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).
How is the contract termination indemnity calculated according to the 2014 Industry AEC?
Article 10 of the 2014 Industry AEC (see also , divides the severance pay into three components:
- termination indemnity, set aside by the principal in the ENASARCO fund (FIRR) (Chapter I);
- supplementary customer indemnity paid to the agent or representative even in the absence of an increase in customers and/or turnover (Chapter II);
- merit-based allowance, linked to an increase in customers and/or turnover (Chapter III).
Para. (3) of Article 10 also provides that the indemnity is to be calculated on all sums, however denominated, received by the agent in the course of the relationship, as well as on sums in respect of which at the time of termination of the relationship the right to payment in favour of the agent or agent has arisen, even if they have not been paid in whole or in part.
This implies that these allowances (on this subject see also calculation of indemnity pursuant to art. 1751 of the civil code., calculation of former AEC 2009 allowances, calculation of ex ANA allowances 2003) should also be calculated taking into account:
- non-commissionable remuneration, such as reimbursement of expenses and/or ancillary activities;
- amounts accrued but not yet received and/or paid to the agent at the date of termination.
I. FIRR
The FIRR is set aside at ENASARCO by the principal and, upon termination of the relationship, is due to the agent regardless of any increase in clientele and/or business. On the other hand, it is not paid in the event of termination of the relationship at the initiative of the principal, justified by the following conduct on the part of the agent: undue withholding of sums due to the principal, unfair competition, violation of the exclusivity obligation for a single firm.
The obligation to set aside the FIRR only exists if the AEC apply to the relationship. The AEC are only applicable to the contract if both parties (principal and agent) are members of the contracting trade unions, or, otherwise, the parties have expressly referred to the AEC in the contract, or have provided for their implicit application in the course of the relationship (e.g., where the principal has provided for a spontaneous, constant and uniform application of certain provisions of the AEC).[1] This implies that in the event of non-application of the AEC, the principal is not required to set aside the FIRR, but only to pay social security contributions to Enasarco.[2] (on this point cf. the social security obligation of the Italian agent and the foreign principal).
It is important to note that case law[3] and doctrine,[4] unequivocally hold that the claim for payment of the FIRR must be made against Enasarco and not against the principal, except for any sums not set aside by the latter.
This allowance is calculated annually as follows:
ONE-MAN AGENT
- 4% on the portion of commissions up to € 12,400 per year
- 2% on the portion of commissions between € 12,400 p.a. and € 18,600 p.a.
- 1% on the portion of commissions exceeding € 18,600 per year
MULTI-FIRM AGENT
- 4% on the portion of commissions up to € 6,200 per annum
- 2% on the portion of commissions between € 6,200 p.a. and € 9,300 p.a.
- 1% on the portion of commissions exceeding € 9,300 per year
II. SUPPLEMENTARY ALLOWANCE
According to majority case law, AECs represent a guaranteed minimum treatment for the agent,[5] such indemnity will be paid to the agent upon termination of the relationship and will be due to the agent regardless of proof by the agent that it has developed the principal's business and/or clientele, as is the case with the civil law indemnity under Art. 1751 of the Civil Code (on this point see severance pay in agency contracts).
It will be recognised at the following rates:
| 3% | on the total amount of commissions and other sums due |
| 0.50% additional | on commissions accrued from the fourth year (up to a maximum annual limit of € 45,000 in commissions) |
| additional 0.50% | on commissions accruing from the sixth completed year (up to a maximum annual limit of € 45,000 in commissions) |
This indemnity shall be due in all cases where the termination of the relationship is not due to a fact attributable to the agent (whether in the case of a fixed term or open term contract). No facts attributable to the agent shall be deemed to be facts:
- resignation due to established serious breach of duty by the principal,
- resignation as a result of permanent and total disability,
- resignation due to infirmity and/or illness that does not permit continuation of the relationship,
- resignation following the attainment of the ENASARCO old-age or early old-age pension,
- resignation following the attainment of an old age or early old age pension INPS.
III. MERITOCRATIC ALLOWANCE
The AEC Industry 2014 provides for a rather structured calculation to quantify the meritocratic allowance, which will only be paid to the agent if it is higher than the sum of the two allowances analysed above (FIRR + supplementary).
