The Ministry of Economic Development claims that it is not competent to interpret whether directors of state-owned companies who were appointed to those positions pursuant to their Law on Business Companies, i.e. at the proposal of the Government, and not after a competition, as stipulated by the Labor Law, are legally in office.
This was announced to "Vijesti" by the department, after the Labor Inspectorate concluded that the Labor Law had been violated after he was appointed as the director of the Port of Bar. Aleksandar Slabidjoreski, at the proposal of the Government, but without a public competition. In the same way, in the past three months, about twenty directors of other state-owned companies have been elected, due to the start of the implementation of the new Law on Business Companies, so the interpretation of the Labor Inspectorate in this case may also call into question their appointments.
Although they claim that the Law on Business Companies does not exclude the application of the Labor Law, the department Nika Đeljošaj They say that the need to amend regulations should not be prejudged before the legal entanglements that have arisen have been examined from the perspective of both laws, that is, after the positions of the authorities have been considered.
The Labor Inspectorate's findings in the "Port of Bar" case questioned the legality of the appointments of top executives and all other state-owned companies that have switched to a new management model when it assessed that "Port of Bar" had violated the law, because Slabiđoreski was appointed without a public competition for the position, even though he was elected by the company's shareholders' meeting at the proposal of the Government.
Executive directors of companies with majority state ownership, who are appointed in accordance with the Law on Companies, do not have to have an employment contract because that law provides them with a position, and if they establish an employment relationship in that company - they will need to conclude a contract in accordance with the Labor Law, although it provides for a public competition, and the Law on Companies requires appointment at the proposal of the Government of Montenegro. This statement stems from the response of the Ministry of Economic Development to questions from "Vijesti" about the compliance of the two laws and the interpretation of the Labor Inspectorate, which operates under the Ministry of Labor, Employment and Social Dialogue, which is led by Naida Nisic.
The Law on Business Companies, which was adopted by the Parliament last summer, provides for changes in the current way of managing companies, through a unicameral or bicameral model, in such a way that from among the board of directors in the unicameral model, one of the members of the board of directors will be the executive director, with the possibility of up to three members of the board being executive directors and four non-executive. In the bicameral model, it is envisaged that there will be no board of directors, but a supervisory body and the institute of the general director from the board of directors.
It is precisely because of these changes in corporate governance that the question arose for the first time in practice as to whether, when electing an executive director in state-owned joint-stock companies, the provisions of the Labor Law governing the establishment of an employment relationship must be applied in parallel, or exclusively the rules from the Law on Business Companies.
The MED told "Vijesti" that the Law on Business Companies primarily regulates the status and legal issues of business companies, including their organization, structure and responsibilities of management bodies, as well as issues of appointment and dismissal within the corporate governance system.
"Issues of establishing an employment relationship and exercising rights and obligations arising from employment are regulated by labor regulations. In this regard, it is important to distinguish between the appointment of an executive director to a position within the management structure of a company and the eventual establishment of that person's employment relationship in the company," they stated.
THE DIRECTOR DOES NOT HAVE TO BE AN EMPLOYEE
The Law on Business Companies, according to them, does not stipulate that the executive director must be employed by the company, nor does it stipulate the obligation to conclude an employment contract with the executive director. The mutual rights and obligations of the company and the executive director can, as they explain, be regulated by an appropriate contract, in accordance with applicable regulations, depending on the specific legal relationship.
The above, however, does not mean that the Law on Business Companies excludes the application of the Labor Law in cases where the executive director establishes an employment relationship with the company, the MED notes, saying that these are regulations that regulate various legal areas and which, depending on the nature of the specific legal relationship, are applied within their subject matter.
They claim that this distinction was taken into account when drafting the new Law on Business Companies. Accordingly, as they said, this law does not regulate the procedure for establishing an employment relationship for an executive director, nor does it prescribe the obligation to conduct a public announcement, or a competition, as a condition for his appointment.
"A possible obligation to publicize that arises from the Labor Law or other special regulations is a matter of application of those regulations, for whose interpretation and supervision of application the Ministry of Economic Development is not competent," they said.
They added that possibly different positions of the competent authorities do not necessarily represent opposing interpretations of the same legal issue, but may arise from the different subject matter and scope of application of the two laws - one regulating the corporate status and management of companies and the other regulating the rights, obligations and responsibilities arising from employment.
The Ministry of Economic Development, they add, is not competent to assess the legality of individual appointments of executive directors, including the specific case in "Port of Bar", nor to prejudge the decisions of competent inspection or judicial bodies.
"The legality of each specific action is assessed according to the circumstances of the specific case and all regulations that apply to that case," the department said.
WILL CONSIDER ALIGNMENT IF NECESSARY
"Vijesti" also asked whether the different interpretation of these two laws could call into question the legality of appointing executive directors in other state-owned joint-stock companies that switched to a new management model this year - Elektroprivreda Crne Gore (EPCG), Montenegrin Electric Transmission System (CEDIS), "Marina Bar", Barska plovidba, Rudnik uglja Pljevlja, "Solar gradnja" (...) as was done in the case of "Luka Bar".
The MED responds that it would not be justified to draw a general conclusion from possibly different positions in one specific case that the legality of the appointment of executive directors in other state-owned joint-stock companies that have harmonized their organization with the new Law on Business Companies has been called into question.
Each individual case, they emphasize, needs to be viewed in relation to the method of appointing and engaging the executive director, the acts of the specific company, and the regulations that are applicable in that case.
Asked whether they would launch an initiative to amend either of these two laws in order to harmonize them, the MED believes that "at this moment, the need to launch an initiative for an authentic interpretation or amendment of legal solutions should not be prejudiced before the issue in question is comprehensively examined from the perspective of regulations in both areas and the positions of the competent institutions are considered."
If legal ambiguities are found that could lead to different treatment, they concluded, the need for further clarification of the normative framework and the undertaking of appropriate initiatives will be considered.
The Labor Law provides for a contract
The mere appointment of an executive director does not automatically mean that the person has established an employment relationship with the company. However, if the executive director performs the function in an employment relationship, the Labor Law explicitly stipulates the obligation to conclude an employment contract.
In practice, the question arises whether a decision by the competent body of the company is sufficient for the appointment of an executive director or, in addition to the appointment, it is necessary to conclude an employment contract, respecting the conditions prescribed by labor legislation.
The Ministry of Labor, Employment and Social Dialogue, whose inspection raised doubts between these two laws, did not respond to questions sent to "Vijesti" on Monday about this legal issue and the possible incompatibility of these two laws.
The current Labor Law explicitly stipulates that the director concludes an employment contract, for a fixed or indefinite period, and if the contract is concluded for a fixed period, the employment relationship lasts until the expiration of the term of office, or until the director is dismissed.
At the same time, this law stipulates that an employment relationship is established by concluding an employment contract and starting work, while the contract must be concluded before the employee starts work and in writing.
For companies whose founder or majority owner is the state or local government, the Labor Law prescribes the obligation to submit an application for a vacant job position to the Employment Agency for public advertising, so the question is not only whether the executive director must have an employment contract, but also whether a public advertising procedure must be carried out before concluding it.
The Labor Inspectorate also believes that an executive director who took office through the provisions of the Law on Business Companies must be in an employment relationship for which he concluded a contract after a public competition, based on the findings, which "Vijesti" had access to, because it determined that the Labor Law was violated in the hiring process of the executive director of "Port of Bar", because the employer did not publish a mandatory public advertisement for a vacant position through the Employment Agency.
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