Tag: employment contract

Employment Contracts: What are they exactly?

Labor law seems to be all about “all or nothing”. On the basis of this principle, a contract either is or is not subject to the provisions and protection of Labor Law. In the first case, the employee enjoys the protection of Labor Law- in its entirety. In the second, Labor Law simply does not apply. It is therefore very important to know if a contract is subject to the provisions of Labor Law. And, of course, under what conditions. But things are neither simple nor clear. Rightly so, we would wonder (regarding Employment Contracts): What are they?

A small breach of the aforementioned “all or nothing” principle, the case of Managers and their own, limited, protection. But what about the rest?

The above topic seems completely theoretical but it is not at all. The (correct) assessment of a contract as an employment contract (or not) reduces the risks of the business. It creates legal certainty.

How important is it, for example, to be able to safely distinguish this form of contract from other contracts like it (indicatively: services and works contracts)? How important is it to be able to choose the right form of contract each time we enter into or re-approach a partnership? How many dangers could we avoid?

This issue does not concern, exclusively, those studying (labor) legal theory. Neither just us lawyers…

Prerequisite for the application of the provisions of the labor legislation

A condition for the application of the specific provisions is the provision of dependent work.

The concept of dependency is crucial. However, the legislator did not choose to define it: Definition of dependence and / or dependent work does not exist.

Various theories have attempted to fill this gap. Each of them seeks to be the criterion for the classification (or not) of a contract as an employment contract

Theories on what constitutes dependence

Many and most experts have written about theories on what is dependence. We will not attempt to record or look into them in detail. But it would not be possible, precisely because of their fundamental importance, not to mention them. Even briefly. Indicatively:

(a) The theory of financial dependence

Necessary but also the only criterion for dependence, according to the specific approach, is when the employee’s sole (or main) source of income comes from a specific job. Under this approach, the employee is required to devote all of his or her working time to the performance of his or her specific job.

In a broader sense, financial dependence is found when the one offering work is not in a place (financially or other) to utilize their own work or the work of others to their benefit. Therefore, they do not take the risk (business or financial) from carrying out the specific activity.

The theory of financial dependence is not a safe criterion for determining dependent work. It is considered by the jurisprudence as only an ancillary criterion for identifying dependence.

(b) The theory of functional or organic dependence

A decisive criterion, according to this theory, is the integration of the employee in the employer’s business. This integration is what makes the employee a functionally integrated element of the company.

This theory has also not prevailed in our country.

(c) The theory of legal dependence

This is a theory of French origin. This theory considers as a critical criterion of identifying dependency the provision of work under the direction, authority and supervision of another person, the employer. The latter has the right to monitor the implementation of their instructions.

This theory presents important similarities with that of personal dependence, which has been adopted as the prevailing theory by Greek jurisprudence. In fact, sometimes these two theories are identical.

(d) The theory of personal dependence & the managerial right of the employer

This particular theory is of German origin and the prevailing one in our country. According to this theory, the work provided under the direction and instructions of the employer is considered dependent. An important element of this theory is the managerial right.

The managerial right is defined as the power of the employer to determine, unilaterally, the terms of employment. Specifically, the place, the time and the way of providing the work.

The scope of the managerial right is determined and limited by hierarchically higher laws. In other words, the employer is entitled to set the terms of employment only when they are not already set by hierarchically superior rules of law.

In particular, it is settled case-law that “… a contract of employment exists when the parties intend to provide the agreed work and wages, regardless of the method of payment, and the employee is subject to legal and personal dependence on the employer. This dependence is manifested in the right of the latter to give binding instructions and directions to the employee, as to the manner, place and time of provision of the work and to exercise supervision and monitor to verify the employee’s compliance with them. ” (indicatively: Supreme Court 602/2017, 171/2016, 608/2014, Plenary Session of the Supreme Court 28/2005).

The inadequacy of dependency theories as a means of identifying employment contracts

The aforementioned theories on dependency have failed to clearly define the meaning of dependent work. In fact, the prevailing theory of personal dependence in our country is currently receiving strong criticism.

The evolution of technology is rapid. The possibilities that come with it are without limits. The needs that are formed are unprecedented. It seems only logical that flexible forms of employment are gaining ground, more by the day, over the classic full-time employment contracts. Especially after the recent, ten-year long, economic crisis in our country. And even more: due to the ongoing international and national economic crisis and recession due to the Covid-19 pandemic. This does complicate things even more.

