Koumentakis

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  • Work stress and the death of an employee

    Work stress and the death of an employee

    Work stress and the death of an employee (An impartial approach of decision no. 1358/2019 of the Athens Single-Member Court of First Instance)

    I. Preamble

    There has been a lot of discussion lately around the decision no. 1358/2019 of the Single-Member Court of First Instance of Athens.

    The case heard? An employee suffered a severe myocardial infarction on his way to work. It was attributed to intense work stress. The business/employer was ordered to pay € 160,000 in damages to the plaintiffs (for mental suffering caused). 80,000 € to the wife of the deceased and the same amount to his son.

    Small(?) Detail: The defendant, the business, was tried in absentia.

     

    II. Heart attacks as occupational accidents: (known) facts and the “overturn”

    Until now, we knew that a heart attack could (under certain conditions) be subject to the concept of an occupational accident. It is always the court that assesses the fulfillment of the conditions and sovereignly decides on the matter. Depending on the evidence provided.

    We all agree that a death resulting from a heart attack suffered by an employee under normal working conditions is not an accident at work. On the contrary, a heart attack will constitute an accident at work when it is linked to excessive efforts made while trying to perform at work. When, for example, the death was linked to excessive working hours (decision no.1959/2017 of the Single-Member Court of First Instance of Athens). Or, alternatively, to other adverse and debilitating conditions: All that goes without saying …

    The decision no. 1358/2019 of the Single-Member Court of First Instance of Athens came to “rock the boat”, by (excessively) extending the conditions under which a heart attack could fit into the concept of an occupational accident. What it did was characterize as an occupational accident a heart attack (considered to be) caused by an employee’s stress. A heart attack not purely attributed to the working conditions of the employee, but to the broader course of the employer’s business. Maybe the national economy as well…

     

    III. The facts of the case

    We have already seen that the defendant (employer) company did not participate in the trial. We do not know whether this was due to reasons of financial distress or other. And, of course, it is impossible to (even) assume its position.

    Therefore the Court, given the employer’s default of appearance, accepted the facts presented by the plaintiffs (the deceased’s wife and son) as true.

    The decision accepted the following facts:

    The employer decided in early 2011 (i.e. during the financial crisis) to reorganize their business. The reorganization included the elimination of distribution divisions. Obviously, the employer could not afford to keep on going the same way. Among the divisions being eliminated was the one that the deceased was employed in. However, the employer had not clarified the (new) tasks (if any) of those working in the divisions about to be eliminated. Not even those employees’ future in the business (Couldn’t do so? Didn’t know? Were wishing for the best? Unknown…)

    In February 2011, rumors regarding the aforementioned reorganization of the business started spreading. The deceased (seems that he) had been overwhelmed by the stress regarding the repercussions of the reorganization and the fate of his job. This anxiety (allegedly) turned into unbearable psychological pressure. Indeed, based on what was accepted, the deceased shared his fears about his future with his colleagues and supervisors. He started (according to the decision) to feel dizzy and have back and stomach aches. However, the employer did not provide clarifications (because they had none?) regarding the impact of the reorganization to the supervisors of the diseased. Much less to the latter.

    On 05.05.2011 the unit of the diseased as well as the latter were informed that from 09.05.2011 the new distribution divisions would be taking over. The next morning he left for work. But he returned home. And there he left his last breath. His death was attributed, according to the autopsy, to an “acute myocardial infarction”.

     

    IV. Subsuming the facts under legal provisions:

    According to the decision: ‘the cause of death … is causally linked to the intense work stress that he experienced because of his insecurity and uncertainty regarding his employment status in view of the impending reorganization of the defendant employer, who on the one hand did not receive appropriate preventive measures and did not a priori provide adequate clarifications to protect the employees from the negative effects the redistribution of the work could have on their mental and physical health, and on the other hand took no measures to eliminate the stress of the abovementioned employee, despite that it was known to his superiors (agents of the employer) that he was experiencing severe job stress due to continued uncertainty regarding his work, which had obviously led him to the brink of collapse. ”

    The Court, in the light of the foregoing, held that the death of the employee concerned, constitutes an accident at work within the meaning of Law 551/1915.

     

    V. The concrete facts: a brief commentary …

    First

    Summing up:

    (a) A heart attack can, under certain circumstances, constitute an accident at work.

    (b) Among the secondary obligations of the employer is the obligation to provide for the welfare of their employees (which derives, inter alia, from: 662, 288 Civil Code, Law 3850/2010, Directives, Regulations)

    (c) The employer has a legal obligation to protect the occupational safety and health of their employees, by taking appropriate preventive and repression measures.

    Second

    In the above (under 1) context, this particular decision recognizes that the employer had to take appropriate action, since one of its employees (allegedly) developed a problem of work-related stress. Despite that stress is not a disease, the Court holds the position that prolonged exposure to stress can have adverse effects. Reduce, e.g. one’s efficiency at work, but also cause serious problems, such as cardiovascular diseases.

    The decision accepts the responsibility of the company as “it did not take appropriate preventive measures, nor did it provide adequate clarifications in advance to protect employees from the negative effects of the redistribution of the work on their mental and physical health …”. According to the plaintiffs “clarifying his new duties or the future of his employment status would be sufficient to prevent the outcome”.

    The fact that the company did not act in this way constituted (according to the Court) a breach of its obligation to provide for the welfare of its employees.

    Third

    The protection of the health and safety of employees cannot (of course) be an absolute obligation. Obviously, the same goes for the obligation to have regard for the welfare of the employees. The limits are seen in the light of the “maximum sacrifice” each employer can endure.

    Fourth

    The employer in this case proceeded to the restructuring in question in May 2011.

    Let’s go back at that time: Many businesses in our country were struggling to survive. The financial crisis was ongoing. Many failed. Desperate people (businessmen, unemployed, retired) were committing suicide.

    What could that particular business’s financials be back then? Booming?

    And the divisions (which ended up being eliminated)? Lucrative?

    And what did the business do?

    The obvious: it foresaw the need for a reorganization and acted on it, to overcome the financial backlog. The end goal? Survival and safeguarding jobs (as many as possible).

    Of course, it is the employer who carries the business risk, which they cannot pass on to their employees. They therefore bear the responsibility of each of their business decisions, as well as of the restructuring of their business. Meaning that the turnover of a business may be reduced. This does not mean, however, that the employer is justified in taking any measures to save their business, without having any regard for their employees. The law imposes (and rightly so) a series of obligations designed to protect employees.

    Fifth

    But there is a core question. To what extent can an employer’s obligations be extended? All the more so when (we can assume / believe) they derive from vague legal concepts (662 & 288AK etc.) and not, explicitly, from the wording of the law?

    What did the company do in this case? It moved forward with a reorganization (as it should). It did not inform about the forthcoming(?) job cuts. Or did it not (untruthfully) assure the employees that their jobs were secure? Should it?

    Or, alternatively, should it have hired (and paid for) qualified consultants, irrespective of whether its finances were insufficient to pay the redundancy payments due?

    Sixth

    One wonders:

    How can we expect from a company that takes action to withstand the effects of a financial crisis, to communicate with its employee and reassure him of the future of his job!? In this case, the company, along with the reorganization, had not started laying employees off. We can rightly assume that its goal was to avoid layoffs altogether. However, when an entrepreneur is anxious about the existence of their business, they clearly cannot make any guarantees about the future of their employees in the business. All the more so when the future of the business itself is ominous. It is then and there that a possible employee-employer communication about the former’s job will most likely constitute the “coup de grâce” in an overly stressed – as accepted by the court- employee.

    Seventh

    The fact that this particular decision accepted that the employee’s cause of death “is causally linked to the intense work stress that he experienced because of his insecurity and uncertainty regarding his employment status” does not appear to be persuasive in the light of its own assumptions.

     

    VI. How the business should have acted (according to the court)

    Let’s go back in time: May 2011.

    Let us try, for a moment, to align ourselves with the suggestions of the court ruling.

    I take on the role of the entrepreneur for reasons of convenience. I invite the supervisor and the distribution division staff to a meeting in my office:

    Scenario A:

    “Good morning! Given the financial crisis, I am sadly announcing that I have decided (in order to save the business and most of the jobs) to discontinue distributions in Northern Greece. Those working in this division, that is X, Y and Z, will be fired in ten days from today. Thank you for your services. “

    Scenario B:

    ” Good morning! I hear the same rumors as you do. How, for example, given the financial crisis I am going to discontinue (in order to save the business and most jobs) distributions in Northern Greece. And also how those working in the division, that is X, Y and Z, will soon be fired. It’s all lies-all good! “

    After ten days I am forced (in order to save the business and most jobs) to discontinue distributions in Northern Greece.

    Again, I invite the supervisor and the employees of the distribution division to a meeting in my office and make the following announcement:

    “Good morning! Given the financial crisis, I am sadly announcing that I have decided (in order to save the business and most of the jobs) to discontinue distributions in Northern Greece. Those who work in this division, that is X, o Y and Z, are fired effective immediately. Please go by the accounting department for the procedural issues. Thank you for your services.”

