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Ten Typical Cases of Labor Disputes With Senior Executives Ⅳ

2021-03-08

On December 4, 2020, the Beijing Intermediate People’s Court No. 1 held a press conference to inform of labor disputes involving senior executives in recent years and issued the "Beijing’s Ten typical labor dispute cases." River Delta Law Firm conducted a comprehensive interpretation of the ten major cases and put forward corresponding management suggestions for employers.

Case 4: Resolution of Shareholders’ Meeting Is Not a Prerequisite for the Remuneration of Senior Executives
 
Introduction
Xu joined a sales company on May 24, 2010 as the general manager, sales director, and director. On February 1, 2017, Xu resigned and later submitted a lawsuit requesting payment of the executive bonus and sales director commission. The company advocated that Xu is a director of the company therefore his remuneration should be decided by the company's shareholders meeting and that since it has not been approved by the shareholders' meeting, it should not be supported. After the trial, the court held that Xu claimed that the executive bonus and sales director commission paid by the company belonged to the labor remuneration that should be obtained after performance of duties. As a prerequisite, the company should pay Xu's executive bonus and sales director commission.
 
Judge Interpretation
Although the Company Law stipulates that the shareholders' meeting of a limited liability company can determine the remuneration of directors, the remuneration shall be in consideration of the performance of duties based on the provisions of the Company Law, and does not involve labor remuneration for performing the duties of senior executive. The remuneration received by company executives as employees is subject to labor law, rather than the consideration for performing directors’ duties in the sense of the Company Law and should no go through resolution procedures of the shareholders’ meeting.
 
Lawyer's suggestions
The status of company's shareholders and directors does not have a labor relationship with the company, and does not need to accept management, command, and supervision in the sense of a labor relationship. The disputes arising therefrom should be under the Company Law. However, when shareholders and directors take up other senior executive positions in the company, they obtain the status of workers when performing their duties, and the resulting disputes should be under by Labor Law and Labor Contract Law. Although company executives are not ordinary workers in terms of their status, their labor rights are also protected by labor law. According to Article 30 of the Labor Contract Law of the People’s Republic of ChinaAn employer shall, under the contractual stipulations and the provisions of the state, timely pay its employees the full amount of remunerations…
Therefore, the resolution of the board of directors on the remuneration of the company’s manager is only a unilateral act within the company. Even if it complies with the Company Law and company rules and regulations, it only achieves internal compliance and is not a prerequisite for the senior executive to receive labor compensation.
 
Employers should consider
1. Reasonably understand and distinguish the dual identities of directors and shareholders as senior executives of the company, and the different applicable laws, and corresponding rights and obligations;
2. Formulate a bonus and business commission system or sign a written agreement with the senior executive to clearly stipulate or agree on the bonus and commission payment conditions, form, calculation and time, so as to avoid future disputes.

 

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