In this, fluid and ever-changing environment in employment relationships, the managerial right of the employer as a means of identifying (or not) an employment contract is more often than ever found to be not enough. This fact, however, does not mean that any flexibility provided to the employee in terms of the place, manner and time of employment, deprives their work of the element of dependence.

There is another aspect worth mentioning

The quick adaptation of employees to the rapid evolution of technology, to which we have already referred, gives them a significant lead in evaluating the optimal way of providing their work. How certain is it that the employer knows better (than the young and tech-savvy employee) the best way to provide non-manual work? And how normal, after all, does it seem to give the employee considerable freedom in how to provide their work? And, in a logical sequence-in addition, in terms of the time and place of the offering of their services?

How important, after all, can the time, place and even the way of providing the work be for the characterization of a contract an employment contract?

Therefore, the limits of this type of contract become fluid. It is difficult to distinguish it from related contracts (services and works contracts, for example).

Additional signs of dependence

The weakness of dependency theories as a criterion for distinguishing employment contracts from related contracts is a given. Consequently, legal theory and/or case law need to take additional evidence into account. A clearer definition of the concept of dependency seems (and is) extremely important.

Among these indications, which advocate the existence of dependence, are, among others (indicatively: Court of Appeal of Athens 15/2008, Court of first Instance of Athens 372/2010, Supreme Court 1133/2012):

(a) The non-existence of an independent business organization of the employee,

(b) The (contingent) payment of operating expenses of the employee by the employer,

(c) The non-use of additional staff by the employee,

(d) The inability of the employee to develop a separate clientele and expand into new markets (formal vs real freedom of action),

(e) The employee does not take responsibility for the financial solvency of the customers,

(f) The assumption of business risk by the employer.

The various signs of dependence do not need to be cumulative. According to case-law, “… what distinguishes dependent work from independent work is not the quantitative element, that is, the accumulation of more evidence of commitment and dependence, but the qualitative element, that is, the particular quality of commitment and dependence which it has for the specific employee that make necessary the special regulation of their relationship with the employer and justify their special protection by the labor law ”(Plenary Session of the Supreme Court 28/2005).

Non-critical signs of dependence

On the other hand, and according to the majority of case law, there are indications that are not critical for the characterization of a contract as an employment contract. These indications may result in the terms of the employment contract deviating from those normally agreed. However, these terms do not appear to be “out of the ordinary” elements of employment contracts.

Among the evidence that are not critical, based on the theory of personal dependence, are:

(a) The duration of the obligation to provide work, (b) The provision of work as a primary or secondary occupation, (c) The amount of remuneration, (d) The manner of remuneration, (e) The type of work provided, (f) The development of an initiative (although its lack advocates the existence of an employment contract), (g) The tax regime and the issued (tax) document, (h) The social security status of the employee (indicatively: Supreme Court 460 / 1986, Court of Appeal of Patra 841/2007, Court of First Instance of Athens 372/2010, Supreme Court 71/2011,).

Executives, to whom we have already referred, are a typical example of employees whose employment provides several of the above indications, which deviate from the usual (even legal) terms of employment contracts. Executives are usually paid very high salaries. At the same time, they are not subject to specific working hours. Rather, they are developing (and should develop) important initiatives. In fact, their characterization as executives determines their clear differentiation from other employees. It places them closer to the employer. In fact, instead of the employer, they operate, exercising their powers both within the company (on the employees, for example) and in the relations and transactions of the company with third parties.

Is the most favorable solution for the employee truly a solution?

Given the difficulties that exist in distinguishing employment contracts and the adverse consequences of not including an employee in the protective provisions of Labor Law, part of case law argues that in cases of doubt the most favorable solution for the employee should be applied.

Indicatively: “In case of doubt, the court must give the most favorable solution for the employee, as required by the principles of Labor Law and with the corresponding application of article 2 of Law 1846/51, according to which it is difficult to distinguish dependent or non-dependent work of a person, this is considered to be covered by turning to the most secure solution, ie that they provide dependent work. ” (indicatively: Court of Appeal of Patra 841/2007).

Let us move away from theories: in reality…

As mentioned in the introduction, understanding that a contract is an employment contract is always valuable. The need to reduce business risk is significant. The need for the company not to take legal risks is even more important.

