Koumentakis

Category: Articles

  • Resignation: Recent Changes

    Resignation: Recent Changes

    The employment contract presupposes the coincidence of the wills of the employer and the employee in terms of its conclusion. Certain of her, precisely, at the moment, her solution – but uncertain of the time and the manner in which it will come. The contract can be terminated (of course) by agreement of the parties. Also after its termination: either by the employer (:dismissal) or (expressly or implicitly) by the employee (:resignation or voluntary withdrawal). In both cases, however, the employer is burdened with specific obligations. In the present we will deal with the last of them: the voluntary departure of an employee.

    We were already concerned with this case in our previous article. There, we dealt with the prescribed procedure, which – under the previous regime – the employer was obliged to follow after the voluntary departure of his employee (art. 38 n. 4488/2017, as codified in art. 320 p.d. 80/2022). Also, with the issues arising from the relevant procedure. However, the recent labor law (:n. 5053/2023) changed the applicable procedure. About the recent-relevant legislative changes, the present!

     

    Notice of Voluntary Resignation

    As expressly provided (and, under the previous regime, it was provided), the employer is obliged to announce, in the P.S. INSTRUMENT II, every case of voluntary resignation of an employee – by electronic submission of the provisions under no. 40331/13.9.2019 HR of the Minister of Labor and Social Affairs forms. [Such as, respectively, any case of termination of an open-ended employment contract or termination of a fixed-term employment contract or project. As well as any case of voluntary termination of the trial period (which is provided for in art. 1A p.d. 80/2022) or consensual termination of the employment contract, such as voluntary exit (art. 320 § 1 p.d. 80/2022)].

     

    Preceded Regime

    Under the previous regime, it was stipulated that the aforementioned notice of voluntary resignation of the employee had to be accompanied by an electronically scanned form signed by the employer and the employee. Alternatively: from an out-of-court statement by the employer to the employee, informing him that he has voluntarily left and that this will be announced in the “ERGANI” information system. In the latter case, the employer’s extrajudicial statement had to be served on the employee no later than four (4) working days after his voluntary departure. The relevant announcement should have been made the next business day after the extrajudicial statement was served.

    The procedure in question created questions and difficulties regarding its application, in particular, in two cases of the employee’s implicit will to terminate the employment relationship. Specifically: (a) in the event that the employee refused to sign the form for their resignation (: Form E5), as well as (b) in the event that the employee stopped coming to work, with the result, likewise, of not signing the relevant printed material. It should be noted, of course, that the employee’s non-attendance at work should be unjustified. Naturally, the employee’s justified absence from his duties (e.g. in cases of leave, pregnancy, childbirth, military service and illness – provided that the legal conditions are met) cannot be considered as an implicit termination of the employment contract by him employee.

    In the aforementioned two cases, the cooperation of a bailiff was necessary. At the same time, however, the employer had to safely conclude – how? – the implicit complaint on behalf of the employee. Also, service and notification by the employer had to take place within strict deadlines.

    Law 5053/2023 improved the (obviously) problematic process of resignations – to a certain extent.

     

    Purpose of the New Regulation

    The new regulation for the resignation of an employee aims – according to the Explanatory Report of Law 5053/2023 – to simplify the process of electronic announcement in the ERGANI II Platform of the resignation. Also, in assisting businesses in capturing the true status of employees who have resigned, they still appear as employees.

    At the same time, with the new regulation, the legislator provides for the provision of insurance barriers, to prevent its circumvention by employers (or at least they declare that they are doing so) (see related Memorandum to law 5053/2023 on article 23).

     

    Current Status

    It is now provided (in the newly introduced § 3 of art. 3 of the Presidential Decree 80/2023), that the employee’s unjustified (arbitrary) absence from work for more than five consecutive working days can be considered as termination of the contract on their part. It is required, however, that an additional period of five consecutive working days has passed since their compulsory employment by their employer, which (a) is posted on the ERGANI II Platform and cumulatively – as specified in the Memorandum of Law 5053/2021 on art. 23- (b) evidenced by any suitable written means. In this case, the employer is obliged, on the next working day after the end of the period of five consecutive working days of the unjustified (arbitrary) absence of the employee (which follows the period of five consecutive working days from the employer’s compulsory harassment), to announce the employee’s resignation to the ERGANI II Platform, without requiring the employee’s signature.

    The new provision does not require the cooperation of a bailiff. It also delimits – in a more specific and safe way – the relevant time limits: the termination by the employee and the obligation to announce the resignation by the employer.

    However, cumulatively, the process of such resignation requires the passing of, as a minimum, ten consecutive working days. This period is evaluated as, obviously, excessive. In particular, the period of five consecutive working days that must elapse from the employer’s mandatory notification of the employee. There can be no doubt that the requirement to pass such a long period of time creates the conditions for abusive behavior on the part of (malicious) employees. The latter will have at their disposal a sufficient period of time to change their possible (implicit) will to leave their job. Also to delay their departure from work or, simply, to inconvenience (:revenge) their employer. In other words: an unjustified absence of an employee for nine consecutive days does not count as resignation in the event that one, and only, working day follows(!!!). Even if it is followed by another nine-day (unexcused) absence. And one more. And so on…

    A problem also arises regarding the completion of the day of the employee’s departure in the -to be submitted- form E5: it is more correct to declare the first day of their unexcused absence.

    In the case of the employee’s return to work – either before or after the relative inconvenience of the employer – it is reasonable for the employee not to be paid nor to be insured for the days of their unjustified absence. Coincidentally, of course, the relevant provision in their employment contract.

     

    The Legal Consequences of Non-Compliance with the Employer’s Obligations

    In the event that the employer does not comply, within the deadline, with the obligations of announcing the resignation, the employment contract is considered to have been terminated by the employer’s irregular termination (art. 320 §4 Presidential Decree 80/2022). It is, in this case, an establishment of a presumption in favor of the employee. The employee then has three options:

    (a) To accept (expressly or implicitly) as correct the process of their resignation – then the employment relationship will be terminated.

    (b) To claim the payment of severance pay, due to untimely termination of their employment relationship.

    (c) To bring an action for the claims arising from the invalid dismissal (due to non-compliance with the formal conditions of dismissal). That is, to ask for overdue wages and their re-employment at their job.

    In each of the last two cases, the employer will have the burden of proving that the termination of the employment relationship occurred due to resignation and not due to dismissal.

     

    Work Retention

    But what happens in the case of work retention? In the event, i.e., that the employee exercises their right to refuse the fulfillment of their benefit, until the employer fulfills an obligation incumbent upon them (e.g. payment of accrued wages). Based on an explicit legislative provision (: art. 320§5 Presidential Decree 80/2022-as amended by art. 23 law 5053/2023) the provisions of the law (specifically §§2, 3 and 4 of the disputed provision) do not apply in the case of work retention.

    It should be noted that the specific regulation/clarification regarding the suspension of work was not included in the bill, as it was submitted to the Parliament. Also, it was not added with a timely amendment (therefore, the Memorandum of Law 5053/2023 does not include a reference to the relevant regulation).

     

    The resignation of an employee from their job is probably the most common way to terminate the employment relationship. The recent legislation simplified and made more rational the existing relevant regulations. However, it did not deal with problematic situations that, on a practical level, can be dealt with: long, for example, unjustified (but not ten days continuous) absence of the employee from their work. The long maintenance of such a serious pending in a working relationship, obviously strikes, in the end, against the business itself and its sustainability. Indirectly (but not clearly-voluntarily though) also against the other employees. A three-day, only, (proven) unjustified absence of the employee would, in any case, be enough to terminate the employment relationship. Justifiably, therefore, we look forward to the next, relevant, legislative regulation.-

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (November 12th, 2023).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Change (Sometimes Damaging) of Terms of Employment

    Change (Sometimes Damaging) of Terms of Employment

    In our previous article, we examined the disclosure and content of the essential terms of employment, as they were formed after the very recent Law 5053/2023. We also dealt with the differentiation of the essential terms from the (not defined by law) basic terms of the employment contract. As well as with the (excessively) complicated way and time of their notification to the employees. In the present article we will examine the employer’s managerial right and the (sometimes unilateral-damaging) change in the employee’s working conditions.

     

    The Managerial Right of the Employer

    Law 5053/2023 incorporated into the national legal order the 2019/1152/EU Directive on transparent and predictable working conditions in the EU. The need to define working conditions is indeed necessary and ensures the interests of both the employee and the employer. However, in a steady legal relationship, as is the employment relationship, the detailed and unequivocal definition of the terms of employment in the individual contract is not at all realistic. Clearly, not desirable either – at least from the business’ side.

    The specification of working conditions (should) take place through instructions from the employer to the employee during the employment relationship. Practically, through the exercise of the former’s managerial right, which is transformative in nature. This exercise, however, in order to be legal, should be subject to specific conditions.

    Content of the Managerial Right

    As is consistently accepted by jurisprudence, “the employer, exercising their managerial right, according to article 652 of the Civil Code, has the authority to determine the content of the employee’s obligation to provide work by determining the conditions of its provision, the place, the time and manner, if these terms have not been determined by legal rules or by the employment contract. In other words, they have, as the manager of the entity, the authority to organize and manage their business based on the criteria they consider to be the most effective for it” (ind.: 906/2023 Supreme Court, NOMOS legal database).

    Limits & Limitations of the Managerial Right

    Therefore, the exercise of the managerial right (must) take place within specific limits and restrictions (ind.: 1248/1993 Supreme Court, NOMOS legal database). It must not, in any case, contradict the sources of formation of working conditions that have a regulatory nature (: law, Collective Work Agreements, arbitration decisions, labor regulation). Also, with the provisions of the individual employment contract. In fact, the more the last (: individual employment contract) specifies the terms of employment, the more (unfortunately for the employer) the managerial right is limited. Whereas, the broader the working conditions become (within tolerable limits, always), the more expanded (fortunately for the employer) the limits of the managerial right become. At the same time, the employer can expand, explicitly through contractual clauses, the limits of the managerial right.

