Agent's severance pay. How is it calculated if AEC does not apply?
In cases where no Collective Bargaining Agreements apply to the agency relationship, understanding whether (and how much) severance pay is due to the agent is not at all easy.
In contrast to AECs, which provide for a precise calculation allowing the parties to quantify the severance payment, the Civil Code only provides a ceiling for the level of indemnity, without giving precise guidelines on the method of calculation
Severance pay was introduced at European level by the Directive 86/653EECthen transposed into our legal system most recently with the reform of Legislative Decree 65/1999, which amended the current text of Article 1751 of the Civil Code, which provides as follows:
"Upon termination of the relationship, the principal is obliged to pay the agent an indemnity if the following conditions are met:
- The agent has procured new customers to the principal or has appreciably developed business with existing customers;
- The principal still receives substantial advantages arising from business with such customers;
- The payment of this allowance is fairtaking into account all the circumstances of the case, in particular the commissions that the agent loses and that result from business with such customers."
The judge must therefore, in the first analysis, find on the basis of the preliminary findings, whether the agent has increased the agent's clientele and/or business and, therefore, determine what amount should be owed to the agent, judging according to equity.
In cases where no Collective Bargaining Agreements apply to the agency relationship, understanding whether (and how much) severance pay is due to the agent is not at all easy.
Contrary to the AEC, which provide for a precise calculation that allows the parties to quantify the severance payment, the Civil Code only provides for a ceiling for the level of indemnity, without providing precise guidelines on the method of calculation
- Read also: Severance Indemnity: Art. 1751 of the Civil Code and AEC compared.
The following is a brief analysis of the criteria set out in the Civil Code.
1. The agent's contribution of customers.
The termination indemnity pursuant to Article 1751 of the Civil Code is undoubtedly intended to reward the principal's activity of promoting and developing customers. For this reason, the following must be considered excluded from the scope of applicability of this rulerecruitment and coordination of agentssince the latter, although relevant and very important from an organisational point of view, is only instrumental and ancillary in nature with respect to customer enhancement.[1]
Following this reasoning, not even the mere increase in turnover by the agent can be considered sufficient to prove the acquisition of new customers or the substantial development of those already existing at the beginning of the relationship:[2] it is not sufficient for the agent to prove (cf. Burden of proof in the agency contract) the increase of its commissions over the years, if it also does not diligently indicate the new customers it has brought in. This is stated in case law:
"the request for payment of the indemnity pursuant to Article 1751 of the Civil Code cannot be granted in the event that the applicant generically acknowledge on appeal of the recurrence of the relevant prerequisites, however failing to deduct precisely the volume of business handled for each individual customeras well as to specify the business concluded, the total value of the contracts, any increase over the business concluded with the same client in the preceding year, omitting altogether to indicate which clients he personally took care of."[3]
And again:
"The agent acting pursuant to Art. 1751 of the Civil Code must first prove that he has brought new customers to the principal, or at least that he has increased the turnover of customers who, prior to the commencement of the agency relationship, were already doing business with the principal."[4]
As for the definition of 'new customer", it should be recalled that in 2016 the European Court of Justice,[5] questioned whether it was possible to recognise as such, legal entities which, prior to the granting of the agency mandate, had already established business relations with the principal, but for products different from those covered by the agency contract. In the present case, the agent had received a mandate to sell spectacle frames of different brands from those that had already been marketed by the principal; the Court was therefore asked whether the sale of such new products to existing customers could fall within the civil law definition[6] of 'new client'. The Court stated that;
"are to be regarded as new customers within the meaning of that provision, even though they already had business relations with the principal with respect to other goods, if the sale of the first goods by the agent has required to enter into specific business relationshipswhich it is for the referring court to ascertain."
2. Advantages for the principal arising from the agent's activity.
The second condition laid down in Article 1751 of the Civil Code is that "the principal still receives substantial benefits from doing business with such customers." When analysing this condition, one must certainly understand to which time period reference must be made to verify the existence or non-existence of advantages. According to the best doctrine[7] the wording of the law is quite clear and refers to the situation existing at the time of the termination of the relationship; case law, on the contrary, is not unambiguous on this point, and there is an opposite orientation, which deems it necessary to verify whether the advantages subsist and continue also in subsequent years and, in this sense, excludes the indemnity if the agent is not able to prove judicially the 'retention' of customers even after the termination of the relationship.[8]
Certainly, the agent cannot be negatively affected by the principal's personal choice to opt for transferring the company to others (for a price undoubtedly determined not only by the trade mark, but also by the goodwill, essentially consisting of the customer portfolio), unless, of course, it is established that the increase in customers was due to factors external to the agent.[9]
On the other hand, the condition must be deemed to be fulfilled if the contracts concluded by the agent are contracts of durationas the development of goodwill and the benefits to the principal, even after termination of the relationship, are in re ipsa.[10]
