Romania: Employment & Labour Law (3rd edition)

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This country-specific Q&A provides an overview to employment laws and regulations that may occur in Romania.

This Q&A is part of the global guide to Employment & Labour Law. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/employment-and-labour-law-3rd-edition/

  1. Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful in your jurisdiction?

    Unilateral termination implemented by the employer is permissible:

    • on the following grounds only: (i) for reasons not related to the individual (redundancy), and (ii) for reasons related to the employee, namely: (a) serious or repeated misconduct (disciplinary), (b) poor performance, (c) medical unfitness, and - least common - (d) arrest of the employee for a period exceeding 30 days; and
    • subject to strictly complying with the procedure provided by law for each case.

    A simplified form of termination is also possible, at the initiative of either party, during or at the end the trial period (subject to this being explicitly agreed in the employment contract), exclusively based on a written notice, with no notice period, nor justification on termination grounds.

  2. What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?

    Applicability of mass lay-offs/ collective redundancies rules is triggered if, within any 30-calendar-day period, a significant number of employees is made redundant. Such number depends on the employer's total headcount, under the following thresholds: (a) at least 10 employees – if the employer hires more than 20 employees, but less than 100 employees; (b) at least 10% of employees – if the employer hires more than 100 employees, but less than 300 employees; or (c) at least 30 employees – if the employer hires more than 300 employees. Assimilated termination cases (above five, arguably also mutual exits) must be considered.

    If so, the employer must (1) observe the same rules as relevant in individual redundancies (a real and serious cause for effectively removing such positions typically, economic reasons), and, in addition, (2) duly follow a significantly more cumbersome procedure (with additional steps and clear deadlines), which includes the legal requirement to consult (sometimes, in 2 rounds) with the appropriate social dialogue partner (trade union or employee representatives) or, if not existing, arguably even with all employees, as well as involvement of several labour authorities.

    In practice, the process to lawfully implement collective redundancies can take even up to 3-4 months to complete, plus the notice period to which employees are entitled and the time required to prepare all necessary documentation.

  3. What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?

    Depending on factual circumstances, a business sale/ transfer is like to qualify as a transfer of undertaking, in the sense of Romanian legislation transposing the Acquired Rights Directive 2001/23/EC. In this context, employees may not be dismissed by reason of the transfer. Further, if the employment contract terminates as a result of substantial changes in the working conditions to the detriment of the employee, the employer is deemed responsible for this termination.

  4. What, if any, is the minimum notice period to terminate employment?

    The statutory minimum notice period in case of dismissal is 20 working days - applicable in case of both management position and non-management position employees. Longer notice periods may be agreed and set out, usually, in the employment contracts or collective agreements.

    By law, notice is not required for disciplinary terminations, nor in case of termination due to the employee being under arrest for a period exceeding 30 days. Equally, as anticipated, no notice applies if employment is terminated during or at the end of the probationary period.

  5. Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?

    Payment in lieu of notice is not possible. In fact, while this used to be limitedly permitted under certain sector-level collective agreements, a ruling of the Romanian High Court of Cassation and Justice (dating back to February 2015) has held that payment in lieu of notice is not permitted as it essentially breaches an employee's right to receive notice (which is a fundamental legal right).
    On this basis, if the employee is legally entitled to notice, employment cannot terminate sooner than actual lapse of the respective notice period.

  6. Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to say at home and not participate in any work?

    Garden leave is not explicitly regulated by law.

    Arguably, there are alternatives to reach substantially similar effects; however:

    • this very much depends on factual circumstances - for example, if this is implemented in a straightforward redundancy context, with a view to facilitate additional time-off to employees to search for alternative employment, this is unlikely to be objected by the employees; and
    • it is not entirely risk-free particularly from an employees' health and safety perspective, as well as from a tax perspective.
  7. Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, describe the requirements of that procedure or procedures.

    In Romania, a specific procedure applies for each type of dismissal.

    For example, for a redundancy dismissal, the employer should primarily focus on:

    • properly documenting the business case - this is key to the entire process, as it serves to showcase the business rationale/ real and serious cause of the planned restructuring, which will need to be fully relied upon in all follow-up steps,
    • having the business case formerly approved by its competent corporate body when effectively suppressing the affected job positions, and
    • issuing and communicating the redundancy dismissal decision.

    On the other hand, when embarking on a disciplinary dismissal, the main points to consider are:

    • the employer may impose a disciplinary sanction within 30 calendar days of acknowledging the disciplinary misconduct (namely after the formal investigation is finalized), but also not later than 6 months after the date when the deed took place,
    • in terms of procedure, this primarily involves (a) setting-up a disciplinary commission to investigate the suspected breaches, (b) summoning the employee to a disciplinary investigation meeting via a written notice, communicated with reasonable time in advance (often 3-5 working days), (c) holding the disciplinary hearing and assessing relevant evidence, based on which the appointed disciplinary commission to report to the employer its conclusion and propose the course of action to be taken with respect to the employee or not (and, if relevant, the proposed sanction), and (d) issuing and communicating the disciplinary sanctioning (disciplinary dismissal, if the case) decision.

