Question 13: For Employees as recruits or current workers, which type of signed LC will allow them to be assigned to managerial positions in the enterprise (general director, managing director and other functional directors)?

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Recruiting or appointing Employees working for Employers to managerial positions in the enterprise

Under the Enterprise Law, apart from the case where the board of management may appoint one of the board of management’s members to be general director, the board of management may also choose the form of hiring a general director – but not a member of the board of management[1]. Thus, the selection of Employees to hold management positions, including the position of general director is not contrary to the Enterprise Law.

For the office term of management positions in the enterprise, the office term the general director shall not exceed 5 years[2]. For other managerial positions, the Enterprise Law does not provide for any office term, but enterprises may include an office term for other management positions in the same format as the general director. Therefore, the corporate decision to appoint a particular position for these individuals is only meaningful in terms of enterprise governance, concurrently ensuring compliance with the law on enterprises. In this case, the relationship between enterprises and those as aforesaid should be defined as the employment relationship i.e. the labour relationship governed by the labour law and the LC must serve as the basis for the parties to apply and comply with.

  • Which type of LC signed with Employees as recruits or current workers will allow them to be appointed to the managerial positions in the enterprise?
  • Case of recruiting Employees to hold managerial positions

Under the Enterprise Law, the office term of the director general/director does not exceed 5 years[3]. Thus, if an enterprise recruits an Employee to act as general director/director, the enterprise will not be able to sign an indefinite LC but only a definite LC with a term of 36 months (3 years), and after expiry of the first LC term, the second definite LC may be renewed for a definite term of 24 months (02 years) or vice versa for consistency with the office term of 5 years of the title of general director/director. 

  • In cases where an Employee is working under an indefinite LC, can he/she be appointed to managerial positions?

For alignment with the Enterprise Law on the office term of the general director as well as other managerial positions, the best solution for enterprises is to change the type of LC signed with the said subjects to the definite LC in order to ensure the consistency between the LC and the appointment decision. Changing the type of LC requires enterprises to terminate indefinite LCs with Employees. In order to do so, enterprises should explain and persuade Employees to agree to terminate current LCs and sign new definite LCs. It should be noted that, for an office term of 5 years as decided, enterprises have the choice to sign the first definite LCs with Employees for a period of 36 months (3 years), and after expiry of the first LC, will sign the definite LC with a term of 24 months (2 years) or vice versa.

However, it is not easy for any Employee to agree to change from an indefinite LC to a definite LC. Therefore, upon changing the type of LC, Employers should consider the following alternatives (as the case may be):

  • Terminating indefinite LCs with said Employees to sign new indefinite LCs specifying the title of any Employee as general director/managing director/other functional directors.

At that time, new indefinite LCs will serve as the basis for the parties to comply with the payment of benefits to Employees in accordance with the labour law, but the appointment decision in accordance with the law on enterprises will serve as the basis for calculating the office term of the said titles held by Employees. At the end of the term, if Employers have no need to re-appoint these Employees, they may sign the LC appendix to amend Employees’ job title and salary rate.

However, it should be noted that this solution will face many risks, such as if Employers no longer have demand to re-appoint Employees to continue holding the said positions and propose to sign the LC appendix to amend Employees’ job title and salary rate (that is lower than that in LC, Employees in case of disagreement will then argue based on new indefinite LCs specifying their title as general director/managing director/ functional director without agreeing to change their title and salary rate despite expiry of the office term of 5 years. Therefore, this alternative will be more risky for Employers if they do not want such Employees to hold those positions anymore. Therefore, Employers may consider applying the following solution.

  • Signing the LC appendix to record any of the Employee’s title in the same manner as the said solution if Employers do not want to sign indefinite LC with Employees. In addition, in order to avoid further problems for Employers in cases where they do not wish to continue re-appointment of such Employees, Employers may include in the appendix the salary rates applicable to these positions and the time limit of the appendix (5 years) corresponding to the office term stated in the appointment decision. Accordingly, at the end of the office term, Employers and Employees can liquidate this appendix and continue to implement according to the signed LC.

[1]Article 157 Law on enterprises

[2]Article 157.2 Law on enterprises

[3]Article 157.2 Law on enterprises