The calculation of the meritocratic allowance is as follows:
- Determination of theincrease in customersconsisting of the difference between the commissions received by the agent at the beginning and at the end of the relationship, bearing in mind that the prognosis period will vary depending on the agent's status as a sole or multiple agent and the duration of the relationship, according to the following table:
| Type and duration | Years |
| Multi-firm agent with a term of 5 years or less | 2,00 |
| Single agent with a term of 5 years or less | 2,25 |
| Multi-firm agent with a term of more than 5 years and less than or equal to 10 years | 2,50 |
| Single agent for more than 5 years and less than or equal to 10 years | 2,75 |
| Multi-firm agent for more than 10 years | 3,00 |
| Single agent for more than 10 years | 3,25 |
- The initial figure is made homogeneous with the final figure by applying to it the Istat revaluation coefficient for labour credits.
- The rate of migration of customers according to the following table:
| Type and duration | percentage |
| Multi-firm agent with a term of 5 years or less | 27% |
| Single agent with a term of 5 years or less | 15% |
| Multi-firm agent with a term of more than 5 years and less than or equal to 10 years | 22% |
| Single agent for more than 5 years and less than or equal to 10 years | 20% |
| Multi-firm agent for more than 10 years | 37% |
| Single agent for more than 10 years | 35% |
- For the first year of the prognosis period, the aforementioned rate of migration is subtracted from the value of the increment referred to in point 1. For the subsequent years of the prognosis period, the same migration rate is subtracted from the value determined for the previous year of the prognosis period. The results thus obtained are added together.
- The amount obtained is reduced on a lump-sum basis by a variable percentage equal to:
- To 10% for contracts of 5 years or less;
- To 15% for contracts with a duration of more than 5 years and less than 10 years
- At 20% for agency contracts exceeding 10 years.
- Compare the meritocratic indemnity calculated according to the preceding points with the maximum value of the indemnity provided for in the third paragraph of Art. 1751 of the Civil Code.
- The termination indemnity and the customer indemnity are deducted from the meritocratic indemnity obtained.
[1] See Bortolotti, Distribution Contracts, 2016, Wolter Kluwer, p. 87 ff.
[2] Trib. Rome 14.1.2010.
[3] Trib. Bari 2.5.2012.
[4] Bortolotti, Distribution Contracts, 2016, Wolter Kluwer, p. 365 ff.
[5] See on this point Cass. Civ. 2014 no. 7567. However, it should be noted that the European Court of Justice, in a judgment of 23 March 2006, challenged the legitimacy of the supplementary client indemnity as provided for by the AEC, which allows the agent to receive a termination indemnity in any event, even if the agent has not actually developed the principal's clientele and the latter benefits from it even after the termination of the relationship; in line with this orientation there is a minority direction of the case law on the merits, which has held the AEC inapplicable to our system and has therefore not recognised the agent's entitlement to the rules set out therein as a guaranteed minimum (Tribunale Treviso 29 May 2008. Tribunale Treviso 8 June 2008; Tribunale di Roma 11 July 2008).
The termination indemnity in the agency contract: Art. 1751 of the Civil Code and AEC compared.
As has already been pointed out, severance pay in Italy follows a binary systemon the one hand, the discipline governed by theArticle 1751 of the Civil Code and, on the other hand, the regulation of AECs. (cf. also Collective bargaining. Origins, value and enforceability. And if a contractor is a foreigner, do they apply or not?)
The current version of Article 1751 of the Civil Code, as amended by Legislative Decree 1999 No. 65, implementing Directive 86/853/EEC, provides that:
"upon termination of the relationship, the principal is obliged to pay the agent an indemnity if the following conditions are fulfilled:
- the agent has procured new customers to the principal or significantly developed business with existing customers;
- the principal still receive substantial benefits 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 third paragraph of the same article states that theallowance is not due when:
- the principal terminates the contract for a default attributable to the agent, which, because of its seriousness, does not permit the continuation, even temporarily, of the relationship;
- l'agent terminates the contractunless the termination is justified by circumstances attributable to the principal or by circumstances attributable to the agent, such as age, infirmity or illness, for which the agent can no longer reasonably be asked to continue the activity;
- when, pursuant to an agreement with the principal, theagent assigns to a third party the rights and obligations which it has by virtue of the agency contract.
About the amount of the indemnity, pursuant to Article 1751(3) of the Civil Code, it:
"may not exceed a figure equivalent to oneannual allowance calculated on the basis of the annual average of the remuneration received by the agent over the last five years and, if the contract dates back less than five years, on the average of the period in question."
