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Indemnity for dismissal and cessation of the Senior Manager

Indemnización por despido y cese del Alto Directivo
Compensation for dismissal and cessation of the Senior Manager

Compensation for dismissals and dismissals of Senior Managers, Managers in common labor regime and Directors

As we mentioned in previous articles, one of the key moments in the relationship of an Executive with the company is the moment in which the dismissal or termination of their position takes place, being essential to be advised by a Specialist lawyer in these cases.

The compensation and the regime of application will depend exclusively on the type of relationship between the Manager and the company, that is, if he is a Senior Manager, if he is a Manager under a common labor regime, or if we are dealing with a Director governed by a commercial relationship, as well as the contract that governs the professional relationship.

Below we detail the different compensation assumptions in view of the nature of the existing contractual relationship:

Dismissals in Senior Managers

The indemnities in the special relationships of Senior Management will attend to what has been agreed in the contract.

If there is no such agreement, the following amounts are established:

  • In case of declaration of unfair dismissal: Compensation equivalent to 20 days of salary in cash per year of service and up to a maximum of 12 monthly payments.
  • In case of withdrawal of the employer: Compensation equivalent to 7 days of salary in cash per year of service and up to a maximum of 6 monthly payments, and a 3-month notice. In the event of total or partial non-compliance with notice, the Senior Manager shall be entitled to compensation equivalent to the salaries corresponding to the duration of the non-compliance period.
  • For the rest of the forms that the dismissal can take, it will be necessary to attend to the specific one at all times, the provisions of the ET being applicable. Therefore, in the event of dismissal for objective reasons, the compensation will be 20 days of salary – in cash and in kind – per year worked with a maximum of 12 monthly payments, and a notice period of 15 calendar days. . These modalities are usually used when the company does not want to face the compensation of the golden parachute clauses.

Dismissal of Manager under common labor regime

Severance pay will be as follows:

  • In case of disciplinary dismissal declared unfair, the compensation for contracts formalized prior to February 12, 2012, will be equivalent to (i) 45 days of salary per year of service for the time of provision of services prior to 12 February 2012, and (ii) 33 days of salary per year of service for the period of service after February 12, 2012. In this case, the compensation amount may not exceed 720 days of salary (24 monthly payments). ). However, if due to the time of provision of services prior to February 12, 2012, a higher number of days results, the indemnity limit would be the one accumulated to said date, with a maximum of 42 monthly payments. For contracts formalized after February 12, February 2012, the compensation for unfair dismissal will be 33 days of salary per year of service.
  • In the event of dismissal for objective reasons, the compensation will be 20 days of salary per year worked with a maximum of 12 monthly payments and a notice period of 15 calendar days. If it is declared inadmissible, the compensation consequences are those set forth in the previous section.

Dismissals of Directors or members of the administrative bodies with a commercial relationship

Spanish civil legislation does not establish the right in favor of the members of the Board of Directors to demand any compensation in the event of revocation or cessation of their appointment, not even on a supplementary basis in the absence of an agreement or express forecast.

This is due to the essentially revocable nature of said positions, which can occur at any time and without having to be included in the agenda of a General Meeting, due to the loss of confidence of the shareholders in the Directors or Administrators.

Therefore, for the purposes of eventual compensation due to contractual termination, it will be necessary to comply with what is established in the contract that binds the parties, and it should be noted that, by virtue of the new wording of the LSC (Capital Companies Act), the Indemnities for termination of the Director or Administrator should be included within the remuneration system provided by the Bylaws.

Additionally, the detail thereof should be provided for in the contract between the Administrator with executive functions and the company.

Jurisprudence in cases of dismissals of Senior Managers

Based on the foregoing, the Jurisprudence of the Supreme Court is unanimous in its pronouncements, admitting the possibility of such compensation only in cases in which:

  • Its amount is reasonable and equitable, so that it cannot affect, condition, limit or discourage the exercise by the General Meeting of shareholders/partners of the absolute and inalienable power to dismiss the administrator or director at any time, and
  • Their payment is mandatory for the company, either on the basis of its express statutory provision and/or, at least, because it has been expressly agreed upon in a contract that either results from the complete and express knowledge/control of the General Meeting or, at least, its content falls within the remuneration policies established by it or, in the case of delegation, by the administrative body itself.

At present, and after the recent reform of the LSC, the foregoing continues to be applicable, reinforcing the need to provide for it in the bylaws and to recognize both the concept and the amount expressly in the contract referred to in article 249 of the LSC to be signed. between the Company and the Director (or administrator) with executive powers.

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