Amendments to the labor code – the impact on business

Date: March 11, 2011

The  Government  proposed  in  Parliament  107  changes  to  the  current  Labour  Code.  The  opposition  filed  a motion against the bill and a vote will be casted on 16th  of March. If the motion is approved, the Government falls. If the motion is rejected, the law will be most likely submitted to the control of the Constitutional Court and then sent to the President for enforcement. Current expectations are that the motion will be rejected, the only  unknown  factor  being  the  reaction  to  street  pressure,  as  the  unions  have  organized  several  meetings against the bill in the days to come.

Following is an Executive Summary regarding the changes which are expected to be most relevant for the businesses and then more details on the main changes.


Options to react to increased demand or to downturns
: i) total weekly work time can be increased over 48 hours as long as this number is maintained as an average at 4months; the reference period can be increased through collective agreements (CLAs) to 6 month or in special conditions up to 12 month ii) individual labour agreements (ILAs) can be suspended with base pay reduced to 75% in case of reduction of activity, not only in case of temporary closure as it is now; iii) 4 days work schedule for no more than 30 days; iv) time in lieu in advance: paid days off now compensating overtime in the following 12 months, (v) work norms do not require agreement of the unions anymore; this measure this needs to be correlated with the National CLA which speaks still of this approval;Proposed changes with the highest impact on businesses:

  • CLAs signed after the entry into force of the changes (expected after 20th of April) cannot last longer than 31st After that, the term will be set in the new Social Dialogue Code scheduled for this summer. One thing is certain: CLAs cannot disappear as they are regulated in the Constitution and in EU legislation. For more comments on this matter please refer to the section below;
  • Fixed contracts and agency work will be more flexible allowing longer periods (36 months and even longer under certain conditions) and better financial offers from work agents;
  • Probation periods increased from 30 to 90 days for non-management and from 90 to 120 days for management;
  • If a need to have a broader work place and therefore using a mobility clause, the employers will have to specify clearly what is the allowance for this (the current practice is to include it in the base pay);
  • Training agreements are left for the parties to structure (currently an employee who attended a 60- day course for more than 25% of the daily schedule has to pay it back if it leaves within 3 years from graduation)
  • Content of ILAs and reporting obligations become more cumbersome for employers, plus fines increase;
  • Collective dismissals based on performance criteria, but regulated in an ambiguous manner;
  • The night work allowance has been increased and the protection of union leaders is being decreased. However, in fact there is no change on these 2 matters because of other existing legislation or the National CLA which remained

COLLECTIVE LABOUR AGREEMENTS                                                                                     2

WORKING TIME AND WORK NORMS                                                                                     3

POSSIBILITIES TO REACT TO ECONOMIC DOWNTURN                                              4

NEW RULES ON INDIVIDUAL LABOUR AGREEMENTS                                                  4

FIXED-TERM EMPLOYMENT CONTRACT                                                                             5

NEW RULES ON TEMPORARY WORK PROCURED BY WORK AGENTS               5

DELEGATION                                                                                                                                         6

PROBATION PERIOD                                                                                                                        6

PROTECTION OF TRADE UNION LEADERS                                                                         6

PROFESSIONAL TRAINING                                                                                                            7

MOBILITY CLAUSE AND REPORTING OBLIGATIONS                                                    7

 

 

UPDATESCOMMENTS
COLLECTIVE LABOUR AGREEMENTS

The  Project  proposes  the  replacement  of  the  existing  articles establishing   the   regime   of   the   collective   labour   agreements (“CLA”),  by  a  reference  to  a  special  law  that  will  regulate  these matters.  It  is  mentioned  that  CLAs  signed  after  the  entry  into force of this law cannot exceed December 31, 2011. Afterwards, it will  be  possible  to  conclude  CLAs  for  the  periods  prescribed  by the new special law.

The current CLAs continue to be in force until the expiry of their term.

Amended articles: 236(2), 237, 238-247 are repealed.

In the background is the Government intention to pass a Code of Social Dialogue which should restructure the manner in which CLAs are concluded.

