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