Koumentakis

Tag: executives

  • Executives: A Ministerial Order full of problems

    Executives: A Ministerial Order full of problems

    Executives are particularly important category of employees for businesses (on many levels). These are the employees who are assigned responsibilities that are specific to the powers of the business. They are the ones who hold “…the position of supervision or management, or the position of trust” (: Article 2 a’ of the International Convention of the Washington International Conference, ratified by Article 1 of Law 2269/1920).

    We have already approached, in our previous article, the criteria for identifying an employee as an executive. Also, the legal consequences that this determination brings to the employment relationship. Finally, we referred to the formulation by case law of the specific criteria as a relevant legislative regulation was missing at that time.

     

    Executive Officer: the criteria for court decisions

    The position of the case law as to the criteria for the designating an employee as an executive is firm. The executive is the one who, “… as a result of their exceptional qualifications (specialization, technical or commercial, education and extensive experience) or the special trust in them by the employer – the owner of the business, is assigned the duties of general executive of the whole business or of an important sector of the business and they not only decisively influence the direction and development of the business, but also are obviously distinguished from other employees by exercising the rights and powers of the employer, such as recruitment and dismissals of staff, they have a high degree of initiative and independence, even if they are obliged to comply with the provisions of laws, plans and general guidelines of the employer, sometimes bears criminal responsibilities for compliance with the provisions, which have been established in the interest of employees and is usually paid a salary much higher than the law minimum limits and the salary paid to other employees”(ind .: 1065/2020 Supreme Court, Supreme Court 249/2019, Supreme Court 1467/2012, Supreme Court 74/2011, Court of Appeal of Piraeus 480/2015).

    The specific criteria are already differentiated. At least some of them.

     

    The Ministerial Order for the Designation of the Executive

    The relevant Order No. 90972 / 19.11.2021 of the Minister of Labor and Social Affairs was finally published (: Government Gazette B ‘5393 / 19.11.21). The latter attempts (: Part B’) to list the criteria on the basis of which it is ascertained whether the employee has one of the qualities mentioned in Article 2 of the International Convention of the Washington International Conference.

    According to this MO:

    “Employees who hold a position of supervision or management or of a confidential nature, are presumed to be the employees who, according to an explicit term or terms that are reflected in their individual employment contract and are declared to the ERGANI information system:

    Α. a. Exercise management rights over other employees of the business or

    1. represent and bind the business to third parties, or
    2. are members of the board of directors or corresponding governing body of the employer or
    3. are shareholders or partners holding more than 0.5% of the employer’s voting rights; or
    4. are in charge of Directorates, Units or Departments or of other independent staff of the employer enterprise which are specified in its organization chart, provided that the employer entrusts them with the supervision of part of its continuous, intermittent or extraordinary operation, but in any case, these employees are remunerated in accordance with earnings not less than six times the statutory minimum wage, or
    5. are paid with agreed monthly salaries that are not less than eight times the minimum statutory salary “.

    It is true that these provisions create multiple issues and raise serious concerns.

     

    The Failures of the Ministerial Order

    As to the (necessary?) Content of the employment contract

    As explicitly stated in the specific MO, the conditions which must be met for the designation of an employee as an executive should be reflected in an explicit term of the relevant employment contract.

    These cases include employees who represent and bind the business. Also, those who have the status of a member of the Board or of another administrative body. Or those who have a shareholding or partnership in the employer.

    However, these cases – if true – are not reasonably expected, nor is it probable, to be recorded in individual employment contracts that are often for an indefinite period. It is known that the powers of representation and commitment of the business to third parties are provided by the respective Board of Directors (or any corresponding body), with a relevant decision, which is recorded in the minutes for a limited time. In any case, the maximum duration of the commitment powers and representation provided to the current executive extends, at the latest, to the end of the term of office of the administrative body that assigns them.

    Therefore, a condition in the individual employment contract regarding the way the business is bound and represented to third parties is not legally correct (and not even tolerable). And, much more, such a term (even as an assumption) cannot bind each subsequent governing body, which is entitled and must decide, again, on the delegation of the relevant powers.