    Following (: same in scenarios A & B) …

    The Supervisor and the distribution division staff look at me frustrated.

    Diagnosis for X: Acute myocardial infarction …

    I wonder: What would the Athens Single-Member Court of First Instance do in any of the aforementioned scenarios?

     

    VII. The author’s personal views on the matter

    At the same time (: 2011) a friend of mine, a brilliant businessman, shared with me the difficulties he was going through.

    He asked for my opinion on how to manage a crisis in his business. At the time he was employing more than a hundred people.

    His business was impressive and strong, until the crisis started knocking on his door …

    My view (albeit harsh) was absolute: personnel reduction and wage cuts.

    It was very difficult for him.

    My Argument: “If you continue with this payroll cost, the business will be destroyed. One hundred families (not including independent contractors) will be left without the basic income you provide them. Alternatively: You reduce personnel and salaries and seek, conservatively, to overcome the crisis. ”

    My advice seems to have made (at least some) impact on him. Most of the jobs were saved. His business didn’t take long to recover. It has come back stronger: it is again a shining example of Greek entrepreneurship.

     

    VIII. In conclusion

    A (core) question arises – in the light of this decision:

    With the business being on the brink of catastrophe, what should it do for its employees? Hire specialized (and of course very expensive) psychologists to support them, when: (a) it cannot afford the payroll cost; (b) it cannot pay the forthcoming redundancy payments?

    Or, according to the decision, to ‘clarify the future’ of specific employees? (e.g. “X, Y and Z are fired!” or “X, Y and Z will be fired within ten days!”)

    Decision 1358/2019 of the Athens Single-Member Court of First Instance DOES NOT convince.

    It may even prove to be dangerous.

    Unfortunately.

    But it is instructive for us lawyers: “Let us try to show a (fake) human interest in those hard-pressed employees, so that we have a chance to get away with it …”.

    Is this what we need?

    Pending the review (if any) of the case, let’s hope that no more decisions like this one will be issued …

    stavros-koumentakis

    Stavros Koumentakis
    Senior Partner

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (December 8th, 2019).

  • The abolition of the collective responsibility of the owner of a project towards the employees

    The abolition of the collective responsibility of the owner of a project towards the employees

    The abolition of the collective and several responsibility of the owner of a project, the contractor and the subcontractor towards the employees: The problem of collective responsibility and liability

    1. Preamble

    1.1. Regarding the collective responsibility and liability

    “I do not know when the term “collective responsibility” first made its appearance, but I am reasonably sure that not only the term but also the problems it implies owe their relevance and general interest to political predicaments as distinguished from legal or moral ones. Legal and moral standards have one very important thing in common-they always relate to the person and what the person has done; if the person happens to be involved in a common undertaking as in the case of organized crime, what is to be judged is still this very person, the degree of his participation, his specific role, and so on, and not the group. The fact of his membership plays a role only insofar as it makes his having committed a crime more probable; and this is in principle not different from bad reputation or having a criminal record. Whether the defendant was a member of the Mafia or a member of the SS or some other criminal or political organization, assuring us that he was a mere cog who acted only upon superior orders and did what everybody else would have done just as well, the moment he appears in a court of justice he appears as a person and is judged according to what he did. It is the grandeur of court proceedings that even a cog can become a person again.

    Thus wrote the Jewish German-American, Johanna “Hannah” Arendt, one of the most significant political philosophers of the 20th century, in her book “Collective Responsibility”, Schocken Books, New York 2003.

    1.2. Regarding the collective responsibility and liability of the owner of a project, the contractor and the subcontractor

    In contrast to what (quite obvious) Hannah Arendt, logic and law dictates, the pre-existing legal framework (article 9 of Act 4554/2018) established the collective and several responsibility and liability of more than one natural and legal persons (owner of the project, contractor, subcontractor) – no matter the actual involvement of each of them. The object: the obligations arising from a (possible) violation of the rights of employees, to be imposed on contractors and subcontractors.

    How fair is that?

     

    2. The necessity(?) for establishing the collective and several responsibility of the owner of a project, the contractor and subcontractor – explanatory memorandum.

    During the past year the executive power saw the need to establish the collective and several responsibility of the owner of a project, the contractor and the subcontractor as a means to fight undeclared and uninsured employment. The lawmaker’s rationale behind the law they introduced to tackle this issue is stated in the relevant explanatory memorandum of Act 4554/2018.

    2.1. General references

    The relevant explanatory memorandum mentions, among others, regarding the issue at hand, that:

    “1. The impact made from the implementation of the fiscal adjustment programs resulted in the increase of undeclared or underdeclared labor. … The suggested provisions introduce a new structure in the way fines are imposed from the Labor Inspection Body on the employers employing undeclared employees, giving incentives for the regulation of the labor market and aiming to the protection of employees and the creation of new jobs with social insurance”.

    Especially regarding the issue of undeclared labor of employees working for businesses (: contractors) who take on the execution of projects on behalf of their clients, the explanatory memorandum mentions that:

    “2. It is more than common for a business to assign specific works to an external associate (contractor), meaning to another business which usually specializes in one or more fields. Those works are executed by employees employed by the contractor, and not by the businessman who assigned the execution of those works to the contractor, in exchange for a fee, a fact that, in most cases, negatively impacts the rights of the employees …”

    Thus: (generally) then intentions are good!

    2.2. The specific provisions of article 9

    The explanatory memorandum mentioned, among others, regarding the provision in question:

     “…Many businesses tend to, more frequently, assign specific specialized or intensive works to contractors, mainly aiming to minimize productive costs.

    …The extensive adoption of this regime blurs the boundaries between legal and illegal practices, increases the undeclared and underdeclared labor and, at the end, contributes to the violation of employees’ rights. The provisions suggested introduce the Greek legal system for the first time with a complete set of rules regulating the responsibilities of a project’s owner, the contractor and the subcontractor towards the latter’s employees, while they execute the works assigned. The introduced collective and several responsibility of the employer and contractor covers the employees’ rights on all levels…”

     

    3. The establishment of the collective and several responsibility of the owner of a project, the contractor and the subcontractor and the relevant issues arising.

    Based on the abovementioned, under 2, thoughts of the executive power, the provision of article 9 of Act 4554/2018 passed and, along with it, the collective and several responsibility of the employer (: owner of a project), contractor and any subcontractors towards the employees. Each of the cores of this provision acted against the owners of each project (natural persons or business entities) and, furthermore, created severe (in most cases unsolvable) problems when applied. To be more precise:

    3.1. Regarding the several responsibility of both the owner of a project and the contractor.

    (a) the provision of art. 9 par. 1 mentioned that:

    “All natural or legal persons who assign, as part of their business, the execution of a project or of a part of a project (owner of a project) to another, natural or legal, person (contractor) is severally and collectively responsible, along with the contractor, towards the latter’s employees, for the payment of salaries, social contributions and any severance pay owed.

    The above responsibility is limited to the employees’ rights arising from the contractual relation between the owner of a project and the contractor regarding the specific project or part of a project.

    In case the execution of a project, or of part of a project, is assigned from the contractor to subcontractors, the collective and several responsibility burdens the owner of the project, the contractor and the subcontractor, subject to the above provision”.

    (b) The problem

    This provision covered all smaller, bigger or vast businesses. It also covered all natural persons-owners of projects. All those persons were liable, no matter the responsibilities of each, “for the payment of salaries, social contributions and any severance pay owed” to the employees who may have worked on a project assigned to a contractor. This responsibility was burdening the owner no matter whether they had paid the contractor in full or not.

    3.2. Regarding the conclusion of a works contract between an owner and contractor and/or a contractor and subcontractor

     (a) the provision of par. 3 mentioned that:

    “When drafting a contract for the assignment of a project, or part of a project, a special term is included, which refers to the obligation of the contractor to abide by the provisions of labor and insurance legislation, the legislation relating to the health and safety of the employees, as well as the legislation relating to the prevention of occupational risk.

    The same specific term is included in the contract concluded between the contractor and the subcontractor as well.”

     (b) The problem

    Most contracts, with only a few exceptions (e.g. contracts for transfers of immovable property), do not have to be written. The provision in question required for all works contracts to be written and to have specific content. It is more than obvious that the burden imposed (time or financial, on the owner and the contractor) did not bother the legislator much.

    3.3. Regarding the bureaucracy imposed

    (a) The provisions of par. 2,4 & 6 mentioned that:

    “2. The contractor assigning a project or part of a project to a subcontractor who will employ staff for the conclusion of the project, must inform so in written the contractor with no delay.”

     “4. The contractor must send to the owner proof of deposit of the salaries and of any pay owed and certificate of deposit of their employees’ severance pay, as long as the subcontractor’s employees, if there is a case of subcontracting.

    This obligation burdens the subcontractor as well, towards the contractor.”