    In those cases, e.g., where the employment contract describes in detail the provision of work, the limits of exercising the managerial right in terms of the type of work due are extremely narrow. Conversely, the contract may mention the employee’s specialty/position and its subject, without a detailed description of their duties. Or, even better for the employer, to have reserved in their favor, through a contractual clause, the ability to assign, at their discretion, the employee to perform “inferior” tasks. Therefore, the escalation in the expansion of the limits of the managerial right in terms of the type of work due becomes clear.

    The exercise, however, (also) of the managerial right is subject to an abuse control of article 281 of the Civil Code. It cannot, in other words, exceed the limits imposed by good faith or morals or the social or economic purpose of the right.

    More specifically, the unilateral determination of working conditions attempted by the employer based on their managerial right must serve their purposes: the optimal utilization of work and the most convenient organization of the business. The unilateral determination of the provision of work, is a possibility that does not aim at the realization of the specific purposes but other, unrelated, pursuits of the employer. As such they could be the satisfaction of motives, reprehensible (also) by the legal order (eg empathy towards the employee). In this case, there is no utilization, but abuse of the managerial right. And this, because good faith obliges the bearer of the right to take into account, during its exercise and to the extent required by the circumstances, the justified interests and justified expectations of the other party (ind.: 1326/2017 Supreme Court, Nomos Legal Database).

    As long as any changes to the working conditions on the part of the employer constitute a legal exercise of the managerial right, they are not only tolerable but also permissible. More precisely, the employer acts within the contractual terms and it is not, literally, a change in the terms of employment. The employee, therefore, undertakes to follow the relevant instructions of the employer and to provide, based on them, their services.

    An issue, however, arises in those cases in which the employer exercises their managerial right in excess of its limits.

     

    Unilateral Change of Employment Terms

    In the event that the employer exceeds the limits of the exercise of managerial right, the employee is not obliged, according to the jurisprudence, to follow their instructions. Any change, therefore, of the working conditions on the part of the employer, by abuse of the managerial right or, similarly, in a manner contrary to the aforementioned sources of formation of the employment relationship, provides the employee, disjunctively, with the following possibilities:

    (a) To accept the change. In this case, a new employment contract is concluded, amending the original one. This will prove to be valid as long as it does not contradict a prohibitive provision of the law or the principles of morality. The acceptance may be express (written or oral) or be implied (eg through the employee’s provision of work on the basis of the new terms of employment – unconditionally).

    (b) To consider the employment relationship as terminated (for an open-ended contract) or to terminate (for a fixed-term contract).

    In particular, in the event of a change in the working conditions by the employer in breach of the contract or in excess of the limits of the managerial right, the employee is entitled:

    In the case of an open-ended contract, to consider the unilateral change as a harmful and disorderly termination of the employment contract by the employer. [Let us note here that any change in working conditions which causes, either directly or indirectly, material and/or moral damage to the employee is considered harmful (1426/2004 Supreme Court, NOMOS Legal Database). In fact, in the case of the employee leaving their job, they are entitled to demand the payment of the legal severance pay (art. 7 Law 2112/1920).

    In the case of a fixed-term contract, to terminate the employment contract and claim compensation (according to article 673 of the Civil Code). [This, in light of the fact that the unilateral harmful change constitutes an important reason for the early termination of the contract (art. 672 Civil Code)].

    (c) To adhere to the contractual conditions, offering its services according to the conditions before the change. [In this case, if the employer does not accept the services of the employee, they become overdue regarding the acceptance of the work and owes overtime wages (656 Civil Code). The employee has the right, of course, to provide the new job while expressing, at the same time, their opposition; in this case, a parallel appeal before the competent court is necessary, with a request that the employer be obliged to employ them in accordance with the conditions in place before the change].

     

    Unilateral Prejudicial Change in Terms of Employment vs Abusive Exercise of Managerial Right

    We must stress that in the case of a unilateral harmful change to the terms of the contract, the employer modifies, without the employee’s consent, these terms, without the relative freedom granted to them by the contract or the law. On the contrary, in the case of the abusive exercise of the managerial right, the unilateral change takes place in accordance with the terms of the contract, however, in excess of the limits imposed by good faith, good morals, the social or economic purpose of the relevant right.

     

    Notice of Terms vs Employment Contract

    The labor legislation (of course also the above-recent labor law) aims – by disclosing the essential and basic terms – to ensure transparent and predictable terms of the work. Beyond the requirements set (also) by the new law, however, the need for adaptability of working conditions to the changing conditions of the permanent employment contract remains. More precisely: It becomes necessary! With express provisions, in fact, in the employment contract, which will provide, in a lawful manner, the possibility of changes in the employment relationship – without the risk of being evaluated as harmful. From the employment contract, after all, derives (also) the scope of the content of the managerial right. A content, which can ensure the necessary flexibility of the working relationship, without affecting the employee’s rights. The individual employment contract, therefore, is reduced to a necessary lever to ensure the functionality of the employment relationship but also, sometimes, the development and survival of the company itself.

     

    We have repeatedly examined, in the context of our articles, the value and importance (especially for the company) of the existence of a dependent labor contract against the simple disclosure of the essential (and still unknown basic) working conditions of its employees. Then, in fact, and from the recent labor law, the (obvious) necessity of written (and tailor made) employment contracts. If there are no such contracts in place, businesses are at great risks. In any case: the risks of characterizing a unilateral change in working conditions as harmful can be drastically reduced.-

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (November 5th, 2023).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Disclosure of the Terms of the Employment Contract: Issues

    Disclosure of the Terms of the Employment Contract: Issues

    We examined, in our previous article, the essential terms of the employment contract that the employer must communicate to their employees. Also their content. We will be looking into, in the present article, the manner and time of said disclosure as well as the multiple, relevant, concerns.

     

    Method of Update

    Employers are obliged to provide employees with all the information as defined in the law (: art. 70 Presidential Decree no. 80/2022) and in the above-mentioned article (as well as additional information – of articles 72 and 73 – in in the case of work provided abroad.

    The written information of the employees takes place (§1 of article 71 Presidential Decree no. 80/2022 – as amended by art. 5 of law 5053/2023, which incorporated articles 3 and 5 of Directive 2019/1152/EU): (a) by delivery of a tangible form or (b) in electronic form. In the latter case (provided for the first time by Law 5053/2023), it is assumed that the employee can access the relevant information, store and print it. Also, the preservation, by the employer, of the receipt of their dispatch or receipt.

    As, further, it is explicitly defined (§4), the employer informs the employee of the provisions of the labor legislation, which are applicable and determine the minimum terms of pay and work. Said notification takes place free of charge, in a clear, transparent, detailed and easily accessible way from a distance, through printed or electronic form, including through existing online portals (at its simplest: online).

     

    Update Time

    Law 5053/2023 also brought about changes in terms of the time within which the employer is obliged to provide the above information. In particular, a shorter period of information for the employee from the employer is foreseen, in relation to the existing regime. However, at the same time, differentiation is introduced in the update deadlines depending on the type of essential terms. The purpose of the new regulation is to inform the employee of the “basic” information as soon as possible (see in this regard, Memorandum of law 5053/2023 on art. 5).

    In particular, under the previous regime, the employee was informed within two (2) months, at the latest, from the start of work. It was also foreseen that for those already employed, the relevant information would take place, similarly, within two (2) months from the entry into force of the relevant Section of the Presidential Decree to which the corresponding regulation was subject.

    Based on the new regulation, there is no obligation to inform existing employees. As far as new employees are concerned, however, the (new) deadlines become shorter but also more complicated. In more detail:

    (a) Within one week from the start of the employment contract, the employer must ensure that their employee is informed, in printed or electronic form, regarding:

    The  details of the identities of the contracting parties,

    The place of work, the company headquarters or the employer’s residence.

    The position or specialty of the employee, their rank, the category or – as it is now further defined – the branch of their employment as well as the subject of their work.

    The date of commencement of the contract or employment relationship,

    The expiry date or the expected duration of the employment contract – if it is for a certain period of time.

    The duration and conditions of the trial period – if such has been agreed.

    All types of remuneration to which the employee is entitled, as well as the periodicity and manner of their payment.

    The duration of the employee’s normal daily or weekly working hours, the arrangements for overtime or additional work and their remuneration as well as the arrangements for shift changes – in the event that the work schedule is entirely (or mostly) unpredictable.

    (b) Within one month from the start of the employment contract, the employer must ensure that his employee is informed, in printed or electronic form, regarding:

    The details of the indirect employer, if it is a job provided through a temporary employment agency.

    Any training provided by the employer.

    The duration of the paid leave to which the employee is entitled as well as the manner and time of its granting.

    The procedure followed by the employer and the employee in case of termination of the contract or the employment relationship; in particular regarding the obligation to give written notice. Also, about the notice periods and the amount of the compensation. Finally, for the (if necessary) existence of a great reason.

    The collective agreement that defines the minimum wage and working conditions of the employee as well as the collective bodies that co-sign it.

    The social security bodies in which the employee is insured as well as any other benefit from the employer related to social security.

     

    The Basic Terms of Employment

    Their disclosure and management

    So far we have analyzed the essential terms of employment and the obligations arising from the law. The law, however, also makes a special (rather surprising) reference to the basic terms of employment (: art. 21 of Presidential Decree no. 5053/2023-“Posting of basic terms of employment and individual employment contract in the “ERGANI II” Information System – Electronic signature – Model of Basic Terms of Employment and Individual Employment Contract”).

    The provision in question provides that every employer, who hires an employee with a dependent labor relationship under private law, is obliged to post electronically on the ERGANI II the so-called “basic conditions” of the employee’s work. Most importantly: before they start providing their work.

