MAR 22 / 2022

COMMENT ON THE SENTENCE 39/2022 OF 3th FEBRUARY OF THE SOCIAL COURT Nº 6 OF BARCELONA

I.  INTRODUCTION

Some years have passed since the entry into force of Law 31/2014 of December 3, which modifies the Capital Companies Act, for the improvement of corporate governance (LSC). Since then, legal doctrine have continued to carefully analyze the precedents cases given by the courts, as well as the criteria established by the current Directorate General for Legal Security and Public Faith (former DGRN), on this topic, giving rise to a permanent debate on the validity of the “link theory”, that seems to be endless.

Undoubtedly, the reform of the LSC was intended to provide transparency of the governing bodies and protect the minority shareholder and these were, in principle, the purposes of the rule, which, in my opinion, neither did seek to alter the status quo of the nature of the professional link, nor other ambitions that differ from the intention of providing transparency to the remuneration system of the governing bodies.

In short, beyond the obligations entailed by the Capital Companies Law (particularly the requirement to formalize a services agreement the company and the executive director) and the significance of the breach of its preventions in other orders, fundamentally the tax one, I consider that the theory of the link is still fully valid and that, therefore, it should be considered the appropriate instrument to resolve the controversies raised before the labor jurisdiction, to determine the legal nature of the professional link.

It is appropriate, therefore, to comment on the recent judgment of the Labor Court No. 6 of Barcelona, in whose process we have had the opportunity to assist the defendant companies that, in addition to resolving the dispute in the traditional way in which it has been pronounced The jurisprudential doctrine is very appropriate, because it has also clearly settled other interesting issues, such as that relating to the remuneration of the executive director and professional performance within the framework of a group of multinational companies, of which the company was a part. for which the plaintiff member of the board provided services, issues on which the plaintiff relied to assert the existence of an employment relationship.

II.  BACKGROUND

In summary, in the case analyzed we must point out that the plaintiff was dismissed from his Company as Executive Director, the professional relationship being terminated at all effects by the company. The Director, who received a high remuneration, sued for dismissal before the Labor Court , claiming the existence of an employment relationship and requesting the declaration of nullity of the dismissal or, alternatively, the inadmissibility, in addition to other concepts that as a whole could reach a sum close to two million euros.

In the list of proven facts, the following were demonstrated as relevant data:

• That the plaintiff has recognized the provision of services since 1973, having subsequently been appointed manager and also a director, with large powers of signature.

• Later, as a Director, he signed a contract as General Manager.

• The Company's bylaws do not establish a remuneration for the position of Director that the plaintiff held.

• The plaintiff is a minority shareholder of the company.

• The plaintiff was the visible head of the Company, reporting only to the shareholder, which was the Group's holding company.

• In day-to-day management, he was the one who gave all kind of instructions.

• The Group of Companies is provided with centralized services, for reasons of synergy and cost savings. There are also criteria of uniformity and consolidated accounts and, for operational reasons, on occasions, the various companies provide services to each other, which are remunerated.

III.  DETERMINATION OF THE LEGAL NATURE OF THE LINK

In this context, the court reaches the conclusion that the only link that unites the parties is commercial and not labor, falling outside the scope of article 1.1 of the Workers' Statute (hereafter, ET) (because the notes of employment and dependency do not concur in this case), for the simultaneous exercise of the position of chairman of the board and manager of the company.

The judgment affirms, and this is crucial, that « the duality of relations, labor and commercial, has not existed, since there has been no demarcation between the two, but on the contrary, a confusion between business functions and the provision of services».

That is, without quoting it, it is fully applying the link theory, which is summarized in that statement. And, as can be seen, no reference is made to the LSC, in terms of compliance or not, with its provisions, since what is relevant is only the analysis of the nature of the link, that is, the concurrence in the same person with functions of general director and executive director, who only reports to the ownership.

And it can even be inferred that the omission of any specific allusion to the link theory and the LSC, what it does, is to reinforce the validity of that and the irrelevance of this regulation for the purposes of determining the nature of the link, a circumstance that will be given, exclusively, by the fulfillment or not of the requirements of art. 1 ET and not by the fulfillment of the preventions of the aforementioned LSC.

