I want to dismiss the CEO. How can I do it?-Publication

Under the Labour Code of the Russian Federation, the CEO is the sole executive body of a legal entity. However, despite a broad range of its powers (for instance, the chief executive bears full financial liability for the damage caused to the company), the CEO is still a salaried employee who entered into an employment agreement with a corporate employer. Therefore, similar to other employees, the CEO is subject to the provisions of the Labour Code of the Russian Federation and the other laws and regulations containing labour law provisions. Olga Abashnikova, methodologist at BDO Unicon Outsourcing, specified the grounds that can be used to dismiss the CEO without any problems.

1. Legal entity liquidation

In this case, all employment agreements, including the agreement with the CEO, will be terminated. The owner may transfer the responsibility to manage the company to another company (management company) or to an individual entrepreneur (manager). In this case, the position of the CEO will not be included in the staffing chart, it may be abolished, and the CEO may be dismissed.

2. Wrongdoing
This item is provided in Article 279 of the Labour Code of the Russian Federation. If the chief executive commits an embezzlement at work, shows up at work under influence, discloses a secret protected by law, he may be dismissed without any compensation. In this case, the employer must have the documentary evidence of the CEO’s fault. You will need it in court if the former top manager makes up his mind to contest the employer’s decision.

3. Special grounds
These include the factors associated both with changes in the company’s processes and with the actions of the CEO:

change of control over the company’s assets. The new owner may terminate the employment agreement with the current CEO within three months from the date of acquiring ownership rights;
making a decision causing damage to the company (Clause 48 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated 17 March 2004);
gross breach of job duties: normally, this item is associated with violations that might have caused harm to employees’ health or damage to the company;
conditions laid down in the employment agreement.

If we take a closer look at the last item, you should be aware of the fact that you will be unable to include absolutely all potential risks in the employment agreement. First, the grounds for dismissal set forth in the agreement must not be in conflict with law. In practice, the additional grounds for dismissal are as follows:

failure to implement the resolution of the general meeting of shareholders;
making decisions outside the purview;
systematic failure to pay salaries to the company employees in a timely manner;
systematic violations of the labour laws.

4. External reasons
These grounds are separated into a dedicated article – Article 83 of the Labour Code of the Russian Federation. They stand out for the fact that they are beyond the control of the parties to the employment agreement. For example:

The CEO is declared bankrupt;
The CEO is held administratively liable and is unable to perform its duties.

5. At the employer’s discretion

The CEO fails the probation period;
The employment agreement has expired and the employer is not under an obligation to renew it.

The most popular ground for dismissal is consistently Clause 2, Article 278 of the Labour Code of the Russian Federation providing that the owner may terminate the agreement unilaterally at its sole discretion. However, in this case, the employer will have to pay a compensation specified in the employment agreement that in any case cannot be less than a total of three average monthly incomes.

The dismissal of the CEO, similar to the dismissal of other employees, must be documented with a personnel order. The order may be issued using unified form No. T-8 adopted by the Resolution of the Federal State Statistics Service of the Russian Federation No. 1 dated 05 January 2004 “On approval of the unified forms of primary accounting documents for labour accounting and compensation” or a form developed and approved by the company’s accounting policy.

The order must specify the enabling documents for issuing the order:

in case of voluntary resignation, the employee’s personal letter of resignation is enough;
in case of employment termination by mutual agreement of the parties – the Employment Termination Agreement;
in case of employment termination due to expiry of the employment agreement – employment termination notification of the employee;
in case of employment termination for the reasons beyond the parties’ control – the relevant documents (draft notice in case of conscription, court verdict in case of a sentence, Judgment on an administrative case in the event of disqualification, etc.).

In all cases, in addition to the documents listed above, you should specify the resolution of the legal entity’s competent body on the removal of the CEO from office.

Based on the dismissal order, a relevant entry will be made in the CEO’s work record book except when the CEO is a part-time employee.