3. The determination of severance pay in equity.
Once the existence of the first two requirements has been ascertained, the judge will have to quantify the allowance in equity. As mentioned above, for the purposes of determining the quantumthe judge is bound to verify compliance with the requirement of equity prescribed by Art. 1751 of the Civil Code, taking into account all the circumstances of the case and in particular the commissions that the agent loses and that result from business with those customers.
It is interesting to note that, while the law clearly identifies the requirements for the agent to be granted the indemnity, for the quantification in equity, the normative reference is not exhaustive and concerns all "the circumstances of the case', identifying, by way of example only, the reference to commissions that the agent loses and that result from business with customers.[11] In this regard, case law holds that the judge must:
"have regard to all those elements that are suitable for an adequate personalisation of the quantum due to the agent"[12] e "may or may not be considered 'fair'in the sense of also compensating for the special merit of the agent emerging from the [emerging] factual circumstances."[13]
"If it does not consider it fair, in the absence of a specific regulation, it must award the agent the differential necessary to bring it back to fairness. "[14]
It is clear that equity is a principle that is difficult to apply in practice. It follows that the non-application of the AEC to the relationship certainly entails greater uncertainty as to the quantification of the severance payment, since this is ultimately left to the sensitivity of the individual judge.
It is also important to recall that the one referred to in Article 1751 of the Civil Code is a typical case of judicial equity and as such can only be criticised in the court of legitimacy from the point of view of the logic and congruity of the reasoningbut not in its amount.[15]
4. Severance pay calculated on the basis of the criteria set by the Commission.
From the above analysis, it appears that the approach of the European directive, which only provides a ceiling for the level of indemnity, without providing precise guidelines as to the method of calculation, has and continues to create great uncertainty. It is clear, therefore, that a clear and precise method, perhaps developed by national jurisprudence, would lead to greater legal certainty, with benefits for both contracting parties.
This issue was also encountered by the same European Commission in its report of 23/7/1996which, aware of this regulatory limitation, prepared a report aimed on the one hand at analysing how European case law has approached this interpretative issue and on the other hand at providing a solution to the member states.
A solution would have been found in the German model (and in particular §89b of the HGB from which the legislation was inspired), taking into account the fact that since 1953 it has provided for the payment of a surplus value allowance, which has given rise to extensive case law regarding the calculation of the latter.
The Commission report goes into detail to analyse the calculation model developed by German case law, to which reference is made in full. For what it is worth, it is important to emphasise the fact that the system developed by German case law was then used as a model for the drafting of AEC calculations and that, therefore, the same system, although very complex, is not completely alien to us.
The Commission, after having analysed the calculation method in an analytical manner, concludes by noting that the model developed by German case law can nevertheless be used as a model to be applied, as this "facilitate a more uniform interpretation of this article."
Italian jurisprudence has, in any case, very rarely followed this model (perhaps also because it was not pushed by the parties' advocates), which at the moment remains almost completely unknown; in any case, there are a number of judgments on the merits that have shared the Commission's position, which deemed it appropriate to quantify the severance indemnity on the basis of the calculation criteria established by the European Commission in its report of 23/7/1996 on the application of Article 17 of Directive 86/653/EEC. [16]
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[1] Cass. Civ. 2018 No. 25740.
[2] On this point see also Bortolotti, Distribution Contracts, p. 386 ff., 2016, Wolters Kluver.
[3] Court of Milan 26.7.2016.
[4] Court of Bari 12.2.2014.
[5] Judgment of 7.4.2016, Case C-314/14, Marchon v. Karaskiewicz
[6] To be more precise, in the definition of 'new customer', of which Article 17 of the European Directive 1986/653 on commercial agentsby Article 4, Legislative Decree No 303 of 10.9.1991, which amended Article 1751 of the Civil Code and replaced it by Article 5, Legislative Decree No 65 of 15.2.1999.
[7] Bortolotti, Distribution Contracts, p. 388.
