Regulation of Executive Employment Agreements in Spain
The labour law is characterised by the coexistence of various employment relations of a special nature, which refer to persons employed by a company and average employees. Article 2.1 of the Spanish Workers’ Statute (“Estatuto de los Trabajadores”) reflects special labour relations. Among them, we find labour relations involving professional athletes, performing artists, dockworkers, prisoners in penitentiary institutions, and senior management employees, the subject of this article.
Legal Definition and Regulation of Executive Employment Agreements in Spain
Article 1.2 of the Royal Decree 1382/1985, of August 1 defines executive employment agreements. This Article regulates the special labour nature of senior management workers.
The relationship between senior management workers and the employer is a special employment relationship differing from a regular employment agreement; however, it is not always easy to distinguish. The senior management employment relationship is based on mutual trust between the parties.
What distinguishes this type of contract is that the powers granted, apart from affecting functional areas of great importance for the life of the company, must be referred to in the overall activity of the company or its main objectives.
The applicable provision (Article 1.2 of Royal Decree 1382/1985) recognizes as senior management personnel those workers who exercise legal powers inherent in the ownership of the company related to its general objectives and with full responsibility limited only by the criteria and direct instructions issued by the person or the supreme governing and managing bodies of the entity that are dealing respectively with its appointment.
However, not all management service provisions, or management of the company results in this special employment relationship. Each case requires its own analysis about whether the characteristics suggest ordinary labour relations, special relations, or even a business relationship.
It is not easy to define when facing a legitimate executive relationship, or on the contrary, an ordinary employment relationship that seeks to take on the characteristics of an executive one to qualify for certain benefits –, especially the redundancy payment for only seven days worked per year in the case of dismissal compared to 33 days required from a regular employee. Therefore, on many occasions, it will be necessary to refer either to the doctrine or to the labour law.
The Spanish Supreme Court has held that the powers granted, besides affecting functional areas of indisputable importance to the life of the company, must be normally referred to in the company’s overall activity or in its main objectives, with full territorial dimension, referenced areas of work or main activity centres.
This article is not considered as legal advice