    “6. a) The contractor and/or subcontractor must state all the owner’s or contractor’s information, respectively, at the staff establishment plan they submit to the Labor Inspection Body, for each employee who works in a place other than the base of the business. The contractor and/or subcontractor, who employ employees on two projects or more, are obligated to state in the staff establishment plan the working hours of their employees on each project separately, as well as the information of each of the owner or contractor respectively.

    1. b) The contractor and/or the subcontractor are obligated to provide the employees with a copy or abstract of the staff establishment plan when they work in a place other than the base of their business.
    2. c) When the contractor’s or subcontractor’s employees work on the owner’s establishment, the latter displays in the workplace a copy of the staff establishment plan described under b

    In case of a violation of the principals of this paragraph, the sanctions described in Act 3996/2011 (A’ 170) are imposed.

     (b) The problem

    In case the parties involved (owners-employers, contractors and subcontractors) decided to comply, as they ought to, they would have to maintain (and if they did not already have one, establish) a separate department which would be in charge of their compliance, the relevant briefing of their counterparties involved as well as monitor the fulfillment (or not) of the obligations of their counterparties: The cost of which would be terribly high and the efficiency questionable. And let’s not forget: anyone could be an owner, contractor or subcontractor, even the smallest business and/or a person.

    3.5. Regarding the right of recourse

    (a) the provision of par. 5 mentioned that:

    “The owner maintains the right of recourse, in accordance with the relevant provisions in place, especially when they operated in a diligent manner regarding the fulfillment of the contractor’s, or any subcontractor’s, obligations towards their employees. The owner acted diligently especially when they have conducted all of the following:

    1. a) has requested from the contractor to receive, in accordance with paragraph 4, all the monthly salary payment and the payment of any severance owed, as well as proof of payment of the social contributions for the contractor’s and any subcontractor’s employees,
    2. b) has sent to the contractor and any subcontractor an extra judicial protest as soon as a violation of their obligations towards their employees is brought to their attention, or if the contractor and any subcontractor have not fulfilled their obligations set under a’, requesting that they comply within fifteen (15) days, and
    3. c) terminate the contract with the contractor right after the expiration of the fifteen-day (15) period after the communication of the extra judicial protest described under b

    The contractor has, under the same conditions, the right of recourse towards the subcontractor”.

     (b) The problem

    Let’s assume, for a moment, that the time has come that we take our car (our personal, possibly cheap car) for a service. We take it to the repair shop and tell the repairman to do whatever is needed (: oral works contract/assignment). The work that has to be done on the car turns out to be a bit bigger than anticipated and the service ends up taking the whole day. The repairman does not pay the mechanic who did this specific job -the mechanic is not even registered as one of the employees who worked that day. The mechanic (according to article 9) has the right to turn against us and we most likely would be obligated to pay them their daily wage and the relevant social contributions -despite the fact that we have already paid for the service in full: we would only be able to turn against the repairman asking for a reimbursement for what we had paid to the mechanic only after we had fulfilled our obligations (described under a). In any other case: too bad…

     

    4. Retroactivity of the abolition of the provision in question

    Based on article 117 par. 1 of Act 4623/2119 (Government Gazette Α 134/9.8.2019) it is provided that “article 9 of Act 4554/2018 is abolished from the moment it came into force”.

    As for the issue of retroactivity of the abolition of this particular provision, despite the opposing views expressed (as happened in the case of the retroactivity of the abolition of the “valid reason” requirement), there is no issue of unconstitutionality. Both legal theory and case-law [even case-law deriving from precedents set by the Supreme Court (Arios Pagos) and the State Court] agree on the legality of a retroactive law – as long as the retroactivity does not affect any constitutional rights. And in the issue at hand, such rights are not affected. (Needless to say, it would be unconstitutional if a tax law, penal law or a law disguised as an explanatory law of a previous, clear law, to pass.)

     

    5. In conclusion

    It is clear that the lawmaker, when passing article 9 of Act 4554/2018, probably had in mind the protection of the employees’ rights from those who (as the infamous Greek song says) like “black ravens are attaching labor with their sharp nails”.

    But they did not notice that the provisions they were passing were covering not only those (very few) who intended to maximize their profits by undermining the employees’ rights but, in general, all those assigning a project: even the nice neighbor, Ms. Eulalia, a pensioner, who asked a painter to paint her only room (for 50€ “paint included”) and they did not pay their employee who helped them for the two hours it took to paint the room.

    Could anyone really consider explaining to Ms. Eulalia her obligations deriving from the provision in question?

    And what would happen if the Labor Inspection Body, while inspecting Ms. Eulalia’s room, did not find the contractor’s staff establishment plan -which poor Ms. Eulalia was obligated to display according to article 9 § 6c Act 4554/2018?

    It is obvious that the sanctions would be, according to the same provision, those of Act 3996/2011.

    And to ease any concerns: Ms. Eulalia would not be burned at the stake or impaled! She would only(?) have to face administrative sanctions (: a financial penalty ranging from 300€ to 50.000€ -article 24) and, of course, criminal sanctions (: imprisonment for at least six months and/or a financial penalty of at least 900€ -article 28).

    The example of Ms. Eulalia seems ridiculous, but it is not: that is what article 9 of Act 4554/2018 provided for all, none excluded, sly and honest, bigger Greek industries and smallest mini market in a neighborhood and the, aforementioned, kindhearted and sympathetic, Ms. Eulalia.

    The provision in question was abolished with article 117 §1 of Act 4623/9.8.2019.

    Thankfully.

    stavros-koumentakis

    Stavros Koumentakis
    Senior Partner

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (August 25th, 2019).

  • The abolition of the “valid reason” requirement

    The abolition of the “valid reason” requirement

    Terminating an Employment Contract set for an Indefinite Period of Employment: The abolition of the “valid reason” requirement

    1. Preamble

    “Vom Kriege” (: On War), which analyses how the theory, strategic, tactic and philosophy of war evolved, is not that modern. It is, however, taught, even to this day -one hundred and eighty eight years after the death of its author (the Prussian military and author Carl Philipp Gottlieb von Clausewitz), in military academies, corporate management and marketing schools.

    It should probably be taught, if it is not already taught, to each political party’s “academies”.

     “What is important with ambushing is extreme speed with secrecy” Clausewitz proclaimed.

    Making such an absolutely surprising move (pleasant for some, unpleasant for others) seems to, more or less, be what the Greek Parliament did on the 8th of August, by submitting (and passing in the end) an amendment with a big, crystal clear, stamp “BELATED” -on its top right: this amendment regarded, among others, the abolition of the (already infamous) “valid reason”.

     

    2. The problematic around and the problems caused by the adoption of the «valid reason” requirement

    In a previous article we noted the results from the establishment (with article 48 of Act 4611/2019) of the “valid reason” requirement as a prerequisite for a valid termination of an employment contract, what differed from the previously existing regime and the dangers emerging from its establishment. The author’s reservations expressed were not the only ones against this legislative provision, neither were the reservations expressed by the business and academic community of minor importance. Unfortunately, in the short period this provision was effective, the reservations expressed against it were proved to be true. Furthermore: the reactions against it were proved justified. The imposition on the employer of the burden of having to prove that there was a “valid reason” for the termination of an employment contract set for an indefinite period started “feeding” the (usually illegal and unethical) expectations of those with bad intentions.

    After the procedure of letting an employee go was concluded and before the lawsuit that was to follow was submitted, usually a legal advisor was involved, and an investigation process was conducted in front of the Labour Inspectorate. During these “in between” stages, the objections raised and the views opposing the “valid reason” requirement were proven correct.

    A step further, it seems that the establishment of the “valid reason” requirement negatively affected the job market: the job market balance (hiring-dismissals) proved negative during the past month (July) with the loss of 14.691 jobs (it is noted that the “valid reason” requirement was established on the 17.5.2019 – Government Gazette A’ 73/17.5.2019).

    This provision proved to be problematic on more than one levels, as it resulted in:

    (a) The employee being stigmatized with any of their “valid reason” resembling “behaviour” or “abilities” in case their employment contract was terminated

    (b) The employers being cautious over hiring employees with employment contracts set for an indefinite period (a fact shown in the negative balance of hiring-dismissals)

    (c) Choosing employment contracts of a fixed term (which, when terminated, did not require a “valid reason”) and

    (d) Setting (morally reprehensible) expectations for the dismissed employees with bad faith and for their legal advisors and, as a conclusion, stretching the relevant legal actions taken, before and out of courts.

    No matter how strong the opposition of this provision was, we never would have expected the Government to act so quickly. The abolition of the “valid reason” requirement was, as mentioned above, a highly surprising move. For many of us, myself included, a most pleasant surprise (as was the abolition of the absolutely problematic – joint responsibility of the owner of a project, contractor and subcontractor, as well as the abolition of the suspension of prescription periods relating to employees exercising their rights) and a signal that we are heading back to “normal”.

