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Labor and employment law challenges in business transformations

Romania

Workforce restructuring

The key practical issues in workforce restructuring include:

  • Legal justification
  • Works council and employee representatives’ process
  • Labor administration process
  • Costs and timing
  • Litigation risk

Applicable legislation

Workforce restructuring, also referred to as collective redundancy, is governed by Art. 68–74 of the Romanian Labor Code.

Collective bargaining agreements (CBAs) can modify the rules governing collective redundancies, and grant more favorable rights to the employees.

Rules regarding collective redundancy is triggered when an employer proposes to terminate the following number of employees within 30 calendar days in the specified threshold:

  • At least 10 employees in a company with 21–99 employees
  • At least 10% of the total number of employees in a company with 100–299 employees
  • At least 30 employees in a company with 300 or more employees

This triggers the complex process described below.

This complex process has the following features:

  1. Legal justification
  2. Employee representatives’ consultation
  3. Information requirements to the territorial labor inspectorate and unemployment agencies throughout the process
  4. Selection criteria process and dismissal documentation requirement
  5. HR legal costs

Redundancies that fall below the abovementioned thresholds are not considered collective redundancies and a simplified process applies to them.

Required legal justification

Collective redundancy may occur for one or several reasons not related to the employee. The restructuring must be effective and have a real and serious cause.

The Romanian law does not establish specific situations when a redundancy is justified. In practice, workforce restructuring may be justified by the following economic or financial grounds:

  • Economic or financial difficulties
  • Change(s) in technology that would render certain job position(s) obsolete
  • Company reorganization necessary to safeguard its competitiveness
  • Closure of business

Works council/unions or other employee consultation requirements

Consultation requirements with works council/unions

Union and/or employees’ representatives: They play an important role in the collective redundancy processes and must be informed and consulted on the following matters:

  • Total number and categories of employees
  • Number and categories of employees impacted by the collective redundancy
  • Reasons for the contemplated restructuring
  • Selection criteria process
  • Envisaged measures to limit the number of dismissed employees
  • Contemplated timing
  • Social plan measures to limit the negative impact of the redundancy
  • Period in which the union or the employees’ representatives may submit proposals for avoiding or limiting the redundancy

If there is a union with representation rights at the company level, it must be informed and consulted with respect to the abovementioned matters. If no union is established at the company level, the employees’ representatives must be informed and consulted accordingly. If at the company level, the employees have established a union and have also elected employees’ representatives (this situation may occur in case of unions with no representation rights), the employer should approach both the union and the employees’ representatives.

The Romanian law does not provide for a specific time frame for the information and consultation process (i.e., should occur “within due time and with the scope of reaching an agreement”). In practice, it is interpreted in the sense that the employer cannot proceed with the collective dismissal prior to the consultations with the union/employees’ representatives or within a term which does not effectively allow the union/employees’ representatives to express their opinion and propose valid solutions to limit the negative effects of the dismissal.

Within 10 calendar days from the receipt of the abovementioned notification from the employer, the union/employees’ representatives can propose measures to avoid the redundancy or to reduce the number of impacted employees.

The employer must reply in writing to the proposal of the union/employees’ representatives within five calendar days from its receipt.

The concept of works council does not have a legal equivalent under the Romanian law.

Consultation requirements with other employee representatives

Employers are required to inform and consult with the employees’ elected representatives prior to implementing the contemplated collective redundancy. For more information, see “Consultation requirements with works council/unions.”

Consultation requirements with employees

Although there is no express legal obligation for employers to inform and consult its employees individually, it is a leading practice for the employers to provide information and consult with the employees directly on matters affecting their employment if there is no existence of union representation or if the employees did not elect their representatives.

Approval/notification of the labor authorities or other government authorities

The employer has the obligation to notify the territorial labor inspectorate and the unemployment agency with respect to the collective redundancy and the measures envisaged to limit the negative consequences of the collective redundancy.

The unemployment agency must search for solutions and communicate them to the employer and to the unions/employees’ representatives.

If, after the consultation with the union or the employees’ representatives, the employer decides to continue the redundancy process, it must inform the territorial labor inspectorate, at least 30 days before issuing the dismissal decisions to the employees. The approval of either the unemployment agency or territorial labor inspectorate is not required to implement the contemplated collective redundancy (i.e., the employer is free to implement the redundancy process after 30 days of notification to the territorial labor inspectorate).

At the grounded request of any of the parties, the territorial labor inspectorate may postpone the issuance of the dismissal decisions with maximum 10 days or reduce the 30-day period, without prejudicing the employees’ right to termination notice.

Employee selection criteria

The Romanian Labor Code provides that the employees made redundant must be selected based on certain criteria established by law and/or by the provisions of the applicable collective bargaining agreement. The selection of the employees should be done in a transparent manner based on the criteria pertaining to the employee such as:

  • Family situation
  • Number of years of service within the company
  • Existence of issues increasing difficulty to find a new job (e.g., disability, age)
  • Specific professional skills

The purpose of these criteria is to differentiate the employees and shall be applied only after the assessment of their professional performance. This means that the professional performance of the dismissed employees should be firstly appraised and afterwards the additional criteria shall be applied. In conclusion, the employer may dismiss the employees with lower professional performance first.

