Question:
Our company has multiple legal representatives. Currently, the company needs to enter into a labor contract with one of these legal representatives in order to appoint him/her to a specific managerial position.
Under the latest regulations, does one legal representative of the Company have sufficient authority to represent the enterprise in signing a labor contract with another legal representative of the same Company?
Answer:
Pursuant to the Labor Code 2019 and the Law on Enterprises 2020, our response is as follows:
1. Authority to enter into labor contracts on behalf of the enterprise: According to Clause 3, Article 18 of the Labor Code 2019, the person competent to enter into a labor contract on behalf of the employer (the enterprise) is the legal representative of the enterprise or a person duly authorized in accordance with law. Accordingly, in principle, a legal representative has the authority to act in the name of the company to execute labor contracts with employees.
2. Enterprises having multiple legal representatives: Pursuant to Clause 2, Article 12 of the Law on Enterprises 2020, limited liability companies and joint stock companies may have one or more legal representatives. The law does not prohibit one legal representative from executing documents and contracts (including labor contracts) on behalf of another legal representative, provided that such execution falls within the scope of assigned rights and responsibilities.
Conclusion: If Mr. A and Mr. B are both legal representatives of the Company, Mr. A has a sufficient legal basis to represent the Company in executing a labor contract with Mr. B.
Important internal governance considerations
Allocation of authority: The Company should review its Charter and/or resolutions of the Board of Directors / Members’ Council to ensure that Mr. A has the authority to execute labor contracts (which is typically vested in the General Director / Director).
Avoidance of “self-contracting”: It is permissible for one legal representative to sign a labor contract with another legal representative (i.e., Mr. A signs on behalf of the Company for Mr. B). However, an individual must not sign the same contract in both capacities of “Employer” and “Employee.” In a company having only one legal representative who is also an employee, the labor contract must be executed by another individual pursuant to a proper authorization or in accordance with specific provisions of the Company’s Charter.
Appointment authority:A labor contract merely formalizes the employment relationship. Prior to execution of the labor contract, it must be ensured that a competent authority (the Board of Directors or the Members’ Council) has issued a valid decision appointing the relevant legal representative to the corresponding position.
Reference consultation: Labor lawyer consulting services