     

    3. What constitutes a “valid reason”?

    It is reminded that with the provision of article 48 of Act 4611/2019, the first subparagraph of paragraph 3 of article 5 of Act 3198/1955 (A’98) was amended, with an immediate effect, as follows:

     “3. The termination of a work relationship is considered valid, only if it is owed to a valid reason, as such is defined in article 24 of the Revised European Social Charter, which was ratified with the first article of Act 4359/2016 (Α΄5), is done in writing, the compensation owed has been paid and the employment of the dismissed employee has been submitted and kept with the relevant official records of ΕΦΚΑ (previously IKA) [relevant social security body] or the dismissed employee has been insured. In case of a dispute, the burden of proof that all the conditions of a valid termination are met lies with the employer.”

    As a result: what the provision demanded (for a termination of an employment contract set for an indefinite time to be valid from 17.5.2019 forward) was the existence of a “valid reason”. The employer terminating the contract had to state that cause when filing out the relevant form for the termination on ERGANI (:Doc. 26100/98/7.6.3019 Minister of Labor, Soc. Sec. and Soc. Solidarity), by choosing only one of the restrictively mentioned, “valid reasons”:

    (a) Ability of the employee to perform their work,

    (b) Behaviour of the employee and

    (c) Operational requirements of the business

    It is noteworthy that the employer was obligated to make a choice and (what is most important) could not choose more than one of the above.

     

    4. What happened with the previously, before the 17.5.2019, effective legal framework?

    The provisions in place before 17.5.2019 allowed the employer to terminate an employment contract set for an indefinite period at any time, with their main obligation being to pay the compensation owed. When the employee felt that the employer abused this right, they turned to the competent courts: that is where the employees themselves were burdened with proving the employer had abused their power.

    According to the contested provision (enacting the “valid reason” requirement) the employer was the one obligated to state and prove all the conditions of a valid termination were met, including its existence (existence of a “valid reason”).

     

    5. Article 24 of the Revised European Social Charter

    The enactment of a valid reason being a prerequisite for a valid termination of an employment contract set for an indefinite period was based, according to the explanatory memorandum of the, today abolished, provision, on article 24 of the Revised European Social Charter, which states that:

    “With a view to ensuring the effective exercise of the right of workers to protection in cases of termination of employment, the Parties undertake to recognise: a. the right of all workers not to have their employment terminated without valid reasons for such termination connected with their capacity or conduct or based on the operational requirements of the undertaking, establishment or service; b. the right of workers whose employment is terminated without a valid reason to adequate compensation or other appropriate relief. To this end the Parties undertake to ensure that a worker who considers that his employment has been terminated without a valid reason shall have the right to appeal to an impartial body.”

    Regarding the nature of the Revised European Social Charter, the content of article 24 and the “valid reason”, in accordance with the provision in question (:article 48 of Act 4611/2019), we are referring to our relevant, previous article.

     

    6. The explanatory memorandum of the abolition of the “valid reason” requirement

    The explanatory memorandum for the abolition of the “good” cause adopts, as expected, certain political views. What is interesting, though, is the reference to the premises of decision 1512/2018 of Arios Pagos.

    6.1. The referenced assumptions of decision 1512/2018 of the Arios Pagos

    The explanatory memorandum references certain parts of this decision of the Supreme Court of Cassation. Specifically:

    “1. From the provisions of article 669 par. 2 of the Civil Code, 1 of Act 2112/1920 and 1 and 5 of Act 3198/1955, it is concluded that terminating an employment contract initially set for an indefinite period is the right of either the employer or the employee and is a unilateral, unjustified legal act.  Therefore, its force is not depended on the existence or invalidity of its cause. Nevertheless, terminating such a contract should not, obviously, exceed the boundaries set by good faith or the principles of morality or its social or financial purpose (Civil Code 281). So, when such boundaries are exceeded, that termination is forbitten as abusive and therefore invalid (Civil Code 174, 180). More precisely, the termination of an employment contract by the employer is abusive, when it is dictated by motives other than the purpose, for which it was provided as a right. This can occur in cases when the contract is terminated because of prejudice or vengefulness, after a previous lawful, but unpleasant to the employer, behavior of the employee. The termination is not considered invalid when there is no obvious or true cause. The employee, in order to prove the invalidity of the termination, must invoke and prove certain incidents, because of which, when practicing this right of theirs, the employer exceeded in a clear manner the boundaries set by article 281 of the Civil Code, and therefore it is forbidden.

    1. The abovementioned legal status has not changed after the ratification (article 1, Act 4359/2016, in force since 20-1-2016) of the Revised European Social Charter (RESC). It is true that article 24 a’ of RESC recognized “the right of all workers not to have their employment terminated without valid reasons for such termination connected with their capacity or conduct or based on the operational requirements of the undertaking, establishment or service”. Right after that, though, Article 24 b’ of RESC, provides that breeching the abovementioned right is “the right of workers whose employment is terminated without a valid reason to adequate compensation or other appropriate relief.”.

    It is deducted from these provisions that even when there is no valid reason for terminating an employment contract or relation initially set for an indefinite period by the employer, the termination is still effective.

    6.2. The (non) referenced assumptions of decision 1512/2018 of Arios Pagos

    The same decision, though, continues:

    “…The obligation of the employer to compensate the employee is acknowledged since a long time ago in domestic law (….) for every case of termination of contract (except the one made due to criminal legal action taken) and cannot be lifted even when the employer could prove the existence of a valid reason for the termination of the contract. Therefore, a positive or negative reference to a valid reason for the termination is, at the end, ineffective.  Therefore the validity of the termination is individually examined only through article 281 of the Civil Code, as was it happening beforehand, after a lawsuit of the employee was submitted before the competent court.

    6.3. Conclusions

    No matter how cautiously or critically one might examine the assumptions of this specific decision of Arios Pagos on a theoretical level, the Supreme Court of Cassation accepts, among others, the following facts:

    (a) the termination of an employment contract initially set for an indefinite period is the right or the employer.

    (b) when the employer abuses their right to dismiss an employee (something that the employee must prove), this termination of the contract is invalid.

    (c) the ratification of the Revised European Social Chapter does not affect the preexisting legal status in our country, since “even when there is no valid reason for terminating an employment contract or relation initially set for an indefinite period by the employer, the termination is still effective”. Therefore, it continues, “a positive or negative reference to a valid reason for termination is, at the end, ineffective … the validity of the termination is individually examined only through article 281 of the Civil Code, as was it happening beforehand, after a lawsuit of the employee was submitted before the competent court”.

    Based on these assumptions, this decision of Arios Pagos acknowledges that the preexisting legal status, before establishing the requirement for the existence of a “valid reason”, was completely adequate in relation to the directives of the Revised European Social Chapter.

     

    7. The retroactivity of the abolition of the “valid reason” requirement

    Based on the provision of article 117 par. 2a of Act 4623/2019 (Government Gazette A 134/9.8.2019) it is provided that the (problematic in our opinion) provision of article 48 Act 4611/2019 “is abolished after it was in force” and that, unnecessarily, “The provisions of Act 2112/1920 as it is in force and of Act 3198/1955 as it is in force, in combination with article 24 of the Revised European Social Chapter, ratified by the first article of Act 4359/2016 (A 5), are not affected”.

    Regarding the issue of the retroactivity of the abolition of the obligation to state a “valid reason” (in case of a termination of an employment contract initially set for indefinite period and the proof of is burdening the employer terminating), no unconstitutionality issues arise -although the opposite view has been supported. Both legal theory and case law (the Supreme Courts -AP and CoS- included) agree on which statutes can pass with retroactive effect -those that do not affect the constitutionally established rights. In this case, such rights are not affected. (Needless to say, an unconstitutionality issue would be raised in case a tax, penal or pseudo-interpretative statute was retroactive.)

    The confirmation of the force of provisions of Acts 2112/1920, 3198/1955 and of article 24 of the Revised European Social Chapter, is unnecessary. Towards this way, the Report of Results of the Regulations (attached to the amendment) mentions: “With the abolition of the abovementioned provisions, the rights of the employees, industrial peace, recruitments and jobs are ensured, preventing confusion, ensuring further development, reinstating normality in the employment market, always in accordance with the European and National legislators and the precedents set by the National Judge”.

     

    8. Conclusion

    The enforcement of the requirement to invoke a “valid reason” as a prerequisite for the legality of a termination of an employment contract initially set for indefinite period was problematic on many levels. Respectively, so was burdening the employer with the obligation to prove that such a cause existed. The facts that prove those statements right have already shown, during the short life of the abolished provision, in a scientific, business, social, financial and employment level.

    The completely (to use Clausewitz’s terms) ambushing introduction for a vote before the Greek Parliament of the amendment to lift the “valid reason” burden, does not decrease the present and future value of its abolition.

    The positive results of this abolition (and the return to the, in many ways, tested and healthy legislative framework and environment) will surely be seen in the near future. In employment as well.

    stavros-koumentakis

    Stavros Koumentakis
    Senior Partner

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (August 18th, 2019).