But what does all this (unfortunately) “fine print” mean for the business?

As for the same subject-seen from another angle:

What should be the choices of the business and what of its legal representative?

Given the current (legislative, jurisprudential and theoretical) data, we must, with excessive care, each time evaluate the legal framework whithin which we (choose to) enter into a contract.

Particular care should be taken to capture in the contractual text the critical elements that conceptually differentiate any type of contract (eg services or works contract) from an employment contract -provided of course we choose to do so.

Dependency theories for characterizing an employment contract as such have already proved inadequate. Developments in labor relations attempt, in vain, to follow the rapid, on a continuous basis, developments in technology. The speed of both intensifies, more and more, the inadequacy of dependency theories.

The recent pandemic has given a further boost to flexible forms of employment. It put “informal” forms of work on the lead. Teleworking is probably the most typical example. It is a given, already, that it is not possible to talk about the future, when, exhausted, we try to catch up with the present.

The managerial right, shaped around the Ford production model (: production line, homogeneous workforce, simple and repetitive movements that serve mass production), already seems obsolete.

It is therefore necessary to expand the conceptual elements of the managerial right.

Even clearer is the need for a clearer demarcation of employment contracts, taking into account the present and the (foreseeable) future.

Until then;

It is necessary to (very carefully) manage the relationships that are specific to employment contracts.

Both on a substantive level and on a level of the relevant contractual texts.

But especially in the relevant contracts.-

Stavros Koumentakis
Managing Partner

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

June 28, 2020
Employment contracts: The necessary content

The (rather necessary) content of the employment contract

I. Preamble

“I keep your words painted on paper …”, Marinella, a famous Greek singer, has been singing since 1970. She was probably not referring to written agreements. However, the commitments deriving from written texts are definitely binding. So says the Roman quote: “Verba volant, scripta manent” (: “talks fly away, written words stay put”).

We have seen in a previous article that it is not generally necessary to conclude employment contracts in written.

However, we concluded that: “The (written) employment contract, though optional, can prove valuable. As long as it has the right content. ”

This article will address the (possible) necessity of written employment contracts. As well as their (desirable) content.

II. The purpose of (written) employment contracts

The aforementioned article was the comparative overview of the employment contract in relation to the disclosure of its essential terms, which derives from the P.D. 156/1994.

There we found, inter alia: “But the purpose of the employment contract is significantly broader and more important. And this is the case despite it not (always) being mandatory – as opposed to the individual working conditions disclosure document. The contract regulates (and should regulate) all the rules governing the employment relationship. Not just the essentials.

First of all, it may achieve the purpose of informing on the essential terms and thereby nullify the reason for the existence of the separate document. In addition, it can be an important tool in the hands of the employer with regard to all the terms and conditions of the employment relationship. The employment contract may place the employment relationship in a predetermined framework. It may preventively address a multitude of issues. It may act as a deterrent for actions which may result in litigation between the parties.”

Therefore: The conclusion of (written) employment contracts, although not obligatory, is nevertheless very important – if not necessary.

III. Regarding the structure and content of the employment contract:

1. The structure

The structure of employment contracts must serve, in addition to its content, the above (under II) purposes and goals.

There may be two main sections. The first should refer to the specific information of each employment relationship (eg employee name, duration, etc.). The second is the uniform, for all employees, contractual arrangements. In this second section, it is important that no unauthorized person intervenes.

2. The content of the employment contract

The content of the employment contract may be, where appropriate, extremely broad or focused on particular issues. But it is important that it covers all the specific needs of the each business. It may include, indicatively, provisions concerning:

2.1. The duties

The duties of the employee need not be described in full detail in the employment contract. This is because they are essentially defined by the employer in the context of their managerial right. The employment contract is, moreover, an ongoing legal relationship. The needs of the employer are likely to change over time. Therefore, strict demarcation of employee duties is not only undesirable. It often turns out to be impossible. It is essential, however, that the employer has reserved the right to move freely within a predetermined framework.

2.2. Place of the performance of work

Businesses may have local or supra-local activity. It is not advised that they limit themselves, in one case or another, regarding the place where their employee’s services should be provided. Greek case-law gives some directions for when dealing with this particular issue: An entire geographical area, regardless of its size, can be agreed upon as the place of work of the employee. Even the whole of Greek territory – though this is dictated by the type and nature of the work provided.

