The dismissal of the senior manager

At G. Elías & Muñoz Abogados, we have been specialists in the dismissal of senior executives for over 30 years. In this article, Vicente García Elías, head of the employment law department and founding partner of the firm, examines key issues such as the definition of a senior executive, the procedures involved in the dismissal of a senior executive, the compensation they may be entitled to, and the protective clauses that can be negotiated in their contract.

What constitutes a senior manager?

The Workers’ Statute classifies the employment relationship of senior management as a special category.

This category of staff is governed by the Royal Decree on the employment relationship of senior management, which defines senior management as those employees who exercise powers inherent to the legal ownership of the company and relating to its general governing bodies, with autonomy and full responsibility, limited only by the criteria and direct instructions issued by the person or the higher governing and administrative bodies of the entity in which they hold that position.

For example, this includes managing directors of a commercial company.

Therefore, it is a special employment relationship characterised by the following:

• Powers of the company are exercised.
• Work is carried out with autonomy and responsibility.
• The only limitation on their actions derives from the instructions of the company’s governing bodies.
• It is an employment relationship based on trust.

Termination of a senior management contract by the employer

A senior management contract may be terminated by the employer in a number of circumstances:

• Termination by the employer.
• Termination due to serious and culpable breach by the senior manager.

These are examined in detail below.

Termination by the employer

One of the key features of a senior management contract is that the employer may terminate the contract. In such cases, several factors must be taken into account:

• Written notice. The employer must give the senior manager at least three months’ written notice. This period is extended to six months if this has been stipulated in writing in contracts of indefinite duration or those lasting more than five years.
• Failure to give notice. Should the employer fail to comply with the aforementioned period, they shall be obliged to compensate the senior executive with a sum equivalent to the wages lost as a result of the failure to give notice.
• Right to agreed compensation. The executive shall be entitled to the compensation agreed in the contract and, if no such agreement exists, shall be entitled to compensation of seven days’ pay per year of service, subject to a maximum of six months’ pay.

Disciplinary dismissal of a senior manager

For the employer to be able to invoke this ground, there must be a serious and culpable breach of duty on the part of the senior manager. In the case of the disciplinary dismissal of a senior manager, there are certain requirements specific to this type of employment relationship, as well as others that are standard in any employment relationship:

• Formal requirements for disciplinary dismissal:
  o Written notice.
  o It must state the facts justifying the dismissal and the effective date.
  o Other formal requirements as set out in the applicable collective agreement.
• Classification of the dismissal. If the executive challenges the dismissal—for which they have 20 working days from the date of notification—three scenarios may arise. The judge may rule that the dismissal is:
  o Unfair. In this case, the employer must pay the executive the compensation agreed in the contract. If no amount has been agreed, twenty days’ salary per year of service shall be paid, up to a maximum of twelve months’ salary.
  o Valid or void. If the judge declares the dismissal justified (because it is determined that the grounds for dismissal alleged by the employer exist) or void (because it infringes fundamental rights), the employer and the senior executive must agree on whether the executive is to be reinstated or whether the compensation described in the previous section is to be paid. If no agreement is reached, it is understood that the corresponding compensation must be paid.

For example, let us imagine a chief executive who signed a senior management contract with a construction company and who uses confidential company information to divert contracts to another competing firm in which he is a partner. This constitutes a breach of contractual good faith and is one of the grounds for disciplinary dismissal.

Termination of senior management contracts in insolvency proceedings

Where a company is subject to insolvency proceedings, the insolvency act sets out a number of specific provisions regarding senior management contracts:

• The insolvency administrators may terminate or suspend the contracts of senior management.
• If the contract is suspended, the senior manager shall be entitled to terminate the contract with one month’s notice and shall be entitled to compensation.
• The judge hearing the insolvency proceedings may adjust the senior manager’s compensation, and the limit applicable to collective redundancies shall apply.

Severance pay and protection clauses

We have already seen that senior management contracts may include a specific severance payment in the event of dismissal. This is known as a protection clause. It is an agreement between the executive and the employer that is only rendered void if the contract is terminated by the insolvency administrator.

Precautions to take if you are a senior manager facing dismissal

If you are a senior manager at a company and believe you are about to be dismissed, it is important to consider the following:

• Do not sign any documents without reviewing them and consulting an expert employment lawyer.
• Request a copy of the letter and check that it contains all the necessary details (reasons, date, company signature, etc.).
• Gather as much evidence as you can: copies of emails, signed agreements and contracts, WhatsApp messages, results achieved or witnesses, amongst other things.
• Work with your labour lawyer specialising in senior management to define your negotiation strategy with the company.

Frequently asked questions about the dismissal of senior executives

To summarise the above, we answer the most common questions regarding the dismissal of a senior executive.

Can I be dismissed if I am a senior manager?

The answer is yes, under the circumstances we have discussed, as this is an employment relationship involving senior management. This may take the form of disciplinary dismissal for a serious and culpable breach of contract, or termination by the employer.

How should severance pay for senior executives be calculated if there are no golden parachute clauses?

If there are no severance protection clauses in the senior management contract, compensation of twenty days’ salary per year of service applies, up to a maximum of twelve monthly payments.

What differences are there between a senior executive and a manager with an ordinary employment relationship?

From a legal standpoint, for a manager to be considered a senior executive, they must meet the characteristics established by law:

• Exercise of company powers.
• Autonomy and responsibility.
• Acting under the instructions of the company’s governing bodies.
• An employment relationship based on trust.

For example, a senior executive may be the company’s CEO, while a manager may be responsible for one of the organisation’s areas (such as a finance or marketing director), maintaining an employment relationship with the company.

What happens if the employer fails to comply with the notice period when terminating a senior management contract?

The employer must compensate the senior executive with an amount equivalent to the salary not received due to failure to comply with the notice period.

How does the non-compete clause affect the situation once the senior management contract has ended?

A non-compete agreement cannot exceed a duration of two years and will only be valid if it meets two requirements:

• The employer has a genuine industrial or commercial interest in it.
• The executive is paid appropriate financial compensation.

Can a senior executive resign?

Yes, and the content of the contract signed with the company must be analysed to determine the specific resignation conditions. The notice period is three months, or six months if agreed in writing in indefinite contracts or those lasting more than five years.

What happens if an employee becomes a senior executive through internal promotion?

In this case, a senior management contract must be signed. The contract will specify whether the new employment relationship replaces the previous one or whether the latter is suspended. If nothing is specified, the ordinary employment relationship is deemed to be suspended.

If the ordinary employment relationship has been suspended, the employee may resume their previous position, unless it involves a disciplinary dismissal.

Summary outline of dismissal of a senior executive

Therefore, the working conditions of a company’s senior executive are special due to the responsibilities they must assume. For this reason, current legislation provides for a special senior management contract with the particular features outlined above compared to a standard employment contract.

Author: Vicente García Elías, head of the firm and employment lawyer with more than 30 years’ experience, specialising in senior management contracts.

Article updated on 6 February 2026.

Sources:

• Workers’ Statute
• Royal Decree regulating the special employment relationship of senior management staff.