Edited by Gianluigi Baroni, Francesca Tironi and Lorenzo Zanotti
On 20 May 2023 the Law on Fair Compensation (Law No. 49 of 21 April 2023, published in the Official Gazette General Series No. 104 of 5/5/23) will come into force, with major impacts on professionals and companies, both in terms of costs (for the companies concerned) and in terms of contractual relations between the parties and the instruments of protection for the professionals involved.
The new law, indeed, terminates a long period of substantial liberalisation of professional compensations, to mark the return to a system of rigidly bound compensations (downwards), which will have to be mandatorily re-arranged to the minimum tariff values established by ministerial decree.
In addition to the above, there will be a number of significant innovations, which will concern, on the one hand, the terms and conditions of the contractual relationships between the parties (with certain clauses, very frequent in practice, that will no longer be able to find a place in the agreements between professionals and companies), and, on the other, the provision of a system of ‘reinforced’ protections for the professionals concerned.
Below are the main innovations and the first application impacts, while waiting for the inevitable interpretative clarifications that – we have no doubt – will not be long in coming from the Ministries and professional orders concerned.
Scope of application
The new provisions will apply to all professional relationships, having as their object the provision of intellectual work (pursuant to Article 2230 of the Civil Code), governed by agreements that provide for the performance of professional activities, also in associated or corporate form, in favour of certain categories of enterprises.
The range of professionals concerned is extremely broad, as it includes both registered professionals (lawyers, engineers, actuaries, architects, surveyors, etc.) and professionals without a professional register or order (as identified by Article 1 of Law no. 4/2013), with potential impacts on over 2 million operators.
On the principals’ side, the new rules will apply to professional services rendered in favour of
- banking and insurance companies, as well as their subsidiaries and mandataries;
- companies that employ more than fifty workers or have annual revenues of more than EUR 10 million;
- public administration and companies with public shareholdings;
- on the other hand, securitisation vehicle companies and activities performed in favour of collection agents remain excluded.
It should be noted that the provisions on fair compensation do not have a retroactive effect and, therefore, will only apply to agreements entered into after the entry into force of the Law (20/5/23), whereas agreements already in force on that date may continue until their expiry date with the fees and terms already agreed between the parties.
What is meant by fair compensation and how it is determined
The law under comment defines “fair compensation” as compensation “proportionate to the quantity and quality of the work performed, and to the content and characteristics of the professional service” to be determined on the basis of the tariff values identified by ministerial decree. These decrees, already in force for lawyers and ordinary professionals, will have to be adopted, for all other professionals, within 60 days from the entry into force of the Law and will be updated every two years upon proposal of the competent professional orders and colleges.
It follows that, by virtue of the new provisions under comment, clauses will be deemed null and void which, also taking into account the costs incurred by the professional, do not provide for a fee that is ‘fair and proportionate to the work performed’, i.e. a fee that is lower than the amounts established by ministerial decree for the various categories concerned.
This regulatory provision will therefore inevitably entail, for all impacted operators, the need to update the forecasts of expenses for professional fees due to the progressive adjustment of fees to the ministerial tariff parameters.
Other invalid clauses if agreed between professionals and companies
In addition to fees, the provisions under review will also have an effect on contractual agreements between professionals and companies, since clauses (which are quite frequent in practice) will be considered null and void if they provide, among other things
- the prohibition for the professional to demand advance payments in the course of the service;
- the advance payment of expenses to be borne by the professional or the waiver of reimbursement thereof;
- advantages for the client that are disproportionate to the quantity and quality of the work performed or service rendered;
- the client’s right to unilaterally change the terms of the contract;
- the assignment to the client of the right to refuse to conclude the essential elements of the contract in writing;
- granting the customer the right to demand additional services free of charge;
- payment terms exceeding 60 days from the invoice;
- for lawyers, the recognition of only the fee stipulated by the parties even if the judicially awarded costs are higher;
- the obligation for the professional to pay to the client or third parties fees, consideration or reimbursements in connection with the use of software, databases, management systems, technical assistance services, training services and any goods or services whose use or enjoyment in the performance of the assignment is requested by the client.
In light of the foregoing, therefore, a careful review of the contractual terms and templates adopted by firms and professionals is required in order to adapt them to the prohibitions introduced by the new Law on Fair Compensation, i.e. the adoption of the standard models of agreement that may be drawn up by the professional orders and colleges concerned.
New instruments of protection for the professional
Among the most important innovations brought about by the law under comment are those relating to the instruments for the protection of the professional, in the event that the remuneration provided for does not meet the parameters set forth on the subject of ‘fair compensation’.
Confirmed, first of all, is the possibility for professionals to take recourse to the ordinary judicial channels to challenge the agreement deemed harmful to the rights set forth in the new legislation. In the event of ascertained illegitimacy of the agreed fee, however, the judge will not be limited to condemning the client to pay the difference between the sum already paid to the professional and the ‘fair compensation’ due on the basis of the ministerial parameters, but may also condemn him to an indemnity of up to twice that difference, in addition to any compensation for greater damages.
Another novelty concerns the possibility for professionals to obtain a “congruity opinion”from the professional association or college on the remuneration or fees requested and the expenses incurred, which will constitute an enforcement order if not opposed by the debtor within forty days.
Again, as a further form of protection of individual ‘homogeneous’ rights of professionals, the possibility of a class action is provided for by the national council of the order to which the professionals concerned are registered or by the most representative associations.
Lastly, the new law contains some important clarifications regarding the commencement of the limitation period for professional liability actions, which runs from the day on which the service is rendered and not, as previously assumed by some parties, from the time when the damage occurred.
Lastly, it should be noted that compliance with the legislation on fair compensation by all the professionals concerned will also depend on the adoption of deontological provisions by professional orders and colleges aimed at sanctioning professionals who fail to comply with the new provisions, for example by accepting a lower fee than that provided for by ministerial order.
Some initial operational suggestions
In light of the foregoing, it is suggested, from an operational point of view, that operators falling within the scope of the law proceed – also with the assistance of consultants who are experts in the field – to map the relationships with the professionals concerned, in order to
- identify the professional services impacted by the new legislation;
- monitor expiring agreements with professionals and their renewals;
- review and adjust, where appropriate, the contractual terms and conditions with the professionals concerned;
- assess the possible cost impacts of the need to adjust fees to the new parameters for fair compensation.
On this point, PwC remains available to provide the necessary support.
For a more in-depth discussion please contact:
PwC TLS Avvocati e Commercialisti
PwC TLS Avvocati e Commercialisti
PwC TLS Avvocati e Commercialisti