The criterion in Article 1751 of the Civil Code, does not contain any calculation methodbut only a ceiling (i.e. an annuity to be calculated on the basis of the average commission of the last five years) and two conditions to the fulfilment of which the accrual of the indemnity is subject, namely that
- the agent has procured new customers and/or 'intensified' the turnover of existing ones;
- the indemnity is "equitable" in light of "all the circumstances of the case including the commissions that the agent loses as a result of the termination of the contract.
On the other hand, the contractual regulation of AECs establishes a certain and precise method of calculation based on three different items:
- the indemnity for termination of the relationship (the 'FIRR', consisting of an annual provision in the special fund managed by ENASARCO) calculated on the basis of the AEC;
- l'supplementary customer allowancepaid to the agent even in the absence of an increase in clientele, (equal to approx. 4% on the total amount of commissions and other sums accrued);
- l'allowance meritocraticlinked to an increase in customers and/or turnover.
As can be seen, both systems have within them both advantages and disadvantages for the contracting parties.
I advantages for the agent of theindemnity pursuant to Article 1751 c.c. are the fact that the compensation paid by the court is often higher than that provided for in the CEC.
The disadvantages normally lie in the fact that:
- only a maximum is set, but a calculation criterion is absolutely missing;
- the burden of proving the increase/intensification of the clientele and the fairness of the indemnity rests entirely on the agent;
- the indemnity is excluded in all cases where the agent is terminated from the contract without just cause.[1]
As for the allowance calculated according to the AEC i advantages are quite obvious, given that:
- a clear and defined calculation criterion is configured;
- FIRR and client indemnity are due (subject to exceptions) at all times, even in the event of termination by the party;
- no burden of proof is placed on the agent.
As to the disadvantages for the agent, it should be noted that, in fact, the indemnity paid under Article 1751 of the Civil Code is very often higher than that guaranteed by the AEC.
It should be noted that the European Court of Justice, in a ruling of 23 March 2006,[2] ha disputed the legitimacy of the severance payment as regulated by the AEC. Such agreements, according to the Court, may only derogate from the rules laid down in Directive 86/653/EEC if, on analysis ex antethe application of the AEC would result in the agent being treated economically more favourably than under Article 1751 of the Civil Code. Now, since there are no calculation tools that make it possible to predict the amount of the codified indemnity and it can only be known and calculated after the termination of the relationship and since, according to the Court, the assessment as to whether the treatment of the AEC is (always) more favourable than the civil law discipline must be made ex anteit is clear that, following this reasoning, only a calculation system that always guarantees the maximum allowance can be considered in line with the principles dictated by the directive and the ruling of the Court of Justice.[3]
Despite the ruling of the Court of Justice, However, the orientation of the Supreme Court appears to be in the process of consolidation according to which the criteria for quantifying the severance indemnity provided for by collective bargaining must in any event be considered as a minimum treatment which must be guaranteed to the agent, subject to the need for the judge, once he has ascertained the existence or non-existence of the requirements provided for by Art. 1751 of the Civil Code, to carry out a kind of case-by-case assessment in order to evaluate the fairness of the solution resulting from the AEC, with discretionary power, taking into account all the circumstances of the concrete case.[4]
It should be noted, however, that there is a minority orientation of the jurisprudence on the merits, which has held the AEC to be inapplicable to our system and has therefore not recognised the discipline set forth therein as a guaranteed minimum for the agent.[5]
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[1] Art. 1751 (2) (1): "The indemnity shall not be due [...] when the agent terminates the contract, unless the termination is justified by circumstances attributable to the principal or by circumstances attributable to the agent, such as age, infirmity or illness, for which the agent can no longer reasonably be required to continue the activity"
[2] Court of Justice 2006, C-465/04.
[3] Baldi-Venezia, Il contratto di agenzia, 2014, GIUFFRÈ; Bortolotti, L'indennità di risoluzione del rapporto secondo il nuovo Accordo Economico Collettivo Settore industria, 2014, www.newsmercati.it.
[4] Cass. Civ. 2009 no. 12724; Cass. Civ. 2012 no. 8295; Cass. Civ. 2013 no. 18413; Cass. Civ. 2014 no. 7567; Cf. Baldi-Venezia, Il contratto di agenzia, 2014, GIUFFRÈ, "This solution does not appear satisfactory and, above all, does not concretely identify the quantification criteria to be adopted, leaving the judge of merit with a wide margin of discretion, which does not militate in favour of the future identification of precise and uniform criteria to the detriment of a principle of certainty'..
[5] Tribunale Treviso 29 May 2008; Tribunale Treviso 8 June 2008; Tribunale di Roma 11 July 2008.