The big change expected from this Code of Social Dialogue is to harden the requirements that trade unions and employers associations must meet in order to be representative and therefore participate in collective negotiations.

Perhaps,  by  limiting  the  duration  of  CLAs  to  be  concluded this year, the Government sought to suppress the desire or need of companies or industries to negotiate and enter into CLA’s until  December 31, 2011, because what would  be  the point in concluding a CLA only for a few months?

However, this opportunity decision should not be made by the Government, but by the social partners who know their interests best.

For sure CLAs cannot be suppressed given that art. 41 (5) of the    Constitution    guarantees    the    right    to    collective bargaining.

An  option  for  parties  who  want  to  conclude  a  CLA  during 2011  would  be  to  insert  a   clause  which  will   prolong  it

UPDATESCOMMENTS
 automatically once the new law will come in force.
WORKING TIME AND WORK NORMS

The maximum weekly work time (48 hours per week) can be increased as long as the average is maintained on 4 months. Previously the reference period was of 3 months.

The  reference  period  can  be  extended  to  6  months  through  the CLA and then even to 12 months under certain conditions.

Amended article: 111

This  would  be  a  useful  change.  Currently  the  reference period can be extended through collective negotiations up to 12  months  only  for  few  sectors  specified  in  Annex  6  to  the National CLA.

The timeframe within which overtime can be compensated with time in lieu increases from 30 to 60 days.

In  periods  of  downturn,  the  employer  has  the  option  to  grant paid days off which will compensate overtime to be performed in the following 12 months.

Amended article: 119

This change is beneficial as it increases the ability of the employer to adapt to market conditions. Anyway, in practice the time in lieu is granted also after the expiry of the 30-day term.

The   Project   increases   the   allowance   for   night   work:   25% compared to 15% as it is now specified in the Labor Code.

Amended article: 123

No  change  in  practice  as  the  National  CLA  anyway  speaks about   25%   allowance.   It   is   expected   however   that   this change  will  lead  to  trade  unions  demands  to  increase  the allowance in the National CLA to a higher level.

This Project removes trade unions approval in establishing the work norms. The employer is only required to consult the trade unions or employees’ representatives in developing work norms.

Amended articles: 129

This is actually a return to normality, worknorms being the traditional  and  necessary  attribute  of  the  employer.  The current   National   CLA   still   requires   the   trade   unions approval,   so   this   issue   remains.   Still,   if   the   Project   is approved,   it   can   be   interpreted   as   prevailing   over   the National CLA by virtue of Article 8 (2) of the National CLA – if more favorable legal provisions occur, they are deemed as part of the contract.

The duration of the annual leave will be determined by the Individual Labour Agreement in compliance with the applicable law and CLAs. The current legislation provides somehow the other way around, i.e. that the duration is determined by the applicable CLA and it is just mentioned in the ILA.

Amended article: 140(2)

It is likely that the intention was to cover the situation where there are no CLAs at the unit level establishing the annual leave.

However, we believe that the proposal is not beneficial because the annual leave regime is, in general, a matter negotiated at the collective level. It would be advisable to avoid the situation of an employee refuses the terms negotiated in the CLA because they are not consistent with the ILA.

In practice, however, there could be found contractual solutions so that the negotiation of this issue remains at the level of CLAs.

The minimum annual leave fraction is of 10 working days, unlike the current legislation, which is 15 days.

Amended article: 143(5)

This is a useful because anyway in practice the annual leave fractions were usually less than 15 days.
UPDATESCOMMENTS
POSSIBILITIES TO REACT TO ECONOMIC DOWNTURN

The Project contains the possibility of the employer to reduce working week from 5 to 4 days a week, with a corresponding reduction in salary, for no more than 30 days. It requires prior consultation with the representative trade union or with employees’ representatives, as the case may be.

Amended article: 52

This change is beneficial to employers. The correct interpretation of the text seems to be that the employer may reduce working time even more than 4 days/week with the union’s approval.

