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Introduction |
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When Romania’s Labor Law No. 53/2003 became effective on March 1, 2003,
it imposed requirements upon employers that made hiring someone
potentially more onerous than marrying them. Every employer – whether a
candy store operator or a major manufacturer – was required to enter
into a written employment agreement with its employees, the terms of
which were strictly mandated by law. Termination at will of employment
was prohibited, the term of employment became, in essence, forever –
subject to certain limited exceptions – and multitudinous requirements
posed confounding and unnecessary obstacles – a formulation unwittingly
designed to daunt foreign investment and inhibit new hiring. Despite
some changes to the Labor Law outlined below, no significant amendment
has been made to the law in the five years that it has been in force.
Although similar restrictive provisions inhibit both the French and
German economies, Romania seems politically incapable of creating a
labor regime that both protects workers and stimulates entrepreneurial
development.
Romania’s entry into the European Union resulted in a wider recognition
of the right of foreigners to work on its territory. Law 203/1999
regarding work permits was abrogated and relations between foreign
employees and Romanian employers became regulated by Government
Emergency Ordinance no. 56/2007 regarding the employment and the
temporary transfer of foreigners in Romania (“GEO 56/2007”) and, also by
the provisions of the Labor Law, as successively amended, which are
applicable to both Romanian and foreign employees.
Since March 2003, the Labor Law has been amended in regard to various
matters, such as the creation of a right of employees to be properly
informed as to their scope of duties and position within the company as
well as the a regulatory framework for non-compete clauses and of some
tinkering with the justifications for the termination of an individual
labor agreement. None of these amendments brought any serious change to
the manner in which employees are hired or fired. This article addresses
the matters which both employers and employees need to know upon
entering into an employment relationship in Romania – both with Romanian
and foreign nationals. |
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General provisions of the Labor Law |
Hiring by Romanian employers
Romanian law provides that employment relations must be based upon
written individual labor agreements concluded between employers and
employees, no matter if the employee is a Romanian citizen or a
foreigner, and no matter the size of the employer’s business. The
obligation to conclude the individual labor agreement in written form
lies with the employer, who is bound to execute an individual labor
agreement in writing before the beginning of any employment
relationship. Prior to concluding or amending the labor agreement, the
employer must inform the employee of certain aspects of the job such as
the express duties to be undertaken by the employee, any specific risks
related to the job, the annual leave to which the employee is entitled
and the gross salary. During the process of negotiation, conclusion or
amendment of the individual labor agreement, each party may, according
to their wishes, be assisted by third parties. If the employee is to
work abroad, the employer must communicate in due time, before
departure, specific information such as the length the employees sojourn
abroad, the currency to be used to pay wages, the payment method, and
the relevant labor laws and regulations in the country to which the
employee is being sent. When the Labor Code came into force, in March
2003, employers had 15 days from the date they made the offer of
employment to provide the employee with such requisite job information.
Today, the term has been amended to be as soon as possible, but if this
has not occurred after 30 days, the employer can be sued by the employee
for damages.
Besides the essential clauses of an individual labor agreement mandated
by law, the parties may also negotiate and include other specific
clauses in an individual labor agreement, such as a clause on vocational
training; a non-compete clause; a on-site work clause or a
confidentiality clause. If a non-compete clause is contained in an
employment agreement, the employee must receive from the employer during
the entire non-compete period a monthly non-compete benefit. A
non-compete clause is effective only if it includes the specific
activities prohibited to the employee during the term or upon
termination, the nature or amount of the monthly non-compete benefit,
the time limit for non-competition, the third parties for whom it is
prohibited to perform competitive activities, and a geographical area
where the employee may reasonably compete with the employer. The
non-compete benefit must be made by the employer, and be deducted when
calculating the taxable income of the employee, and the tax must be
collected from the employee according to law and may last no longer than
a maximum 2 year period from the termination of the individual labor
agreement.