[8] See Court of Padua 21.9.2012 where the indemnity was denied for lack of orders following the dissolution of the relationship; to the contrary Cass. Civ. 2013 no. 24776 ".Moreover, the utility for the principal is to be assessed at the time of termination of the relationship, the crystallisation of the results obtained by the agent at that time being of relevance. "
[9] Cass. Civ. 2013 no. 24776.
[10] Cass. Civ. 2013 no. 24776.
[11] See Cass. Civ. 2018 no. 21377, Cass. Civ. 2008 no. 23966.
[12] Cass. Civ. 2016 No. 486.
[13] Cass. Civ. 2014 No. 25904.
[14] Court of Appeal Florence 4.4.2012.
[15] Cass. Civ. 2018 No. 25740.
[16] Court of Pescara of 23.9.2014, with comment by Trapani in Agenti&Rappresentanti di commercio no. 2/2015; Court of Bassano del Grappa of 22.11.2008
Commercial agent and antitrust law: when the agency contract is considered a vertical agreement.
The purpose of this article is to try to understand whether the agency contract can be considered a vertical agreement within the meaning of European Regulation 330/2010 on vertical agreements and, as such, be subject to the prohibition under Article 101(1) TFEU and antitrust law.
As has already been analysed (cf. exclusivity clauses and vertical economic agreements), the Regulation No 330/2010 provides that vertical agreements between undertakings may not have as their object or effect the prevention, restriction or distortion of competition within the common market and that such agreements, if any, are void pursuant to Article 101(1) TFEU.
In this blog, the applicability of the regulation to the exclusive distributors and to the retailers using e-commerce to distribute contractual products. The purpose of this article is to analyse (albeit briefly) an equally complex and interesting topic, namely whether the agency contracts can be considered vertical agreements within the meaning of the Regulation and, as such, be subject to the prohibition under Article 101(1) TFEU; this question is of particular relevance, given that agency agreements normally contain a number of restrictive covenants such as limitations on the determination of price, territory and clientele.
These restrictions are expressly among those defined fundamentals by Article 4 of the Regulation and the presence of which means that the agreement as a whole loses the benefit of the block exemption provided for by the Regulation[1]. The vertical restrictions that would have the greatest impact on an agency contract would certainly be those relating to the prohibition of:
- determination by the purchaser of the resale price;
- determination by the purchaser of the territory or customers to whom the buyer may sell the contract goods or services;
- restriction of sales (active or passive) to end users;
Hence the importance of understanding when an agency contract is to be considered (under the antitrust) as true and when fakeIf the brokerage contract were to be considered (within the meaning of the antitrust) an agency contract fakethe same would fall under the prohibition of Art. 101, with the result that the principal would not be able to impose limits on the agent with regard to the determination of the price (or at least reserve to him the right to grant discounts on his commission), territory, customers and inhibit him from passive sales to customers outside their area. [11]
The first assessment as to whether agreements concerning commercial representation are subject to the prohibition formerly art 101, § 1, goes back to the "Communication Christmas"of 1962[2]The Commission had excluded, in principle, the sales representative from this prohibition, provided that he did not assume '...'.in the performance of his duties (...) no other contractual risk, except the usual guarantee of the star del credere."[3] The Commission considered that the trade representation agreements,
"have neither the object nor the effect of preventing, restricting or distorting competition", since the representative performs in the market ".merely an auxiliary function [acting] in accordance with the instructions and in the interest of the undertaking on whose behalf it carries on business'.
Over the years, jurisprudential orientations have emerged[4] on the basis of which one can basically state[5] that the principle laid down in Art. 101(1) does not apply to commercial agency contracts where:
- the agent does not assume the risks commercial and financial typical of a distributor/dealer;
- the agent is integrated within the structure distribution of the principal;
- the agency contract is not part of a broader framework of contracts falling under Art. 101.
Similarly, in the Guidelines on Vertical Restraints,[6] the characterising element, in order to be able to understand whether or not an agency agreement is subject to the prohibition, is characterised by the risks assumed by the party qualified (correctly or not) as agent:[7] if the risks are substantially borne by the principal, we are in the presence of a true agency agreement, otherwise an agreement liable to incur the prohibition formerly Art. 101, § 1.
The same Orientations Point 16 states that:
"an agreement will generally be considered [...] agency [...] if ownership of the contract goods [...] does not pass to the agent or if the agent does not himself provide the contract services."
