THE KEY ASPECTS OF SENIOR MANAGEMENT RECRUITMENT FROM A LABOUR POINT OF VIEW
We are constantly being asked about senior management contracts and their meanings. Doubts generated by the lack of knowledge and the generalized use of this contractual figure, often applied in the wrong way.
To understand this type of relationship, what it represents and what its characteristics are, we must start from the following
Article 2.1 a) of the Workers’ Statute includes the figure of senior management personnel as an employment relationship of a special nature, excluding them when the activity in the company is limited to the mere performance of the functions inherent to the position of director or member of the administrative bodies.
The senior management contract is regulated by Royal Decree 1382/1985, of August 1. Senior management personnel are those workers who exercise powers inherent in the legal ownership of the company with autonomy and full responsibility, limited only to the higher bodies of government and administration.
In accordance with the mentioned legislation, the senior management contract must be formalized in writing and, among the general matters, must reflect the identification of the parties, the purpose of the contract, the agreed remuneration, specifying the various items making it up and the total duration of the contract or its indefinite nature.
A trial period is also provided for, which in no case may exceed nine months if the contract is for an indefinite period.
Regarding the non-competition agreement, the senior executive may not enter other employment contracts with other companies unless authorized by the employer or agreed in writing to the contrary. This exclusive dedication is implicit in the employment relationship of the senior executive. The non-competition agreement may be valid even after the termination of the special employment contract, although it may not exceed two years and will only be valid when the employer has an effective industrial or commercial interest in it and if the senior executive is paid financial compensation for it.
If the senior executive has received a fixed-term professional specialization at the expense of the company, it may be agreed that the employer will be entitled to compensation for damages if the senior executive leaves his or her position before the term fixed between them. This is known as the permanence agreement.
As for the termination of the senior management employment contract, the law provides for the termination by the decision of the senior manager or by the decision of the employer.
In the first case, after giving three months advance notice, which may be extended to six months if the contract is for an indefinite period or for a period of more than five years. Likewise, the senior executive may also terminate the special employment contract with the right to receive the agreed compensation when there are causes such as substantial changes in the working conditions that result in the impairment of his or her dignity, failure to pay or continued delay in the payment of wages, or any other serious breach of the company’s contractual obligations.
In the event of the termination of the special unilateral employment relationship of the employer, the senior executive will be entitled to the compensation agreed in the contract and, in the absence of such agreement, the compensation will be seven days’ salary per year of service. The contract may be terminated by decision of the employer by means of dismissal based on the serious and culpable breach of the senior executive, in the manner and with the effects provided for in Article 55 of the Workers’ Statute. If the dismissal is declared unjustified, with respect to the indemnity, it will be as agreed by the parties in the contract and, in its absence, the equivalent of twenty days of salary per year of service.
The conflicts that may arise between senior management and the companies, in relation to the issues that we have exposed, the competent jurisdiction to know about these conflicts will be those of the social order.
The special modality of the senior management relationship has several particularities, which must be taken into consideration at the time of formalizing the contract. The legislation leaves margin to the autonomy of the parties to specify the extremes of this special relationship, which is why advice on this matter is essential, to better regulate the labour relationship to avoid future lawsuits or, if necessary, to be able to face them with the maximum guarantees.
We remain at your disposal to attend to you on this aspect or any other in the labour field, in a more individualized way.