Labor law – a prerequisite for business (Demo)

Labor law is a daily challenge for every business. From recruiting and hiring a top executive manager to firing an employee, from negotiating with trade unions the bargaining contracts to taking actions against an employee without discriminating him, any employer has faced the labor laws implications at least once during the company’s lifetime.

By Anca Liana Caraiola Buftea – Senior Partner and Andrei Buga – Managing Associate STOICA&Asociatii

The solutions to all these issues implies knowing multiple rules, prescribed by the law, or construed in a specific way by the case-law or the authorities’ approach.

The legal framework of this legal field consists of several main laws and many secondary legal provisions. The main laws are: the Labor Code enacted in 2003 and subsequently modified, the law concerning the social dialogue, the law concerning the employees’ rights protection at the enterprise’s transfer, the law concerning the prevention and sanctioning of all forms of discrimination, the law concerning the occupational health and safety, the law concerning the teleworking, the laws concerning the maternity protection at work. Such list is just an example of the range of problems related to employment matters.

The Labor Code governs employment relationships, contemplating all legal aspects from the conclusion to the termination of the labor contract.

The rights set forth by these laws grant a minimal protection for the employee, which can be increased by either collective or/and individual negotiations. Any waiver or limitation of these minimal rights is considered null and void. Moreover, negotiating and establishing rights without observing the minimum level set forth by the law is subject to fines and penalties for the employer. As a matter of fact, in accordance with the Romanian law, the employees enjoy a high legal protection with respect to their rights and employers should carefully observe all these legal limitations/obligations, otherwise they could be easily sanctioned by the labor authorities.

The labor laws are frequently modified according to the political decisions in the field. One of the most important modifications of the Labor Code was enacted in 2011 and its purpose was to bring more balance into the employment relationship, so that the two actors could better communicate and that employers could implement business decisions in a more flexible manner.

The latest changes from 2017 were adopted for two reasons: (i) to assure the implementation of the recent fiscal amendments related to the transfer of the social contributions for work (pension and health) exclusively to the employee and (ii) to reduce and/or stop the undeclared work.

Thus, in 2017, the Romanian authorities decided a major fiscal amendment, which had multiples implications in the labor field as well. Traditionally, the burden represented by the payment of the social contributions for work was split between the employer and the employee. Starting with 2018, the social contributions related to pension and health (35% from the gross salary) were transferred exclusively to the employees. One should observe that, apart from the employee’s contributions, the employer is still bound to pay the insurance contribution for work (2.25% from the total amount of the gross salaries).

This fiscal amendment had tremendous effects in the labor market at the end of last year and nowadays as well, due to the fact that maintaining the net salary of the employees within this unpredictable fiscal system was on the agenda of each employer. At the end of last year, the Government also imposed mandatory collective bargains in order to implement the said fiscal measures. Facing unpredictable laws, having limited budgets, but being compelled to start negotiation, no matter if they had a social dialogue partner, employers put in place different legal mechanisms to compensate their employees for the loss incurred further to the transfer of the social contributions.

The said fiscal modifications were even more debated in the IT sector. As shown by many economic assessments performed so far, IT workers, who are exempt from paying income taxes, represent the most important assets when discussing of the results of the Romanian IT sector. In order to maintain the advantages in the IT sector, under the pressure of preserving this profitable business for the economy, the Government introduced a state aid scheme for a limited period of time.

The second modification of the labor laws as of 2017 was meant to reduce the undeclared work. In this respect, one should note that the recent modifications of the laws are increasing the rigidity and bureaucracy of the labor relationship. Thus, employers have to draft multiple documents and registers to record the employee’s work. In addition, the part time job was strictly regulated, which has adverse effects. The first and most important effect is that this type of work relationship could decrease, which shall finally affect a certain category of people and the final social security budgets.

In the context of verifying the undeclared work, Romanian employment market is facing nowadays new and complex challenges. The labor authorities together with the fiscal institutions increased their controls in the labor filed. Their perspective on any fiscal optimization and its contractual implementation are very restrictive; anytime they find that a relationship is likely to appear as a labor relationship, they re-qualify the contract and compel the company to conclude employment agreements and to pay all social and fiscal contributions.

We are not aware of any precise agenda of the coming legislative modifications, but we can firmly conclude that the interpretation and incidence of the labor laws in Romania involve, on the one hand, the need to interdependently analyze different areas of law, and, on the other hand, to be constantly updated with the latest development on the case-law and practice of the authorities because sometimes life comes with a variety of scenarios that never could be imagined.

So, employers, prepare in advance! Labor law can provide you with suitable solutions, if you have the right support for interpreting it.


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