In Orientations several examples of risks outside the typical activity of the agent (in the strict sense) are then enumerated, which occur when the agent:
- acquires ownership of the contract goods[8];
- contributes to the costs related to the supply/purchase of goods covered by the contract;
- maintains, at its own cost or risk, stocks of the contract goods;
- assumes liability towards third parties for any damage;
- assumes liability for non-performance of the contract by customers;
- is obliged to invest in sales promotion;
- makes investments in equipment, premises or staff training;
- carries out other activities in the same product market as the one requested by the principal.
The best doctrine[9] (to which we refer for a more in-depth study of the issue briefly reported here) notes that the Commission's considerations in the Orientations regarding the criteria for distinguishing between agents real e fakes are often "misleading"This is partly due to the fact that the general criteria set out in the Orientations have been taken up (mostly) by a series of case law precedents of the European Court of Justice of a very particular character and this has not allowed the Commission to "consider the way in which 'normal' agents operate, of which [the Commission] was not aware [...]; the Commission has identified a number of criteria that are difficult to apply to the reality of 'normal' cross-border agency relationships'. [10]
Hence a situation of grave uncertaintydistinctive criteria indicated in the Orientations may mislead the reader (e.g. judges and national competition authorities) who relies on them, leading them to qualify as fakes agents, intermediaries who de facto (at least from a civil law point of view) perform a typical agency activity.
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[1] The regulation defines categories of agreements for which, even if there is a restriction of competition within the meaning of Article 101(1), they may be presumed to be exempt from its application.
[2] OJ, No. 139, 24.12.1962, p. 2912 ff.
[3] Id. p. 2922.
[4] Case SugarCommission decision of 2.1.1973, case Vlaamse Reisbureaus decision of the Court of Justice of 1.10.1987, case Vag Leasing decision of the Court of Justice of 24.10.1995.
[5] See on this point Bortolotti, Distribution Contracts, p. 674., Wolters Kluwer, 2016
[6] Point 13) of the Orientations: "The determining factor in defining a commercial agency agreement for the application of Art. 101(1) is the financial or commercial risk assumed by the agent in relation to the activities for which it has been appointed as agent by the principal.
[7] See on this point Pappalardo, The Competition Law of the European Union, p. 321 ff. UTET, 2018.
[8] On this point see the case Mercedes Benz decided by the commission in its decision of 10.10.2001, in which the Court of First Instance held that the purchase of demonstration cars and spare parts was not a sufficient element for the agent to be considered a distributor in its own right.
[9] Bortolotti, Distribution Contracts, p. 675 ff., Wolters Kluwer, 2016
[10] Id. p. 675
[11] The Guidelines, point 51, define passive sales as: "the response to unsolicited orders from individual customers, including the delivery of goods or the provision of services to such customers. Passive sales are advertising or promotions of a general nature that reach customers within the (exclusive) territories or customer groups of other distributors, but which are a reasonable way to reach customers outside those territories or customer groups, for instance to reach customers within one's own territory.
General advertising or promotions are considered a reasonable way to reach these customers if it is attractive for the buyer to make such investments even if they do not reach customers within the (exclusive) territory or (exclusive) customer group of other distributors'..
Agent and/or Area Manager? A brief overview.
When a company intends to organise its sales network in a structured manner, it often needs to rely not only on a plurality of agents, but also to ensure that they are among themselves organised hierarchically and are coordinates by a supervising person: the area manager.
The function of coordinating sales agents is often assigned by the company to a Area Manager (also known as area manager or area coordinator/supervisor), who is entrusted with a wide variety of tasks: he/she may be required to support the agents at the beginning of the relationship and supervise their work; coordinate the sales network in the assigned area, which may be composed of both agents and direct salespeople or resellers; or select and recruit agents, thus creating/implementing a distribution network within the assigned area.
Given the multiplicity of functions that can be attributed to an Area Manager, this figure is not easily framedMoreover, despite the highly strategic role it plays, the importance of properly delineating the relationship is frequently underestimated, with an awareness of what could be the risks associated with an ill-considered management.
1. Area manager: self-employed or commercial agent?
Before starting to establish the relationship, it should be clear how one intends to include this figure in the company's distribution network: employee, self-employed, or commercial agent?
One should ask oneself these questions not only before contracting the collaboration, but also during the development phase: it often happens that an Area Manager, classified as an agent, after the relationship is closed, claims the subordinate natureasserting (and proving) that the collaboration has always presented the typical characteristics of employment[1]. In the event of a dispute, it is common ground that, regardless of what the name iuris which the parties conferred on the relationship, the judge is called upon to frame it according to the manner in which the parties actually 'experienced' it (on this point cf. differences between agent and employee).