    It should be noted here that the written individual employment contract, if such exists, is required (in particular: §1, para. a) to be posted within the deadlines set by the relevant legislation (: article 71 of Presidential Decree no. 80/2023 – safer: within a week of the start of the work).

    For the validity of the aforementioned basic terms of employment as well as for the posting of the individual employment contract, their co-signature by the employee is required. The signature can be provided either physically or digitally. Specifically, by hand or with an approved electronic signature or with a digital certificate (via gov.gr-Single Digital Portal) or with acceptance by the employee through the ” MyErgani ” information system (§1, para. b).

    Any change in the basic terms of employment must be posted, similarly, electronically on ERGANI II (§2).

    The purpose of the above procedure is to notify the employee and their consent to the basic conditions of their work through a simplified and easy-to-use procedure (see, in this regard, Memorandum to law 5053/2023 on art. 5).

    But what are the “key terms”?

    From what is mentioned above, it follows that the recent labor law not only makes extensive reference to the “basic conditions” of the employment contract but also demands the fulfillment of specific obligations regarding their management.

    But what are the “basic terms” of the employment contract? And in what, do they differ from the essential terms, with which it extensively deals?

    The relevant concern becomes more intense when the law reserves a special treatment for them. The moment it claims, especially for them, their co-signature / posting / delivery before the start of the new hire’s work. While, on the other hand, the corresponding deadlines for the essential terms are, as the case may be, one (1) week or one (1) month from the start of work.

    Unfortunately, the existing legislation does not provide us with any answer. And this despite the fact that (according to art. 21 §3), in the ERGANI II a “Basic Terms of Employment” template as well as an “Individual Employment Contract” template are shown. Although the present tense is used, these templates are not yet available.

    Accessing them will, perhaps, make us wiser in regard to this, important enough, concept of key terms.

     

    And the (ever present) bureaucracy…

    We have already established that informing employees regarding their employment contract will take place, according to the law, in three stages: (a) for its basic terms before the start of work, (b) for some of the essential terms within one week of commencement of work and (c) for other material terms within one month of commencement of work. And if, of course, one recruitment per year is carried out by the employer, all of this could simply be characterized as unnecessary bureaucracy. But if we are talking about more recruitments, it would probably be difficult for someone to be in the position of being liable for the fulfillment of the relevant obligations of the company. And if we think about the cases where the recruitments amount to dozens, then one could easily talk about insanity and about lost hours/days/weeks. Also: for significant business costs that could easily be avoided.

     

    No one would be able to overlook the value of informing employees (and of course the competent authorities) regarding their essential working conditions. But the matter is complicated by the volume, manner and time of the information that should be communicated to them. Especially since some of the information in question is currently unknown (:basic terms). The specific conditions acquire, in fact, a special importance and value as they will be invoked, among other things, in cases of unilateral harmful change of the working conditions. However, this particularly important case will be discussed in our next article.-

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (October 29th, 2023).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Disclosure & Content of Essential Terms of Employment Contract

    Disclosure & Content of Essential Terms of Employment Contract

    It is a common phenomenon that in practice (both by entrepreneurs and by HR managers) the document disclosing the individual terms of employment is confused with the written employment contract. However, these two documents are of particular importance and value should not be confused. Much more: the value and importance of existence of a dependent labor contract. In the present article we will examine the document of the disclosure of the individual terms of employment. In particular, the changes brought about in its regulatory framework by the recent labor law (: law 5053/2023).

     

    The Distinction From The Written Employment Contract

    However, before examining the differences brought about by the recent law in the disclosure of individual terms of employment, it would be useful to recall some basic distinctions between it (the Notice) and the Employment Contract.

    Document Type & Content of Employment Contract

    The written form is not, first of all, a condition for the validity of the employment contract. An exception, however, to the rule of non-necessity of the written form applies in two cases. In particular, when the written form: either (i) is provided as necessary (component) by a special provision of the law (e.g. in the case of part-time contracts – art. 38 Law 1892/1990) or (ii) is chosen by the parties involved (employee-employer) as necessary.

    Of course, from the point of view of expediency and assurance of the contracting parties (especially the business), the existence (tailor made) of a written dependent contract proves to be absolutely necessary. This, because the written contract regulates (but it is also appropriate and mandatory to regulate) – in a way, in fact, easily demonstrable and binding the set of rules that (it would be good to) govern the employment relationship. Not only essential-basic terms.

    Obligatoriness

    The employment contract is therefore not binding on any of the contracting parties (employer & employee). On the contrary, the document notifying the terms of employment is characterized, in advance, by its obligation. It is noteworthy, in fact, that it is an obligation of the employer. And its purpose, primarily, is to inform the employee about the conditions of their employment.

    The said obligation of the employer derived, until recently, from the Presidential Decree no. 156/1994. However, Law 5053/2023, incorporating the 2019/1152/EU Directive, repealed, from its entry into force (i.e., on 26.09.2023), the aforementioned Presidential Decree. The said, recent, labor law reformed: on the one hand, the content and conditions of the relevant document notifying the working conditions, and on the other hand, the manner and the time within which the employer is obliged to provide relevant information to the employee.

     

    Essential Terms

    Under the current regime, in compliance with Article 4 of the above Directive, the essential terms of the contract or employment relationship, which employers are obliged to communicate to employees, were enriched by the introduction of new elements, in relation to the existing regime (Memorandum to Law 5053/2023 on Article 6).

    Specifically new (beyond those provided for in Presidential Decree no. 156/1994), cases of providing information were introduced (: art. 6 of law 5053/2023 which replaced article 70 of the Individual Labor Law Code). Among other things, information about the workplace and the procedure for terminating the contract or employment relationship with termination, the duration and conditions of the trial period of employment, the right to training as well as the program for organizing working time – when this is in full or as mostly unpredictable.

    In particular, the essential terms now include:

    (a) The identity details of the contracting parties,

    (b) The place of providing the work (including the case of providing work in various places or, in case the place is not specified by the employer, the possibility of choosing it by the employee). Also, the company’s headquarters or the employer’s residence.

    (c) The position or specialty of the employee, their grade, the category or – as will now be further defined – the branch of their employment as well as the subject of their work.

    (d) The date of commencement of the contract or employment relationship.

    (e) The end date or its intended duration – if it is a fixed-term employment relationship.

    (f) The details of the indirect employer, if it is a job provided through a temporary employment agency.

    (g) The duration and terms of the probationary period – if such has been agreed (given the possibility of foreseeing, under the recent arrangements, a six-month probationary period).

    (h) The training provided by the employer – if any such provision exists for the employee.

    (i) The duration of the paid leave to which the employee is entitled as well as the manner and time of its granting.

    (j) The procedure followed by the employer and the employee in case of termination of the contract or the employment relationship, in accordance with the applicable legislation; in particular the obligation to give written notice to the other party. Also, as under the previous regime, the notice periods and the determination of the amount of the compensation. Finally, the existence of a great reason, if such is required for the termination.

    (k) All types of remuneration to which the employee is entitled, as well as the periodicity and manner of their payment.

    (l) The duration of the employee’s normal daily or weekly employment, the arrangements for overtime or overwork and their pay and arrangements regarding shift changes. (And all this under the condition that their program is entirely or mostly predictable).

    (m) When, however, the working time schedule is entirely (or mostly) unpredictable:

    (i) the principle that working hours are variable, the agreed number of guaranteed paid hours as well as the remuneration paid for work performed in addition to or beyond those guaranteed paid hours;

    (ii) the reference hours and days, as their determination is prescribed in the law (art. 69 §6 para. b’ Presidential Decree no. 80/2022).

    (iii) the minimum period within which the employer must notify the employee before assigning work and the deadline within which (according to Law: article 182 of Presidential Decree no. 80/2022) the employer has the ability to cancel the assignment.

    (n) The collective agreement that defines the minimum remuneration and working conditions of the employee as well as the collective bodies that co-sign it.

    (o) The social security institutions in which the employee is insured (currently: EFKA-exclusively) as well as any other benefit from the employer related to social security.

    As expressly defined, information on the above elements of cases (g), (h), (i), (j), (k), (l) and (j) can also take place by referring to the applicable provisions of the labor legislation (art. 70 §2 Presidential Decree no. 80/2022).

    While, further, it is defined that when the employee is employed through a temporary employment agency or with a loan agreement, in addition to the above-mentioned information obligations of the direct employer that result, the indirect employer has the obligation to notify them of the details of par. (ib) and (ic) (: art. 70 §3 Presidential Decree no. 80 /2022).

     

    A written employment contract is valuable (although not legally required). The written notification of the essential terms of the employment contract is, however, mandatory and legally binding for the employer. The content of the essential terms which such disclosure should include is interesting but also extremely extensive. However, the differentiation of the essential terms from the (not defined by law) basic terms of the employment contract is of interest. Also the (excessively) complicated way and time of their notification to the employees. About them, however, see our next article.-

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (October 22nd, 2023).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Parallel employment

    Parallel employment

    With the recent labor law (: law 5053/2023), our country incorporated, albeit late, the Directive (:2019/1152/EU) on transparent and predictable working conditions of the European Union. Even before the draft law was put into public consultation – with only its relevant announcement – there was an intense exchange of opinions and the formulation of strong objections; among other things, regarding the possibility of parallel employment. Objections were raised and distortions were subsequently identified, both on the draft law and on the ultimately passed relevant regulation. What is impressive is that they come from both the employees and the employers. Why is that?

     

    Regime that prevailed

    Legislative Regulation

    According to the previous law (: art. 16 §3, ed. c’ and d’ Presidential Decree 27/1932) the employer was not allowed to employ within the same day an employee who worked in another factory or in another place of work for the legal daily working time. They could only employ workers who worked on the same day for other employers, for fewer hours than those determined by the above-mentioned Presidential Decree; however, only for the remaining time until the completion of the legal upper limit of daily work.