    Accordingly, it is not reasonable for the employment contract to contain as a condition the employee’s status as a member of the Board of Directors or another management body, as well as their shareholder or partnership status. These are, after all, traits that may be differentiated-even lost in a short period of time.

    In any case, the specific powers derive and are evidenced by documents provided by business law (eg minutes of formation of the Board of Directors in a body, shareholders’ book, etc.).

    Based on the above data, it is necessary for the presumption for the above-mentioned conditions (incl. Right of representation, board member, shareholder) to derive not only from the terms of the individual employment contract but also from any other document, as provided by the provisions of business law.

     

    Regarding the exercise of the executive right

    The employees who ” … exercise the managerial right over the other employees of the business.” are presumed to be executives”, according to the above-mentioned MO.

    However, this wording raises (legal, among others) concerns. An executive does not exercise the managerial right – that is, all the powers deriving from it. If this were to happen, it would be a substitute for the employer as a whole. The executive, on the other hand, exercises duties and powers that are specific to the business entity either as the latter or (more importantly in this case) as the employer.

    Therefore, it is deemed necessary for this presumption to (also) be related to the employees who exercise part (and whole) of the managerial right.

     

    Regarding the wage conditions

    Approaching the concept of executives in the context of the above article, we mentioned that, clearly, the salary of the executive must be very high. We stressed, however, that “there are no (and could not be – of course) absolute approaches. At the same time, we noted that “Particularly high salaries do not always lead, in an inevitable consequence, to an employee being classified as an executive. Especially when those high salaries are associated with the employee’s long experience and several years of prior professional experience (Supreme Court 1148/2017, Supreme Court 747/2007) “.

    The new MO came to change, in a problematic way, the above assumptions. The salary criteria that it introduces, raise significant concerns. This is for two reasons:

    (a) An executive is considered, according to the above MO, a senior employee if paid “with agreed monthly salaries that are not less than six times the minimum statutory salary”. What if they are paid 5.9 times (only) more than the minimum wage? What if, further, an executive is paid 7.9 times (only) more than the minimum wage? Should they not / can they not be considered executives? The lack of logic is obvious in case we give a negative answer to these questions.

    (b) And further: one reasonably wonders whether, after the ten-year financial crisis and the current health crisis, it is theoretically possible – for the vast majority of businesses, to provide levels of remuneration of executives such as those mentioned in this MO.

    In the context of the above data, this definition already poses a serious problem to the majority of businesses. This is because absolutely few, in number, employees exceed the limits set by the MO- even though they would be accepted as Executives according to the case law to date.

    Therefore, it is considered necessary for the employers to be able to (counter) prove that -especially- the persons of case B ‘(: heads of Directorates, Units or Departments, etc.) who are not paid with six times the minimum wage, are executives in the business, if they receive remuneration significantly higher than the average remuneration received by the other employees in the specific employer. And also, in the case that they have been assigned the responsibility of key sectors for the operation of the business (even when the sector in question, despite its importance, only has one employee).

    In addition, in any case, it must be accepted that to the minimum, according to the specific MO, monthly salaries are added and distributed – as moreover the relevant case law always accepts (inter: 1724/2008 Supreme Court, 1030/2005) the benefits in kind to the executives (inter: car, travel and maintenance expenses, residence, mobile phone, etc.).

     

    The Introduction of Presumptions

    As we have already pointed out, the MO introduces a series of presumptions. If one of the listed cases occurs, it is presumed that the employee is an executive.

    However, the MO does not clearly state whether this is a rebuttable or not presumption. When the law does not discriminate, it is concluded that this is a rebuttable presumption. This means that although one of the divisively reported cases may occur, this presumption is not irrebuttable. It is possible, in this case, to counterprove that the employee does not fall into the category of employees holding a supervisory or managerial or confidential position.

    At the same time, however, this presumption can also be approached vice versa: Can an employee who does not meet the listed conditions be considered, in the end, an executive (?).

    In the event that we finally accept (and rightly so) that the presumptions of this MO are rebuttable, the criteria that, to date, have been formulated by the jurisprudence, will continue to be of particular importance.