  • Changes regarding the termination of Employment Contracts

    Changes regarding the termination of Employment Contracts

    Changes regarding the termination of Employment Contracts that are initially set for an Indefinite Period: The New, Important, Data

    1. Preamble

    All of us, no matter our political beliefs or which party we support, seem to want the (long-awaited) development of our country. We will all, most likely, agree that this development requires, among others, private investments and the creation of new jobs (when we, permanently, succeed in breaking away from Carl Marx’s position that: “Capital is dead labor, that, vampire-like, only lives by sucking the blood of the living labor. The more it lives, the more labor it sucks”).

    In our country, we have encountered all possible employment models: from medieval working conditions to the uncontrolled (most likely met as a pre-election campaign strategy and usually catastrophic for our country’s economy) benefits given to the private and public sector employees.

    We will also (most likely all) agree that, we will have to by all means protect the balance between conflicting interests in employment relationships, in order to avoid leading the country to dead ends, as past practices have done; dead ends that contributed to the “crisis” that brought us in the current adverse financial situation.

    There has been an intense discussion for the past month (which peaked in the recent vote, on Friday, 17th of May, of article 48 Act 4611/2019, which replaced subparagraph 1 par.3 article 5 Act 3198/1955) about how making terminating employment contracts set for an indefinite period more complex affects employment relationships: the existence of a “valid reason” for the termination of the employment contract from the part of the employer was added to the requirements, with the employer being responsible for invoking and proving its validity.

    But what has the status been so far and what will be happening from now on?

     

    2. The important changes made

    2.1 Terminating employment contracts initially set for an indefinite period in the previous legal scheme

    According to the first subparagraph of par. 3 of article 5 of Act 3198/1955:

    “3. Termination of the employment agreement is valid, as long as it is done in writing, the compensation due has been paid and the employment of the employee being laid off has been registered with IKA (insurance body of Greece) or the laid off employee has been insured”.

    Therefore: The termination of the employment contract set for an indefinite time was valid without the employer invoking any reason. The only obligation of the latter was the payment of the compensation that was due to the employee. When the latter regarded the employer was misusing the right given to them by law to terminate the employment agreement, the employee could appeal before the courts and as for the cancellation of the termination and the continuation of the employment relationship. In this case, the employee had to prove the claims they made.

    2.2 The New Legislation

    With the provision of article 48 of Act 4611/2019, the first subparagraph of paragraph 3 of article 5 of Act 3198/1955 (‘A 98), is replaced, effective immediately, as follows:

    “3. The termination of employment is valid, only if it is based on a valid reason, as such is defined in Article 24 of the revised European Social Charter, ratified by article one of law 4359/2016 (A’ 5), it is done in writing, the compensation due has been paid and the employment of the laid off employee has been registered with IKA or the laid off employee has been insured. In case the termination is challenged, the employer is responsible for invoking and proving that the requirements were met”.

    Therefore: From this point forward, the law requires, in order the termination of an employment contract set for indefinite period to be valid, a “valid reason”, which the employer terminating the employment has to invoke and prove. For the definition of the term “valid reason” (in detail below, under 3.3) the provision is referring to the revised European Social Charter (below, under 3.3), which is already ratified by Greece, (with an increased formal power) and more specifically in article 24 of said Charter (below, under 3.2).

    2.3 What changed comparing to the previously exiting legal scheme when it comes to terminating an employment contract initially set for an indefinite time?

    According to the pre-existing legislation, the employer could terminate any employment contract set for an indefinite time, with the main requirement being the payment of the compensation of dismissal. When the employee considered there was a misuse of this power, they applied to the competent courts and the employee was responsible for proving the misuse of thee employers right.

    The new regulation brings fundamental changes: the employer now must invoke and prove the requirements of a valid termination are satisfied, therefore the existence of a (now required) valid reason.

    This position the Greek law has taken is compatible with the explanatory memorandum of the recent (article 48 of act 4611/2019) regulation concerning the necessity of the existence of a valid reason (see the report), as well as with the position the European Committee of Social Rights took on the provision of article 24 of rESC.

    2.4 In Conclusion

    In contrast with what was been happening so far, the employer can no longer rest assured just by paying the compensation of dismissal when terminating an employment contract initially set for an indefinite time. They shall keep in mind that a valid reason must be invoked. This reason should have something to do with the behavior or the skills of the employee, or the operational requirements of the establishment. Even more so: invoking and proving the existence of this valid reason, is theirs (the employer’s) responsibility.

    Concluding: The requirement for the existence of a valid reason for the termination of the employment contract set for an indefinite time and also the “burden” of invocation and proof of such reason being on the employer, is certain to fill the court halls (a first “taste” of the stand the courts will take under 4), boosting our (lawyers’) bank accounts -no matter whose side you are defending.

    Let us all just hope that it will have positive effects not only in ensuring the employees’ rights (as the law maker intends it to) but also to the development of the economy, the businesses and the country.

     

    3. The Revised European Social Charter and the “Valid” Reason

    3.1 The European Social Charter and the Revised European Social Charter

    According to the explanatory memorandum for the Ratification of the revised European Social Charter:

     “The European Social Charter (ESC), international convention for the protection of social rights, was adopted by the Council of Europe in 1961 and ratified by Greece with Act 1426/84 (Government Gazzette No 32A/21-2-84).”

    The ESC is constantly developing by the precedents set by the European Committee of Social Rights, which oversees its application, and by incorporating Protocols in the ESC that widen the range of the rights protected and improve the mechanisms set to control. In 1998, the Additional Protocol was added to the ESC, which expanded the scope of the Charter with the recognition and protection of new rights. In 1995, a new Additional Protocol was added, providing with a system for Collective Complaints. Greece ratified the two Additional Protocols with the Act 2595/98 (Government Gazzette 63A/24-3-98). In 1991, the amending protocol was added, which improved the mechanisms set to ensure the application of ESC and was ratified with Act 2422/1996 (Government Gazzette 144A/4-7-96).

    In 1996, the European Social Charter was revised, in order to be more up to date and to include more rights. The Revised European Social Charter was adopted on the 3rd of May, 1996, in Strasbourg, where it was open for signing, and was entered into force in the 1st of July, 1999, after the three necessary ratifications. It takes in consideration the developments in labor legislation and social policy, the ones that happened since the creation of the Charter in 1961, and intends to replace it.

    The rights protected by the ESC divided to four areas: a) Employment, Training and Equal Opportunities, b) Health, Social Insurance and Social Protection, c) Labor Rights and d) Protection of Children, Family and Immigrants.

    Greece has already signed the Revised European Social Charter in the 3rd of May 1996. The ratification of the Revised Charter improves, beyond any doubt, the level of protection provided in the area of social policy and proves the active interest of our country in the protection of human rights.

    The Revised European Social Charter is already national law since its ratification with Act 4359/16. In addition, it is protected under the Greek Constitution (article 28 par. 1).

    3.2 Article 24 of the Revised European Social Charter (RESC)

    The European Social Charter (ESC) is, as already mentioned, an international convention for the protection of social rights. In 1996, the ESC was revised in order to be more up to date and to include more rights.

    According to article 24 of RESC: “In order to reassure the effective application of the right of protection of the employees in cases of termination of the employment relationship, the parties must recognize that: a. the right of all employees to not have their employment relationship terminated without a valid reason relating to their ability or behavior, or based on the operational requirements of the establishment, of the facilities or the agency, b. the employees’ right, those ones whose employment relationship is terminated without a valid reason, to a sufficient compensation or other proper rectification. For this reason, the parties have to make sure that the employee, believing that their employment relationship is terminated without valid reason, has the right to appeal to an impartial body.”

    3.3 What constitutes a “Valid reason” according to Article 24 of RESC

    It is accepted that the valid reason required by article 24 of RESC (and now by paragraph 3 of article 5 of Act 3198/1955) is the one justifying the proper use (and not misuse) of the termination.

    There is no obstacle in ratifying this article, as long as the causality of the termination of employment coincides with article 281 of the Greek Civil Code, which is setting the requirement of good faith intention and in accordance with the financial and social objective of the right of the employer to terminate the employment contract. The reasons for termination mentioned in article 24.a. are related to the reasons that lift the unfairness of the termination of the employment contract …”

    The current position of the legal theory on the “valid reason” is basically the same as the abovementioned opinion of the European Economic and Social Committee Draft Law “Ratification of Revised European Social Charter”.

    Valid reason is any reason relating to the employee them self, the way they work and their attitude as an employee, the technical and financial aspects of the establishment (not necessarily the establishment’s financial difficulties) or its operational requirements. Such a valid reason could not be tolerated, of course, outside this specific context: The dismissal of an employee for reasons irrelevant to the employment relationship and business could not be tolerated (i.e. vindictiveness, union activity, sexual orientation, political beliefs, racial discrimination etc.).

    Therefore, we could conclude that valid reason is any reason that negatively affects the employment relationship and justifies its termination from the part of the employer.

