Revised Labour Code adopted

Download article in original language : RO0507102FRO.DOC

A government Emergency Ordinance, published in July 2005, has brought into force a revised Labour Code in Romania. The Code has been amended, partly to bring national legislation into line with EU law, in areas such as fixed-term contracts, dismissals and redundancies, working time and training. The amendments follow lengthy negotiations with representative trade union and employers’ organisations.

In January 2005, the Ministry of Labour, Social Solidarity and Family (Ministerul Muncii, Solidarităţii Sociale şi Familiei, MMSSF) proposed amendments to Law no. 53/2003, the Labour Code (RO0401107F), in the hope of having them adopted by March (RO0502102F). Negotiations delayed the process and it was not until June that the government passed Emergency Ordinance no. 65, published in the Official Gazette no. 576 on 5 July 2005, thus bringing into force a revised Labour Code.

The approved text is the result of lengthy negotiations with representative trade union and employers’ organisations and includes considerably fewer amendments than those proposed in January 2005 by the Ministry of Labour, Social Solidarity and Family. Around 80 amendments were proposed in the course of negotiations.

The arguments behind the new regulations include: establishment of more flexible work relationships; ensuring protection of employees; and creating the conditions to harmonise the Labour Code's provisions with the EU 'acquis communautaire' in terms of working time, collective redundancies and keeping workers informed, in line with the engagements assumed by Romania under chapter 13 on 'employment and social policies' of its EU accession negotiations.

Content of revised Labour Code

The main amendments and additions to the Labour Code refer to:

  • relaxation of restrictions on concluding individual fixed-term employment contracts;
  • simplifying record-keeping procedures relating to employees;
  • making regulations on individual dismissal and collective redundancies more flexible;
  • setting less rigid rules for working hours and overtime;
  • regulating cooperation between employers and trade unions over work quotas (by observing the regulations in force and with the approval of trade unions or employee representatives, including the possibility of resorting to arbitration in the case of disagreements);
  • introduction of new regulations on paid annual leave. Holiday pay will not be lower than the basic wage and will be calculated based on the average daily pay entitlements over the last three months, including permanent indemnities and bonuses recorded in the individual employment contract. In the old Labour Code, the average daily holiday pay was calculated on the basis of income received, not entitlements (for various reasons, income could be higher or lower than the entitlements);
  • improving provisions on vocational training for employees; and
  • revision of the legal system of contraventions and penalties related to work relationships.

These amendments seek to bring Romanian law in line with the norms of the International Labour Organisation (ILO) and the requirements of five EU Directives (91/533/EC, 93/104/EC, 94/33/EC and 98/59/EC and 2003/88). The changes also resulted from the country reports for Romania drawn up by the European Commission in 2003 and 2004. Finally, the new Code also takes into account the obligations assumed in agreements between the government, theInternational Monetary Fund (IMF), and the World Bank (WB).

Major changes

To summarise, the Emergency Ordinance has: abrogated entirely eight articles and four sections of the previous law; introduced two new articles, seven sections and eight letters; and amended 13 articles, 29 sections, 16 letters and one title.

The most significant changes made by the revised Labour Code are as follows.