In this sense, it is opportune to cite the brilliant reasoning of Ignacio García-Perrote Escartín, Magistrate of the Labor Chamber of the Supreme Court, in «The Legal Assumption of the Theory of the Link: A Single Transparent Contract of the Executive Directors with Comprehensive Remuneration » -EDC 2015/1004360- when analyzing the purpose of the LSC, in relation to the formalities it establishes for the remuneration of directors, when it states that:

“I do not believe that the problem of the contract regulated by articles 249.3 and 4 and 529 octodecies LSC is its legal nature. Labor activists know very well that contracts are what they are and that the nomen iuris does not prevail over the real nature of the contract . That said…, what does the Capital Companies Law want? He wants there to be a single contract where everything is, absolutely everything that the CEO or the director to whom executive functions are attributed... Now, having said that, and taking into account the purpose served by the jurisprudential construction of the link theory, I don't think the happiest idea is to consider that this is an employment contract. The LSC does not identify its nature, it does not qualify the contract».

Although, certainly, the famous jurist is referring to a detailed analysis of the remuneration system that was established with the reform of the LSC, what he is saying is that the legislator did not intend with said reform to go so far as to affect to the determination of the legal nature of the professional relationship of the executive director, it simply regulated how his remuneration should be instrumented.

In short, we can conclude that compliance or not with the provisions of the LSC will not qualify per se the nature of the professional relationship, while, on the contrary, if we find ourselves before the accreditation of the absence of alienation and dependency , which is required by article 1 ET, the professional relationship of the said link may not be other than commercial.

IV.  THE EXISTENCE OF A MULTINATIONAL GROUP OF COMPANIES

As we have seen in the proven facts that we have highlighted, from the judgment analyzed, the plaintiff Director provided services in a subsidiary company that was part of a multinational group.

It includes the judgement, that the plaintiff has been simultaneously a partner, chairman of the board, manager and general director , "with no more limitations than those derived from the integration in a commercial group" . The belonging to the said group also gave rise to uniform lines of action for all subsidiaries, as well as submission to a centralized services, based on reasons of synergy and costs (rent, payroll management, accounting, etc.) and even to the occasional cooperation of various companies in certain projects, billing the services provided.

In such circumstances, the opinion of the tribunal remains unchanged, by clearly deciding that the relationship should continue to be classified as a commercial one, given that the director acts with full autonomy, large powers, initiative, hires and fires employees and take all decisions, reporting only to the shareholder, adding that the uniform lines of action required for all Group subsidiaries constitute an exercise of control by the shareholder, "naturally" ; underlining that it is normal that the shareholder, as owner of the Group, could impose the uniform rules that he deems appropriate, without affecting the nature of the professional relationship of the executive director.

In short, the fact that the company belongs to a multinational group , to the extent that the company maintains its own substance (own clients, own employees, etc.) and is directed with full autonomy by its Executive Director, who reports to the shareholder, does not it alters the nature of the professional relationship, which must be classified as commercial.

V.  THE DIRECTOR'S REMUNERATION SYSTEM

In addition to this last reasoning, another issue that has arisen in the dispute and that was resolved by the judgement, is the treatment of the Director's remuneration, which, as we have seen, was made through monthly salary receipts , appearing in certain remuneration certifications and in the contract signed, as an employee, which in the opinion of the plaintiff was proof of the existence of a labor relationship.

The judgement , once again, consider that "The fact of receiving remuneration for the performance of his work does not denature him either, since the position of director was free of charge, so it could be configured as a way of remunerating the work carried out in favor of the Company." That is, latu sensu, the remuneration was received for his professional performance in favor of the company entirely, the nomen iuris given by the parties being irrelevant.

And this is so, because as the resolution warns, since he was appointed member of the board of directors and acted with full autonomy in the exercise of his position, the nature of the relationship was transformed into a commercial one , in which there is no reliance of any kind.

Consequently, what is relevant when qualifying the legal relationship as labor or commercial, is not given by the greater or lesser adjustment to the preventions of the LSC, nor to the formal name of their relationships, but to the materiality of the fulfillment of the employment requirements mentioned in the article 1 of ET.

VI CONCLUSIONS

1st. It can be inferred from the judgment analyzed that the professional relationship of the plaintiff director will not be given by the degree of compliance with the remuneration requirements for directors established by the LSC, but by those of article 1 ET, so that, it can be said , that the theory of the link, in this sense, has not been altered and has been confirmed by the judgement.

2nd. For the judgement analyzed, the accreditation of the plaintiff's full autonomy, an executive director who reported only to the shareholder, is crucial and justifies the qualification of the relationship as commercial  and not labor.

3rd. From the content of the judgement, it is clear that the remuneration system, through salary payrolls and with a work contract classified by the parties as labor, is irrelevant, the important thing is not the nomen iuris but the materiality of the fulfillment or not of the requirements of article 1 ET.

4th. The circumstance of being a subsidiary, integrated into a Multinational Group with common services and uniform action, established by the shareholder, does not affect the classification of the link, insofar as said subsidiary maintains its substantive nature and acts with full autonomy.

Miguel Angel Alonso Garcia