     

    4. How will the courts react?

    (A First Taste of The Future… From The Past)

    Obviously, we cannot possibly know how the courts will rule on, very recent, new regulation. However, there is a very interesting ruling coming from the past.

    The ruling of the Court of First Instance of Piraeus 3220/2017 is definitely the first, and till this day only one, as far as the writer knows, published court decision that accepts that the status of unjustified termination (ruled according to subparagraph 1 par.3 article 5 Act 3198/1955) was not compatible with Article 24 of RESC. This ruling accepted that RESC had already (after its ratification with Act 4359/16 – and according to Article 28 of the Greek Constitution) increased formal power over common Greek laws.

    “With the above provision (Article 24 of RESC) is introduced for the first time in the European legislation for Human Rights a new fundamental right, which is the protection of the employee from dismissal with the initiative of the employer. The main scope of the provision is that an arbitrary and unjustifiable dismissal offends the merit and the dignity of the employee. The protection Article 24 of RESC ensures that: a) every termination of an employment contract by the employer must be based on a valid reason, which should be relevant to the behavior or the skills or the operational requirements of the establishment, b) the employer must be properly compensated for being unjustifiably dismissed by the employee, or be provided with some other form of rectification and c) adequate lawful protection must be ensured.

    After the ratification of Article 24 of RESC it is clear the status of the “unjustified” termination by the employer is not compatible with the termination due to a valid reason as required by the new article. Therefore, the principle of justified termination is directly adopted by the Greek legislation and from now on the Greek courts should investigate the existence or not of a valid reason and deem invalid every dismissal that is not based on such a reason. This can be done by either directly referring to Article 24, which sets precise requirements that are explicit and free of contingent, at least regarding this issue, of course along with the provisions of 174 and 180 of the Greek Civil Code – solution that is deemed more appropriate by this Court -, or by interpretating Article 281 of the Greek Civil Code, resulting to deeming all dismissals not taking place in accordance with Article 24 of RESC (par. 23) unfair.   

    Regarding the consequences of unjustified terminations – besides them being invalid according to article 174 and 180 of the Greek Civil Code, the employer has to provide adequate compensation or other form of rectification, as required by national law. It should be noted that the European Committee for Social Rights has consistently held rulings that the invalidity of the dismissal and the claim of salaries of late payment and the reinstatement of the invalidly dismissed, are considered as adequate rectification, so there is no need for financially compensating the illegally dismissed. [Gavalas, What is changing to labour law after the ratification of the revised European Social Charter, E.L.L.(ΕργΔ) 2016, 130 and on].

    In view of all of the above, it is clear that the rulings the court made until now resulting that a dismissal is valid even if it is not based on a valid reason (due to its “acausal” nature) and that in order for a dismissal to be considered unfair it is not enough for the reason the employer based the dismissal on to be untrue or for the dismissal to lack an obvious cause, but the for the dismissal to be invalid it should be considered to oppose to article 281 of the Greek Civil Code, should be considered to contradicts to the provision of Article 24 of the RESC, which forbids the arbitrary and unjustifiable dismissal of the employee”.

    In other words: The court rulings addressing cases about actions for the cancelation of terminations of employment contracts set for an indefinite time will focus on investigating the existence of a “valid reason”. When the employer succeeds in proving the existence of a “valid reason” (relevant to the behavior or the skills or the operational requirements of the establishment) the relevant action will be dismissed. But when the judge is not convinced by the argument of the employer, the action of the employee is upheld and the employer is obliged  to reinstate and pay all the salaries of late payment.

    What a great opportunity this is!

    stavros-koumentakis

    Stavros Koumentakis
    Senior Partner

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (May 25th, 2019).

    καταγγελία σύμβασης

     

  • The employment of employees in more companies of the same Group

    The employment of employees in more companies of the same Group

    The employment of employees in more companies of the same Group: a problem without solution?

     

    The “headache” of the heads of HR: Is it possible for a “Group” to be the employer?

    It has always been a problem, and not an insignificant one, for the heads of the HR Departments of Groups of companies operating in our country (and of course for the heads of the Group themselves) the employment of employees in more than one company in the same group.

    This is because, although they are recruited and paid by one of the companies that form the single Group, they are nevertheless required to work on objects that concern other “sister” companies (subsidiaries).

    Under Greek law, however, the Group cannot be considered as a single employer, so that for certain rights of the employee (salaries, compensations, etc.), all companies be responsible regardless of which company employs the employee at a given time (SC 650/82 and SC 10/18-NOMOS).

     

    Important definitions: Employer and Group of companies

    The meaning of Employer

    Under the employment contract, an employer is considered to be any natural person or legal entity in whose service another natural person is employed who provides him or it with that specific service and not necessarily the person who has recruited him (the employee). Usually, but not always, the employer is the owner of the business the interest of which the employment contract serves. (SC 1290/2010, SC 873/2009 and SC 10/18-NOMOS).

    The meaning of Group of companies, of parent company and of the subsidiary

    It is acceptable (in the light of the definitions in Law 4308/2014-Annex A and Article 2 of Law 4172/2013) that the group of companies is characterized by joint management, common economic policy, joint financing, i.e. common financial interests. While it is composed of many independent legal entities, it is an economic unit (SC 10/18-NOMOS)

    Furthermore, according to the definitions in Annex A of Law 4308/2014:

    (a) Group of companies is “the parent company and all its subsidiaries”,

    (b) Parent company is “the entity that controls one or more subsidiaries” ) and

    (γ) Subsidiary is that “entity which is, directly or indirectly, controlled by a parent company”.

     

    The provision, centrally, of individual services to the Group’s companies.

    For the sake of ease of administration and because of the economies of scale, most of the companies in the same Group often share the same headquarters and facilities. So, the accounting department, the HR department, the procurement department, the secretariat, the reception, the quality department, and so on. can only provide their services to all, at the same time, the (co-owned or not) companies of the same group. The same stands for the employees employed in them. The CEO, the CFO, the COO is not (in general) more than one in each Group of Companies. The accountants account for the transactions of most of the Group’s companies and the reception does not welcome only the visitors of their employer’s company.

    Often, the companies of the Group are in different locations – even in different cities. In this case, executives and employees are often required to move to the headquarters of the other companies of the same Group in order to provide (also) to those (and not only to the employer company) their valuable services.

     

    The “thesis” of the individual involved and the corresponding one of the legal advisors: HR managers in despair!

    This particular problem could be classified as old, classic, but at the same time very serious with multilevel effects. However, it becomes more complex if viewed from the point of view of individual stakeholders. (Among other:)

    CEOs are demanding (and reasonably) the maximum possible group-level utilization of the human resources.

    CFOs require (budgeted and outturn -also reasonably) the allocation of employment costs per legal entity.

    Employees sometimes dislike such obligations (formal or informal) imposed on them, and sometimes they “take notes” in order to seek for legal redress against most of the companies in the same group. It is unlikely that they have not wondered about this “ataxia”: “Is it possible for another company to have recruited me and for me to be employed in more?”

    Legal advisers often propose solutions that are inapplicable, poorly practicable or, at a practical level, problematic (e.g. recruitment by one and lending to the others, more recruitment-reduced-time employment, for the same employee, to each of the most companies of the group – with specific hours and days of employment for each of the involved companies, and so on). However, all solutions have a common problem: The inability to determine in advance (sometimes even afterwards) the exact time that the employee will need to work (or, respectively, has already worked) for each company in the Group. And then: the cost! Any of these solutions creates, in addition to the disruption to the organization and to the employees, increased costs for the Group.

    HR managers, sometimes in despair, are called upon to reconcile incompatibilities …

     

    The case law

    The (relatively recent) decision 10/2018 of the Supreme Court confirms its earlier decision (: SC 1222/2003), which provides the solution: “Thus, for a group of companies having common financial interests, even in the case of where the employee’s employment contract was drawn up with one of the group companies and his work is also used by other companies in the same group, the employer remains the employee’s counterparty, who manages his work and is responsible for all payments of any salary nature)

    In simple words it is accepted by virtue of the specific decision that:

    • It is possible for an a-SA to recruit an employee and for this employee to provide his services not only to the specific SA (the a-SA) but also to b-SA and c-SA companies in the same group.
    • In this example, as the employee’s employer remains the company with which the employee has contracted his / her contract of employment (the a-SA) even though the employee provides his / her services also to other companies (b-SA and c-SA) of the same group.

     

    Untying the “Gordian” knot

    As it is clear from the case law of the Supreme Court, it is acceptable for the employee to provide his / her services to other companies in the same group and not only to the one from which he was recruited.

    This assumption proves to be extremely important for groups of companies. Subject (of course) to appropriate contractual arrangements:

    (a) the employee is not entitled to oppose to the provision of his services to other companies in the same group

    (b) the other companies, other than the one which hired him, are not exposed to legal risks to the employee and / or the state

    (c) the individual companies constituting the group are entitled to use the services of an employee in one of them.

    A recurrent problem proves to have its (simple) solution!