It follows that the creation of a hierarchical pyramid structure, structured in such a way as to strongly affect the Area Manager's autonomy of choice, may entail the risk that a (often unwanted...) relationship of a subordinate nature is established between the parties.
Among the elements characterising the subordinate nature of cooperation, there is, for example, the imposition on the Area Manager of excessively stringent visiting obligations, the giving of constant instructions on the management of the agents coordinated by him, or an obligation to report very frequent.[2]
The Court also held to be in the nature of a subordinate employment relationship, that of an Area Manager classified as an agent, but who performed almost no direct promotional activity, limiting himself to coordinating and directing the agents subordinated to him. He was remunerated with a monthly fixed sum, qualified as an advance on commissions, against commissions that were in fact practically nil (Lire 5,400 in 10 months of activity).[3]
In contrast, the Court ruled out the subordinate nature of the relationship of a coordinator of a group of commercial agents, where the parties had agreed on a monthly advance payment, to be balanced with the commissions actually accrued, in addition to a share of the commissions that the commercial agents of the group under his coordination would have accrued. The Court recognised in this structure both the actual activity of coordination, but also that of promotion, typical of the agent, with the allocation to the latter of a
"risk in the activity of the [agent]represented by the insecurity of commission level. "[4]
If the typical characteristics of subordination briefly set out above do not exist, it must first be clarified that the activity of Area Manager is not incompatible with that of commercial agent[5]However, if he only performs the activity of coordination/supervision, without actually promoting sales in the area entrusted to him, he cannot be classified as an agency.[6]
This principle is constantly reaffirmed by case law, which states that the activity of promoting the conclusion of contracts, which constitutes the agent's typical obligation under Article 1742 of the Civil Code, cannot consist in a mere activity neither of mere control, nor of "propaganda"even if this results in an increase in sales (see also: Obligations of the Agent. Is a simple propaganda activity sufficient?). On this point we read:
"The activity of promoting the conclusion of contracts on behalf of the principal, which constitutes the agent's typical obligation, [...]. cannot consist of a mere propaganda activityfrom which an increase in sales can only indirectly be derived, but must consist in persuading the potential customer to place orders for the principal's products, since it is precisely with regard to this result that the agent is awarded the remuneration, consisting in the commission on the contracts concluded through him and successfully concluded.[7]
In any event, promotion activity should not be understood solely as the activity of seeking out the end customer, who may also have been acquired on the principal's instructions (or in any other way),
"provided there is causal link between the promotional work performed by the agent vis-à-vis the client and the conclusion of the transaction to which it relates the request for commission (Applying these principles, the S.C. upheld the contested judgment that had excluded the existence of an agency contract between the parties, given that the appellant had the task of creating a commercial network by recruiting and training agents, as well as carrying out propaganda and support activities for them, without, however, having any influence on the individual deals concluded by the agents themselves with customers). (Cass. Civ. 2018, no. 20453)
Therefore, strictly speaking, since the activity of controlling and coordinating agents is not an '.promotion"of concluding contracts, the Area Manager who only performs that task cannot be considered to be a commercial agent.[8] In order to classify the Area Manager as a commercial agent, he will have to combine coordination activities with the promotion of business directly, i.e. in cooperation with the agents assigned (or selected by him);[9] It will certainly be easier to consider it an agent where the second activity is, if not predominant, at least significant.
2. The ancillary nature of the office of area manager.
That being said, in the event that the Area Manager predominantly carries out promotion activities and is therefore classifiable as an agent, the coordination activity has accessory naturethan that of agent. On this point, the Supreme Court has ruled on several occasions: [10]
"the relationship between agency contract and ancillary supervisory assignment must be reconstructed through the scheme of the negotiated link, with unilateral dependence bond. "
Given the ancillary nature of the coordinator's relationship with respect to that of an agent, one of the main consequences of this unequivocal interdependence is that in the event of termination of the main contract (agency), the ancillary contract (coordination) will follow
"the fate of the main contract to which it accedes [11][...].