     

    Entry into Force

    The entry into force of the above MO, in terms of its part concerning the introduction of a presumption for the characterization of an employee as an executive “… begins after the deadline for submission of the annual E4 Staff List for the year 2021”.

     

    The identification of some employees as Executives is an issue that has occupied, for many years, jurisprudence, business, employees and, ultimately, the economy. The criteria were set by court decisions. But there were no absolutely safe criteria. Each case was considered separately. The court decisions took into account the overall picture formed by the employee’s job and the tasks assigned to them. Therefore: there was no legal certainty.

    The above MO attempts to fill a particularly important gap in terms of establishing safe criteria regarding the characterization of an employee as an executive. Some move, inefficiently, in the right direction. Others are just wrong. And, finally, others are very problematic. It is therefore important that the necessary improvements are introduced.

    Such is important for another reason as well: for the Ministerial Order to become a useful and safe tool for assisting both businesses and employees.

    We all need it.-

    Stavros Koumentakis
    Managing Partner

     

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (December 19th, 2021).

     

    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.

  • Executives (and their “bras de fer” match with the business)

    Executives (and their “bras de fer” match with the business)

    I. Preamble

    Bras de fer (:”iron arm”) is the well-known game of muscle power (arm wrestling). Two opponents rest their elbows on a horizontal surface (eg a table) and hold each other’s palms. The winner is the one who manages to bend their opponent’s arm outwards.

    It is a game of power. The strongest wins. The one who has an arm (: bras) of iron (: de fer). External help is out of the question.

    What if we, hypothetically, considered that an employer and employee played this game?

     

    II. The inequality (?) in employment relationships and labor law

    The employment relationship is (said to be) an unequal relationship. This is because, as a rule, it is the employer who (seemingly) has the power. They are, after all, empowered to give orders to their employees. Particularly with regard to the place, manner and time that work will be provided.

    This unequal relationship is offset by labor law. Its provisions are highly protective of employees. They also provide for serious barriers to the freedom of contract. Their main concern is to protect employees and prevent their financial exploitation.

    The protection of employees is dictated by the (essentially) inability of the employee to operate on an equal footing with their employer and to adequately defend their rights.

    Therefore, in a possible “bras de fer” employer-employee match, labor law acts as “outside help” for the latter. This is despite the fact that the employer carries, undiminished, the business risk. And of course, the relevant (potentially) adverse consequences that go with it.

     

    III. Executives and labor legislation

    But what is the role of labor law for that category of employees who are not in a position comparable to others? For those whose duties are similar to those of their employers? For those who are heavily involved in the formulation of business strategy and policy? For those whose position is not so disadvantaged compared to their employers?

    It is reasonable to assume that these employees have a good bargaining power. How can they, on top of that, satisfactorily safeguard their rights?

    This is the category of employees designated as “executives”. For the executives, labor law reserves only limited protection.

    But it is precisely the restriction (by law) of the protection of this category of employees that renders the careful characterization of an employee as an executive necessary.

     

    IV. The designation of an employee as an executive

    1. The legislative “introduction” of the concept of executive

    The restriction of the protection of executives is not recent. And it does not apply just in Greece. The 1919 Washington International Labor Convention “On the Restriction of Working Hours in Industries and Enterprises” introduced the restrictions. This Convention was ratified by Law 2269/1920. It takes precedence over any other provision of law (Article 28 (1) of the Constitution).

    The Washington International Labor Convention regulates the work time limits (Article 1). However, it excludes from its scope persons who hold “… a supervisory or managerial position, or a position of trust” (Article 2.a’).

    This wording is extremely broad. In addition, the structure that businesses now have (turnover expansion, business groups, etc.) is creating more and more supervisory, managerial positions and positions of trust, which are filled by employees. A literal (and most likely fair) interpretation would lead to a large number of employees being exempt from the protective provisions of labor law. The relevant limits for its application are, however, interpreted by case-law.