2.3. Providing services to a Business Group

It is not uncommon for employees hired and paid by a company that is a member of a Group to (also) work for other “sister” companies. This practice created a problem, the content and solution of which we have already discussed in a previous article: (Employing employees in multiple companies in the same group: a chronic problem found its solution). We referred there to the Supreme Court’s Decision No. 10/2018, which held that: “… on a group of companies having common financial interests, even where the employee’s employment contract was drawn up with one of the group companies and their work is offered to other companies in the same group, the company which hired the employee remains their employer, and it is it which exercises managerial powers over the employee’s work and is responsible for the payment of all their remuneration.”

This assumption turns out to be extremely important for company groups. The reason? The companies that make up the Group will be able to “employ” “sister” company employees. This is without exposing them to legal risks against these employees and / or the state. Also, without the employee being entitled to object to providing their services to other companies in the same Group. This discretion, however, presupposes appropriate contractual arrangements, so that its content, that is positive for the Group, does not end up exposing them to risks.

2.4. Duration of the contract

The employment relationship is agreed as fixed-term or for an indefinite period. The employment contract must, therefore, regulate matters concerning its termination, either if it is fixed-term or indefinite. More specifically and by way of indication, a fixed-term contract should provide for the possibility of premature termination (and without the invocation of a valid reason) by applying, at the same time, the applicable law on termination compensation for indefinite-term employment contracts (Article 40 of Law 3986/2011). Provisions should accordingly be made with regard to the part-time employment contracts. It is reasonable, for example, to provide a notice period, after which the employee will be entitled to leave his / her job (subject, of course, to the existing legal framework). Also, a number of other issues related to the employee resigning.

2.5. Duration / working hours

The maximum working time limits are set on a daily and weekly basis. These are set by law and may not be provided for restrictively in the employment contract. Unless we are talking about part time work or rotational work.

2.6. Earnings:

The employer and the employee are, in principle, free to agree on the salary to be paid. However, they are bound by the thresholds set by the existing institutional framework. This is, in this case, the “legal salary”. The agreed upon salary may be higher than the legal salary. In employment contracts, it is possible (in this case) to agree that the excess of the agreed upon salary (in relation to the legal) will cover overtime pay, work provided on a Saturday, Sunday or public holidays as well as night work.

2.7. Voluntary benefits

These are voluntary benefits, in cash or in kind, offered voluntarily by the employer, without them being bound to provide them by law or contract. The employment contract must provide for an express freedom of the employer to offer such benefits. Otherwise, if they offer them for a long time, they run the risk of creating a precedent. The result of which? Creating an obligation for the employer to offer them in perpetuity.

2.8. Employee Obligations:

The main obligation of the employee is to provide the agreed work (article 648 Civil Code). However, in the context of the employment relationship, the employee assumes a number of other obligations. What we call “ancillary”. These obligations include, but are not limited to: the obligation of employee loyalty, the obligation for obedience, confidentiality, information, to undergo medical examinations. Also the (contingent) obligations to not act in a competitive manner and to not enter into parallel employment. Indeed, in some exceptional cases (and depending on the nature of the work provided), the employee may also be bound to act (or not act) in a certain manner even outside of the context of their work. Failure to comply with the ancillary obligations may result in the employer terminating the employment contract. Therefore, such obligations are reasonable (and possibly mandatory) to be included in employment contracts.

2.9. Protection of Personal Data – GDPR:

Given the mandatory application of EU General Data Protection Regulation 679/2016 (GDPR), businesses (among others) have to comply with the requirements of the Regulation regarding the protection of personal data which is processed as a result of their activity. In a logical sequence, each of their employees must comply as well. Compliance with the relevant obligations is clearly the responsibility of the company concerned. The latter, as an employer, must – inter alia – explicitly inform its employees of its “Privacy Policy. Also, it must provide them with clear and detailed instructions on how they should process the Personal Data to which they gain access when providing their work. The fines imposed by the Regulation on those who violate it are extremely high. Written proof that the company has provided instructions to its employees regarding the processing of personal data is required. The written indication of their obligations and the consequences of any violations. All this either as an annex to existing contracts or as a new part of contracts to be concluded.

