article 1748 of the Civil Code reads as follows:

"The agent is obliged to return the commissions collected only if and to the extent that it is certain that the contract between the third party and the principal will not be performed for reasons not attributable to the principal."

The agent is therefore entitled to the commission only if there is the conclusion of a contract between the principal and the third partycommission is not due and, in any event, if it has already been paid to the agent, must be returned to the principal if the third party fails to perform the contractfor causes not attributable to the principal itself.

The above articles set out the prerequisites for the agent's entitlement to commission to arise. This moment, however, must be absolutely distinct from the moment of accrual of the commission itself, i.e. when the agent may claim its payment (see also on this point The 'star of belief' in the agency contract).

This distinction follows from a reading of Art. 1748(4) of the Civil Code:

"Unless otherwise agreed, the commission shall be payable to the agent from the moment and to the extent where the principal has rendered or should have rendered the performance under the contract with the third party. The agent shall be entitled to commission at the latest, without limitation, from the time and to the extent that the third party has rendered or should have rendered the performance if the principal had rendered the performance at its expense."

A reading of this rule shows that there are two distinct moments on which the actual accrual of the commission depends:

  • when the service is performed by the principal (the so-called 'general' criterion);
  • at the latest, and without fail, when the service was performed by the third party (the good performance of the business).

With reference to the first pointcommission accrues from when the principal performs its service, or should have performed it by virtue of the contract concluded with the third party (i.e. the customer). This constitutes the so-called "general" regime, which applies whenever the parties have not agreed otherwise.

On this point, it must certainly be emphasised that the rule does not expressly refer only to the moment in which the principal performs his service, but rather to the moment in which he should have executed itaccording to the agreements he had made with the client.

Think of the classic example where the principal undertakes to deliver the goods by a certain date: if the principal does not send the goods by that date, the commission will still be due to the agent, as the failure to perform is attributable to a default on the part of the principal.

An interesting aspect is that the article obliges the principal to pay the commission to the agent, only in the event that the same is actually required to perform the service under the contract. This implies that if the principal's non-performance is due to causes not attributable to it, the agent's right to payment of the commission itself is forfeited.

Returning to the case analysed above, i.e. the delivery of goods: if the principal has not sent the goods due to force majeure, i.e. because the customer has not paid for the goods sold or the balance of the down payment in the manner agreed upon by the parties, the principal will no longer be liable to pay the commission.

Therefore, the right to the commission accrueda, unless otherwise agreed between the parties, when the principal's failure to perform constitutes a breach vis-à-vis the third party.

The general criterion described above is however derogable by the parties, who may agree otherwise, postponing or bringing forward the time at which the right to commission accrues, anchoring it at a different time than the principal's performance.

This option granted to the contracting parties is ceiling mandatory, which is enshrined in the second sentence of Art. 1748(4) of the Civil Code:

"the commission shall be due to the agent, at the latest, from the time and to the extent that the third party has performed or would have had to perform the service if the principal had performed the service at its expense."

This means, in essence, that it is possible to postpone the accrual of commissions, as long as it is made payment by the third partyi.e. at the latest upon the successful performance of the business. The latter hypothesis, however, must always be subject to the principal having performed its own performance. In essence, the reference to the time when the third party should have rendered the performance must be interpreted as meaning that the agent may treat the commission as due even in the event of non-payment by the customer, but only where this results from the default of the principal (cf. on this point Venezia-Baldi, Il contratto di agenzia, p. 273, Giuffrè Editore, 2014).

With the following examples, an attempt is made to make the above case clearer:

  • the principal correctly delivers the goods to the customer, who, notwithstanding the principal's performance, does not pay the price of the goods within the agreed time limit: in this case, the principal cannot be considered to be obliged to pay the commission, since the non-performance of the third party is not justified by a non-performance of the principal himself
  • the principal delivers the wrong goods to the customer, who fails to pay the price within the agreed time limit. In this case, it may reasonably be held that payment of the commission is due, since the third party's non-performance is caused by the principal's own non-performance (on this point cf. Bortolitti, Distribution Contracts, p. 285, 2016, Wolters Kluver).