    2. The jurisprudential definition / restriction of the concept of executives

    The jurisprudence of the Greek courts has already defined (and also restricted) the concept of executives. It could be said that it is now widely accepted that “…persons having a supervisory or managerial position or a position of trust are those who, because they are highly qualified or trusted by the employer, are entrusted with the duties of a general manager of the business or of a sector of the business, as well as  staff supervision, so that they not only have a decisive influence on the direction and development of the company, but are also clearly distinguished from other employees because they exercise employer rights to a large extent, including the recruitment or dismissal of employees, the undertaking of criminal liability relating to possible non-compliance within the business with laws that protect the employees and making important decisions that affect the pursuing of the goals of the employer, and who are usually remunerated by salaries far exceeding the minimum wage or the remuneration paid to other employees.” (indicatively: SC 249/2019, SC 1467/2012, SC 74/2011, Court of Appeal of Piraeus 480/2015).

    Thus, according to the assumptions of the Greek courts, the prerequisites for one qualifying as a manager (and inherent to the concept) are:

     (a) The exercise of managerial duties that are essential to the very existence of the business. Alternatively (or cumulatively) the occupation by the employee of a highly confidential, executive or advisory position in key areas due to their “…high qualifications and special skills of high education and specialization” (Court of Appeal of Piraeus 480/2015).

     (b) To possess significant initiative when exercising their duties and to freely exercise strategic decision-making, to be capable of influencing the future and evolution of the business.

    3. Particular indications for the designation of an employee as an executive

    Courts, (including the Supreme Court), take into account other (in addition to the above-mentioned, under 2) indications, in order to accept that an employee is an executive. These indications can be summarized as follows:

    (a) The amount of remuneration

    The remuneration of executives must be particularly high. There are no absolute approaches (and there, of course, could not be any). The comparison measure (must) be twofold: (i) the minimum legal salary of the post in question and (ii) the remuneration of other employees in the company concerned. Particularly high salaries do not always lead, in an inevitable consequence, to an employee being classified as an executive. Especially when those high salaries are associated with the employee’s long experience and several years of prior professional experience (SC 1148/2017, SC 747/2007).

    From another point of view, however: It is not possible to be an executive and not receive a high salary. This element cannot be missing when designating an employee as an executive. It is assumed that the substantially increased earnings balance out the highly increased obligations of the employee. And of course, the limited protection under labor legislation.

    (b) The exercise of employer powers over other employees.

    Executives shall be entitled to exercise employer powers. The executive shall exercise them in a manner an employer would. A typical example of such power (but not always of crucial importance) is the ability of the employee to freely decide on the recruitment and dismissal of other employees (SC 1148/2017).

    (c) No control over the time frames during which the job is provided

    An indication that an employee is an executive is their independence in terms of the time they provide their job. Also, that they do not have specific working hours (SC 1467/2012).

    (d) Granting the employer’s power of attorney in dealing with third parties

    This indication, though worth mentioning, is of limited relevance to the assessment in case-law.

    (e) The undertaking of criminal or civil liability on behalf of the employer in connection with violations of labor law

    In this case, however, the Court has to check whether these responsibilities are inherent in the position of the employee or whether they are merely a transfer of the employer’s responsibility (SC 74/2011).

    The above indications [under (a) to (e)] need not be cumulative in order for an employee to be an executive. It is important to note, however, that the employer-employee agreement on the latter having the title of an executive is irrelevant. The concept of an executive’s role “… is defined on the basis of objective criteria of good faith and common experience and logic by the nature and type of services that are considered as a whole, as well as by the particular relationship of the one providing the work and the employer, as well as the other employees.” (Indicatively SC 935/2017, SC 74/2011).

     

    V. The consequences of an employee being designated as an executive

    1. Legislative and jurisprudential consequences

    Special attention is paid, as already mentioned, to the designation of an executive. This attention is drawn because of the legal consequences of this designation. Among them, the non-submission of executives to protective provisions of labor law. The exceptions to these provisions are either expressly provided for in law or have been formulated by case law.We have already seen (under IV.1 above) that the legislature explicitly exempts managing officers from specific legislative provisions. Specifically those relating to working time limits, night work, Sundays or other rest days. Executives, in this context, are not entitled to additional remuneration or compensation for overtime – legal or not (SC 74/2011).

