ITA 
Contributions are due on the indemnity in lieu of notice regardless of actual payment and waiver by the worker.
Court of Cassation Ruling 13 May 2021, no. 12932
The legal obligation to pay social security contributions cannot be circumvented by a negotiated out-of-court settlement between the parties on the parting of ways in an employment relationship.
The case originates from the dismissal of 90 managers by a well-known Italian bank and the subsequent settlement agreement entered into between the parties, whereby the employment relationship was configured as a mutual termination (as opposed to a dismissal) and the agreement included a waiver of the indemnity in lieu of notice.
The Italian social security body (INPS) claimed payment of contributions on the indemnity in lieu of notice due (and not paid) by the bank, who had opposed same by virtue of the settlement agreements signed with all the employees involved.
The Court of Appeal rejected the bank’s request for a negative assessment of contributions, confirming the legitimacy of the claims by INPS.
For the (local) court in first instance, the employment relationship had been terminated with the dismissal of the managers, with effect from receipt of the letter of termination and notification of their right to payment in lieu of notice (PILON). Given that the dismissal had already taken place, the company was deemed to have expressly acknowledged that PILON was due as it constituted an element of remuneration that had already become part of the employees’ patrimony, and as such was subject to social security contributions.
The Court of Appeal considered as irrelevant the private agreements signed by all the managers a few weeks after the dismissals were served, in which it was agreed the mutual termination of employment, with an explicit waiver of any future claims, including any right to notice or indemnity in lieu of same, and an implicit waiver to any future challenge of the dismissal.
The Court of Cassation with the judgment in question upheld the decision of the court in first instance.
For the Judges “the obligation to contribute, which has the nature of a public obligation arising by law, can not be affected by a negotiated agreement, which attempts to regulate differently the obligation to pay, or resolve the dispute by means of an out-of-court settlement
The Supreme Court goes on to say that “the expression of a different intention between employer and employee cannot overrule the position of INPS, which prevails in court as being entitled to the contributions deriving from the law and cannot be derailed by the terms of a private settlement agreement between the parties
The Ruling under examination goes on to say that the indemnity in lieu of notice is subject to social security contributions given the remunerative nature of the indemnity (see, among others, Court of Cassation nos. 5974 of 1984, 13395 of 1999, 9895 of 2016). At the very moment in which the dismissal becomes effective “he worker’s right to the indemnity in lieu of notice arises as does the resulting obligation to pay contributions on the indemnity: if the dismissed worker subsequently waives the right to the indemnity, this waiver cannot have any effect on the public obligation, which pre-dates the waiver and is indifferent to it because the abdication comes from a party (the worker) who is not the owner of the debt (INPS) (see, among others, Court of Cassation no. 17670 of 2007)
With the notice of dismissal, the indemnity in lieu of notice therefore falls within the category of “everything that the worker is entitled to receive” and attracts, due to its intrinsic value, the obligation to pay contributions, indifferent to the defense’s argument of whether or not it is part of the employee’s patrimony.