    There arose, therefore, an explicit prohibition of the employment of any employee within the same 24 hours for the same or a different employer, after providing work throughout the legal maximum time of daily employment. As accepted by the jurisprudence, the specific regulation was intended to limit the strain on the employee’s physical forces and to protect his free time and his personal life. Therefore, any employment contract, which provided for the provision of work beyond the legal hours, was considered invalid, as contrary to a prohibitive provision of the law. In fact, the relative nullity was characterized as absolute and was therefore examined ex officio (680/2011 AP, TNP LAW).

    Any violation of this obligation by the employer will result in the imposition of an administrative fine, in the event of an inspection by the Labor Inspectorate (2684/2018 STE, TNP LAW).

    Clauses Prohibiting Concurrent Employment

    Outside the context of the above time limitation, the employee was, in principle, free, during his employment relationship, to work for another employer at the same time. However, it was not uncommon to find in employment contracts (contractual) clauses prohibiting parallel employment during the employment relationship.

    The prohibition clauses in question differed in their scope. It was possible to prohibit any parallel employment of the employee regardless of its object. Also mCivil Codee the ability to provide it dependent on the prior consent of the employer. Sometimes, in fact, it was possible that they only concerned parallel employment that affected the legitimate interest of the employer (e.g. parallel employment in a competing company).

    The theory criticized the relevant clauses in those cases where the scope of their prohibition infringed on the professional freedom of the employee. Clauses prohibiting any parallel employment (it was claimed) should be considered invalid. Alternative clauses, which, although requiring prior permission from the employer for the parallel employment, did not foresee a relative obligation of the employer to consent – as long as the parallel employment did not affect their justified interests.

    The above clauses should, according to part of the theory, be considered invalid due to “immorality” as they cause an excessive commitment of the professional freedom of the employee (art. 178 and 179 Civil Code). Otherwise, and since it was accepted that the relevant clauses could not be characterized as “immoral”, their potential abuse should be investigated (281 Civil Code). In the latter case, the relevant clauses should be considered invalid as abusive if there was a disproportion in the distribution of contractual rights and obligations.

    However, jurisprudence has hesitantly considered any clauses prohibiting parallel employment to be invalid. On the contrary, given the lack of specific legislative provision for the invalidity of relevant clauses, the jurisprudence relied on the contractual freedom of the parties in order to judge their validity. In fact, the acceptance of their validity took place even in cases of generalized restriction (e.g., when the prohibition of parallel employment concerned employment with any other employer, regardless of the object of their activity – see ind.: 1992/1992, Legal Database QUALEX).

     

    Directive 2019/1152/EU

    The Directive incorporated into national law (with the recent law 5053/2023) includes – among other things – a provision for parallel employment. It is specifically established (:no. 9 §§1 & 2) the obligation of the member states to ensure that the employer is not going to prohibit an employee from working for other employers, outside of the working hours determined by the first (employer). Also, not to reserve unfavorable treatment to an employee for this reason.

    At the same time, the Directive in question provides the member states with the possibility to set conditions for the use of the restrictions on incompatibility by employers for objective reasons. Examples include health and safety, the protection of business confidentiality, the integrity of the public sector or the avoidance of conflict of interest.

     

    The current provisions

    …On Parallel Employment

    The existing legislative regime prohibited parallel employment within the same day for the same or a different employer – as long as work was previously provided throughout the legal maximum daily employment time. It was changed by the recent labor law, which incorporated the corresponding provision of the above Directive.

    It amended (: art. 9, law 5053/2023), specifically, article 189 of presidential decree no. 80/2022 and the codified -mentioned above- article 16 of presidential decree no. 27/1932. In particular, the above sec. c and d of §3 of article 16 were repealed. It was expressly provided, among other things, that parallel employment for another employer is permissible, subject to the restrictions that apply to the daily and weekly work and rest time of employees (in particular, articles 162 to 179 of presidential decree no.  80/2022). The relevant reservation/clarification is, of course, for the safety of the employees and the removal of any doubt (see Memorandum to law 5053/2023, on art. 9). Therefore, the employee is now legally entitled to be employed by a different employer beyond the maximum daily working time, subject to compliance with the working time limits. In fact, in case of multiple insurance or multiple payment of contributions, the monthly pensionable earnings of the employee are increased, respectively (according to paragraph a of §2 of article 28 of law 4387/2016).

    Similarly, with the aim of protecting employees in case they choose to take advantage of the possibility of parallel employment, it is expressly provided that: “… any unfavorable treatment of the employee by the employer due to the provision of work to other employers is prohibited”.

    In order to avoid abuses at the expense of employees, it is clarified (Memorandum to law 5053/2023 on article 9) that “…to avoid abusive application, parallel employment is not understood between affiliated companies, as defined by the applicable legislation.”.

    …. On the Clauses Prohibiting Parallel Employment

    Furthermore, the above regulation (: art. 9, law 5053/2023) expressly provides that “it is not allowed to conclude agreements or set clauses by which the employee is prohibited from providing work to other employers outside the working hours agreed with a specific employer, unless justified by objective reasons such as health and safety, protection of business confidentiality, working for competing businesses or avoiding conflicts of interest. Agreements or clauses prohibiting the provision of work to other employers are void.”.

    The above regulation regarding the clauses prohibiting parallel employment incorporates the Directive almost to the letter and seems to be drawn up with the above-mentioned position of the theory. The relevant clauses are, in principle, void. There is now, therefore, a special provision of the law, which directly establishes the invalidity of the relevant clauses. And this without requiring recourse to the general provisions of Articles 178 and 179 or 281 of the Civil Code and invoking the assistance of their conditions.

    However, such clauses may exceptionally become permissible if they are justified by objective reasons. For example: the health and safety of the employee (reasonably, one would expect a full-time employment contract, e.g., driver, to have a relevant clause prohibiting parallel employment). Also for reasons linked to the employer’s justified and, clearly, worthy of protection, professional interests. Such, indicatively, could be the protection of business confidentiality, the prevention of employment in businesses competing with the employer or the avoidance of conflict of interest between employee and employer.

    Pending Ministerial Decision

    The procedure for implementing parallel employment is expected to be clarified by a Ministerial Decision, the issuance and publication of which is still pending. Specifically, it is foreseen that by decision of the Minister of Labor and Social Security, every necessary issue regarding informing the employer about the existence of parallel employment will be dealt with, as well as any more special/additional issue arising from the implementation of the new regulation.

     

    The Problems

    While waiting, however, for the immediately above-mentioned Ministerial Decision, various concerns are raised (both for employees and employers) regarding the implementation of the institution of parallel employment. In more detail:

    …For Employees

    As already mentioned, the pre-existing prohibition of the employee’s employment beyond the legal maximum daily working time was intended to prevent straining their physical capabilities. In the protection, also, of their free time and personal life. The present regulation may, according to the opponents, call into question their security.

    It could, further, be argued (in exaggeration) that any employment of an employee by more than one employer is likely to deprive them of the (extraordinary) salary increases that they would be entitled to receive in the event of their employment – in excess of the time limits work for the same employer.

    However, the most important (and more tangible) risk seems to be the possible complete circumvention of the institution and regulations for parallel employment, in the case of employment of an employee (without payment of increments) in a second company (not connected-by law) of the same employer, which will provide its services to the first (e.g. outsourcing).

    …For The Employer

    The eventual employment of the employee with a different employer is possible to prevent (sometimes for reasons of objective impossibility) their overtime and (mandatory for the employee) overwork – even if this became absolutely necessary for the first employer.

    Further, the possibility of application of the working time arrangement system, calls into question the possibility of its coexistence with any parallel employment of an employee.

    Finally, with the (as mentioned above) new regulation, it is not specified which of the most employers will bear the responsibility in case of violation of the daily and weekly employment and rest time limits of the employees. Nor is it specified which employment will be considered, e.g., main, with the result that any violation of said time limits will not establish the responsibility of the “main” employer.

     

    The institutionalization of, as stated above, the possibility of parallel employment of an employee for several employers was an obligation arising from the above-mentioned European Directive. We will not doubt, of course, the good intentions of the legislator in dealing with an old (and not unusual in Greek reality) problem. It managed, however, to create strong concerns – among employees and businesses. Some of them are evaluated as absolutely reasonable; neither are they of minor importance nor, would it be possible to characterize all of them as theoretical. We look forward, for the time being, to their successful tackling by the expected issuance of the relevant Ministerial Decision.-

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (October 15th, 2023).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Salary and Daily Wage: Three years and not only…

    Salary and Daily Wage: Three years and not only…

    From the prime minister’s lips – but also those of the then Minister of National Economy – we had heard, before the elections, that the past four years worked in favor of businesses and the next four years (: the current ones will work) in favor of employees. Regardless of the evaluation, each of us, of the specific statements and choices, we already meet a first sample of writing with the passing of the recent labor law (: law 5053/2023). The occasion was, indeed, opportune: During the long economic crisis we encountered significant pressures (but also reductions) in wages and salaries through (also) legislative interventions. The latter concerned, on the one hand, the determination of their amount and, on the other hand, their increments. Indicative through the suspension of the increases resulting from the passage of a certain working time (e.g. a three-year allowance). The recent labor law (law 5053/2023) abolished, among other things, the above suspension. This is article is about that.

     

    Suspension of Increases With the Passage of Working Time

    Already, from 14.2.2012, the validity of provisions of laws, regulatory acts, collective agreements or arbitration decisions, which provide for increases in wages or daily wages, was suspended (: Act of the Ministerial Council no. 6/2012-art. 4). In the same context, the application of the increases related to seniority was also suspended, with the only condition that a specific working time has passed. These were: the working time allowance, the multi-year allowance, the five-year allowance and the three-year allowance. Based on the specific legislative provision, the aforementioned suspension would last until the unemployment rate is below 10%. For the implementation of the relevant regulation, it was defined that the average of the national unemployment rate of the last four quarters, as reflected in the Labor Force Survey of the Hellenic Statistical Authority, will be taken into account.

