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.

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