Executive employment

In any relationship with executive employees, employment as well as corporate law aspects will need to be considered. In a German limited liability company (GmbH), for example, the managing directors are subject to shareholder instructions and may be released from duties at the shareholders' will.  In a German stock corporation (AG), on the other hand, management board members must be appointed for specific periods and may be removed from duties and office within the original appointment period only in cases of "cause".  The release from duties will generally not affect the compensation claims for the remainder of the contract term. Indefinite term contracts subject to notice will normally involve significantly less liabilities than multi-year fixed term contracts and are therefore the more flexible contract type for managing directors of a GmbH. Management board members of an AG, however, must be issued fixed term contracts. There are some options, though, to limit liabilities for the period after release from duties. 

Members of the management level below managing director or management board member are employees, and different from managing directors or management board members do enjoy protection against involuntary termination of employment. Like any other employee, these so-called "managerial employees" (often referred to also as leading or executive employees) may challenge an involuntary termination by filing legal action with the labor courts. Remedy is re-instatement, not monetary award. Managerial employees with the authority to make independent hiring or firing decisions are less protected: employers may file for a motion of judicial termination of employment even if the court finds an involuntary termination to be invalid and ineffective. When terminating the employment by court order, the court will order the employer to pay a severance calculated as a multiple of 1/12th of annual remuneration, depending on age and length of service.

Michael Tepass is well experienced in drafting employment contracts for executives, including rules on bonuses, restrictive covenants and privacy issues. Michael will also assist when the relationship develops issues or when it comes to termination of employment. Commercially-minded advise is what sets us apart.