2.10. Confidentiality

An important challenge that all businesses face is that of ensuring that their confidential information is protected as such. Especially that they will not leack to the competition. This safeguard seems to be one of the important prerequisites for most business’s development. As we have already pointed out in a previous article (Companies and Confidentiality), it is of major importance that employment contracts provide for arrangements for limiting the use of confidential information to which employees gain access when providing their work. Of major importance is also: to provide for the obligations of employees during a specific period after the termination of their employment (eg return of forms, documents, notes, deletion or return of electronic files). Even more so: to provide for penalties for breach of their relevant (contractual and post-contractual) obligations (usually high penalties – in addition to general compensation claims).

2.11. Patents

It is vital for businesses to be able to protect their commercial as well as technical know-how. Often employees, in order to provide their work, have to gain access and use their employer’s know how. But such information may be the quintessence of a business’ business. It must, consequently, ensure their protection. An enterprise has the right, (as well) through the employment contract, to impose restrictions on those employees who become have access to such information. And to also impose sanctions (eg high penalties for violations). This is achieved through contractual provisions concerning the duration of the employment relationship (contractual terms) and also the period following its termination (post-contractual terms).

IV. In conclusion

Numerous large companies in our country, with numerous employees, do not have written employment contracts. They mistakenly believe that disclosing the essential terms of the employment relationship is sufficient. Even worse: that it provides adequate guarantees.

But it is more than obvious that writing (and pre-emptively) arranging a significant number of work-related issues can be valuable to the business.

Not just useful.

Sometimes it is absolutely necessary for its survival and development.

Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (February 16th, 2020).

February 16, 2020
Employment Contract=Disclosure of its Essential Terms
Employment Contract = Written Disclosure of its Essential Terms (urban myth or not?)

I. Preamble:

“A hare’s eyes cannot see as well as an owl’s can.” A proverb used in Greece to indicate that not all things are the same. Not all have the same value.

This is how life is.

The same goes when dealing with employment relationships.

It is widely held that the employment contract is identical to the written disclosure of essential terms of the employment relationship. Even in the HR departments of big corporations.

But is this position correct?

Or is it a general misunderstanding?

II. In General: The principle of the “informality” of contracts

It is generally not a prerequisite in our legal order for a contract to be in written, in order for it to be valid.

Our Civil Code (Article 158 of the Civil Code) states the relevant rule: Specific formalities are only required where the law specifically requires them. This is the so-called “principle of informal transactions”.

This principle (rule) is proven by the existence of exceptions. There are exceptions in cases where formalities are required by a specific law. Also, under conditions, subject to the agreement of the parties (Article 159 of the Civil Code).

III. The (non) necessity of the “written document” in employment contracts
1. The rule
The “principle of informal transactions” also applies, not unequivocally, to the field of labor law. Employment contracts, of course, included.

In other words: the existence of a written document is not a prerequisite for the validity of the employment contract.
1. The exception
There are two exceptions to the rule of non-necessity of a written document. Specifically, where the written document is either (a) provided as necessary by a specific legal provision or (b) the parties (employee-employer) opt for it.

In the field of labor law, however, the exceptions to the rule appear to be several. For the validity of some employment contracts the law requires the written form.

In the cases listed below, the written form is mandatory (that is, without a written document, there is no valid contract). This happens:

(a) In employment contracts with the State and with Public Legal Entities (Articles 80 & 84 Law 2362/1995),

(b) In the cases of part-time contracts (Article 38 of Law 1892/1990),

(c) In cases of renewals of fixed-term contracts (Article 5 (2) of Presidential Decree 81/2003),

(d) In the cases of temporary employment contracts (Article 124 of Law 4052/2012).

IV. The document with which individual employment conditions are disclosed
1. The employment contract and the disclosure of its terms
The employment contract must not be confused with the document with which the employment conditions of each employee are disclosed. We have already mentioned (above under III.1) that there is usually no need for a formal document for the validity of an employment contract. A (common) contract in the private sector, for example, can be oral. That is, no conventional text is required to be signed.

However, the employment contract (whether compulsorily concluded or the parties opt for it) should not be confused with the document with which individual employment conditions are disclosed.
1. The obligation to disclose the employment conditions
The employer is obligated to provide a document with which the employment conditions are disclosed, an obligation deriving from the PD. 156/1994.

Directive 91/553 of the Council of the European Union required every employer to inform the employee of the terms of their contract or employment relationship. The aforementioned Presidential Decree was issued in the context of the relevant harmonization of (Greek) labor legislation.