Termination of an individual labor agreement
i) The dismissal
A labor agreement can be terminated only by a lawful dismissal or
resignation. The dismissal by the employer may be when: the employee has
committed a serious or repeated disciplinary offence related to the
firm’s work rules; the employee has been taken into preventive custody
for more than 30 days pursuant to the Code of Criminal Procedure; a
competent medical examiner has determined the existence of a physical or
mental disability preventing the employee from fulfilling the duties
corresponding to the position held; the employee is not professionally
fit for the work for which he is employed; or the employee has reached
the conditions for retirement and he has failed to resign.
A dismissal caused by a serious or repeated disciplinary offence against
the firm’s labor discipline rules may only be decided after the employer
holds a preliminary disciplinary hearing. When the dismissal is the
result of an employee’s physical or mental disability preventing him
from fulfilling his job duties, or where the employee is not
professionally fit for the work to which he has been hired, the employer
must propose to the employee other vacant positions in the organization
which are compatible with his professional background or with his work
capacity, as established by an occupational medicine physician. When the
employer has no vacancy, it must request the support of the local public
employment office in order to reallocate the employee according to his
professional background, or according to his work capabilities as
established by the occupational medicine physician. In a maximum of
three days following the employer’s notification to the employee with
regard to a new vacancy, as mentioned above, the employee must express
his opinion in writing. In case the employee does not express his
agreement to take the newly offered job within such deadline, and after
notifying the local public employment office, the employer is entitled
to dismiss the employee.
The law sets forth the grounds for dismissal that are not directly
related to the employee’s performance. These are linked to the
elimination of positions within the company for reasons such as
financial difficulties, technological improvements or the reorganization
of the business. Dismissed employees benefit from social protection
measures. The dismissal needs to be communicated to the employee and it
must include the rationale for the dismissal and the list of other
positions available in the company. The employer is liable for damages
to the employee if the dismissal is deemed groundless or illegal by a
court.
ii) Resignation
A resignation is a written notice to the employer which, in effect,
terminates the individual employment agreement at the end of a
designated notice period. Such notice period varies between 15 calendar
days and 30 calendar days based on the position of the employee within
the company: operational or managerial. During the notice period, the
individual employment agreement is still in force. If the employer
waives such notice period, the agreement is terminated immediately upon
the receipt of the resignation. Unlike the dismissal which, as mentioned
above, needs to contain proper reasoning, a resignation need not be
grounded upon anything. Furthermore, no notice period is necessary if
the employer has breached its obligations under the individual labor
agreement. |
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Specific Provisions Applicable to Foreign
Employees |
Employers’ duties
 Romanian
employers must comply with the Labor Law irrespective of whether their
employees are Romanian citizens or foreigners. The employer’s
obligations are related both to the employees and to dealing with the
respective labor authorities.
The employer is required to grant to the employees adequate breaks,
weekly rest periods and paid annual leave. The work day is usually 8
hours. Employers must also avoid all manner of discrimination in the
workplace and especially gender discrimination. Although formerly, an
employee was entitled to compensation for annual leave not taken, this
has now been eliminated. The employer must register the individual labor
agreement with the competent labor authorities as well as proof of
regular payment of wages and social benefits for the employees.
GEO 56/2007 provides for certain specific obligations with regard to
employers’ of foreigners working in Romania. For example, a foreigner
can be employed only if he has a work authorization issued by the
Romanian Office for Immigration which is granted upon request of an
employer. In order to hire foreigners, an employer’s taxes must be fully
paid before the employer can make a request for a work authorization.
The employer pays a fee of €200 for each work authorization.
GEO 56/2007 stipulates that some persons do not fall under the
provisions of the above-mentioned rule, i.e., foreigners who have a
permanent visa, those who have been granted the right to work in Romania
based on agreements or conventions concluded between Romania and other
states, or foreigners who are members of the immediate family of a
Romanian citizen.
Work authorizations
GEO 56/2007 provides for several different categories of work
authorizations for permanent workers, for temporarily transferred
workers, for seasonal workers, for workers on probation or for
sportsmen. These categories of workers and the types of authorizations
are described in the GEO 56/2007. A permanent worker is a foreigner
employed in Romania based on an individual labor agreement between him
and a Romanian individual or legal entity, or a branch or an office of a
foreign company in Romania. A temporarily transferred worker is a
foreigner employed by a foreign company that carries on an activity in
Romania based on an agreement concluded between that foreign company and
the Romanian beneficiary of the services performed by that temporarily
transferred worker. A work authorization for a permanent worker grants
him the right to enter into one individual employment agreement for a
definite or indefinite period of time with a Romanian employer, while
the work authorization for a temporarily transferred worker grants him
the right to work one year in Romania in accordance with the temporary
transfer issued by a foreign employer to a Romanian employer.