    …Especially Towards the Three Years

    With the Approval of the 2013-2016 Medium-Term Fiscal Strategy Framework (law. 4093/2012), in the midst of the economic crisis, the minimum (and sub-minimum) salary was determined (€586.08 for employees over 25 years old and €510.95 for workers under 25). Issues of the three years were also regulated. Regarding the latter and:

    (a) with regard to workers over 25 years of age it was provided that:

    the minimum salary of employees is increased by 10% for each three years of service and up to a maximum of three years (increase, i.e., up to 30% for nine years of service or more);

    the minimum daily wage of artisans is increased by a percentage of 5% for each three years of service and up to a maximum of six three years (increase, i.e., up to 30% for eighteen years or more of service).

    (a) with regard to workers under the age of 25 it was provided that:

    the minimum salary of employees is increased by 10% for three years of service and for three years of service or more.

    the minimum daily wage of artisans is increased by 5% for each three years of service and up to two three years at most (increase, i.e., up to 10% for six years or more of service).

    The specific legislation provided, however, that the three-year allowance will be paid to those employees who had completed a corresponding period of service by 14.2.2012. For previous service, on the contrary, which would be completed after 14.2.2012, the increase of the minimum wage and daily wage was suspended.

     

    Abolition of the Suspension of Increases

    The recent labor law (law 5053/2023-art. 33) significantly changes the above data. It specifically abolishes (art. 33 §8), from 01.01.2024, the above-mentioned suspension (of no. 4 of PYS 6/2012) of salary and daily wage increases; among them and those mentioned in seniority – with the only condition after a certain working time.

    In this context, from 01.01.2024, the validity of provisions of laws, regulatory acts, collective agreements or arbitration decisions, which provide for increases in wages or daily wages, is reinstated. The validity of those relating to seniority is also restored, with the only condition being the passage of a specific working time; among these are working time allowances, multi-year, five-year and three-year allowances (art. 33 §1). It is noteworthy, in fact, that all this takes place before the fulfillment of the heresy for the formation of the national unemployment rate of the last four quarters at a rate below 10% (as this is reflected in the Labor Force Survey of EL.STAT. – see related Explanatory Report n. 5053/2023). Based, in fact, on the currently existing rate of unemployment reduction, it was estimated that the aforementioned lifting of the suspension (and reinstatement of the above regulations) would take place in 2025.

     

    Purpose Of Lifting The Suspension

    The above regulation is expected (Explanatory Report n. 5053/2023) to boost the income of employees and partially address the issue of persistent inflationary pressures, which weaken their purchasing power. Moreover, the increase in workers’ income is compatible with the convergence of the wage level with that of the other member states of the European Union. Also, with the increase in the level of the average salary in our country.

     

    How to Apply the Lifting of the Suspension

    Completion of employees’ seniority is distinguished in terms of its implementation as follows (art. 33 §2):

    (a) For employees who were hired (and started working) before 14.02.2012, their seniority continues to be completed from 01.01.2024.

    (b) For employees hired after 14.02.2012, their seniority starts to be completed after 01.01.2024.

    The period of time between 02.14.2012 and 01.01.2024 is considered, for the purposes of this regulation, as non-existent.

    In order to avoid misunderstandings, the law explicitly clarifies (art. 33 §5), that for the period from 14.02.2012 to 31.12.2023 no claim is made, nor are salary or daily wage increases due – including those related to seniority – with the sole condition that a specific working time has passed. Also, it does not allow the calculation of seniority completed from February the 14th 2012 to December the 31st 2023.

    …Especially Regarding the Three Years

    As, in particular, it is provided (art. 33 §3), for the increase due to seniority to those employees who are paid the minimum statutory salary or daily wage, the time of seniority is recognized as the time of a dependent contract or employment relationship, which has been spent with any employer and in any specialty before 14.02.2012 and after 01.01.2024. The specific, due to seniority, increase (given also the abolition, already, from 2019, of the minimum wage) is determined as follows:

    (a) For employees at a rate of 10% for each three years of service and up to a maximum of three three-year terms (increase, i.e., up to 30% for nine years of service);

    (b) For craftsmen at a rate of 5% for each three years of service and up to six three-year terms (increase, i.e., up to 30% for eighteen years or more of service).

    Based on the above data as well as the recent increase in the minimum wage, the salary that an employee will receive, from now on, after the above suspension is lifted, is as follows: (i) at €780 – as long as they have not completed three years, (ii) at €858 -if they complete, with the above calculation, three years, (iii) at €936 -if they complete two three-year terms and (iv) €1,014 -if they complete three three-year terms. Further adjustment will occur if, of course, a new increase in the minimum wage takes place.

     

    Set-off with the highest legal wages

    The payment of the above salary and daily wage increases, which arise based on the passage of working time, depends on whether the employees receive higher wages than the legal ones.

    In the case, i.e., when the paid regular wages of an employee are higher than the legal ones, the relative increases are set off with the difference that arises between the paid and legal ones. By paying the difference in question, the above increases are paid in full or in part (art. 33 §4). Therefore, only the remaining amount is paid.

     

    The Impermanence Of The Lift

    The legislation to lift the suspension of increases based on the passage of working time is not permanent. The continuation of the payment of the relevant increases depends, directly, on the formation of the unemployment rates. Specifically, it is foreseen that from 01.01.2027, if the unemployment rate exceeds 10% – and until it reaches a rate below 10% – the relevant increases will be automatically suspended (as described in art. 33 §1 & art. 33 §6). For the implementation of the relevant forecast, the average of the national unemployment rate of the last four quarters, as reflected in the Labor Force Survey of the Hellenic Statistical Authority, will be taken into account.

     

    We are used to hearing the above regulations under the general heading ” three-year unfreeze”. They aim at the (even partial) restoration of workers’ income. In restoring, also, favorable for those arrangements to the pre-crisis levels. The (alleged) defenders of workers’ rights complain, on the one hand, about the lack of regulations and the limited restoration of their incomes. Businesses, on the other hand, treat them with skepticism considering their total costs, the related burdens on their products and services as well as, of course, their competitiveness. The ruling majority chose, however, the middle path.

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (October 8th, 2023).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Consultant-Manager SA

    Consultant-Manager SA

    In a previous article, we examined the important role of the Board of Directors of an SA. However, the legislator of Law 4548/2018 is not limited to the provision of an administrative body which by definition will be composed of more than one member. On the contrary, they introduced (: art. 115), the institution of the Single-Member Administrative Body (or, otherwise, the so-called “Consultant-Manager” – to distinguish it from the administrator of other corporate types). About this topic, the present article.

     

    Purpose of Regulation: Advantages & Disadvantages

    The innovation of the institution of the single-member administrative body aims to cover a previous gap, highlighted by the business and economic reality.

    It is not uncommon to choose the SA corporate type, even if the business activity is very small or of a small scale. Its advantages, compared to Private Companies, for example, are obvious. However, under the regime of the previous Law 2190/1920, those who carried out business activity through small or very small businesses (especially family businesses with the aforementioned characteristics) and chose the SA corporate type faced significant problems: First, they often had to “recruit” people in order to complete the (at the minimum) three-member Board of Directors. And this, although in practice the administration was exercised by a single person, while the others played “…a simply decorative role” (see in this regard, memorandum to law 4548/2018 on art. 115). Consequently, they were burdened with additional costs and, not infrequently, with unnecessary delays in decision-making. At the same time, those who formally presented themselves as members of the Board of Directors were not unlikely to be exposed to responsibilities, without actually acting as board members with a decisive capacity.

    Taking into account the above, the legislator, on the occasion of the reform of the law on SAs, seized the opportunity and provided the possibility of a single-member body for small and very small SAs (although the existence of a multi-member board is better suited to the structure of SAs). Through the possibility of this specific institution, the legislator aims to reduce the operating costs of SAs, which, due to their size, do not justify the employment of more people in an administrative position. In addition, the possibility of electing an administrator-advisor simplifies – as will be explained below – the regulations to which the company is subject (see, in this regard, Memorandum to law 4548/2018 on art. 115). Moreover, decision-making by a single person is characterized by greater flexibility and speed.

    However, this feature is not without drawbacks. In particular, the delegation of management authority to a consultant-manager is likely to prove detrimental to corporate interests. This is because, in contrast to the collective Board of Directors, the consultant-manager is not accountable and is not supervised during the exercise of their duties (as would be the case with a multi-member Board of Directors). In addition, the consultant-manager is easier to manipulate by the shareholders, as a result of which, among other things, their independence is called into question. By extension, as a rule – in this particular case – the separation of responsibilities desired by the legislator between the bodies of the General Assembly and the Board of Directors does not exist. Finally, it is not excluded that the (external) image of the company will be negatively affected, for example towards prospective investors.

    Finally, it should be pointed out that the existence of a single-member administrative body does not necessarily mean the removal of the legal personality of the SA and its identification with its (only?) shareholder.

     

    Subjective Field of Application Conditions for Appointment of a Consultant-Manager

    The institution of the consultant-manager is not addressed, as mentioned above, to all, without exception, SAs. It concerns, on the contrary, “small” and “very small” SAs not listed on a regulated market (as deduced, by contrast, from the provision of art. 115 § 6). For the evaluation and classification of entities as “very small” and “small”, it is necessary to fulfill (at least two of) the criteria of Article 2 § §2 and 4 of Law 4308/2014. Specifically:

    “Very small entities” are those that “…at the date of their balance sheet do not exceed the limits of at least two of the following three criteria: a) Total assets: 350,000 euros. b) Net turnover: 700,000 euros. c) Average number of employees during the period: 10 people.’.