    Case law, however, has extended the above exceptions. In particular, it includes further provisions of labor law. It further rules out the application to the executives of the provisions of:

    (a) the remuneration for extra work (CC 659- SC 1029/1980);

    (b) the granting of leave and holiday allowance (SC 1047/2007, Court of Appeal of Dodecanese 79/2008) and

    (c) the payment of additional compensation for overnight stay (SC 968/2002).

    2. The justified (or not?) exemption from provisions of labor law

    It is justified to exclude executives from the provisions on working time limits. To be more precise: it is mandatory. The executive cannot be subject to time restriction controls as they do not have specific working hours. And how could that be implemented otherwise? Their increased responsibilities often require longer working hours than other employees. As a result, the provisions on time limits become incompatible with the position of an executive. Compensation for long-term work, however, is significantly higher than other employees.

    However, case-law does not recognize to the executives the right to leave. The relative (established) position of case-law is criticized by legal theory as being wrong, on the basis that it is contrary to both national and Union law. The relevant arguments are based on three pillars – legislations.

    In particular, Law 539/1945 “On the granting of regular paid leave”, although it provides for exceptions to its provisions (Article 1 par.3), does not exclude executives.

    In addition, the EU, via the Directive 2003/88 (which replaced Directive 93/104), guarantees the right to paid leave for all employees who provide work, without excluding executives.

    Lastly, International Labor Convention No. 52 (which deals with employees’ leave and was ratified by Law 2081/1952) does not include in its exemptions the executives from the right to take leave (Article 1 par.3).

    Notwithstanding the foregoing, there does not appear to be a change in case law on the relevant exception.

    3. Executive officers and trade unions

    There is a question of incompatibility with the position of an executive and the involvement in trade unions.

    Law 1264/1982 explicitly prohibits employers from joining employees’ trade unions (Article 14 par.3). The purpose of this prohibition is the independence and free development of employees’ trade unions, without being hindered by the employer. Based on this point of view, part of the theory argues that the legislative ban should also cover executives. The argument in favor of this view is that managers exercise employer powers while at the same time their interests overlap with those of employers. Consequently, they cannot engage with other employees as long as they serve the interests of their employer.

    However, in case-law the opposite oppinion prevails. In particular, it has been held that there is no prohibition on the participation of an executive in the company’s employees’ union, “… because the provision of Article 14 par. 3 of Law 1264/1982 prohibits the participation in trade unions only of employers and not of executives.” (CA 561/2007).

    4. Continuing to include executives in the category of employees

    In any event, the executive shall not cease to be an employee. Despite their increased (employer) powers and / or despite them having a highly confidential position, they still are employed. As a consequence, the attribution to them of the title and duties of an executive does not entirely deprive them of the protection of labor law. This protection is limited, not eliminated.

    However, the executive still enjoys considerable safeguarding of their labor rights. In particular, the provisions of the law of relating to the termination, collective redundancies and transfer of business apply to them as well. That is, they are entitled to redundancy compensation and a number of other benefits as well as additional holiday pay (unless otherwise agreed, SC 178/2008).

     

    VI. In conclusion

    In the (theoretical) bras de fer between employer and employee the result is rather clear. At a first glance, the relationship seems uneven.

    But it is not the same when an employer and an executive are competing. Accordingly, the protection of the latter by the provisions of labor law is reasonably limited. However, the limits of their protection are essentially laid down by case law. Sometimes even against (or beyond) the law. This, of course, creates legal uncertainty. Both for executives and for businesses.

    Adequate legislation regarding the rights of both (executive-business) is therefore desirable.

    And if such legislation is desirable, there is another legislative intervention that is necessary. And that is one that would lay down the conditions (with the least possible subjective elements) under which an employee as an executive.Until then, adequate (but also necessary) contractual arrangements between the employer and the executive will be of particular importance. We have already seen the importance of concluding written contracts with the right content for common employees. However, when employing executives, it is essential to conclude appropriate written employment contracts. Both for the executives and, above all, for the businesses that make use of their services.

    stavros-koumentakis

    Stavros Koumentakis
    Senior Partner

    P.S. A brief version of this article has been published in MAKEDONIA Newspaper (March 15th, 2020).

     

    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.

This site is registered on wpml.org as a development site. Switch to a production site key to remove this banner.