    Irrespective of the dismissal ground, statutory minimum content rules apply for any dismissal decision. Equally, they are all effective upon communication - typically, this is attempted through personal handover to the employee, but, if refused, alternative communication means must be implemented (including via official bailiff).

  8. If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?

    The employer's failure to fully observe the applicable dismissal procedure (as varying depending on the relevant dismissal ground) is ground for an unlawful dismissal claim. These are fairly common in Romania - probably since, by law, employees are not obliged to pay any judicial taxes to bring such a claim and the burden of proof lies with the employer.

    In terms of potential employer exposure:

    • reinstatement, if expressly requested by the employee;
    • compensation of all lost wages, for the period starting with the date of the dismissal decision up until the date of the final court decision. In fact, Romania is a "double recovery" jurisdiction - meaning that the right to compensation applies in full irrespective if the employee secured alternative employment in the meantime;
    • pecuniary and moral damages, if proven;
    • legal fees;
    • in certain circumstances, administrative liability or even criminal liability (for abuse in service) cannot be excluded; and
    • finally, a general reputational concern must be factored - also considering the public character of court hearings.

    In view of this, mutual agreed exits have definitely gained a lot of popularity over the last couple of years in Romania. Please see our input to questions 15 and 16 below, for details on this.

  9. How, if at all, are collective agreements relevant to the termination of employment?

    As a general note, in Romania, company-level collective agreements have witnessed quite a major set-back over the last couple of years, continuing to be enforced mainly in companies where trade unions are historically present and/or where it is a specific business context (for example, they are inherited in transfer of undertaking context and/ or linked to change of control).

    On this basis, if a company-level collective agreement is indeed applicable, termination of employment via dismissal is the precise circumstance where it will be particularly relevant on matters such as:

    • setting severance pays and social protection rules,
    • adding steps to follow during the dismissal procedure, to the employees' benefit, or
    • adding cases of protection against dismissal (for example, no redundancy for as long as collective negotiations are pending) etc.
  10. Does the employer have to obtain the permission of or inform a third party (e.g local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?

    There are no third-party approvals expressly required by law, however, there is a requirement to involve certain labor authorities (during a mass lay-off process or, in specific cases, during a poor-performance or medical unfitness dismissal), including an obligation to provide them with relevant termination-related documents.

  11. What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?

    Employers are generally obliged to observe a good-faith and non-discrimination principle in the employment relationship. Moreover, the law includes a general prohibition of dismissing any employee based on discriminatory grounds. Thus, employees cannot be dismissed for characteristics such as: age, disability; HIV status, language, non-contagious chronic disease, race, nationality, ethnicity, religion, belief, sex, sexual orientation, social status and underprivileged status.

  12. What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?

    Firstly, it may give rise to unlawful dismissal claims in employment courts. In addition, employees may also complain before the National Council for Combating Discrimination - NCCD (an autonomous state authority responsible for enforcing the anti-discrimination laws). If ever they ascertain that the employer issued a termination decision on discriminatory grounds, then such employer may pay administrative fines and be required to publish NCCD's decision in media.

    Also, the risk of a criminal complaint for issuing a dismissal decision in breach of the law cannot be excluded.

  13. Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?

    Other express cases when employers are prohibited from dismissing employees include:

    • pregnancy, if the employer acknowledged the pregnancy before issuing the dismissal decision;
    • maternity leave;
    • parental leave;
    • sick child care leave;
    • during maternity risk leave (and for a 6 month term after);
    • for a 6 month term after their final return to work from parental leave etc.
  14. Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?

    No legal protection is provided for dismissing (or taking other detrimental action) against an employee for the breach of his/her work related obligations, irrespective of whether he/she is a whistleblower. However, the employer could decide internally to offer this. If so, it is typically recommended to clearly set out in the internal regulation the conditions for a whistleblower to benefit from such special protection.

  15. What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?

    No statutory minimum level of severance payment applies in case of employment termination. By law, the employer is only bound to grant the notice period (typically amounting to 1 month's salary), but as actual salary payment, not payment in lieu. However, in practice, employers may decide to offer severance payments (in restructurings).

    Also, there is no generally applicable benchmark, nor any widely spread custom when employers decide about financial compensations, as they very much depend on the sector in which the employer operates, the scale of the redundancy process, the company's history / practice with compensations, the internal policies or other documents that may apply (even group-level), etc.