The draft stipulates that the employer may temporarily suspend activity even in case of the workload decreases, not only when the company’s activity is temporarily interrupted.

Amended article: 52 (1, d), 53.

This brings the law in line with reality. However, in case of a trial, the employer will have a duty to prove in court the need to reduce the workload as well as that the measure was implemented in accordance with the employer’ decision.
NEW RULES ON INDIVIDUAL LABOUR AGREEMENTS
I.            Additional formalities

The written form becomes a condition of validity for the ILA.

 

Having up to 5 workers without concluding an ILA is an administrative offence. Having more than 5 workers without concluding an ILA constitutes criminal offence.

Amended article: 16, 276, 280

This change has a substantial potential to create ambiguities and interpretation issues.

We understand that having people at work without concluding ILAs or other similar contracts would not lead to the risk of reinterpreting the relationship between the parties as an ILA.

These omissions will be administrative or criminal offences depending on the number of people found in these situation.

The ILA will include criteria for assessing the professional performance of the employees.

Amended article: 40

We do not understand why these criteria were introduced in the ILA given that the employer was already able to set these criteria in the Internal Regulation and other internal documents.

Their insertion in the ILA means that employers need to obtain the employees’ consent whenever they have to change such criteria, which is atypical.

II.         Procedural terms are suspended if the ILA gets suspended

If the ILA is suspended, all terms related to the conclusion, amendment, observance or termination of the ILA shall be suspended as well, throughout the entire duration of the suspension of the ILA.

Amended article: 49

The amendment clarifies a matter which previously generated confusions. An application is that the 30-day term within which disciplinary investigation can be carried out is suspended if the employee is ill.
III.         Collective dismissal
Before performing a collective dismissal, the employer will assess the performance of the employees envisaged by this measure. The text is ambiguous, but it appears to say that the employees will be classified in accordance with their performance and the social selection criteria will be applied only between those who have the same performance results.This amendment is positive for both employees and employers. Normally, in case of dismissal, social protection is achieved by offering severance and unemployment insurance packages, not by requiring employers to keep the employees who have children or less than 3 years until retirement.
UPDATESCOMMENTS
Amended article: 69 
The duration on which employers have an obligation to employ the employees dismissed in collective dismissals was decreased from 9 months to 45 days.This measure is normal, considering the fast change of the economic reality. The fact that after 45 days the same jobs are reestablished should not be considered in itself sufficient proof of the fact that the dismissal was not effective.
FIXED-TERM EMPLOYMENT CONTRACT

The  period  of  a  fixed-term  ILA  was  increased  from  24  to  36 months.

The cases in which a fixed-term ILA may be concluded have been extended.

There is a limitation to maximum 3 successive fixed period agreements between the same parties. Contracts concluded within 3 months from expiry of the previous one are considered successive agreements.

The proposed text removes the obligation of the employers to hire an employee indefinitely, either upon expiration of the maximum term of such contract or upon termination of the third successive fixed-term contract.

Amended articles: 80, 81(b) and (e), 82(1), 84

Such a contract may be concluded whenever there can be identified tasks that could be constrained to a limited duration.

It could be interpreted that, as long as the periods between the contracts are longer than 3 months, there is no limit on the number of fixed-term ILAs to be concluded as long as each of them does not exceed 36 months.

However, we believe that such an approach is at risk of exceeding the spirit of the law which still considers that fixed-term contracts is the exception. That is why, at least another two interpretations can be found: either i) regardless of the number of contracts concluded between  the same parties, their aggregate duration should not exceed

36 months, or ii) there can not be more than 3 such contracts between same parties.

If the draft becomes a law, it will be for the case law to clarify this issue.

NEW RULES ON TEMPORARY WORK PROCURED BY WORK AGENTS

The text is no longer limiting the situations in which employers may use a temporary employee provided by a temporary work agent.

Amended article: 88

This way, employers will have permanently the option to choose between a temporary employee and an employee under a fixed-term employment contract.

The  duration  of  the  temporary  work  mission  is  set  for  a  period not exceeding 24 months and may be extended up to 36 months, as compared to 18 months as it is today.