Certain employees are afforded special protection against employment termination during the redundancy process, particularly pregnant women, employees on maternity or child care leave, employees having their employment contracts suspended due to a cause of temporary work incapacity, etc.

Actions required to limit the negative impact and social plan

The Romanian Labor Code establishes the general principle stating that employers have the obligation to apply protective measures in order to limit the negative impact of collective redundancies on the impacted employees.

Such measures may be decided in the context of the redundancy or otherwise, prior to such events, in a collective bargaining agreement (CBA), i.e., a CBA can include protective measures applicable in case a redundancy occurs in the future.

In this respect, the employer may propose or negotiate a social plan including measures which may vary depending on the size of the company, the means of the company and its group, previous social plans and the employer’s ability to provide for a large range of measures to limit the negative impact of the redundancies, including outplacement.

Internal alternative employment/redeployment
The social plan or CBA negotiated with the union/employees’ representatives may provide measures such as professional retraining of the impacted employees and/or redeployment of the impacted employees to another legal entity within the group or to a new working site.

Other measures
The social plan or CBA negotiated with the union/employees’ representatives may provide measures such as outplacement and additional financial compensations, for example, for those employees who are close to retirement and may have difficulties in finding a new job, or for those who need to move for a new job.

If within 45 days as of the dismissal date, the activity performed by the impacted employees is re-established within the company, the employer has the obligation to reinstate the impacted employees. For more information, see “Hiring restrictions post-redundancy.”

Estimated timeline

The time required to fully implement a collective redundancy depends on a variety of factors, such as the amplitude of the restructuring and whether a collective bargaining agreement was concluded or not.

In practice, the legal time frame necessary for collective redundancies to be finalized may vary from three to five months.

Estimated costs

Mandatory costs

The key components of mandatory HR legal costs are as follows:

  • Notice or an indemnity in lieu of notice if the employee is released from working during the notice period
  • Termination indemnity, if such an indemnity is established in the individual employment contract or applicable collective bargaining agreement (No legally prescribed amount or methods of calculation; however, in practice employers usually grant at least one month’s salary as termination indemnity. Further, this amount may vary depending on the seniority level of the impacted employees.)

Customary additional costs

The measures proposed or negotiated by the employer (within a social plan or not) may vary depending on the size of the company, the means of the company and its group, previous social plans and the employer’s potential to provide for a large range of measures to limit the negative impact of the redundancies, including outplacement, which is one of the main customary additional HR costs.

Hiring restrictions post-redundancy

If within 45 days as of the dismissal date, the activity performed by the impacted employees is re-established within the company, the employer has the obligation to reinstate the impacted employees. A specific process is applicable in such situations.

Litigation risk

Interested parties

The following interested parties can bring lawsuits related to the redundancy process:

  • Impacted employees: The impacted employees may challenge their termination in court within 45 days from the date of notification of their termination.

    Also, the impacted employees may challenge the employer’s breach of his or her rights and entitlements guaranteed by the applicable collective bargaining agreement (CBA), within six months from the date the right was born.
  • Unions: Unions are legally entitled to represent their members in a court of law during labor litigations if requested by the members. For example, unions may claim for annulment of the dismissal decision if the procedure was not observed.

Damages and other remedies

Challenges could lead to two types of civil remedies.

Damages for unfair dismissal
Damages could be awarded to employees based on notably:

  • Absence of a legal justification or the mandatory elements of a dismissal decision
  • Failure to apply the protective measures and grant the compensations negotiated and mentioned in the CBA, if applicable
  • Failure to comply with the rehiring obligation within the legal term if the jobs are reinstated

The amount of the damages shall be at least equal to the amount of the indexed salaries (i.e., increase in the salary due to, for example, inflation and legislative changes) to which the dismissed employee would have been entitled if the dismissal had not occurred (together with any other additional rights negotiated in the individual labor agreement or applicable CBA), calculated from the date of dismissal and until the reinstatement of the employee (if the employee requests reinstatement) or the final ruling of the court.

Reinstatement
Employees are entitled to reinstatement within the company — and the employer cannot refuse the reinstatement — when the dismissal decision is declared by the court as unlawful and therefore null, and the employee has specifically requested to be reinstated.

Litigation cannot stop or slow down the collective redundancy process.

Criminal sanctions
There are no criminal sanctions applicable in the context of redundancies.

Country-specific issues

There are no other issues specific to Romania.

Contact

Primary Contact for Romania Labor and Employment Law

Nicoleta F Gheorghe
RADU SI ASOCIATII SPRL
+40214024107

Global Labor and Employment Law Guide
Workforce restructuring
2016-07-01
Romania
RO

Contacts