Work authorizations are necessary only for those foreigners who are not
citizens of EU member states or of states that are parties to the
agreement regarding the Economic European Area and, also, who are not
permanent residents in Romania. The above-mentioned categories of
foreigners can be hired in Romania only if the job cannot otherwise be
fulfilled by Romanian citizens, the citizens of EU countries or of
states who are parties to the agreement regarding the Economic European
Area or are permanent residents in Romania.
In order to obtain a work authorization, the employer has to submit a
file with certain documents which are different for each category of
foreign worker. Among these documents are: the articles of incorporation
of the company (the employer), the registration certificate of the
employer, the certificate issued by the Trade Registry which proves that
the shareholders of the employer were not convicted of any crimes; a
letter of good financial standing; and a fiscal certificate or job
description. Also, resumes and diplomas or certificates which attest to
the competence and professional training for the job are part of the
documentation required from foreign workers.
After receiving an application for a work authorization, the Romanian
Office for Immigration must issue the authorization within 30 days from
the submission of the application. The valid period of the authorization
is no more than one year but it may be automatically renewed for the
same period of time if the foreign worker maintains the same job with
the same employer. The extended individual labor agreement is valid from
the date of the extension of the work authorization.
Yearly, the number of permissible work authorizations at the national
level is established through a Government Decision proposed by the
Ministry of Labor, Family and Equal Opportunities. In order to be able
to establish this number, the requirements of the Romanian labor market
are analyzed. The Ministry of Labor, Family and Equal Opportunities
drafts a list of critical employment positions. Also, the Romanian
Office for Immigration communicates to the Ministry of Labor, Family and
Equal Opportunities, quarterly, a statistic on issued work
authorizations.
Not all the applications for work authorizations are resolved in favor
of the applicants. Some are dismissed for a variety of reasons such as
the fact that the number of work authorizations previously approved by
the Government has already been met. Also, the law provides for certain
limited situations whereby a work authorization can be annulled by the
Romanian Office for Immigration. Such situations include ones where an
employer or a foreign employee submits annulment requests as a
consequence of the termination of either an individual labor agreement
or the end of the temporary transfer period in Romania. Additionally, if
the employer does not take possession of the work authorization from the
Romanian Office for Immigration within 30 days of its issuance, the
authorization will be annulled. Even if the work authorization is in the
employee’s possession after its issuance, the employer has the
obligation to retain a copy of it in order to be able to prove the
legality of the employment relation with the foreign employee. GEO
56/2007 stipulates sanctions for employers if they hire foreigners with
no work authorizations or with expired work authorizations. Such
penalties include fines between 1500 and 2000 RON. |
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Conclusion |
 The
amendments to the Labor Law over the past five years have not brought
any significant improvement to the burdensome formal and bureaucratic
obligations of employers towards the state or to their employees. While
these provisions may protect incompetent employees, they do nothing to
enhance Romania’s economy. Instead, they lead to a decrease in the
willingness of entrepreneurs to create new jobs, and an increase in the
black labor market – as well as to outsourcing jobs wherever possible.
Romania’s economy needs to be stimulated by entrepreneurship unhampered
by rigid labor laws that stifle the growth of productivity. By shielding
employees in bureaucratic red-tape, Romania’s reduces its growth and
impedes its development. |
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Editors Note: It is our policy not to mention our clients by name in
The Romanian Digest™ or discuss their business unless it is a matter of
public record and our clients approve. The information herein is correct
to the best of our knowledge and belief at press time. Specific advice
should be sought from us, however, before investment or other decisions
are made.
Copyright 2008 Rubin Meyer Doru & Trandafir, societate civila de avocati.
All rights reserved. No part of The Romanian Digest™ may be reproduced,
reused or redistributed in any form without prior written permission
from the publisher.
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