Proposed Labour Code changes prove controversial

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In January 2005, based on a prior commitment to the International Monetary Fund and with the aim of enhancing the flexibility of the labour market, the Romanian government proposed substantial amendments to the Labour Code. Trade unions categorically oppose the proposals and have launched protest actions of unusual scale. They have, however, agreed to hold parallel negotiations on potential changes with employers’ associations, as soon as the latter have reached a joint decision on the matter.

Since its election in December 2004, the new government - a coalition of PUR, the Justice and Truth Alliance (Alianta pentru Dreptate si Adevar, Alianţa DA PNL-PD) and the Democratic Union of Hungarians in Romania (Uniunea Democrată a Maghiarilor din România, UDMR) - has included amendments to the Labour Code among its priorities, hoping to finalise this objective by March 2005. The current Code adopted in 2003 (RO0401107F) has repeatedly attracted criticism from employers’ associations and business circles (RO0308102N), which claim that it excessively favours employees. In summer 2004 (RO0408101N) the then government made a commitment to the International Monetary Fund (IMF) to make several liberalising changes to the Code.

In January 2005, the Ministry of Labour, Social Solidarity and Family (Ministerul Muncii, Solidarităţii Sociale şi Familiei, MMSSF), released for public debate a proposal that would amend or repeal 62 out of the 294 articles of the Labour Code. Some of the major proposed changes are that:

  • collective bargaining should no longer be compulsory, and should cover only the signatory parties (currently, the national collective agreement automatically covers all Romanian employees while sector-level agreements apply to the entire sector concerned);
  • vocational training for employees should no longer be mandatory;
  • collective redundancy should be defined as the dismissal of at least 10 employees (compared with five at present) and related procedures simplified;
  • employee allowances for periods of temporary cessation of work should no longer be subject to collective bargaining;
  • trade union leaders should lose their immunity and become liable to dismissal for 'professional inadequacy';
  • conditions for concluding temporary employment contracts should be less rigid, with the maximum duration extended from 18 to 24 months;
  • part-time employment contracts should no longer have to include a minimum number of weekly working hours; and
  • non-competition clauses - barring employee from undertaking activities similar to that of their employer - was should remain effective even after termination of the employment contract.

Trade union reactions

Despite their often divergent views during bargaining with employers’ associations and the government, the five nationally representative trade union confederations (RO0307101F) have been united in their vehement refusal to accept the proposed Labour Code changes, and have even threatened to topple the government.

The unions express their disappointment with the government for failing to secure the aid of the International Labour Organisation (ILO) in drawing up the proposals, preferring instead to use a study drawn up by an expert of the World Bank (WB) from Denmark, who would scarcely have dared to make such proposals in his home country, the unions claim. Moreover, the unions state that many of the proposed measures are not applied anywhere else in the world: 'The IMF would make of Romania a Trojan horse intended to break up the European social model.'

Trade union leaders accuse the government of seeking to suppress collective bargaining, turn temporary work into the rule rather than an exception, allow the discretionary establishment of workloads and permit employers to set overtime work without previous approval from employees.

According to the leader of the National Trade Union Bloc (Blocului Naţional Sindical, BNS), flexible and fixed-term employment would severely unbalance the system of social insurance, health insurance and unemployment benefits. He admits that the current Labour Code contains 'oversights', and these should be rectified but not in haste as requested by the IMF which, he claims, lacks the required competence to intervene in a legislation-controlled market such as the labour market. The competence of the IMF is limited to macroeconomic indicators: 'The labour market in Romania must not be allowed to slip for the sake of experiment from legislation-controlled into chaos.'

At a joint press conference held on 15 February 2005, trade unions announced a calendar of protest actions, which are set to take place despite the resumption of negotiations (see below):

  • 21 February to 4 March 2005 - picketing outside all prefects’ offices;
  • 7 to 18 March 2005 - protest meetings in all county seats;
  • 19 March 2005 - a protest meeting in Brussels; and
  • a protest meeting in Bucharest followed by a general strike.

The trade unions will inform the ILO and international trade union organisations, requesting their expertise.

Employers’ standpoints

Both employers’ associations and business organisations have repeatedly criticised the current Labour Code for granting too many rights to employees and too few to employers. For instance, the Alliance for Economic Development of Romania (Alianţa pentru Dezvoltare Economică a României, ADER), which is not an employers' organisation but groups business representatives, proposed changes to 34 articles of the Labour Code. The requested amendments would eliminate restrictions related to job security, maximum weekly working time, and recruitment and dismissal. Employers' bodies are not in favour of consulting trade unions and employees’ representatives in the process of decision-making, or of informing employees of companies’ financial results on a regular basis. They also disapprove of the idea of setting up a wage guarantee fund to be used in the event of bankruptcy and contest the time- and money-consuming method of keeping employee records.

For the first time in Romania (RO0411102F), representative employers’ organisations organised a joint press conference to announce that they are holding negotiations in view of setting up a single, nationally representative organisation. The presentation of a joint standpoint of all employers’ organisations on amendments to the Labour Code was due on 22 February 2005.

At present, some employers’ organisations believe, like trade unions, that collective bargaining should remain mandatory. Employers’ organisations declare that they have submitted many pages of demands that are nowhere be found in the government’s proposals. If their demands are not taken into account, they say that they will be making investments in other countries.

Negotiations

Confronted with the social partners' discontent, the Ministry of Labour, Social Solidarity and Family declared that it only wished to enhance the flexibility of the labour market and would let trade unions and employers’ organisations negotiate the necessary amendments on their own, reserving to itself the right to act as final arbiter.

Although initially trade unions threatened to cease all negotiations, they subsequently changed their mind. After resuming negotiations, MMSSF argued that some employers find it impossible to apply the provisions of the current Labour Code, especially small and medium enterprises, as indicated by a recent study.

Although the government believes that as long as negotiations continue, 'the general strike threat is either premature or a factor of pressure in the negotiation process', trade unions have announced that they will not cease protest actions. On 18 February 2005, trade unions met with the Prime Minister. The latter agreed to a proposal made by trade unions that the government should approve without any change the outcome of negotiations between trade unions and employers’ organisations.

Since the time limit set for finalisation of the proposed Labour Code changes cannot be met, the government has agreed to inform the IMF of the delay.

Commentary

Despite the fact that some earlier demands made by employers were not included in the initial bill presented by MMSSF, the press noted that several changes had not even been requested by employers and saw this as excessive liberalism on the part of the government in power. Taking into account the present minimum and average wage levels in Romania, considerably lower than in the Member States of the European Union, including the 10 new Member States, the current drive towards flexibility may lose much of its rationale.

The increased cohesion visible both on the trade unions’ and employers’ side is noteworthy as a welcome and long awaited outcome of the current attempts to make radical changes to the Labour Code. (Luminiţa Chivu, Institutul de Economie Naţională)

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