    Whereas, as “small entities”, those that “…at the date of their balance sheet do not exceed the limits of at least two of the following three criteria: a) Total assets: 4,000,000 euros. b) Net turnover: 8,000,000 euros. c) Average number of employees during the period: 50 people.’.

     

    Conditions of Existence of a Consultant-Manager

    In order to elect a Consultant-Manager, it is necessary to have a relevant statutory provision that allows it or, as the case may be, requires it (art. 115 § 1 para. a’). In practice, however, it usually constitutes, simply, an alternative (instead of, that is, the election of the Board of Directors). Therefore, the General Assembly will be competent to grant the power of administration, at its absolute discretion, and essentially, to “choose” between the two alternatives available to it.

    The appointment of more than one Consultant-Manager is not permitted. A board with two members is also still not be tolerated (see Petition Report n. 4548/2018 on art. 115).

    It should be noted, finally, that a consultant-administrator can be, exclusively, a natural person (art. 115 § 1 para. b’).

     

    Regulatory framework

    The legislator, in the provision of article 115 § 2, tried to define those regulations of law 4548/2018 that concern the consultant-manager by referring, for the rest, ” to the rules that apply to the board of directors, to the extent that they are compatible with the character of the consultant-manager, as a single-member body”.

    In the above context and given the differences presented by a single-member institution in relation to a multi-member one, it is necessary to examine which arrangements can be applied to both institutions. Clearly, issues of compatibility arise with regard to provisions relating to tenure, powers and authorities, remuneration and so on.

    Appointment/Election of Consultant-Manager & Exercise of Powers

    First of all, in terms of the method of appointment/election (and by extension the related defects) as well as the eligibility conditions of application, in general, what applies in the case of the Board of Directors. However, some differences are also found.

    In this context, given the one-person nature of the specific body, and although its emergence is possible: (a) either by its appointment, upon the establishment of the SA – directly from the statute (art. 78 § 2), (b) or following his election, during the time of operation of the SA, by the General Assembly (art. 78 § 1), it does not mean directly appointing him by the shareholder(s) (art. 79), nor any election based on lists (no. 80).

    It is desirable that the General Assembly has elected, at the same time, an alternate member (no. 81). And this is because, in case of loss of the relevant capacity of the consultant-manager (e.g. due to death, disability, etc.) and the non-existence or unwillingness of a substitute person, the company falls under the status of lack of management. Replacement or the continuation of the management and representation of the company by remaining members – as in the case of the multi-member Board of Directors (art. 82) – is not allowed. In the absence of a substitute body, the only way is to appeal to the court for the appointment of a temporary administration (:temporary administrator – art. 69 of the Civil Code) – unless an unsolicited and universal General Assembly intervenes to elect a new one.

    At the same time, given that the body does not act collectively, awarding of titles and offices is not possible. Where the law or statute refers to duties e.g. of the  , these concern the consultant-manager.

    Furthermore, as noted above, there is no possibility of appointing a legal entity to the position of consultant-manager. However, it is possible for the consultant-manager to delegate, pursuant to Article 87 § 1, the management and representation of the company to a third, substitute body, which may be a legal entity. Clearly, the consultant-administrator will bear the responsibility of overseeing the performance of the powers of the substitute body.

    Finally, regarding the (mentioned above) SAs subject to this regulation, the formation of an executive committee does not seem to be of any practical interest (art. 87 § 4).

    Decision Making

    Due to the one-member character of the body, the Consultant-Manager, of course, does not (co)decide. Therefore, there is no reference to issues of compliance or non-compliance with the -legal or statutory- procedure ( the body, etc.) which, after all, belongs to the Board of Directors.

    In the above context, it is excluded that questions of illegal, e.g., composition and, by extension, defectiveness of the decision taken by the one-person body, due to failure to reach the required quorum and majority, may arise.

    The infringement of the validity of the decision of the consultant-administrator can, in any case, be based on the general provisions of the Civil Code (due to incapacity, e.g. to legal action).

    An obligation to register in the SA minutes book exists only for those decisions, which either do not concern issues of current management or are registrable in the Business Registry These decisions (and only) are subject to a review of defectiveness, according to the legislator’s explicit reference to the proportional application of the provision of article 95 (art. 115 § 4).

    Conflict of Interest: Consultant-Administrator VS AE

    from the obligation of loyalty (art. 97 § 3) when exercising his powers. In fact, the latter must refrain, on the one hand, from actions that are contrary to the corporate interest. On the other hand, from making decisions on issues for which they (or the parties connected to them – art. 99 § 2) is in a situation of conflict of interest. In this case, exclusive, decisive competence of the General Assembly is established (art. 115 § 3 para. b’).

    Referral of the matter to the General Assembly is pointless in case the consultant also recommends the sole shareholder of the SA. After all, according to the monistic view, there is not even a conflict of interest in this case (so that it can be treated accordingly). It is therefore sufficient to comply with the written form (art. 101 §4).

    Obligation to Inform Shareholders

    The consultant-manager bears the obligation to inform the shareholders in the corresponding cases where a member of the Board of Directors has such an obligation towards, however, the other members. The consultant-manager must inform the shareholders individually, in compliance with the requirements of the principle of equal treatment or in the context of the General Assembly (art. 115 § 3).

    Manifestation of the said obligation is the direct information of the shareholders on, if any, assistance to the person of the obstacle which mandates the activation of the relevant provisions (art. 99 et seq.)

    Claims Against Consultant-Manager

    The raising of any claims by the SA against the consultant-manager becomes possible – in case of non-replacement – through, and in this case, the appointment of a special representative (no. 105).

     

    The choice of establishing a Single-Member Administrative Body/Consultant-Manager in the SA (instead of the Board) was a wise choice of the legislator who came to face a reality where single-shareholder (small or very small) SAs (or two, at most, shareholders) were looking for three persons for their board of directors. The choice ended up being, basically, forced for persons who, to a large extent, did not have the freedom of choice. The most important: persons who were unaware of their responsibilities, rights and obligations as members of the Board. Still, even today, the role of Consultant-Manager is not without responsibilities. Therefore, both the selection of the person and the latter’s exercise of powers should be done prudently.-

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (October 1st, 2023).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Speaking of hourly wages…

    Speaking of hourly wages…

    The salary was connected, at least until recently, with employees and the daily wage, respectively, with the craftsmen. The distinction between them used to be to the benefit of the former, throughout time. However, alongside the concept of salary and daily wage we encounter, in most cases, the concept of hourly wage. Are individual distinctions and use of individual concepts, institutions, values and calculations necessary? Do they exist, perhaps, for the benefit of businesses or employees? Do the relevant legislative regulations and ministerial decisions (especially those related to minimum wage limits) unnecessarily create serious “headaches” and problems for businesses and (justified) feelings of injustice for employees? And what would the abolition of the salary and daily wage and the uniform application of the hourly wage mean for all, without exception, cases? And if, in the end, its (excellent) application turns out to be nothing short of terrifying, would it simply solve all the relevant problems?

     

    Employees and Craftsmen, Salary and Daily Wage

    With the passage of time, we notice that the regulations of the law increasingly equate Employees and Craftsmen.

    In this direction we find the recent labor law (:law 4808/2021), by virtue of which (art. 64 §1), previous differences between employees and craftsmen were equalized, as all discrimination “…regarding the deadline” was already abolished notice and the termination of dependent labor contracts”.

    The most important thing: in a previous article we established, with certainty, that despite the usual practice, it is clearly permissible (according to the law and jurisprudence) to pay a salary to the craftsmen and, respectively, a daily wage to the employees.

     

    Minimums (salary and daily wage)

    The very recent Decree No. 31986/2023 of the Minister of Labor and Social Affairs (: Official Gazette B’ 2023/28.3.2023 ) provides for the determination of “…the legal minimum wage and the legal minimum daily wage, for full-time employment, for employees and the craftsmen of the whole country…, as follows:

    1. a) For employees, the minimum salary is set at seven hundred and eighty euros (€ 00).
    2. b) For craftsmen, the minimum daily wage is set at thirty-four euros and eighty-four cents (€34.84).

    Salary vs daily wage: the considerations

    Salaried employees and salaried craftsmen

    As we have already pointed out, employees and craftsmen can be paid a salary or a daily wage – whatever they agree with their employer. And the above Ministerial Decision (no. 31986/2023) links, unfortunately-according to established practice, the minimum wage with employees and the minimum daily wage with craftsmen.

    The calculation – the amount of the consideration

    Based on the above data, an employee (employee or craftsman) is likely to be paid a salary – in which case they will receive €780. However, it is possible (the same employee or their colleague performing the same work) to be paid a daily wage. In this case – in the system, e.g., of six-day employment – they will receive €871 (times 25 daily wages x €34.84) or, as the case may be, €905.84 (times 26 days’ wages x €34.84).

    It is easy to see that the specific differences lack not only legal background but also seriousness. All the more so as it is possible for them to concern the same worker (: employee/craftsman) or their colleague who performs the exact same work and is paid in a different way. (It should be noted, of course, that equal treatment is, logically, subsequent to considerations) …

    The method of calculating severance pay

    Furthermore, the legislator, in order to calculate the employee’s severance pay (: art. 64 §3 law 4808/2021- art. 327 3§3 Presidential Decree no. 80/2022), considers that their (supposed) monthly salary equal to 22 days’ wages (when not already paid a monthly salary). That is €766.84 (:22 x €34.84). It therefore falls short of the minimum wage – under any method of calculating it.

    If one looks for logic in all of the above, we could safely assume the unfortunate outcome of their efforts…

     

    The hourly wage: an unprecedented concept?

    In most regulations we find the concept of hourly wage. Indicative in overtime, legal & illegal overtime employment as well as part-time employment.

    Overwork

    overtime is paid at the paid HOURLY WAGE increased by 20%.

