Legal Briefing

Moderate revolution in Romanian employment legislation

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Human Resources | 04 July 2011

On 1 May 2011, long-debated amendments to law no 53/2003 (the labour code) finally entered into force in Romania. At the same time, a significant number of laws and secondary legislation were repealed and replaced by the new law no 62/2011 when social dialogue was effected mid-May 2011 (the social dialogue law).

The two recent enactments were prepared at the same time, but were subject to separate legislative commissions. This means that although they are both aimed at, and have achieved more flexibility in, employment relationships, certain issues and inconsistencies still remain. A good example is the contestation deadline in connection with a lay-off decision. While the labour code requires any dismissal to be challenged before the court where the claimant has their domicile, and within 30 days of the communication of such a decision to the respective employee, the social dialogue law allows for a 45-day term from the date the employee acknowledges such a dismissal (which can be proven by any means), and the contestation may be filed with the court where the claimant has their domicile or their workplace. Given that the social dialogue law is more recent, it is commonly understood that the social dialogue law provisions will prevail.

CRISIS MEASURES IN THE LABOUR CODE

In case of a decrease in activity, it is now possible for the employer to opt for:

  • cutbacks of salary and work days – from five to four days per week;
  • technical breakdown;
  • deduction of overtime within 12 months; and
  • fixed-term contracts for longer periods.

Other changes to the labour code, even if not directly connected to crisis conditions, also aim at reducing unemployment and saving costs:

  • Recovering damages caused by an employee can be done following the parties’ mutual agreement up to a threshold of five minimum national gross salaries and with a court decision no longer being necessary.
  • An extension of the overtime reference period is now possible: regularly to four months, respectively to six months and extraordinarily to 12 months, through collective bargaining agreements. Presently, EU member states may set reference periods of a maximum of four months for the calculation of overtime. The extension of the reference period to 12 months, under the Romanian labour code, would be more than the Working Time Directive (the Directive) allows for at the moment, respectively to derogate with an extension of six months through collective bargaining agreements (during the five-year transition period set out under the Directive, it would have been possible to obtain another 12-month derogation, but this transition period ended in 2009). Derogations regarding the computation of overtime reference periods are beneficial for employers. However, such periods should not exceed six months, according to EU legislation.
  • Collective redundancies:
    • performance criteria were introduced for selection, so that social criteria no longer prevail and employers are able to retain employees based on performance;
    • shorter intervals to re-hire dismissed employees, in the event of the re-opening of the dismissed employees’ positions were introduced – now 45 days rather than the nine months previously; and
    • removal of restrictions to terminate trade union leaders for reasons other than having fulfilled their mandate.
  • Unrestricted use of the services of temporary work agencies is now possible.
  • Extension of the probation period to 90 days and respectively 120 days, allowing for a more thorough examination of the respective employee under improved conditions, including no restrictions with respect to the number of people to be employed successively for a cumulative maximum time of 12 months.
  • Severe sanctions for illegal work. Harsher fines per illegal employee, plus imprisonment for employing more than five people without a proper contract, as well as possible complementary sanctions, including the permanent withdrawal of the employer’s operational authorisation. Moreover, not only the employer, but also the employee working without a contract is being sanctioned.

SIMPLIFIED COLLECTIVE RELATIONSHIPS ACCORDING TO THE SOCIAL DIALOGUE LAW

Two developments in collective relationships are of particular importance:

  1. the repealing of the concept of a collective bargaining agreement at a national level; and
  2. the increased representation quorum for a trade union.
No national collective bargaining agreement

The existence of a collective bargaining agreement at a national level has been heavily disputed since the beginning of this year as, in practice, the 2010 national collective agreement was considered denounced by the majority of experts. The social dialogue law now completely annihilates any national collective bargaining agreement concept, providing collective bargaining agreements only for sectors, groups of companies and companies. Subsequently, many requirements set out under the former national collective bargaining agreements, that employers were familiar with in practice, are provided for nowhere else in the labour code or in the secondary enactments and so are no longer mandatory or hold no legal ground. Some of these requirements were:

  • establishing a minimum reference for salary;
  • granting four hours off per day during the notice period for dismissal; and
  • observing an evaluation procedure prior to any dismissal on the grounds of being professionally unfit.
Increased representation requirements

To be representative at a company level, a trade union must consist of at least 50% plus one of the total number of the company’s employees (formerly one-third of all employees was sufficient). The absence of such a representation right can be ascertained in court on request and entitles the company to renegotiate the collective bargaining agreement before the expiration of the existing collective bargaining agreement. In light of the recent changes, including the decrease of employee benefits under a national collective bargaining agreement, an increase in renegotiations of collective bargaining agreements at a company level is to be expected.

Several other new provisions are also positive for employers:

  • Sector collective bargaining agreements are now applicable only if the respective company is a signatory party thereof, and they no longer have erga omnes effects. An unusual and much-disputed exemption from this rule concerns changing the main scope of activity. In such a situation, the new sector collective bargaining agreement for the new main scope of activity should apply automatically.
  • In addition to the trade union leaders’ protection against dismissal, which had already been removed from the labour code, similar protection, as well as other benefits, were lost as a result of the new social dialogue law. Any benefits and special rights can now be obtained only by direct negotiation with the employer.

REQUIRED MEASURES

To comply with these new legislative changes, employers must take various immediate actions in connection with any existing and future employment files:

  • Amendments to existing agreements. This would require the employee’s consent and is therefore difficult to implement. Any amendment should include:
    • an introduction of the performance evaluation criteria, which may create issues, as some employers might abuse this new obligation to justify a decrease in salaries or even dismissals (in principle only, an increase in the number of employment litigations can be anticipated);
    • an extension of the probation period, if applicable;
    • the transposition of certain clauses of the collective bargaining agreements, as it appears that changes to collective bargaining agreements are not automatically applicable and should be contemplated in addenda in all employment agreements; and
    • professional training conditions, as the employee may be obliged to pay for the training expenses irrespective of the training duration and whether they were removed from work.
  • Written contracts and minutes/proof of delivery of originals (including job description). The written form is required for the validity of the agreement, while failure to provide the employee with an original is sanctioned with a fine.
  • Obtaining medical certificates prior to employment agreements. Obtaining these at a later stage is no longer possible, and the agreement remains null and void without a prior medical certificate.
  • Filling in the employees’ register: salary, bonuses, periods of and reasons for suspension, as well as secondment periods, must now be registered in the employees’ register.
  • Changes to the template offer and template agreement (probation period, performance criteria and targets, professional training, resignation and dismissal notice periods).
  • Appropriate negotiations of the collective bargaining agreements: eg night shift employees may only render overtime if this is allowed and provided for under the applicable collective bargaining agreement.

Following these recent significant developments in Romanian employment legislation, it is anticipated that rights will be more balanced and that employment disputes will have a more favourable outcome for employers. Hopefully there will be a change of attitude in courts as well, with work relationships perceived as largely flexible and with an enhanced degree of contractual freedom.