The specific obligation of the employer relates to the essential terms of the employment contract or relationship.

The employer must fulfill this obligation within two months after drawing up the employment contract (Article 3 §1 PD 156/94) and within one month after any -possible- amendments (Article 5 §1 PD 156/94).
1. The content of the (mandatory) disclosure document
The above PD lists (not restrictively) the terms which must necessarily be included, as a minimum, in the information provided by the employer (Article 2 §2).

The document providing information to the employee must at least contain:

(a) The identity of the parties.

(b) The place of employment, the seat of the business or the place of residence of the employer.

(c) The position or specialty of the employee, their title, the category of employment and the scope of their work.

(d) The date of commencement of the contract or employment relationship and its duration, if drawn up for a specified period.

(e) The duration of the paid leave that the employee is entitled to and the manner and time it will be granted.

(f) The amount of compensation due and the deadlines to be met by the employer and employee according to the applicable laws in the event of termination of the employment contract or relationship.

(g) Any remuneration to which the employee is entitled and the when it should be paid.

(h) The duration of the employee’s regular daily and weekly employment.

(i) Metion of the collective arrangements that apply and determine the minimum remuneration and working conditions of the employee.

It is clarified that the information referred to in points (e), (f), (g) and (h) above may also be given by referencing to the applicable provisions of Labor Law.

V. The purpose of the obligation to disclose the conditions of the employment compared to the purpose of the employment contract

The above (under III) obligation of the employer is not a requirement for the validity of the employment contract.

(Possible) Non-compliance does not affect the validity of the contract.

The purpose of this requirement is purely to inform. This is also explicitly stated in the relevant case-law. It is therefore acknowledged that “… when the employer fulfill their obligations under p.d. 156/1994, the employee is simply informed of the conditions of the employment contract or relationship, as those are defined by law and the individual contract, and this action itself has no effect on the particular employment contract or relationship”(Inter: Supreme Court 860/2010).

On the contrary, non-compliance with the obligation to provide information gives rise administrative sanctions (Article 7 Presidential Decree 156/1994). A fine is imposed on the liable employer by the competent Labor Inspector. The latter is the one who will check the existence (or not) of the (completed) forms of disclosure of the essential working terms of each employer in the workplace.

The information contained in this form is, in fact, essential. It is precisely the importance of the information that makes it necessary to include them in any (possible) written employment contract. That is why the Presidential Decree also provides that, in addition to any ‘other document’, the information can be provided to the employees through the ‘written employment contract’ (Article 3 §2).

It is therefore possible that the above incorporation may not actually take place (: notice through a written contract). The (mandatorily) separate document for the disclosure will then work in parallel with the employment contract.

In any case, however, it must be understood that the two documents serve different purposes.

The notification of the PD is purely informative. It indirectly, therefore, evidences some basic working conditions.

But the purpose of the employment contract is significantly broader and more important. And this is the case despite it not (always) being mandatory – as opposed to the individual working conditions disclosure document. The contract regulates (and should regulate) all the rules governing the employment relationship. Not just the essentials.

First of all, it may achieve the purpose of informing on the essential terms and thereby nullify the reason for the existence of the separate document. In addition, it can be an important tool in the hands of the employer with regard to all the terms and conditions of the employment relationship. The employment contract may place the employment relationship in a predetermined framework. It may preventively address a multitude of issues. It may act as a deterrent for actions which may result in litigation between the parties.

VI. The (potential) content of the employment contract

We have already seen that the employment contract (possibly) has a significantly wider content than that of the (mandatory) disclosure of the essential terms of the employment. Even on issues where (prima facie) the content of the two seems identical, it is worthwhile to have an extended approach of them written down. Such issues may include, inter alia:

(a) The duties of the employee

(b) The place of the provision of the services – especially for undertakings which have or may develop transnational activities

(c) The provision of services to a Group of Undertakings

(d) Duration of the contract

(e) Working Hours

(f) Remuneration

(g) Voluntary benefits

(h) Employee obligations

(i) Personal data matters

(j) Confidentiality

(k) Potential patents

VII. In conclusion

The employment contract is quite different from disclosing the essential terms of the employment relationship.

The first is optional. The second compulsory.

Failure to do either does not affect the validity of the employment relationship.