    As we mentioned in the past, (statutory) overtime (: art. 58 law 4808/2021) is considered the time of employment that exceeds the contractual hours, but not the maximum legal hours. In companies with a five-day working system from the 41st to the 45th hour and in companies with a six-day working system from the 41st to the 48th hour.

    Overtime

    Overtime means the provision of work that exceeds the contractual and legal hours. The law (: art. 58  law 4808/2021) distinguishes between legal and illegal overtime.

    Statutory Overtime

    Overtime (legal) workers receive as remuneration for each hour of overtime work an amount equal to the HOURLY WAGE paid, increased by 40%.

    It is noted that legal overtime is that which (after the necessary notifications) is provided for work beyond 45 hours per week in five-day businesses and 48 in six-day businesses. It cannot, however, exceed three (3) hours per day and one hundred and fifty (150) hours per year.

    Illegal Overtime

    Overtime work may take place without complying with the legal requirements or in excess of the maximum limits. The illegally (overtime) employed employee is entitled to compensation equal to the paid HOURLY WAGE increased by 120%.

    Overtime Leave

    Under certain conditions, it is possible to grant an overtime work permit to companies, in addition to the maximum permitted overtime work limits. Such (after permission from the competent body of the Ministry of Labor and Social Affairs) overtime employment is paid with an amount equal to the paid HOURLY WAGE increased by 60%.

     

    Part time job

    Based on the HOURLY WAGE of a comparable employee, the remuneration of the part-time employee is calculated (Art. 38 §9 Law 1892/1990). And, in the event of exceeding their agreed hours, they are entitled to a corresponding consideration with an additional twelve percent (12%) on the agreed consideration for each additional HOUR of work they will provide (art. 38 §11 law 1892/1990).

    It is reminded that part-time employment of an employee can be agreed during the drawing up of the employment contract (or during it) between the employer and the employee. This agreement must be enclosed in a formal document and may refer to daily or weekly or fortnightly or monthly work of shorter duration than normal, for a definite or indefinite period (: art. 38 §1, law 1892/1990).

     

    Hourly wages and labor rights

    The replacement of the hourly wage and the daily wage by the hourly wage and the universal application of the latter would be likely to raise reasonable concerns among the well-meaning and vehement objections from the usual and all-out naysayers. Both logically expected. But this happens in every change. In this particular case, however, it would be advisable to have (in parallel with the establishment of a generalized and only application of the hourly wage) a generally worded “reassuring” provision. A provision with the content of, in any case, ensuring – and not worsening – the contractual and legal rights of employees, regarding (also) their working time limits & remuneration.

     

    The maintenance (to this day) of matching the salary with the employees and the daily wage with the craftsmen, is (already/also) legally consequential. The maintenance (to this day) of the differentiation of the way employees are paid by salary or daily wage creates legal and practical inconsistencies. It obviously lacks logic and, ultimately, seriousness. It only creates problems for businesses and serious injustices for employees. And if one considers the current necessity of calculating (some) hourly wages for exceeding daily hours and also for part-time work, one will reasonably wonder: Will the generalization of the method of remuneration of employees on the basis of hourly wages solve all, without exception, the related problems?

    Only one answer is appropriate: obviously.–

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (September 24th, 2023).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Responsibility of Board Members: Insurance Contributions, Customs Violations, Bankruptcy Code, Infidelity & “Laundering”

    Responsibility of Board Members: Insurance Contributions, Customs Violations, Bankruptcy Code, Infidelity & “Laundering”

    In a series of our previous articles, we explored the responsibility of the members of the Board of Directors of an SA. Specifically, we looked int the internal (intra-company) liability of the members of the Board of Directors for their actions or omissions, which risk the company’s property (art. 102-108, law 4548/2018). Also, with the “external” responsibility of the directors of the SA for the direct damage to shareholders or third parties due to their (illegal and culpable) actions. In addition, with the liability of the aforementioned persons vis-à-vis corporate creditors due to causing or delaying the bankruptcy or from tax violations of the SA. In the present article we will examine the other responsibilities (civil, administrative, criminal) that may be borne by the administrators of the SA from custom-related violations of the SA and non-payment of insurance contributions. Also, from the potential disloyalty of the managers of the legal entity at the expense of the latter, as well as from the criminal provisions of the bankruptcy code. And all this in the light of the provisions for money laundering from criminal activities.

     

    Liability From Non-Payment of Insurance Contributions

    Joint and several liability of the administrators of the SA, with the latter, is established regarding the (non)payment of insurance contributions.

    In particular, legal representatives, presidents, administrators, managing directors, authorized management and liquidators of legal persons and legal entities (as defined in art. 3 of Law 4174/2013) are personally, jointly and severally liable for the payment of insurance contributions, additional fees, surcharges and other charges owed by the legal persons and legal entities to the Social Security Institutions, regardless of the time of their certification. In this case, in order to establish its liability, the conditions for joint and several liability in fiscal offenses must also be met [see art. 31 Law 4321/2015, as amended by Law 4646/2019 (Article 66 of which was amended pursuant to Article 31 Law 4701/2020), and e-EFKA Circular 62/21].

    Specifically, in order to establish the said liability of the above persons, the following conditions must be met cumulatively:

    (a) The aforementioned persons must have had the above qualities during the time of operation of the legal entity or at the time of its dissolution or merger or during its liquidation.

    (b) The debts became overdue during the term of office of the above persons (subject to the law regarding the time of reduction of the debts when any tax is imposed following an audit by a tax authority and the cases subject to settlement). If, therefore, a debt becomes overdue in the following year from the one to which it relates, then the person who exercises the administration of the SA when the debt became overdue is responsible. In other words, the person who was in charge of the SA at the time the disputed debt was incurred is not liable.

    (c) The debts were not paid or attributed to the State due to the fault of the above persons-administrators (with the explicit clarification, however, that the burden of proof for the eventual non-existence of culpability is borne by the specific persons). In the event that the above persons are responsible (as discussed above), their culpability is also presumed. Unless these show a lack of culpability. The reformation of the institutional framework related to the issue aims at the assumption of responsibilities by persons who actually exercised management during the critical time of the creation of the tax debt. That is, by persons who had the ability to act in the name and on behalf of the legal entity and fulfill its obligations.

    Furthermore, the provision of article 1 §1 and 2 of Law 86/1967 is still in force, which criminalizes – subject to conditions – the non-payment of employer contributions as well as the withholding and non-return of employee contributions. The relevant sanctions are also not insignificant (: a prison sentence of at least 3 months and a cumulative fine of at least 10,000 drachmas and a prison sentence of at least 6 months and a cumulative fine of at least 10,000 drachmas, respectively). At the same time, according to §7 para. a’ of the same article, as perpetrators for employers who are not natural persons, of the relevant offences, the following are considered with regard to national SAs: the presidents of the Board of Directors, the managing directors or authorized or co-acting advisors, the administrators, the general managers or directors and in general any person entrusted either directly by law or by private will or by court order to the administration or management thereof. If all the above persons are missing, the members of the boards of directors of these companies are considered as perpetrators, as long as they actually temporarily or permanently exercise one of the aforementioned duties.

     

    Liability for Customs Violations

    Liability of the administrators of the SA may be established (also) due to customs violations.

    Specifically, based on the provisions of the Customs Code (law 2960/2001), a customs debt is the obligation of any natural or legal person vis-à-vis the Customs Authority to pay all duties, taxes, including value added tax (VAT), and the other rights of the State, which correspond to goods and burden them according to the relevant provisions.

    For the payment of the customs debt, the following are personally and jointly and severally responsible for the payment of the customs debt: the presidents of the Board of Directors, the managing directors or authorized or advisors acting jointly, the administrators, the general managers or directors, and in general, any person authorized, either directly by the law, either by private will or by court order in their administration or management. If all the above persons are missing, the members of the boards of directors of these companies are considered to be perpetrators, if they actually temporarily or permanently exercise one of the aforementioned duties, as well as the SA liquidators, at the time of their dissolution or merger, regardless of the time of attestation of the debt (articles 29 and 153 of paragraph a of Law 2960/2001).

    The same, aforementioned, persons are considered perpetrators or, as the case may be, accomplices of the offenses of smuggling and, as a result, are exposed to the relevant (not insignificant) criminal sanctions (: in its basic form, imprisonment of at least 6 months – art. 157).

     

    Liability Under Criminal Provisions of the Bankruptcy Code

    The Bankruptcy Code (law 4738/2020) includes a series of provisions (arts. 197-203 of the Bankruptcy Code) that provide for the criminal liability of managers, members of the administration and directors of legal entities to which any bankruptcy is referred, as long as these persons have fulfilled the prescribed in the said provisions unfair acts (art. 202 § 1 Bankruptcy Code). In particular, the persons in question may be held liable for the offences of: (a) bankruptcy (art. 197 Civil Code) and (b) favorable creditor treatment (art. 198 Civil Code).

    Furthermore, as expressly defined, administrators, members of management and directors of legal entities are punished with the penalties of §1 of the article on bankruptcy (: prison sentence of at least 2 years and a monetary penalty – no. 197 of the Civil Code), and in the case of receive of advance payments, higher than those provided for in the decision of the competent corporate body or in the statute of the legal entity (art. 202 § 2 Bankruptcy Code).

     

    Liability Under Criminal Code Provisions: The Crime of Infidelity

    The management of an SA and its members may be liable (also) under the provisions of the Criminal Code for the crime of infidelity (art. 390 law 4619/2019) when they knowingly cause certain damage to the property of another, who have, by law or legal action, the custody or management.

    Regarding administrative offenses against the property of a legal entity, this crime is committed by those who violate the rules of diligent management – of course also the members of the board of directors of the SA.

    The persons in question are punished with imprisonment and if the damage caused is particularly great, with imprisonment of at least three months and a monetary penalty. In the distinguished form of the crime, if the damage caused exceeds a total of one hundred and twenty thousand euros, imprisonment for up to ten years and a fine are imposed.

