How to draft an Executive Management Contract in Spain

In management contracts, workers should own an effective decision-making power within the company with full autonomy and direct reporting to the board.  If this does not occur, the employment relationship is in fact a standard relationship and not an executive-management one.

How to Draft an Executive-Management Contract:  Duration and Time

The special employment relationship of executive management focuses on mutual trust between the parties, based on the exercise of their rights and obligations in good faith.

This relationship formalizes in writing with a copy, and each contracting party holds one copy.

In the absence of a written agreement, the worker is an executive manager when the circumstances described in Article 8.1 of the Workers’ Statute are met (the employment contract may be either in writing or formalized orally.  An employment relationship exists  where an individual provides a service on behalf of and within the scope of the organization and management of another (and the individual providing the service receives compensation in return), and the professional service corresponds to the scope defined in Article 1.2 of the Royal Decree 1382/1985.

The employer may establish a probationary period, which may not exceed nine months, if the contract in question is of indefinite duration.

After the end of the probationary period, during which a withdrawal has not occurred, the contract is fully effective including the time of the services performed previously for the company.

The parties establish the duration of the contract.

The contract’s terms will also establish the working days, hours, holidays, and allowed time off for leave or vacation.  These benefits are not payable to the worker who notoriously exceeds those benefits common to the profession in question.

Non-competition and Permanence Commitment Agreement

A senior manager may not establish employment contracts with other companies without an authorization of the entrepreneur unless otherwise agreed in writing.

If a senior manager has received the professional specialization at a company for a definite period, the parties may agree that the employer is entitled to compensation for damages if a senior manager abandons the work before the fixed term.

The non-competition agreement that once had extinguished the special worker contract, which may not exceed a duration of two years, shall only be valid if the following requirements are met:

  • The employer has an actual industrial or commercial interest in it
  • Appropriate financial support to the senior manager is ensured

Internal Promotion

The written contract should be drafted when the worker (who is associated with the company under the standard employment agreement) is promoting to perform executive-management services in the same company or in another one that is associated with it as a part of the group or in another cooperative form.

In such cases, it is necessary to specify whether the new special relationship replaces the previous standard one or suspends it.  The common employment relationship is suspended except as expressly provided in the agreement.  If chosen to replace the common employment relationship for the special one, it will only be effective within two years from the relevant novation agreement.

In case of simple suspension of the previous standard employment agreement, transposed to the special employment relationship, the worker will have the option to renew the employment relationship of origin without affecting the compensation rights arising from the termination.  An exception to this rule is the termination of the executive-management contract in the case of disciplinary dismissal for misconduct.

Collective Rights

Executive-management workers are excluded from the protection mechanisms that a union representative provides, notwithstanding other forms of representation.  Fellow workers and committees of companies appoint a union representative.  This means, in practice, the habitual exclusion of these workers from the scope of collective agreements.

This article is not considered as legal advice

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