Are the roles of Social Administrator and Employment Relations compatible?

Traditionally it has been questioned whether social administrators would be able to coordinate their role as an Administrator with that of Employment Relations (of either senior or middle management) having already the so called “Teoría del Vínculo” (“Contractual Link Theory”) applied by Courts. 

1. “Contractual Link Theory” (magistrate of the Supreme Court, Mr. Desdentado Bonete) 

It has been defended that the performing of the role of administrator of a company (mercantile relationship) will absorb the employment relation that could pre-exist (art.1.3 c. Workers’ Regulations). This Law allows the exclusion from the labour legal scope of those mercantile relations referred to the mere performance of the position as member of the Board of Directors. 

The jurisprudence has interpreted this exclusion (from the labour regulation), understanding that it affects all members of the Board of Directors, those mere advisors and those with executive roles since all the activities carried out by them are related to the administrator position. 

2. Opinion on the current situation of “Senior Management” 

Traditionally, Senior Managers are considered those “employees” who exercise powers (with autonomy and full responsibility) associated to the legal title of the company and its general objectives (RD 1382/1985, 1^st of August). Currently, the definition is more restricted, reserved to senior managers who depend directly to the Board of Directors, or to the Managing Director. 

According to the Supreme Court, when a senior manager becomes part of the Board of Directors is applicable the “Contractual Link Theory” because all the activities that he or she undertakes since that moment, will be connected to the administrator role. Therefore, the pre-existing labour relation is terminated unless parties expressly agree to suspend it. 

3. Is it possible to defend the duality of relationships and compensations? 

The Law on “The improvement of corporate governance” (Law 31/2017) has introduced two possible forms of compensation for administrators or advisors:

• on the condition of administrators or advisors, or;
• For the performance of the executive role, being possible to receive a contractual remuneration different from that agreed by the General Assembly and/or in the Company´s Bylaws. 

Nevertheless, this has not facilitated the overcoming of the “Contractual Linked Theory” because the Jurisprudence and doctrine understand that deliberative and control functions along with the management duties are within the administrator activities, and independently of being remunerated. 

Generally, an employment contract and the administrator position could coexist if the functions and duties contained in the contract are different from those of the social administrator. 

 It is obvious that it would be easier to support the duality when the labour relationship is not related to a senior manager position (i.e.: a mere Administrative and functional Management Role), but even when this is not the case, the “Contractual Linked Theory” might be overcome by clearly differencing the two relations and its duties: 

• Labour relationship: (either in middle or senior management) with the specific duties and the retributive items.
• Mercantile relation as social administrator in which it has established the duties associated to the position or those of the senior manager, if is the case. 

4. Advice 

Recommendations to delimit the position and duties of each manager and/or administrator of a company: 

• If the senior management labour relationship is desired, it is essential to build it as dependant to the Board of Directors or to the Managing Director, if any.
• Keep in mind that it is possible to defend the duality (more easily in the case of middle Management) always and when the faculties, obligations and objectives etc, are clearly and correctly defined in all positions. In those cases, the “middle manager” is dependant of a Senior Manager and not directly dependant of the Board of Directors or Managing Director. 
• In case of not being possible the double relation, you must decide whether the labour relation is terminated or suspended (expressly). When suspended the social administrator returns to the labour relation when terminates its appointment as administrator.