The Italian labor market reform rewrites the rules and shrinks the utilization of the “association in participation” agreements

The Italian labor market reform, enacted June 28, 2012 as Law no. 92 and effective July 18, 2012 (the so-called “Fornero Reform” or the “Act”), introduced important changes to joint ventures and, in particular, the structure of the so-called association in participation (“A.I.P.”), a peculiar type of cooperation agreement provided for and regulated by Articles 2549-2554 of the Italian Civil Code. In conformity with Article 2549 of the Civil Code, pursuant to such an agreement one party (Associating Party) grants another party (Associated Party) a participation in the profits of the enterprise, or of one or more transactions, in exchange for a specific contribution of value, usually money, labor, or both.

Since the contribution made by the Associated Party may consist of independent furnishing services but also ordinary labor, case law has pointed out that A.I.P. agreements that the work contribution of the Associated Party may in fact be a subterfuge for a coordinated and continuous relationship of a dependent employment. Thus, the Act with its purpose of curbing the abuse of these flexible forms (which can hide a subordinate employment), has been amended introducing a new sub-paragraph in Article 2549 of the Civil Code. The Code now provides that if Associated Party contribution includes a labor component, the relative number of Associated Parties (involved in the same enterprise) shall not exceed three, regardless of the number of the Associating Parties, except where an Associated Party is married to the Associating Party or related within the third degree defined by law. According to the provisions of the Act, in case of violation, the relationship with all members whose contribution consists of work in which there has been no effective participation in the profits of the enterprise or of the business, must be considered an ordinary subordinate employment.

Therefore, the Act has reduced the use of the A.I.P. agreements such that it may be considered as an alternative legal structure of establishing joint ventures and reflecting the same ratio of the association in participation, that is, the profit-sharing agreement or contratto di cointeressenza (Civil Code, Article 2554). In particular, the Civil Code provides two types of profit-sharing agreements: the first provides for participation only in the profits and not in the losses (cointeressenza impropria); in the second, one contracting party grants to another a participation in the profits and the losses of his enterprise without a specified contribution (cointeressenza propria). In light of the former comments, the expectation is that, due to the Act, this different commercial agreement will have a more limited application.

Giampiero Belfiore
Marco Moretti