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FLEXIBILITY AND TRANSPARENCY IN THE NEW LABOR CODE |
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Introduction
Amending Romania’s Labor Code has been the subject of much discussion
over many years culminating in a recent government-sponsored revision
that sparked controversy and a full national debate on the subject of
employment law in Romania. In an extremely difficult economic
environment characterized by massive cuts in salaries, protests by
employees, significant unemployment, and an increase in the “black” and
“grey” labor markets, the transparency and flexibility of labor
relations is imperative. Employers argued – as has this publication --
that the former Labor Code was too favorable to employees harming
productivity and growth, and therefore detrimental to business and the
nation. The trade unions organized huge protests arguing that the newly
proposed measures would affect already earned employee rights.
The new Labor Code entered into force on the May 1, 2011 through the
decision of the Romanian Government to undertake responsibility for it.
The amendments to the former Labor Code enacted by the Government are
substantial. It is not the purpose of this article to detail all of
them. However, employers intending to enter the Romanian labor market
should closely examine the provisions applicable to them. We present
below a few of the most significant amendments in the new legislation. |
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Main amendments to the Labor Code |
One of the most significant amendments to the new Labor Code, generating
important practical consequences, requires that individual labor
agreements be concluded in written form, and in the absence of such a
written agreement, the employment arrangement is null and void. Until
now, the individual labor agreement could have been concluded orally,
but employees preferred to have it executed in written form in order to
prove their employment conditions. This meant that labor agreements that
were not concluded in writing were not automatically null and
void, but it would be difficult to prove the conditions of such
employment such as duration, salary, and other rights granted to them
according to the provisions of the Labor Code, and be able to claim such
rights. Moreover, many times employers chose to hide employment
relations through other types of agreements, such as services
agreements, thereby avoiding the grant to their employees of the rights
pertaining to them under the Labor Code.
The amendment is meant to increase transparency in labor relations and
reduce the “black” labor market; not to mention that an enlargement in
the number of registered agreements would result in higher amounts of
taxes paid to the state. The new Labor Code has also set new
infringement sanctions for employers in the event of a breach by them of
these provisions. Some employers see this as yet another formality they
need to take care of further burdening their activity.
 Higher
amounts of taxes should be paid to the state budget as a result of the
new provisions entitling employees to be hired by different employers
based on separate individual labor agreements, and to benefit from the
salary corresponding to each of their separate jobs. This amendment was
praised by employees who can earn a living from several jobs without any
interdiction or formalities. However, employers will be faced with new
problems, such as ensuring that their employees’ performance is not
affected by their multiple employment and ensuring that they maintain at
all times the confidentiality of their business.
The newly amended Labor Code has raised an employer’s level of
responsibility in relation to labor law matters with added burdens to
their daily activity. New record keeping obligations have been adopted
for employers that come as a consequence of the amendment of the
structure and activity of the labor authorities, i.e. employment records
are no longer kept by the labor authorities, but fall under the
obligations of each employer. For instance, the role of the internal
registry of employees has been strengthened, meaning that employers must
now pay much more attention to the content of the registry, to the
manner in which it must be completed, but also to the person entitled to
perform this activity. The internal registry of employees has actually
become a sort of ID card of an employer as regards its employment
matters, and any control to be performed by the labor inspectorates
would undoubtedly have as one of their focus points this registry.
As an example of what this entails, any newly concluded individual labor
agreement must now be registered in this internal registry of employees,
and the registry thus completed must afterwards be transmitted to the
labor law inspectorate. Moreover, as compared to the former legal
provisions, now the registry must be completed with more information
about the employees, including their salary, allowances and the causes
and periods of suspension of the individual labor agreement, as well as
any period of job relocation. In case of amendments to the individual
labor agreements through additional deeds, the amended information must
be inserted in the registry and, afterwards, the registry again
transmitted to the inspectorate.
The obligation to include in the internal registry of employees all this
detailed information, as well as the fact that the registry may be
subject to the control of the territorial labor inspectorate at any
time, should raise the degree of transparency in labor relations.