The (written) employment contract, though optional, can prove valuable.

As long as it has the right content.

Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (February 9th, 2020).
February 9, 2020
Valid reason for dismissal

Valid Reason for Dismissal (: Do I need one to fire my employee?)

I. Preamble

Much has been said during the past year about the termination of employment contracts set for an indefinite duration. The reason is the May 2019 law that introduced the need for a “valid reason” for the validity of such dismissals. The problems this law created were, in fact, too many. We have analyzed them in a previous article. Its abolition (“after it came into force”) came as a pleasant surprise in August 2019. We have already mentioned the benefits of this (necessary) legislative correction.

However, the need for the existence of a valid reason for a dismissal is also provided for in the Revised European Social Charter.

Which provision prevails?

Can Businesses / Employers feel (completely) safe?

I personally think it is worth taking a closer look at the subject…

II. Brief Review: the status of the termination of the employment contract of an indefinite duration

1. The termination of an employment contract of an indefinite duration

1.1. We all knew, until May, that an employment contract set for an indefinite duration could be terminated by the employer at any time. Without the employer having to invoke any reason. The only condition: the payment of the redundancy compensation (: Article 5 § 3 of Law 3198/1955).

When an employee considered that their dismissal was unfair, they had the right to appeal to the competent courts. Their main claim: cancellation of the dismissal and, in addition, returning to work. The burden of proof of the claims laid with the employee.

1.2. On the 3^rd of May 1996 the Revised European Social Charter was signed. The Revised European Social Charter is an international convention for the protection of social rights. It is already a domestic law as it was ratified by law (Law 4359/2016). It is, in fact, higher – ranking than Greek laws (Article 28 § 1 of the Greek Constitution).

3. Article 24 of the Revised European Social Charter

One of the rights guaranteed under the Revised European Social Charter is the right to protection in cases of termination of employment. Article 24 of the Revised European Social Charter provides:

“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 recognize:

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.”

4. The legislative provision regarding the requirement for the existence of a valid reason

4.1. Much later after the Revised European Social Charter was ratified in our country (2016), the first subparagraph of article 5, paragraph 3 of article 31 of Law 3198/1955 was replaced (article 48 of Law 4611/2019) as follows:

“The termination of employment shall be considered valid only if it is due to a valid reason within the meaning of Article 24 of the Revised European Social Charter ratified by Article 1 of Law 4359/2016 (A ‘5), invoked in writing, if the redundancy compensation due has been paid and if the employment of the dismissed employee has been registered in EFKA (IKA) or the dismissed employee has been insured. In the event of dispute, the burden of invoking and proving the validity of the conditions invoked for a valid termination shall rest with the employer.”

4.2. This provision has proved to be problematic on many levels as it has resulted in:

(a) stigmatizing the employee by any of the “valid reason” options regarding their “behavior” or “abilities” in the event of termination of their employment contract;

(b) the employers being reluctant to enter into indefinite-term contracts

(c) the leaning towards fixed-term employment contracts, the termination of which does not require any “valid” reason; and

(d) the increase of extrajudicial and judicial disputes.

6. The abolition of the requirement to invoke a valid reason

The Greek legislator, fortunately, listened to the legitimate reactions that the establishment of the “valid reason” requirement had caused. With a surprising move, it abolished the (problematic) provision of Article 48 of Law 4611/2019 — less than three months after it came into force.

The provision of Article 117 § 2a of Law 4623/2019 (Government Gazette A 134 / 09.08.2019) provides that the provision of Article 48 Law 4611/2019 “shall be abolished after its entry into force” and that “the provisions of Law 2112/1920, as applicable, and Law 3198/1955, as applicable, in conjunction with Article 24 of the Revised European Social Charter, ratified by Article 1 of 4359/2016 (A ‘5) shall not be affected”.

III. What is the “value” of Article 24 of the Revised European Social Charter?

1. The questions raised

The debate around the “valid reason” (as a prerequisite for a termination of indefinite term contracts) had begun since the Revised European Social Charter became state law. The questions that we have been dealing with since then (and until May 2019), and we are still dealing with (after August 2019), are:

(a) What is the legal binding effect of Article 24 Revised European Social Charter in the Greek legal order? and

(b) Is Greek law in conformity with Article 24 of the Revised European Social Charter?

There are two ways to approach this issue.

