Are you a co-employer?

“Co-employment” may be defined as a situation characterized by two or more companies (e.g. the holding company and one or more subsidiary) having legal rights and duties over the same employee. Co-employment may represent a way to define the employment relationship among companies organized under the same group. This conclusion is supported by Italian case law and by the great majority of commentators.

Two conditions must be met in order to consider multiple companies as co-employers of an employee:

1. the working performance must be supervised by two or more companies of the group; and

2. the same performance must be aimed at reaching a group interest.

The existence of a relationship among the companies, or the fact that two or more companies are organized under the same group is not, in itself, sufficient to determine the existence of a co-employment relationship between the companies and the employee.

1. Supervision exercised by two or more companies of the group

It can be difficult to evaluate whether two or more companies of the same group are both supervising the working performance of an employee. Indeed, the holding company may exercise its control over a subsidiary without having any relationship with the latter’s employee. Therefore, it may seem that the holding company has no particular role in the employment relationship.

According to Italian case law, if the holding company exercises direction and control over the subsidiary, then such activity may have an impact on the management of the employment relationship. However, this may not be sufficient to determinate whether the employee of the subsidiary company has an employment relationship with the holding company that exercises the direction and control.

The holding company may need to achieve specific production and business goals and, therefore, it may direct the activities of a specific subsidiary (or a specific department) in order to reach such goals. Furthermore, the holding company may require compliance with particular processing techniques, technical standards, or quality standard of the final product. In such cases, the holding company exerts a dominant influence over the management and organization of the work of the subsidiary’s employee. It follows that the role of the holding company is not different from that of an employer. This may lead to co-employment of the employee by the holding company and its subsidiary.

2. The group interest

The group interest is different from the interests of the holding company and of the subsidiaries, which are directed and controlled by the holding company.

The group interest is aimed at developing a single strategy to direct the activities of all companies belonging to the group. If the holding exercises direct control over an employee, then such an individual may be recognized as an employee of the holding, rather than of the subsidiary, as the latter is the one profiting from the work done by the employee. This activity carried out by the holding is illicit under Italian law (“interposizione illecita di manodopoera”).

Conversely, if two or more companies act in order to reach a group benefit, then they may be considered as co-employers.

3. Risks and recommendations

Co-employment poses particular risks if an employee files a legal complaint. If successful, both the employer and the co-employer may be held responsible for any related damages. Indeed, each company would be liable for the decisions taken by the other.

To avoid such risks, the holding company shall not supervise, as far as possible, the working performances of any of its subsidiaries’ employees; and such performance shall not be carried out in order to reach a group benefit, but in order to reach the interest of the employer (e.g. the interest of the subsidiary).

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