     

    Laundering of Proceeds of Criminal Activities

    It is pointed out, finally, that the above crimes of smuggling and non-payment of debts to the State are included in the “basic crimes” for establishing responsibility in terms of money laundering (law 4816/2021). In other words: the crime of legalization of illegal proceeds is concurrent, cumulatively (also) with the aforementioned crimes. The threatened penalties for the crime of money laundering are not at all negligible (: in its basic form, the wrongful act is punishable by imprisonment for up to 8 years and a fine from 300 to one thousand 1,000 daily units – no. 6).

     

    We have already established that the responsibilities of the members of the Board of Directors are extremely extensive. They derive from the provisions of the law on SAs and extend beyond it. The latter, in fact, seem more important. For obvious reasons, it seems that the provisions concerning the liability of the members of the Board of Directors and administrators of the SA for the non-payment of the latter’s insurance obligations seem to attract greater interest. The liability of the liable legal entity and its co-obligatory natural persons/managers is joint and several. Corresponding are the responsibilities of the administrators of the SA from violations of the Customs and Bankruptcy Code. But more important, for many reasons, are the relative criminal responsibilities of the managers-individuals involved. Of course, the responsibilities and penalties of the crime of infidelity. If we consider, in fact, that those responsible will be prosecuted, potentially (and cumulatively) for money laundering, we realize – in this case as well- that the relevant responsibilities are not at all simple. Neither negligible.-

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (September 17th, 2023).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

  • Liability of Board Members: Tax Offenses

    Liability of Board Members: Tax Offenses

    In a series of our previous articles, we looked into the responsibility of the members of the Board of Directors of an SA. Specifically, we examined the internal (intra-company) liability of the members of the Board of Directors for their actions or omissions, which endanger the company’s property (art. 102-108, law 4548/2018). Also, with the “external” responsibility of the directors of the SA for the direct damage to shareholders or third parties due to their (illegal and culpable) action. In addition, the liability of the aforementioned persons towards corporate creditors due to causing or delaying the bankruptcy. In the present article we will look into the other responsibilities that may fall on the administrators of the SA from tax violations of the latter.

     

    Liability for Fiscal Violations

    Joint Liability of Managers of the SA

    The administrators of the SA are, subject to conditions, personally and jointly liable for the tax debts and obligations of the SA.

    Specifically, as expressly provided in article 50 Code of Fiscal Procedure (law 4987/2022), “Persons who are executive presidents, directors, general managers, administrators, managing directors, appointed to the administration and liquidators of legal persons and legal entities, as well as and the persons who in fact exercise the management or administration of a legal person or legal entity, are personally and jointly liable for the payment of income tax, withholding tax, any imputed tax, VAT. and ENFIA, owed by these legal persons and legal entities, regardless of the time of their certification, as well as for interest, fines, surcharges and any administrative monetary sanctions imposed on them… “.

    In order, however, to establish the said responsibility of the specific persons, the following conditions must be met cumulatively:

    (a) The aforementioned persons must have had the above qualities during the time of operation of the legal entity or at the time of its dissolution or merger or during its liquidation.

    (b) The debts became overdue during the term of office of the above persons (subject to the law regarding the time of reduction of the debts when any tax is imposed following an audit by a tax authority and the cases subject to regulation). If, therefore, a debt becomes overdue in the following year from the one to which it relates, then the person who exercises the administration of the SA when the debt became overdue is responsible. In other words, the person who was in charge of the SA at the time the disputed debt was incurred is not liable.

    (c) The debts were not paid or attributed to the State due to the fault of the above persons-administrators (with the explicit clarification, however, that the burden of proof for the eventual non-existence of culpability is borne by the specific persons).

    This is, therefore, non-genuine or illegitimate objective liability. This means that in the event that the above persons are held responsible (as discussed above), their culpability is also presumed. Unless these show a lack of culpability.

    Law 4987/2022, in continuation of Law 4646/2019, aims to correct the incorrect wording of the existing CFP regime. Based on the latter, it was usual for natural persons to be liable (also), who, although they participated in the management of the SA, did not, however, exercise management in reality.

    In this specific context, the Explanatory Report n. 4646/2019 states that under the previous regime, the additional joint and several liability of those exercising administration to legal persons or entities for the tax debts of the latter was structured in such a way that it could be imposed on persons who they had no participation in the administration. In other words, obligations were born to the above persons, simply because they happened to be in charge at the time of dissolution or merger of the company.

    Given the above, the reform of the institutional framework is aimed at the assumption of responsibilities by persons who actually exercised management during the critical time of generation of the tax debt. That is, by persons who had the ability to act in the name and on behalf of the legal entity and fulfill its obligations.

    Criminal Liability of Directors of the SA

    In order to prevent violations of the tax legislation by the liable legal entities, criminal sanctions are threatened against the managers (and) of the SA. The specific sanctions concern the offences: (a) tax evasion and (b) non-payment of confirmed debts to the State and the wider public sector.

    (a) With respect to the crimes of tax evasion:

    The crimes of tax evasion are standardized in article 66 KFD.

    Specifically, the crime of tax evasion is committed by anyone who intentionally conceals taxable income in order to avoid paying income tax, ENFIA or special real estate tax. Also, anyone who does not pay VAT, PKE, insurance premium tax and withheld and imputed taxes, fees and contributions (having completed the above actions as, specifically, described in the law).

    Based on the value of the violation, the crime takes either a misdemeanor or a felony form, leading to a different penalty (from at least two years in prison to imprisonment).

    The crime of tax evasion is also committed by anyone who issues false or fictitious tax information, as well as anyone who accepts fictitious tax information or falsifies such information, regardless of whether or not they are evading tax payment.

    Especially with regard to legal entities – and, in this case, SAs – the legislator determines the perpetrators (and accomplices) of the (above) crimes of tax evasion.

    Specifically, it is provided that as perpetrators in the AU countries, if by any act or omission they contributed to the commission of the above offences, the following are considered:, as well as in general any person mandated either directly by law or by private will or by court decision in the administration or management or representation thereof. If all the above persons are missing, the members of the boards of directors of these companies are considered as perpetrators, as long as they actually temporarily or permanently exercise one of the duties mentioned above. » (see art. 67 §1 CFP).

    Furthermore, it is provided that “the person who knowingly signs an inaccurate tax return as a proxy, as well as anyone who in any other way knowingly cooperates or offers direct assistance in the commission of these crimes, is punished as a direct accomplice ” (see art. 67 §3 CFP).

    While, finally, as perpetrators or participants of the above crimes, it is expressly provided that they are also considered “…those who actually exercise the powers and responsibilities that correspond to the roles and positions named in the KDF.” (see art. 67 §4 KFD).

    (b) Regarding the offense of non-payment of confirmed debts to the State and the wider public sector:

    The offense of non-payment of debts is committed by anyone who does not pay the debts certified to the Tax Administration to the State, legal entities under public law, businesses and organizations of the wider public sector for a period of time longer than four months (art. 25 § 1 Law 1882/1990).

    The commission of this offense is punishable by imprisonment. Its amount depends, also in this case, on the value of the debt.

    And with regard to the specific offence, the legislator expressly determines the persons against whom the relevant penalties are imposed in the cases of the nationals of the Republic. Specifically, as provided for “…the prescribed penalties…are imposed, in order: for domestic limited liability companies, to the presidents of the Board of Directors, to the managing directors or authorized or co-acting advisors or managers or general managers or directors thereof or to any person authorized or directly by the law either by private will or by judicial decision in the administration or management thereof, cumulatively or not.”.

    It is further provided that in the event that all the above persons are absent, the penalties are imposed against the members of the Board of Directors of these companies, as long as they actually exercise, temporarily or permanently, one of the above duties (art. 25 § 2 par. a) Law 1882/1990).

    For the above persons, the criminal prosecution is carried out for the debts to the State and third parties – except private individuals. The debts were confirmed at the time of acquisition of any of the above properties or were confirmed while they had the specific property (and this, regardless of whether they later rejected this property in any way or for any reason). Also, for the debts that were confirmed regardless of the dissolution or not of the SA, but were born or go back to the time they had this relevant status (art. 25 §3 law 1882/1990).

    It was clarified, in fact, by an explicit legislative regulation (:469PC) that “…in the application and in the table of debts, the debts arising from the non-execution of fines imposed by a criminal court are not included and are not calculated for the determination of the person’s responsibility the related surcharges, interest and other charges as well as the debts from the offenses standardized in article 66 of the Tax Procedure Code together with the related surcharges, interest and other charges”. The legislator, in other words, authentically removed the charge of violation of the principle of the prohibition of double jeopardy (ne bis in dem).

     

    Laundering of Proceeds of Criminal Activities

    It should be pointed out, however, that the above crime of tax evasion is included in some of the “basic crimes” for establishing liability in terms of money laundering (Law 4816/2021). In other words: the crime of legalization coincides, cumulatively, with the crime of tax evasion. The threatened penalties for the above offense of money laundering are not at all negligible (: the offense in its basic form is punishable by a prison sentence of up to 8 years and a cumulative fine of 300 to 1,000 daily units).

     

    The responsibilities of the board members are extremely extensive. They (also) derive from the provisions of the law on SAs. However, the other relevant regulations are probably the most important. Among them, the provisions concerning the liability of the members of the Board of Directors and administrators of the SA for the non-payment of the latter’s tax obligations are of great importance. The liability of the liable legal entity and the co-obligatory natural persons is joint and several. But more important, for many reasons, are the relative criminal responsibilities of the latter. If we consider, in fact, that those responsible will potentially be prosecuted for money laundering, we understand that the relevant responsibilities are not at all simple. Neither are they negligible.-

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (September 10th, 2023).

     

    Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

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