2. The first view

(: Article 24 of the Revised European Social Charter does not affect the protection against dismissal)

2.1. According to the first view, Article 24 of the Revised European Social Charter did not have, nor does it exercise, any influence on the Greek system of protection against dismissals. This view (that the signatory shares) seems to prevail in jurisprudence. A series of decisions attests to the truth (SC 1512/2018, First-Instance Court of Athens 237/2019, First-Instance Court of Athens 2180/2018, First-Instance Court of Thessaloniki 10675/2018, First-Instance Court of Thessaloniki 19510/2017).

According to this view, termination of an indefinite-term employment contract continues to be an employer’s right. Most importantly: it continues to not require the invocation of any reason. In other words: “its validity does not depend on the existence or defect of the cause of it.”

2.2. We all agree that this right (as well as any other right) is subject to restrictions. All rights must be exercised within the limits of good faith, the principle of morality and their socio-economic purpose. When the employer’s right to dismiss an employee is abused, the termination is invalid. The relative burden of proof lies, of course, with the employee. The declaration of invalidity presupposes an assessment. In addition: a court ruling.

2.3. The ratification of the Revised European Social Charter does not affect the specific, preexisting, legal provisions in our country. The conditions laid down in Article 24 of the Revised European Social Charter are (more than) fulfilled in the Greek legal order. This is because the “obligation of the employer to indemnify the employee has long been recognized in domestic law (…) in every termination (with the exception of a termination due to criminal charges) and is not waived even when the employer could prove a valid reason for the termination of the employment. Consequently, the affirmative or negative reference to a valid reason for the termination is irrelevant. That is why the validity of the complaint is still being examined individually only with the application of the article 281 of the Civil Code, as before, after the employee has filed a lawsuit with the competent court ” (SC 1512/2018).

2.4. The (recent -August 2019) abolition of the requirement for the existence of a “valid” reason was also based on the above (under 2.3) decision of the Supreme Court. It is therefore obvious that the legislator itself is in favor of not requiring, after the ratification of the Revised European Social Charter, any reason in order for a termination of an employment contract of an indefinite duration to be valid.

3. The second view:

(not requiring the invocation of any reason is incompatible with Article 24 of the Revised European Social Charter)

This view is only slightly reflected in Greek jurisprudence. There are only two decisions, so far, that approach the termination of an employment contract this way: First-Instance Court of Pereus 3220/2017 and the most recent First-Instance Court of Lasithi 17/2019.

As the latter mentions: “… On the basis of the foregoing considerations it becomes clear that after the ratification of the revised Charter the principle of objectively justified dismissals was directly introduced into Greek law and hence the Greek courts should further investigate on the one hand the existence or not of a valid reason, with valid reasons being those restrictively cited in Article 24 of the revised Charter and, on the other, consider any dismissal not based on such a ground to be unlawful. This can be done either by direct reference to Article 24, the wording of which, at least in this respect, is precise, clear and unconditional, in conjunction with the provisions of Articles 174 and 180 of the Civil Code. – a view considered to be more correct by this Court, or interpretatively, through Article 281 of the Civil Code, whereby any dismissal that is not in accordance with the provisions of Article 24 of the revised Charter shall be regarded as abusive.”

IV. In conclusion

Article 24 of the Revised European Social Charter requires the existence of a valid reason for the termination of an indefinite-term employment contract.

For a quarted it was legally required by the employer to invoke and prove the existence of one. It is not anymore.

Case-law (and correctly, in the signatory’s view) in its majority states that the provision of Article 24 of the Revised European Social Charter does not have any bearing on the Greek system of protection against dismissals. Termination of an indefinite-term employment contract remains the employer’s right. Its validity does not depend on the existence or (possible) defect of its cause. The only limitation: to not abusively exercise this right.

However, the opposite view has been recorded in case law.

It is well known that, in the Greek legal system, jurisprudence is not binding. This means that the approach of case-law can be changed. Moreover, none of the decisions reflecting the minority have so far been appealed before the Supreme Court.

The sole decision of the Supreme Court (SC 1512/2018) dealt with the issue secondarily. However, it made it clear that the employer is not required to do anything more than pay the redundancy compensation.

And rightfully so.

Stavros Koumentakis
Senior Partner

P.S. A brief version of this article has been published in MAKEDONIA Newspaper (February 2nd, 2020).

February 2, 2020

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