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