  • Labour market flexibility increases along with the relaxation of restrictions on the duration and manner of concluding individual employment contracts. So far fixed-term employment contracts have rarely been used and have been little regulated. The new regulations extend the maximum duration of a fixed-term employment contract from 18 to 24 months. There can be no more than three successive fixed-term employment contracts within this period, after which the employer must fill the vacancy with an indefinite-duration employment contract. In other words, the content of the contract may be modified three times in the course of 24 months, compared with a single contract with an 18-month validity stipulated by the previous Code.
  • To simplify employee record-keeping procedures, employers must draw up a general employee record-keeping register. The register now lists all employees by date of employment, specifying occupation, type of individual employment contract (fixed-term or indefinite duration) and contract termination date. Previously, the register also listed individual employment contract-related elements as well as all events occurring in terms of work relationships such as execution, amendment, suspension or termination of the employment contract.
  • To make individual dismissal and collective redundancies more flexible, a number of changes have been made, as follows:
    • after the trial period has ended both the employer and the employee may terminate the individual employment contract by giving written notice; and
    • in defining collective redundancies, the minimum number of redundant employees increases from five to 10 in the case of employers with 20 to 100 employees. An employer is no longer compelled to present a programme of social security and training and development measures before resorting to collective redundancies. Written notification of redundancy decisions to trade unions is shortened from 45 to 30 days. Trade unions or employee representatives may now propose measures to be taken by employers in order to avoid redundancies or to reduce the number of redundant employees within a shorter period of time from the date of notification receipt (from 20 down to 15 days) and the employer must respond within five days (compared with 10 days, as previously stipulated). The local employment inspectorate may order a delay of no more than 10 days (compared with the 15 days as previously stipulated) of the date of issuing the decision. The employer may not fill vacancies resulting from redundancies for a period of nine months (compared with the 12 months stipulated in the former Labour Code).
  • To improve the flexibility of the legal length of working time and make it easier to resort to overtime, the reference period for calculating the maximum number of working hours per week (48 hours) - beyond which limit overtime is officially acknowledged - has been extended from three weeks to one month and in the case of certain sectors may even reach 12 months. Over this limit, an employer may request overtime hours from employees only by invoking absolute necessity or emergency situations.
  • The new provisions oblige employers to finance and ensure the participation of all employees in training and development programmes, at least once every two years in the case of companies with a minimum of 21 employees and once every three years in the case of companies with fewer than 21 employees. Companies with over 20 employees must draw up and apply annual training and development programmes, which are annexed to the company collective agreement (in the former Labour Code this provision was mandatory for all companies regardless of the number of employees). Another novelty is the fact that both the employer and employee may take the initiative in terms of training and development programmes.
  • The new Code has introduced additional provisions on contraventions and penalties related to work relationships, such as fines for non-observance of overtime regulations, for failure to pay an indemnity for temporary interruption of activity, or breaching of provisions on night work. Non-observance of regulations on employment of under-age workers or giving them jobs that run counter to regulations on work conditions for minors are punishable by one to three years in prison;
  • A non-competition clause in employment contracts, which has been a source of numerous discussions between the social partners, has eventually been regulated in the new Cod. It becomes effective subsequent to the termination of an employment contract (the former employee concerned must receive an indemnity of no less than 50% of the average gross wages in the six months prior to the end of the employment contract) if the employment contract specifies the activities prohibited to the employee, duration of prohibition, the third parties which the employee must not work for as well as the prohibited geographical area.
  • A long-lasting controversy on the setting up and use by employers of the wage guarantee fund (RO0401104F) will be settled by means of a special separate law.

Social partner reactions

Soon after the negotiation and finalisation of the Emergency Ordinance, the government as well as trade unions (RO0307101F) and employers’ organisations (RO0310103F) expressed their apparent satisfaction with the contents of the new Labour Code.

Despite the fact that representative trade unions and employers’ organisations agreed on the content, there are still quite a few unions and employers' organisations whose views diverge consistently with the new legislation meant to regulate industrial relations in Romania. Trade union organisations declare that some articles are open to interpretation and that the nuances of meaning are disadvantageous to employees. The leader of the Cartel Alfa confederation, a member of the ILO board, announced that an ILO committee would subject the text to close scrutiny at the end of August 2005. Other trade union organisations, including the National Confederation of Free Trade Unions in Romania Brotherhood (Confederaţia Naţională a Sindicatelor Libere din România Frăţia, CNSLR Frăţia), requested that parliament should not amend the approved text of the Ordinance.

Commentary

Collective agreements at national, sector or company level are now given a decisive role since a large number of provisions in the new Labour Code refer to provisions existing in these agreements.

According to press reports, it seems that IMF representatives asked the government to annul collective agreements as a prerequisite for the approval of a supplementary memorandum on economic and financial policies linked to the Stand-by Agreement on Prevention Assistance signed by the former government (RO0403102F). This request apparently originated in the dissatisfaction of foreign investors in Romania with the text of the new Code. Călin Popescu Tăriceanu, the Prime Minister, declared that he disapproved of the request made by IMF and that he was even contemplating renouncing the Stand-by Agreement if IMF representatives do not reconsider their demand. Renouncing collective agreements would mean a definitive destruction of the entire structure of regulations in the new Labour Code. (Luminiţa Chivu, Institute of National Economy)

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