Executive directors are not entitled to sick pay
under the state insurance system, according to the Supreme
The ruling has parked controversy, even though it
follows previous similar rulings, and has led to speculation that
companies could try to recover benefits paid to executive directors
under their invalid agreements.
Companies can still provide executive directors
with sick pay but must do so at their own expense and not under the
state insurance system.
Executive directors perform their duties under
‘performance’ or ‘service’ agreements
regulated by the Commercial Code, with unlimited liability and no
entitlement to benefits such as health insurance.
However, it is standard practice for them to have a
dual relationship as ‘executive director’ under a
service agreement and ‘general director’ under a
employment agreement, in the hope of getting employment benefits
under the Labour Code. These include rights to holiday,
participation in state insurance schemes, restrictions on working
hours and limited liability.
Since the 1990s, the courts have disapproved of
dual agreements and ruled that the employment agreement is void.
The only exception is where the executive director performs
additional work under the employment agreement that is not part of
his role as executive director.