The administrators of commercial companies present a special problem when relating them to certain aspects of Labor and Social Security Law and this has led to great legal confusion in recent years.
We understand that an administrator of a mercantile company is one who meets the conditions of an employee with a special senior management employment relationship. In other words, it is an employee who holds the powers corresponding to senior management personnel and who, in addition, belongs to the governing body of the Company.
Written by Josep Conesa
Labor and bankruptcy lawyer
Before qualifying the labor or Social Security regime of these administrators, we must focus on determining what are the main features that determine them:
The main sources of confusion regarding the qualification of directors are centered on two aspects: the position they occupy within the company and the type of employment relationship existing between the company and the director.
A person who holds part of the capital stock of the Company and who, in turn, provides his services as an employee cannot be classified in the same way as another employee of the company since, by holding part of the company, he does not meet the requirement of being an employee of another party, which is necessary, according to the provisions of the Workers' Statute, to be considered a worker covered by labor legislation.
Another factor that shows the special situation of an executive director as opposed to that of a worker is that the former does not receive the social protection to which any employee is entitled.
Once the obvious peculiarities of this sector have been analyzed, and in order to give a better perspective of the characteristics of its regulation, we will develop separately the two concepts mentioned above. In the first place, we will deal with the Social Security classification that arises from the type of relationship between the company and the administrator and, secondly, with the position held by the administrator within the company.
Being a worker who performs a labor activity, independently of the nature of the same one, he must be included within the Social Security System. From this consideration, its framing will vary depending on the possible control that the administrator has within the company.
It will be understood that there is effective control of the company when :
- 50% of the capital stock is distributed among partners with whom he/she lives and with whom he/she is united by marital or family relationship up to the 2nd degree.
- The participation of the administrator in the capital stock is equal or superior to 33% of the same.
- The participation of the administrator in the capital stock is equal or higher than 25%, if he/she has managerial functions.
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Resolved this reasoning we find two types of administrators:
ADMINISTRATOR WITH CONTROL OF THE COMPANY: If it is considered that he does not render his services on his own account and therefore he is considered to be an entrepreneur, he must be included in the Special Regime of Self-Employed Workers (RETA).
Specifically, the legislation of this business modality, which works in its own company, has the obligation to maintain the registration in the RETA even when no profit is produced and even if it only generates losses.
ADMINISTRATOR WITHOUT CONTROL OF THE COMPANY: If the administrator who does not exercise control over the company, provides services as an employee in the company, thus maintaining a double relationship, labor and commercial, he/she must be included in the General Social Security Regime as an employee.
This specific case of an employee has the particularity of not being entitled to receive unemployment benefits, nor to those of the Wage Guarantee Fund.
As we have been indicating, the other great aspect to take care of is the relation that is established between the worker member of the governing body of the administration of the company and the same one, for being this the feature that distinguishes the administrators from the rest of the workers.
However, it is necessary to differentiate between the general director or manager, senior manager and administrator of the company because the nature of the relationship is different:
Tribunal Superior de Justicia de Andalucía de Granada, Sala de lo Social, Sentencia 197/2012 de 26 Jan. 2012, Rec. 2901/2011: Determines the possibility of the simultaneous exercise of the activity of worker and administrator of the company.
Case law has established that senior management is specified in the exercise of powers corresponding to the ownership of the company and considers that the performance of a position as a member of the company's administrative bodies also implies the performance of powers of this nature, adding that, when functions of this kind are exercised, the inclusion or exclusion of the labor scope cannot be established in attention to the content of the activity, but must be made from the nature of the link and of the person who develops them in the company's organization.
For this reason, and after many variations in criteria, case law has promoted the "link theory", which affirms that the functions of corporate administration and senior management employment relationships are incompatible. This theory is based on the fact that the activities of direction, management, administration and representation of the company are typical and specific activities of the administrative bodies of commercial companies, whatever form these may take, and their performance by a member of the administrative body gives rise to a commercial relationship excluded from the employment relationship.
Thus, a General Manager (senior management employee) who is promoted to Chief Executive Officer would lose his status as an employee.
On the other hand, the doctrine has indicated that there is no incompatibility between corporate management positions and common employment relationships. It is understood that the work provided under an employment contract is independent of the management and/or minority shareholder activity.
In conclusion, an employee with a special senior management employment relationship should evaluate the consequences of accepting administrative functions and, if he/she does so, should seek protection for his/her situation within the Company.