     

    stavros-koumentakis

    Stavros Koumentakis
    Senior Partner

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (February 10th, 2019).

  • Voluntary Benefits In The Context Of Modern Labor Relations

    Voluntary Benefits In The Context Of Modern Labor Relations

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    Voluntary Benefits: “What is, ultimately, in force?”

    The offer of benefits to an employee, in addition to the agreed salary

    (whether this is the statutory or higher than that), is a practice of several employers, which in the last years of the deep economic crisis tends to become an established practice.

    These benefits are classified as “voluntary” and may be a certain amount of money, a benefit in-kind (e.g. vouchers for supermarket purchases, food, meals during work) or even an expenditure on behalf of the employee (e.g. conclusion of a group insurance contract and payment of the premiums).

    As a result of this practice, the employee receives the salary agreed with the employer and in addition, actually, earns more “income” during the employment relationship, which is valued at the amount of the benefit offered. The fact that these benefits are paid in the course and because of the employment relationship, often gives rise to a confusion as to their nature and, in particular, to whether they can be characterized “salary” for the employee.

    The answer to this question is not simple and has repeatedly addressed the Greek courts at the highest level. However, it should be noted that this question has, even beyond the legal, also a business- and of course economical dimension, as for many entrepreneurs the adoption or not of such a choice, is a central question.

    An initial response to these questions is attempted here.

     

    Is it an Employer’s Right Or Obligation?

    In principal, the offer of these (voluntary) benefits takes place in the context of the exercise of the employer’s freedom to give to the employee “something extra” to the salary that has been contractually agreed upon. Thus, the employer (should) be able to discontinue the offer of each voluntary benefit at any time and without providing any reason while the employee cannot be able to raise a claim for the continuance of such offer.

    However, it is possible that the offer of a voluntary benefit become a business practice (custom) due to its continuous and long-term granting and to its acceptance by the employee, which results in a tacit agreement between the employer and the employee that the benefit is part of the latter’s salary. In this case, the employer is obliged to offer the benefit and can no longer stop granting it unilaterally.

    However, if the employer, at the beginning of the offer of a benefit, makes it clear to the employee (e.g. in the employment contract) that he reserves his right to discontinue its grant at any time, without justification and without the agreement of the worker, thereby formulating the so-called “reservation of liberty”, it cannot – in any event – be considered that the benefit has a salary nature and therefore the employee will not be entitled to claim its payment.

     

    Employer’s “Reservation of Liberty” And “Withdrawal Clause”:
    The Distinction of the Legal (And also Economical) Consequences of Each

    The Arios Pagos (Supreme Court of Cassation) for the first time its decision with the no. 1174/2017 separated the concept of the “reservation of liberty” from that of the “withdrawal clause” which the employer may enter at the beginning of the granting of a voluntary benefit.

    In the case of the “withdrawal clause”, the employer may discontinue the benefit by exercising the right to withdraw by a unilateral declaration addressed to the employee. As a result, both the “reservation of liberty” and the “withdrawal clause” allow the employer to unilaterally discontinue the offer of the benefit.

    There is, however, a substantial difference between them: Entering a “reservation of liberty” rules out the creation of a business practice (custom) and thus implicit contractual commitment of the employer to provide a benefit and the employee’s corresponding claim for its payment. On the other hand, entering a “withdrawal clause” does not function in the same way: the employee’s entitlement to the benefit is born thus the exercise of the right of withdrawal results in the loss of that claim for the future.

    As soon as the worker becomes entitled to the benefit, this amount should be taken into account for the purposes of determining both the severance allowance and also any other benefit of the employee provided by law and for the determination of which the amount of the salary paid is taken into consideration (indicatively: ad hoc bonusses). As the choice of one or other clause has direct financial consequences for the burden on the business, the particular value of this distinction is easily understood.

     

    dikhgoriko-grafeio-koumentakis-kai-synergates-law-firm-

    The Real Dimensions of Voluntary Benefits in Labor Relations

    More and more companies, burdened by the unreasonably diverse charges on business nowadays, seem to face voluntary benefits as a means of limiting their contractual obligations towards their employees and hence saving (or potentially saving) costs. The procedure followed is more or less common for both the current employees of the company and for those in recruitment: both are required to accept as a fixed remuneration a certain amount, which is however split down to the statutory minimum wage (which will be mentioned in the employment contract) and to the remaining amount that (explicitly or implicitly) will be offered to the employees as one of the above-mentioned types of voluntary benefit.

    On the one hand, the current employees agree to sign an amendment to their contract of employment, in which the reduction of their salary to the statutory minimum is recorded, while the ones in recruitment agree to sign a contract of employment accepting the statutory minimum salary as a conventional salary. Both categories of employees aim at more permanent compliance with the additional voluntary benefit, which will complement the amount of the agreed salary.

     

    Voluntary Benefits: Its Tax Treatment

    As far as taxation is concerned, the legislator does not deal with the voluntary benefits in a consistent way. In principle, the general taxing rule applies for their taxation, if their value exceeds € 300,00 per year. However, the sub-cases of how to determine their value, but also the explicit exceptions to the rule, are several (and related to the amount of benefits per category envisaged), so that the employee must search in which sub-case the benefit he receives is categorized in order to know if he will be taxed for this benefit. A typical example of this is the coupons for food (i.e. the widely used coupons for the supermarket), which are not taxed if they do not exceed € 6,00 per day, or € 120,00 per month.

    For the tax legislator, therefore, the legal characterization of the benefit is irrelevant, but the amount of the benefit is particularly important.

     

    By Way Of Conclusion

    The choice of companies to offer voluntary benefits under employment contracts (whether offered freely or freely withdrawn) is increasingly adopted in the context of a reasonable effort to derive a legitimate benefit or to reduce unfair costs. In any case, particular attention should be paid to the wording of the relevant provisions and clauses in order for the maximum benefit to be achieved and for the risk to be minimized.

    The contribution of the lawyer (and in this case) also legal advisor is particularly important.

    Evdokia Kornilaki
    Senior Associate

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  • Companies And Confidentiality

    Companies And Confidentiality

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    The Importance Οf Securing Confidentiality

    Every company faces a lot of challenges to become and remain healthy, but also to maintain the high standards it has possibly achieved in terms of operation, efficiency and profitability. Maintaining (and, more importantly, increasing) its market share in the geographic areas of its activity requires a series of obstacles to be overcome daily.

    Achieving and maintaining healthy entrepreneurship is always not only a requirement but also an everyday challenge. One of its prerequisites is to ensure that the information that the business identifies as confidential will be maintained as such and, among other things, will not diffuse into competition.

    In some, special cases, the obligation to preserve the confidentiality of the information that is handled by the company is imposed by the institutional framework (see below on personal data). In these cases, the consequences do not refer to the smooth operation and development of the company. The consequences may refer to indefinitely high fines and penal sanctions!

     

    Persons Liable For Confidentiality

    The obligation to preserve confidentiality is an obligation that everyone has. Without exception!

    As the worker or the company’s usher is not excluded the same way (obviously), the executives, the senior management, the CEO or even the main shareholder are not excluded. It is important, however, to stress that this obligation also includes any third party with whom confidential information is shared, e.g. a close associate or consultant of a business.

     

    Form And Way Of Notification Of Privileged Information

    The form of the information is of no importance for its protection: It may be documents, electronic files, even for oral information disseminated to a specific number of persons and pertaining to a particular company or group of companies.

    Additionally, the way of knowing the information covered by the confidentiality obligation is also meaningless. It may be information that (e.g.) an executive has become acquainted with while performing his/her duties at his workplace or even outside such (e.g. at the client’s premises). It may still be information about matters handled by the person responsible for such, colleagues, business associates or consultants of the company. Finally, there may be information on issues related even to customers of the latter.

     

    Privileged Information

    Information covered by the confidentiality obligation may refer to commercial know-how (commercial information: e.g. customer and supplier lists, cost accounting and price calculations, sales strategies, marketing methods, and so on) and / or technical know-how (expertise, technical information). They may relate to the methodology, procedures, planning, data, development and results of any business activity, process, research, product output or service provision. They may relate to procedures, policies, documents of auditing authorities related to the company. It may, in the end, concern any issue of importance for the company.

     

    Particularly, On Personal (Personal and Sensitive Information) Data

    Thus, some of the protected information may even be related to personal data – personal and sensitive information. This scenario adds more obligations for companies as provided by the current institutional framework (EU / 1995/46 Directive incorporated by Law 2472/1997) as well as by the new Regulation (EU / 2016/679) which will be implemented as of 25 May 2018 and beyond – regardless of whether or not the (expected) law which implements it be adopted.