However, as previously mentioned, considering the significance of this
document for an employer, and also considering that the lack of accuracy
or timely completion of it may cause significant damages to the
employer, close attention should be paid to the person empowered to
manage the internal registry of employees. Also, employers are now
obligated to issue not only to their current employees, but also to
their former employees, at their request, a document attesting to the
activity performed and the duration of such activity, as well as the
wage, seniority, position and specialty of the employee. In practice,
this means that a person seeking new employment, applying for a
retirement pension or other labor related right, would have to keep all
these documents from former employers and obtain any missing ones, in
order to prove his employment record.
Another significant amendment in the new Labor Code refers to the
extension of the information obligation of employers towards their
employees. In addition to the job title itself and their main
responsibilities, employers must now inform their employees of their
specific job description and the criteria for the evaluation of their
professional activity. This new amendment was generated by the practical
problems arising in the past when employees, even if informed of their
duties, were only provided with a vague framework of their future
activity before the conclusion of the agreement. It was only after the
conclusion of the labor agreement that many found out exactly what was
expected of them, and most of the time what was expected largely
exceeded what had been initially disclosed.
Considering all this, the new amendment is meant to increase the level
of transparency in employer - employee relations, and also, through the
development of the evaluation criteria, to increase employers’ capacity
to adequately evaluate the professional activity of their employees and
even sanction employees for failure to perform their specific tasks.
Another amendment with potentially significant consequences to both
employers and employees refers to the latter’s professional training.
Should employees participate at professional training at their
employers’ initiative, then the costs are to be entirely incurred by the
employers. Not only this, but employees will be able to benefit for the
entire duration of the professional training from their salary rights as
compared to the situation regulated by the former Labor Code, which
stated that the salary rights of those employees participating in
professional training could be diminished, corresponding to the daily
period of time for which they were not active at work.
Another one of the major amendments to the Labor Code meant to ensure
greater flexibility on the labor market refers to the individual labor
agreement concluded for a determined period of time. The new legal
provisions extended the period for which such an agreement may be
concluded from 24 to 36 months. However, in order not to allow employers
to indefinitely resort to individual labor agreements for a determined
period of time, thus depriving their employees of their rights which
they would otherwise have if they were full-time employees, the new code
establishes that a maximum of three individual labor agreements for
determined periods of time may be concluded between the same parties.
The agreements for a determined period of time concluded for a term of 3
months since the termination of the previous agreement are considered
successive agreements, and they cannot be concluded for periods longer
than 12 months each.
Until the entry into force of the new amendments, employers could resort
to work through temporary laborers only in specific cases, as expressly
set by law. Now, temporary laborers may be generally used for the
execution of a determined task which has a temporary nature. The new
code does not impose any further specific conditions which would have to
be fulfilled in order to allow work through such temporary laborers.
Moreover, the periods for which the work through temporary laborers, as
well as through delegated employees, may be used has been extended by
the newly amended Labor Code.
 There
are also significant amendments put in place with regard to overtime,
and work at night, as well as during probationary periods, and close
attention should be paid to them as well. Moreover, another significant
amendment refers to the extension of the prior-notice terms. For
instance, a dismissed employee now benefits from a prior-notice term
that cannot be less than 20 business days, instead of 15 business days,
as before.
Furthermore, in case of resignation, the term to provide notice thereof
cannot be longer than 20 business days for employees hired for executive
positions, as compared to the previous term of 15-business days, and
than 45 business days for employees hired for management positions, as
compared to the previous term of 30-business days. Not only have
prior-notice terms been extended for resignations, but employers are now
obligated by law to register their employees’ resignation. An employers’
refusal to register their employees’ resignation may result in sanctions
with an imposed fine.
As regards the collective dismissal procedure, employers have repeatedly
argued that it was too difficult to comply with; that it was not
supportive of their business and that even when facing economic
difficulties and lack of performance by their employees, they were not
protected by the provisions of the Labor Code to the extent of being
able to dismiss employees. In turn, employees claimed that the
collective dismissal procedure was often detrimental to their rights,
and this actually raised the number of claims submitted by employees in
court against their former employers.
