The dismissal of the senior manager

Senior managers of companies, as is the case with the rest of the workers in our country, can be dismissed if a series of requirements are met. In this sense, it is true that there are special conditions for this, but it is a totally feasible possibility. Here we want to talk about it in depth.

What grounds can lead to the termination of a manager's contract?

The contracts held by senior managers of large companies and corporations are called senior management contracts. This, like any other contract, may have a limited duration, in which case it will be terminated and the employment relationship with the company will be terminated when it expires, or an indefinite duration. For its part, the senior manager retains the right to terminate it unilaterally at any time.

However, the employment contracts of senior managers may also be terminated by a voluntary and unilateral decision taken by the employer and without giving any cause.

Dismissal of senior management without cause

This is one of the specificities of the senior management contract. The only requirement for termination by the employer is that the executive is given at least three months' notice. This period increases to 6 months in the case of a temporary contract with a term of 5 years or more or if it is an open-ended contract.

In the event that the employer does not respect this legal period of notice, he/she will be obliged to compensate the senior manager with an economic amount equivalent to the salaries corresponding to him/her. By this we mean that, if he/she had to give 3 months' notice, he/she will have to pay him/her 3 months' wages as compensation.

This indemnity does not replace, but complements, the indemnity agreed in the contract, as senior management agreements must provide for it in advance. The same applies to the legal indemnity foreseen for this type of worker, which is set at a maximum of 7 days' salary per year worked with a maximum amount of 6 monthly payments. The time limit for claiming it is 1 year.

What happens when the senior manager is dismissed for disciplinary reasons?

Current legislation provides that, in order for the employer to be able to invoke this reason to terminate the contract and dismiss the senior manager, the misconduct committed must be serious and there must be no doubt as to its authorship. In fact, case law has expressed itself on many occasions on this issue due to its controversy.

Specifically, for dismissal for disciplinary reasons to be considered fair, it must be demonstrated that the senior manager has taken decisions that have seriously affected the sustainability of the company or that he has abused the means that the company has granted him to carry out his tasks. We are referring, for example, to the company mobile phone or work credit cards used for private purposes.

However, even if the employer claims disciplinary reasons for the dismissal of the senior manager, the judge may consider it to be unfair. For this, there must be evidence that the manager has received humiliating orders from his or her superior, for example to dismiss a family member.

In the event that the dismissal is deemed to be unfair, the employer and the senior manager must agree on whether to pay the corresponding compensation or, on the contrary, to reinstate the employee. In the event that there is no agreement between the parties, the payment of such compensation is always the option. In these cases, the legal part mentioned above is now 20 days' salary per year worked, up to a maximum of 12 monthly payments.

Finally, the dismissal of a senior manager can also be considered null and void by case law. For this to happen, it is necessary to prove that the objective reason alleged for the unilateral termination of the contract is based on fictitious facts. The same applies when it is shown that there has been a disguised novation of the employment relationship.

The dismissal of the senior manager by decision of the company's insolvency administration.

In the event that the company is immersed in a process of insolvency proceedings and is governed by an insolvency administration, it will be this latter body that can decide on the termination of senior management contracts as it sees fit. In this case, it will be a judge who will moderate the compensation to be received by the employee, regardless of the compensation provided for in the contract. This compensation would be set at the amount stipulated by law for cases of collective dismissal, i.e. 20 days' salary per year worked, with a limit set at 12 monthly payments.

In addition, when this situation arises, the period required to give notice is reduced to 1 month, regardless of whether it is a temporary contract with a duration of less than or more than 5 years or an indefinite-term contract.

The golden parachute clause

Earlier we referred to the fact that senior management contracts provide for a specific indemnity to the employee for the moment when the dismissal takes place, should it ever happen. This is known, in legal jargon, as a golden parachute clause.

The golden parachute clause replaces other types of severance payments and usually provides for the payment of different amounts depending on the reason for dismissal. The only case in which it does not apply is when the termination is requested by an insolvency administration.

This clause, as well as all the terms that regulate it, must be mutually agreed by the employer and the senior manager. The only requirement contemplated by law is that under no circumstances may it impose abusive conditions.

For its part, the employer may request that, instead of a sum of money, the senior executive receives an equivalent amount in monetary value of shares in the company. 

What happens if the employee becomes a senior manager coming from a regular staff position?

This is quite common due to the internal promotion conditions in large companies. In such cases, current legislation assumes that, after signing the senior management contract, the ordinary employment relationship is temporarily suspended, i.e. it is not completely extinguished.

This means that, when the senior manager is dismissed, if he or she was previously a member of the company's regular staff, the employee is entitled to return to his or her previous position without this affecting his or her severance pay. If the employer does not want this to happen or cannot guarantee his reinstatement, it will be necessary to determine whether the dismissal is fair or unfair.

As you may have noticed, the working conditions of a senior manager in a company are special because of the responsibilities he or she has to assume. For this reason, the legislation in force provides for a special type of contract for them, which is protected in a manner equivalent to the position they hold.

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