    However, it is not only the additional obligations of companies that are being created by the existing and the new institutional frameworks with regard to personal and sensitive data but also, especially, the threatened sanctions in case of non-compliance and / or violation (for all these issues please refer to the relevant article “Personal Data Protection and Companies”)

    The Obligations Of Executives And Partners

    Contracts that associate all employees and external partners with a company (must) include provisions that restrict the use of information that come to their knowledge during and solely in the context of their cooperation with the company. And even more: (they ought to) regulate the obligations of employees and associates during the period after the expiration of their cooperation (e.g. return of forms, documents, notes, deletion or return of electronic files) as well as the sanctions for breach of their (contractual and post-contractual) obligations (usually high penalties – in addition to general claims for compensation).

     

    Particularly, Decision 1/2017 Of The Arios Pagos (Supreme Court of Cassation)

    This decision has been a landmark on the specific issue.

    By virtue of this decision, it has been accepted that constitutionally protected rights (including the rights of the employees) such as the confidentiality of letters and communication (article 19 of the Constitution), the inviolability of private and family life (article 9C) and the protection of personal data (article 9A C) be limited on the basis of the constitutionally guaranteed principle of proportionality (article 25C).

    Therefore, in the context of this decision, the right to legal protection (article 20 par. 1 C) and of the freedom to conduct business (articles 5 & 106 par. 2 C) of an employer / company could prevail over the abovementioned rights of the employees.

    However, what was, practically, the meaning of the limitation of the constitutionally guaranteed employees’ rights in the framework of this specific and of other similar cases?

    There has been recognized the Employer’s right (whose above-mentioned constitutional rights were deemed to prevail, in the particular case and under the particular circumstances) to:

    • Monitor the electronic (professional and personal) correspondence of its employees as it is imprinted on the computers and on the other means of its company
    • Draw the deleted mail from these computers that constitute its property
    • Record the data obtained from the computers of its company and, in particular,
    • Exercise its legal rights on the basis of data contained in the personal or professional correspondence of its employees which took place through the company’s computers even if they had been deleted in the meantime.

    There is no doubt that this decision is extremely important: The Company does not remain (legally) unprotected against malicious employees who, under the guise of their constitutionally protected rights, attempt to harm it for their own benefit.

     

    When Does The Confidentiality Obligation Recede?

    The confidentiality obligation recedes:

    • when the information to which it refers is public (and a priori) known
    • when there is an obligation to disclose this information arises from the existing institutional framework or is imposed by a competent authority or a competent court.

     

    Confidentiality Provisions In Business Level

    In business level, the provisions that refer to confidentiality are (or should be) normally contained:

    • in the employment contracts, in the service agreements, in work contracts etc. of the company
    • in the company’s Work Rules (where applicable)
    • in the Code of Ethics (or Code of Conduct) of the company
    • in the NDA’s of the company and its customers- clients τόσο της επιχείρησης όσο και των πελατών της (to the extent that the latter apply to the company and, in addition, to its employees)

     

    Confidentiality Provisions Contained Into Legislation – Generally

    In cases where (contrary to what is agreed or what the law requires) the person who breaches the confidentiality obligation causes damage, the person responsible is obliged to restore it in its entirety (losses and damages – article 914 of the Civil Code, moral damage – article 932 of the Civil Code)

    However, irrespective of the civil claims maintained by the injured person against the person responsible, there are a number of criminal provisions relating to the criminal offense of the offender [indicatively: article 370 of the Penal Code (violation of letters privacy), article 370A of the Penal Code (violation of the telephone conversation and oral conversation privacy) , article 370C of the Penal Code (illegal access to an information system) and the related provisions of articles 370B, 370D, 370E of the Penal Code]

    There are, of course, also provisions referring to specific issues arising from the breach of confidentiality, as (indicatively):

    There are, of course, also provisions referring to specific issues arising from the breach of confidentiality, as (indicatively):

    More Specific Provisions

    (a) With regard to personal data breach

    Whenever the confidentiality obligation breach is related to personal data breach, there are administrative, criminal and civil penalties directly or indirectly imposed (also) on the offender.

    On the basis of the existing institutional framework (Law 2472/1997) which is in force until 25.5.2018 – when Regulation 2016/679 –  http://koumentakislaw.gr/en/blog/articles/personal-data-protection-and-companies/ enters into force, there are provided specific administrative penalties (Article 21), criminal sanctions (Article 22) and also civil liability of the offender (Article 23).

    Regulation 2016/679, of course, provides for very serious administrative sanctions (Article 83) and for civil liability for those who violate personal data (Article 82). It is expected that the law currently being drafted will further specify said sanctions or even impose additional (e.g. criminal) for the offenders (Article 84).

    (b) With regard to unfair competition

    Where through confidentiality breach there is also violation of the provisions of unfair competition (Law 146/1914), both criminal penalties (Article 16 & 17) and civil sanctions (Article 18) are provided for.

    (c) With regard to Codes Of Ethics

    It is not unusual for the operation of certain business sectors to be governed by Codes of Ethics. In these Codes, we often encounter a number of provisions regarding the obligation to ensure confidential data as well as sanctions in case of breach. (Indicatively: Code of  Greek Pharmaceutical Conduct – provisions of articles 26-chapter A and 4 of chapter C)

     

    Penalties on Breach of Confidentiality: Legal, Business And Not Only …

    In general, in view of the above, one could say that the obligation to preserve confidentiality directly or indirectly is supported in almost the whole range of law (e.g. civil, criminal, administrative). More specific provisions of the existing institutional framework and of the contractual relationships that have arisen in the course of the negotiations, specify both this obligation and the many consequences of its breach.

    The penalties provided envisaged relate to offenders-natural persons and, sometimes, the directly or indirectly involved companies: those who did not do the appropriate to protect those affected as well as those who urged the offenders into their unlawful actions.

    Thus, the sanctions are not only legal:

    The persons who violate this obligation they also suffer the corresponding personal and professional demerit.

    However, in the case of companies where the offenders were employed, the consequences are sometimes unbearable: For how long can a company operate when data, personal data (or even worse sensitive personal data) of its customers are loaded into the Internet? For how long can a company operate when its critical business secrets (whether it’s recipes or clientele, or production or marketing methods or whatever) are diffused to its competitors?

     

    Necessity Of Compliance And Consequences Of Non-Application Of Confidentiality – The Role Of The Legal Advisor

    Storing and disseminating information (also at business level) is an element of everyday life-one that does not seem to be differentiated from vital, human, functions..

    Safeguarding the integrity and confidentiality of information, notwithstanding the avoidance of the aforementioned sanctions, ensures the existence of high professional standards (in particular) for the companies concerned. This fact, inevitably, is reflected in its existence and development, in its relations with its customers and suppliers. It is reflected into the shareholders, the employees, the associates and their families.

    There is no doubt that securing confidentiality is an obligation of all those who are directly or indirectly involved in operating a company. However, the responsibility of the legal advisor is a little more special as he/she has the burden of: (a) informing the parties involved; (b) creating a coherent grid of contractual and other regulations, dissuasive to be breached; and (c) managing the critical situation created in the case of violation of any kind of confidential information.

    It is also not of a minor importance that your Legal Advisor’s involvement in Cyber Risk issues is already covered by Directive 2016/1148 on Measures for a High Level of Network and Information Security for Networks across the Union ( Network and Information Security Directive 2016/1148 – also known as NIS) – but for this issue, there shall be a specialized screening and filing on the same site.

     

    The Challenge (By Way Of Conclusion)

    In any case, it is more than obvious that securing confidentiality is one of the challenges of today’s business. It is up to us, the directly and indirectly involved (us Legal Advisors in particular), to assist and respond positively to this challenge by providing our own small contribution to what everybody desires, that is to secure and develop healthy entrepreneurship.

    Koumentakis-and-Associates-Stavros-Koumentakis

    Stavros Koumentakis
    Senior Partner

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  • Alliance For Digital Employability

    Alliance For Digital Employability

    [vc_row][vc_column][vc_column_text] Recently, Koumentakis & Associates Law Firm undertook the full support of the “Alliance for Digital Employability”.

    The Vision of this initiative is to reduce Unemployment in Greece through the creation of 500.000 new jobs in the IT sector in the next decade. The action area is, primarily, Greece, with the aim to reduce domestic unemployment and the supply and demand gap for high-level digital skills.

    As documented by a special study, the above Vision can be realized with actions that will aim at:

    (a) accelerated training of candidates in high-quality digital skills

    (b) the certification of the skills they have acquired;

    (c) their absorption from the labor market

    As stated in the relevant announcement, “In order to implement these actions, it is necessary to involve the private and public sectors in the field of education and the labor market, while the key success factor will be the implementation of concrete practical proposals to mobilize more forces”.

    Koumentakis & Associates Law Firm and all those who support the Digital Employability Alliance, will contribute to the creation and coordination of the necessary actions to implement the Vision of this initiative to reduce the digital divide and unemployment. [/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_text_separator title=”Photo Gallery” border_width=”3″][/vc_column][/vc_row][vc_row][vc_column][vc_images_carousel images=”33531,33530,33529,33528″ img_size=”full” slides_per_view=”3″ autoplay=”yes” hide_pagination_control=”yes” wrap=”yes”][/vc_column][/vc_row]

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