source: http://stackoverflow.com/questions/6351111/many-to-many-association-with-multiple-self-joins-in-activerecord

create_employee.rb

create_table :manage_relation do |t|
  t.references :employee_id
  t.references :manager_id
end

create_table :subordinate_relation do |t|
  t.references :employee_id
  t.references :subordinate_id
end

employee.rb

class Employee < ActiveRecord::Base

  has_many :subordinates, 
           :through => :subordinate_relation, 
           :class_name => "Employee", 
           :foreign_key => "subordinate_id"
  has_many :managers, 
           :through => :manage_relation, 
           :class_name => "Employee", 
           :foreign_key => "manager_id"

  belongs_to :employee, 
             :class_name => "Employee"
end