In such a context, the amendments seek to increase the accuracy and
transparency of the collective dismissal procedure. For instance, a
significant amendment introduced by the amended Labor Code mentions
that, in order to establish the order for employees’ dismissals, their
individual performance must be first taken into consideration, and only
afterwards should other criteria be considered.
There are also amendments prohibiting the hiring of new personnel to
replace the dismissed employees’ positions, for which collective
dismissals were determined, for a period of nine months following the
dismissals. Under the amended Labor Code, an employee dismissed based on
a collective dismissal procedure is entitled to be hired back during a
45-calendar day term with priority for the position which has been
re-established in the same area of activity, with no obligation to pass
any exam or traineeship period. Therefore, if during the aforementioned
period, the same activities are recommenced, the employer is obligated
to transmit to the dismissed employee whose job area has been
recommenced under the same conditions of professional competence, a
written document informing the dismissed employee about the
recommencement of activities. Following this formality, the dismissed
employee may express his consent with regard to accepting the proposed
job within 5 calendar days of receipt of the written notice. In case the
employee does not express in writing his consent to be re-hired within
such 5 calendar days, or in case he refuses the position offered, then
the employer is entitled to hire new personnel for the vacant positions.
Individual labor agreements may also be suspended where there is a
temporary reduction of activity, and there are provisions in the new
Labor Code detailing the causes for lawful termination of such
individual labor agreements, but it is not the purpose of this article
to enter into discussion of such terms. Employers should closely check
the new and more severe sanctions in place applicable to the
infringement of such provisions.
While the amended legal provisions are applicable to any new individual
labor agreement which is concluded, the question of how the on-going
agreements are to be regulated so as to be in compliance with the new
legal provisions are explored below. |
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Elements of an Additional Amendment to the
Individual Labor Agreement |
According to the amended Labor Code, an additional amendment to an
individual labor agreement must be concluded within a term of 20
business days following agreement on the terms, as compared to the
15-day term following the written notice to the employee with regard to
the respective amendment, except for cases where such an amendment has
been established by law.
Because the current amendments are set by law, they are in any event
applicable to existing individual labor agreements. However, certain
newly introduced obligations make it advisable that additional
amendments to individual labor agreements be concluded. For example,
since employees must now be informed about their job description,
employers should focus on drafting the corresponding job descriptions
for all their existing employees and, afterwards, include them as
annexes to the individual labor agreements concluded with them.
Another significant aspect refers to the individual performance
objectives and the evaluation criteria of employees’ professional
activity. Employers should focus on elaborating both the objectives, as
well as the evaluation criteria, and include them in the internal
regulations of the employer. The same should be included in amendments
to the individual labor agreements concluded with the employees.
Should the existing labor agreement include a mobility clause, which is
a clause that stipulates the extent to which workers may be asked to
move from one job to another or from one place to another then,
according to the new legal provisions, an amendment should include the
exact amount which should be paid to the respective employee in
consideration for this mobility clause. Also, in case the respective
employee has benefited from professional training at the employer’s
initiative, having all the costs paid by such employer, an amendment
should specify a certain period of time within which the respective
employee cannot initiate the termination of its individual labor
agreement. Such an amendment would include all the other amendments
established by the new law such as, for instance, the prior-notice terms
or the allowances granted for work at night, if applicable. However, one
should always keep in mind that beside compliance with the provisions of
the amended Labor Code, compliance with the provisions of the applicable
collective labor agreement is also required. |
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Conclusions |
 The
new provisions of the Labor Code are intended to bring more transparency
to the relations between employers and employees. The new provisions
intend to make the labor market more flexible, for instance, through the
extension of the period for which individual labor agreements for a
determined period of time may be concluded; or through the increase of
work opportunities through temporary laborers. It was high time that the
Romanian labor market ceased to be regulated in terms of a national
market, and be seen more as part of the common EU market, characterized
through flexibility and transparency. Moreover, the larger sanctions
imposed on violations should diminish the “black” market and bring more
tax money to the state budget. |
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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 2011 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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