  16. Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.

    Mutually agreed exit is one of the possible employment termination routes expressly permitted by the Romanian legislation. Except for the requirement of agreeing the mutual termination in writing (including exit date), there are no express legal conditions on content Thus, not only is this typically safest from an employment litigation risk perspective, but also allows parties an opportunity of most flexibility on the exit terms, including the termination date.

    However, employee waivers are highly debatable as there is a high bar when it comes to protection of employee rights under Romanian law. Therefore, any clause which waives or limits the employee's rights recognised by law is null and void. In light of this restriction, any employee waiver needs to be carefully considered in terms of scope and actual validity and enforceability.

  17. Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.

    Post-termination restraints on non-compete and confidentiality are expressly regulated and fairly common in Romania, however, being most frequently used for employees in senior management positions.

    The non-compete undertaking is expressly regulated, however subject to several validity requirements. These include the obligation of agreeing the non-compete clause in the employment contract and the obligation of observing minimum clause content, including five mandatory elements:

    • the activities restricted to the employee as of termination,
    • the amount of the monthly non-compete indemnity (at least at the level provided by law which is 50% of the average monthly gross salary incomes for the last six months prior to the termination date),
    • the non-compete period (not exceeding 2 years post-termination),
    • the third party competitors (listed) and
    • the geographical area where the employee can be in real competition with the employer.

    In addition, the enforceability of a non-compete undertaking depends on the employment termination grounds. For example, where termination is on disciplinary grounds, a non-compete clause can be enforced but where the employee is made redundant, any previously agreed non-compete will not be enforceable.

  18. Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?

    Yes. Trade secrets may be protected by law during and after employment. In addition, a detailed confidentiality obligation can be agreed in the employment contract with respect to information or data obtained during the course of the employment relationship. Any express confidentiality clause should detail the scope of the confidential information covered, as well as the relevant term which will usually be during and post-termination of employment (arguably even for an indefinite period of time).

  19. Are employers obliged to provide references to new employers if these are requested?

    As part of their employee recruitment process and for checking the candidate's skills, future employers may ask for information from former employers, but only (a) in relation the activities performed by the candidate and the duration of his/her employment and (b) with the candidate's prior acknowledgment. Employers are not obliged to respond to such requests, however, it is fairly standard in practice to provide this basic information about former employees, when requested.

    This type of request might become obsolete. This is in the context of a fairly new obligation for employers to provide (by default) to employees upon employment termination (1) a certificate expressly mentioning (a) the activity performed by the former employee, (b) the duration of his/her employment, (c) the salary, and (d) the seniority in work and specialty, together with (2) an excerpt from the general registry of employees regarding the former employee. If independent background checks are more valuable, employers still have the option of double-checking this information with former employers in line with the above any generally GDPR rules.

  20. What, in your opinion, are the most common difficulties faced by employers in your jurisdiction when terminating employment and how do you consider employers can mitigate these?

    Employers face both:

    • external difficulties, outside their control (such as cases provided by law in which employee dismissal cannot be implemented, including medical leaves difficult to check in practice, protection periods related to pregnancy and various childcare related leaves), but also
    • internal pitfalls arising from a missing or incomplete internal framework for implementing dismissals.

    In our experience, internal pitfalls may arise from various elements, such as:

    • not having in place the required performance criteria, objectives and evaluation procedure documented and communicated to employees in line with the legal requirements, therefore hindering poor performance dismissals,
    • having a complicated, overly orchestrated disciplinary procedure prescribed in the internal regulation (imposing deadlines, steps and actions in addition to those required by law, such as mandating a preliminary disciplinary investigation even when the law permits sanctioning with written warning without any procedure), and
    • not reflecting the "reality on the ground" in its internal regulation or policies (such as not implementing clear rules for recurring situations thus preventing employer control and effective measures being taken in case of breaches or employee abuses, including not putting in place a working time policy when overtime, shift schedules and work in various uncommon circumstances is actually widely used, not setting-up a teleworking framework when remote work often happens in practice, etc.).

    The main mitigating measure employers could consider is starting an employment audit and housekeeping exercise with a view of transforming the unilaterally issued employment documents, such as the internal regulation, into useful, practical tools in managing (including, if the case, terminating) employment.

  21. Are any legal changes planned that are likely to impact on the way employers in your jurisdiction approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?

    Currently, there are no publicly known reliable alerts of any legislative trend impacting the way employers approach termination of employment.

    However, striking the right balance between contractor engagement and properly documented employment relationships is definitely still in the spotlight of both employment and tax authorities and therefore should continue to remain on employers' radars as well. This is the more so since termination of any such contractor relationship sometimes leads to claims of misclassification from contractors with some unlawful employment termination potential component.