What kind of contract for a chairman?
The Labor Code makes it possible to conclude employment contracts for a fixed period in order to perform work for a term of office. The legislator did not foresee, however, that the Code of Commercial Companies distinguishes between the concept of mandate and term of office, which makes it difficult to conclude contracts for a fixed period with board members of commercial companies.
As we pointed out in the article of 18 February 2016, the amendment to the Labor Code, which entered into force on 22 February 2016 removed from the Labor Code the employment contract for the duration of specific work. Such a contract was beneficial for employing board members, as it was subject to automatic termination upon the end of the mandate. The new regulations have introduced the possibility of concluding contracts for a fixed period in order to perform work for a term of office. Such contracts are exempt from the restrictions on the maximum duration (33 months) and the maximum number of contracts concluded (three contracts). This regulation would be a perfect solution for board members appointed for consecutive terms of office. The problem is, that in accordance with the Code of Commercial Companies, the term of office lasts for a specific period, e.g. an annual term of office of a board member appointed on 1 June will end on 1 June of the following year. Once complete, the board member continues his duties because his mandate expires at the moment of the meeting of shareholders (General Meeting) approving the financial statement for the first or the last full year in office. In practice, it rarely happens that the date on which the term of office ends such a meeting takes place to appoint a new management board. Given that the corporate and labor relationships are independent of each other, then there may be doubt about what happens in the period between the end of the term of office and the expiry of the mandate, in which a board member is obligated to continue to perform duties. While the performance of work without remuneration or assuming that there was a tacit conclusion of a new employment contract may not be solutions that are desired by the parties.
The question arises whether there is a solution that will allow to conclude a contract of employment for a fixed period, with the use of the exception discussed and provide employment to a board member for the period of the mandate. Assuming that the aim of the legislator was not to create laws that create a trap for the parties, one may be tempted to attempt to find a formula which will allow the use of the new regulations.
The first option is to accept that the Labor Code uses its own (autonomous) definition of term of office, which covers the period until the date of expiry of the mandate. Practice knows of cases in which the labor courts have retreated from the definitions adopted on the basis of other branches of law. Such a solution, due to the freshness of the regulation, however, is uncertain and would not be conducive to the coherence of the legal system.
The second option should be sought in an agreed settlement that an employment contract concluded for the performance of work during the term of office will last until the date of expiry of the mandate. It must be considered whether such an agreed settlement would not be contrary to the Labor Code. Code regulations indicate that the employment contract must be concluded in order to work through the term of office, but this wording does not imply that the duration of the contract, in any case, must be equal to the term of office. If in fact the mandate will last longer than the term of office, then it will not affect the main purpose of the contract. Also, the obligation to determine the date of termination of the contract does not oppose such legislation. The date until which the contract concluded for a fixed period is valid should be an instantiated event, but can be specified indirectly. Especially that the labor courts in the past have recognized e.g. the admissibility of concluding a contract for a fixed period throughout the duration of the artistic season. Holding the meeting approving the financial statements should take place within six months after the end of each financial year. The parties know that during this time the mandate will expire and a board of a new term of office will be appointed. Determining the date of the meetings as a date of terminating the employment contract was accepted in the previous legal state by the Supreme Court in ruling II PK 155/12. Of course, practice knows of cases in which, e.g. due to negligence, a meeting does not occur for several years. A security in such a situation could be indicating an end date in the contract when the meeting should take place and a management board of a new term of office be appointed, coupled with the deadlines arising from the provisions of the Code of Commercial Companies.
The use of one of the above solutions, in the event of approval by the courts, would allow the use of the new regulations on contracts concluded in order to perform work for the duration of the term of office for employing board members.