Conversely, in the event of revocation of the ancillary contract (i.e. that of coordinator),
"precisely because it relates to a contractual relationship distinct from that of agency, it cannot have any effect on the latter, either from the point of view of the alleged failure of the revoking principal to fulfil its obligations under the agency contract, or from the angle of an alleged lack of interest on the part of the same principal in the continuation of the agency relationship[11]. "
Direct (and far from secondary) consequences of the accessory nature of the Area Manager position as opposed to the agency contract are essentially two:
- the parties may agree not to make the revocation of this assignment subject to any notice period (which, however, is expressly prohibited for the agency contract (cf. Early termination of an agency contract. How is the indemnity for lack of notice calculated?);
- i fees accrued by the Area Manager are not of a commission nature and, therefore, do not fall within in the calculation for quantifying theseverance pay.
2.1. The obligation to give notice and the corresponding indemnity.
With reference to theobligation to give notice (and consequent entitlement to compensation for loss of notice) in the event of termination of the appointment as Area Manager only, the Court:
"ruled out the possibility of a general rule of the system which, in contractual relationships of indefinite duration, would require the grant of a notice period (or the payment of the indemnity in lieu of notice) in every case of termination by one of the parties, unless there is a contractual derogation excluding such an obligation on the withdrawing party", and that this is to be inferred from the fact that only for some typical types of long-term contracts does the law make the validity of the termination conditional on the other party being granted a period of notice, and subject, in any event, to the assessment of whether the duties imposed by Articles 1175 and 1375 of the Civil Code in the performance of the contract."[11]
2.2. Area managers and quantification of severance pay.
As for theseverance pay:
"the claim [...] that the rules laid down in Article 1751 of the Civil Code for the basic agency contract should be applied to the ancillary assignment has no legal or even contractual support."
The ancillary nature of this relationship, from which a compensation non-contributory, which does not affect either the notice allowance or the severance pay, is also indirectly apparent from a reading of the AEC. Article 6 para. 4 of the AEC Industry 2014, in fact states that:
"In the event that the agent or representative is entrusted with the task of coordinating other agents in a certain area, provided that this is specified in the individual contract, a separate commission or a specific additional remuneration, in non-commissionable form, shall be established."
Article 4(11) of the AEC Commerce 2009 extends this regime to all ancillary activities carried out by the agent:
"In the event the agent or representative is entrusted with the continuous task of collecting on behalf of the principal, with the agent's liability for accounting errors, or of performing complementary and/or ancillary activities with respect to the provisions of ss. 1742 and 1746 of the Civil Code, including those of coordinating other agents in a certain area, provided that they are specified in the individual contract, a specific additional remuneration, in non-providential form, shall be established."
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[1] See on this point Cass. Civ. 2004, no. 9060.
[2] On this point see Perina - Belligoli, Il rapporto di agenzia, G. Giappichelli Editore, 2014, p. 21 et seq.
[3] Cass. Civ. 1998, no. 813.
[4] Cass. Civ. Cass. 2002, no. 17534.
[5] Cass. Civ. 1990, no. 2680 "The agency relationship - which is of an autonomous nature - is not incompatible [...] with the agent's obligation to visit and instruct other employees, with the fact that the principal has several agents organised hierarchically, with the principal's obligation to reimburse certain expenses incurred by the agent, nor with the agent's obligation to report daily to the principal."
[6] In doctrine on this point see Bortolotti, Distribution Contracts, Wolters Kluvers, 2016, p. 109. See also Tassinari&Sestini, Area manager in sales agent format, are you in?
[7]Tribunale Vicenza, 22.3.2018, concurring also Cass. Civ. 4.9.2014 no. 18690.
[8] In Doctrine, Bortolotti, op. cit, p. 109.
[9] Cass. Civ. 2007, no. 18303 "Although the "nomen iuris" assigned by the parties to a contract is irrelevant, nevertheless for the purposes of reconstructing the intention of the parties, according to the rules of Art. 1362 et seq. of the Civil Code, the qualification is also part of the words used and contributes to offering elements for reconstructing the common intention of the contracting parties.
In particular, since it is necessary to verify the correspondence of the "nomen" with the negotiated content, both the agent's carrying out of the promotional activity by availing itself of other coordinated and supervised agents and the lack of a formal and express indication of the area in which the agency is to be carried out must be deemed compatible with the legal notion of agency, where such indication is otherwise inferable from the reference to the territorial area in which the parties operate at the time of the establishment of the relationship. (Rejected, App. Trieste, 8 October 2004)"Cass. Civ. 1998 no. 813; in Dottrina Perina - Belligoli, op. cit., p. 22.
[10] Cass. Civ. 2005, no. 19678.
[11] Cass. Civ. 2018, no. 16940; Cass. no. 14436, 2000.
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.
________________________
[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.
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[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]
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[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 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.
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]
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[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.