Indemnities due at the termination of agency relationships under Italian Trade ECAs

The regulation of agency relationships of the trade sector is definitively a peculiar one under the Italian laws and, the parties of this kind of agreements may decide to enrich it of further terms and conditions under a specific normative set – collectively determined – rather than just having them referring to the Italian Civil Code only. Of course, this significantly alters the finalized agreements between the parties, which both the principal and the agents shall properly consider, especially at the termination of the relevant agency contract. 

If expressly established within the agency contract (or de facto applied on a practical level), the parties of agency contracts of the trade sector may refer to the so-called Economic Collective Agreements (“ECAs”) in setting the terms and conditions of said relationship.

The mentioned source provides for specific norms that build on those established by the Italian Civil Code and make a more articulated set of regulations which aim to discipline more in detail the relationship between the principal and the agent.

With specific reference to payments due to the termination of the agency relationship, ECAs provide for severance indemnities that the principal shall grant to its agents whenever the relationship terminates for determined reasons. More specifically:

1. Severance indemnity (FIRR): is due just because of the termination itself; it corresponds to 1% of the commissions accrued and paid to the agent during the entire relationship up to that moment, with an additional 3% due for commissions reaching an economic value up to – due to the exclusive engagement – EUR 12,400 (which decreases to 1% in case of a value ranging from EUR 12,400 to EUR 18,600).

• Supplementary customer indemnity (Indennità suppletiva di clientela): is due when the termination is decided by the principal for reasons for which the agent is not responsible or, in case the agent resigns, when the resignation is due to:
  • Permanent or total disability or pathological status due to which the relationship cannot reasonably be carried out anymore;  
  • Reaching of the retirement requirements;
  • Reasons determined by the principal;
  • Death of the agent (in such a case, the amounts due shall be corresponded to the agent’s heirs).

Such an indemnity amounts to 3% of the commissions accrued by the agent within the first three years of the working relationship, 3.5% for years fourth to sixth of the relationship, and 4% for all following years.

• “Meritocratic” indemnity (Indennità meritocratica), which is only due when:
• the total sum due by way of the indemnities defined in points A) and B), above, is lower than the annual average amount of the commissions paid to the agent within the last five years or within the entire duration of the relationship if it started less than five years prior; and

• at the termination of the relationship, the agent has provided new customers to the principal or has sensibly developed business with existing ones, and the principal still gains relevant economic advantages from said relationships.

This indemnity is not due when the agent decides to terminate its working relationship for his own reasons unless such a determination was caused by a principal’s liability or due to a personal condition of the agent itself.

It is essential to clarify that the regulation outlined by the ECAs provides for requirements and computing basis which significantly differ from those set by section 1751 of the Italian Civil Code.

In fact, according to the collective source, the only commissions that shall be taken into account are those that the agent has received over the course of the entire relationship with the principal, with a limited consideration of the agent’s merits in building new clientele or developing the already existing one (with the exception of the last indemnity, as described above).

However, the second-to-last paragraph of the mentioned section 1751 forbids the parties to derogate from its own provision so to set a disadvantageous treatment for the agent, which shall be assessed before the execution of the agency agreement.

The European Court of Justice (ECJ) judgement dated March 23^rd, 2006, C-465/04 (Honyvem v. De Zotti) claimed the invalidity of the clauses of the ECAs applicable at the time regarding the definition of the severance indemnity since inconsistent with the system set out by Directive 86/653/CEE.

In fact, said provisions do not allow the sum of the contractual and legal indemnity, nor the obligation to grant to the agent an indemnity equal or higher than the one determined based on the Directive criteria.

Although there are no discussions over the righteousness of the above, Italian Courts have developed their own interpretation of it which – although adhering to the statements released by the ECJ with reference to the prevalence of the European norms rather than the national ECAs – claims that the mentioned assessment regarding the higher or lower advantages for the agents coming from the application of the collective source shall be executed at the termination of the relevant working relationship, rather than at its beginning.

In light of the above, it is advisable for principals of an agency relationship to which ECAs are applied to be fully aware of the fact that, at the termination of the agreement, if more favourable to the worker, the latter may claim the application of the collective norm to the computing of the termination indemnities, demanding that the system outlined by section 1751 of the Italian Civil Code is pursued, instead.