Amended article: 89

 

The temporary work agent may conclude an open-ended contract with the temporary employee. During the period between two missions, the temporary employee must be available to the temporary work agent.

Amended article: 94 (2)-(4)

 
UPDATESCOMMENTS

The text removes the interdiction to establish a lower salary for the temporary employee than the salary received by a permanent employee of the user.

Amended article: 95(2)

This provision, in addition to the fact that the beneficiary can renounce to the services of the temporary employee at any time, offers real advantages to this type of work for certain employers. This former interdiction used to make this type of contract too expensive for employers when compared to the option of hiring directly temporary employees. Still, there are provisions which prescribe fair treatment of temporary employees when compared with permanent ones.

Temporary work agents do not charge any fees from temporary employees in exchange for negotiating a permanent employment with the user.

Amended article: 1001 (newly inserted)

This measure is useful for the protection of temporary employees.
DELEGATION

Delegation can be ordered for a period not exceeding 60 calendar days in 12 months.

Amended article: 44 (1)

Under the existing legislation one could interpret that there can be several delegation periods of 60 days within one year.
PROBATION PERIOD

The probation period is increased to maximum 90 calendar days for executive positions (currently, the maximum is, it is 30 days) and  to  120  calendar  days  for  management  functions  (currently the maximum 90 days).

If terminating the ILA during the probation period, none of the parties has to motivate the termination notice.

Amended article: 31

The amendment is beneficial because testing employees in 30 days as currently provided is many times irrelevant.
The text removes the sanction on employers who did not inform the employee about the probation, with the revocation of their right to assess employee’s skills through the probation period.However, as to the fact that it is still mentioned that the probation period is set when concluding the ILA, the absence of such provisions in the ILA leads to the same conclusion, the absence of a probation period.

The prohibition to hire more than 3 persons on probation for the same  position  is  replaced  by  a  time  limit:  a  certain  position cannot be up for probation for more than 12 months.

Amended article: 33

 
PROTECTION OF TRADE UNION LEADERS

The text removes the interdiction to dismiss elected trade union leaders for reasons not related to their person during their mandate and two years thereafter. It is still applicable the prohibition on the dismissal for reasons related to fulfilling the mandate.

Amended article: 223(2)

Still, there is another text which contained a similar interdiction during the duration of the mandate and which has been maintained.

Moreover,  to  the  extent  that  contrary  provisions  of  union Law 54/2003 are not removed, the interdiction will continue to apply in its current form.

The number of free hours for union leaders is determined by the

applicable  collective  bargaining  agreement.  The  current  text

 
UPDATESCOMMENTS

provides for a minimum number of 20 hours per month.

 

Amended article: 228

 
PROFESSIONAL TRAINING

The pay during professional training is simplified – when being trained  the     employees  will  receive  all  the  salaries  they  are entitled to, regardless of the length of time an employee is absent from  work  (more  or  less  than  25%,  as  provided  by  the  current text).

The period within which the employees cannot leave the employer shall be mutually agreed by the parties, as the text no longer provides for the minimum duration of 3 years during which the employee could not leave the company if having benefited of a training of at least 60 days.

Amended articles: 194 and 195

The solution will offer the parties more flexibility when assessing the cost of training, as well as the means used by employers to protect their investment in employees.
MOBILITY CLAUSE AND REPORTING OBLIGATIONS

The Project adds an obligation to specify in the ILA what is the payment related to the mobility clause.

The reporting obligations increased in terms of content of information to be communicated to the labour authorities

The absence of working hour related records and of a medical certificate upon hiring are administrative offences fined up to RON 3,000.

This way the lawmaker intends to remove the practice of avoiding paying the mobility allowance by writing in the ILAs that it is included in base pay.

This provision should either lead to a decrease in the base pay so that the total remuneration stays the same or to an increase of the aggregate remuneration if the mobility allowance comes on top of the current base pay.

 

This information is not legal assistance. For further details, please contact us. 

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