The world economic crisis has had a negative impact on employment in Romania, particularly in the construction and automobile industries. Throughout the country, employers have been forced to fire or lay-off large numbers of their employees with grave consequences to the individuals and to their communities. Indeed, collective dismissals are much more than just the sum of individual dismissals – they bear significant social consequences that may affect the life of an entire community, most especially in localities where its entire economic life is focused around one or two major employers faced with the fallout from the global crisis.
The decision to collectively dismiss employees in Romania involves a complex legal process, and the consequences of failing to conduct the process in full compliance with the law can be disastrous for the company, resulting in the absolute nullity of the collective dismissal decision and the reversal of the whole process.
Romanian labor law sets forth the steps that must be followed for collective dismissals. Those steps are in full compliance with the specific Directive adopted at the European Union level, i.e., Directive 98/59/CE, dated July 20, 1998, on the legislation of the member states regarding collective dismissal within the European Union. However, certain ambiguous legal provisions have caused discrepant practices that can harm employers, while they must rely upon this procedure for their economic survival.
Applicable Legal Provisions
The collective dismissal procedure is regulated by the provisions of the Labor Code and by the collective bargaining agreement adopted at the national level (the “National CBA”). However, employers should also consider the more specific provisions of the collective bargaining agreements adopted at lower levels, i.e., the agreements adopted for each industry sector, as for instance, the chemical, metallurgic or garment industries, as well as those adopted at the company level (generally referred to as the “CBAs”). This is important because a CBA concluded at a lower level, such as at the company level, cannot provide rights for employees that are less than the limits set within the CBA concluded at a higher level. In case of discrepancies, the provisions creating more favorable rights for employees prevail.
According to the Romanian Labor Code, a collective dismissal is a dismissal by employers of employees for a period of 30 days or more for reasons not pertaining to individual aspects of the particular employees. Such reasons may be represented by economic difficulties or technological transformations that the employer is facing. The Labor Code provides that a collective dismissal must be based upon a real and serious cause. In practice, a cause is real when it is imposed by the economic difficulties of the employer, and it is serious when it is based on objective reasons, i.e. reasons that pertain to the business activity of the employer and not to the employees’ individual characteristics, and where it can be demonstrated to have a significant impact upon such business. The effective, real and serious reasoning behind a collective dismissal is subject to the in-depth analysis of a competent court if a collective dismissal decision is challenged.
Furthermore, a dismissal is qualified as a “collective dismissal”, and not just as a sum of individual dismissals -- requiring compliance with the specific procedures set by law -- only if it affects a certain number of employees, out of the total number of persons employed by the employer undertaking the dismissal. Therefore, a dismissal is collective if: at least 10 employees are affected by the dismissal decision, if the employer performing the dismissal has more than 20 and less than 100 employees; at least 10% of the employees are affected, if the employer performing the dismissal has at least 100, but less than 300 employees, and at least 30 employees are affected, if the employer performing the dismissal has at least 300 employees.
Moreover, for a collective dismissal to be permissible under Romanian law, the targeted employees should not be in situations in which dismissals are prohibited by law, i.e. in vulnerable situations which would not allow them to search for new jobs or attend any training courses that would qualify them for further positions in other companies. For instance, it is prohibited to dismiss employees if they are in a temporary disability period ascertained by a medical certificate; in case of pregnant women employees, to the extent that the employer was aware of the pregnancy before issuing the dismissal decision; or during the maternity leave or throughout the duration of the leave for raising a child up to the age of 2 and, in case of a disabled child, up to the age of 3. According to the Labor Code, however, such prohibitions to dismiss are not applicable in case of dismissals caused by the employer’s judicial reorganization or bankruptcy.
The Collective Dismissal Procedure
Consultation with trade unions or employees’ representatives
The most significant stage within the collective dismissal procedure is the consultation stage with the trade unions or employees’ representatives. According to the Labor Code, where employers envisage collective dismissals, they must initiate consultations with the trade unions or, as the case may be, with the employees’ representatives, if there are no trade unions.
Labor Code requires that the consultation agenda with the trade unions or employees’ representatives cover at least the methods and modalities envisaged for avoiding collective dismissals or for the reduction of the number of employees to be dismissed, and the appropriate means envisaged to reduce the consequences of the collective dismissals by resorting to social measures aimed at, inter alia, providing support for the re-qualification and professional re-training of the dismissed personnel.
In addition, under the terms of the National CBA, employers must put at the disposal of the trade unions or employees’ representatives the technical and economic justification for the measures to be taken, emphasizing the possibilities for the redistribution of personnel, the reorganization of the business or the re-qualification or professional reorientation of the employees.
Because the law requires that employers give employees the right to provide constructive proposals with regard to a contemplated collective dismissal, employers must notify in writing the trade unions or employees’ representatives of all relevant information regarding the envisaged procedure, including, at a minimum, the following: the total number and categories of employees employed; the reasons for the planned dismissal; the number and categories of employees to be dismissed; the period over which the planned dismissal is to be performed; the criteria considered within the collective dismissal procedure in accordance with the labor law and to the CBAs; the contemplated measures for limiting the number of dismissals; the measures meant to mitigate the consequences of the dismissals, the severance payments to be granted to the dismissed employees in accordance with labor law and CBAs; and the term within which the trade unions or employees’ representatives may submit proposals in order to avoid dismissals or obtain a reduction in the number of dismissed employees.
On the same date that the notice has been communicated to the trade unions or employees’ representatives, a copy of that notice must also be submitted to the Territorial Labor Inspectorate and also to the Territorial Labor Agency. Furthermore, the Labor Code provides for certain terms that must be met with regard to the submission of the notice. Because this stage of consultation is so important, and should be performed in such a manner so as to lead to an agreement between the parties involved, the law provides for a ten-day term from the receipt of the notice sent by the employers during which the employees are entitled to analyze the information they have received and the technical and economic grounds for the dismissals and to produce any proposals they deem appropriate in order to avoid the collective dismissals or to reduce the number of dismissed employees. Employers then have the obligation to provide reasoned replies in writing to the employee proposals not later than 5 days after receiving them.
The Notice of Dismissal
After the final consultations with the trade unions or the employees’ representatives, if the employer decides to proceed with the collective dismissals, it must issue a second notice. The second notice reiterates all of the elements included in the first one, as well as the outcome of the consultations with the trade unions or employees’ representatives, specifically noting the reasons for dismissal and the total number of employees to be affected by the collective dismissal, as well as the date when such dismissal will become effective.
This second notice must be submitted to the Territorial Labor Inspectorate and to the Territorial Employment Agency, as well as to the trade unions or employees’ representatives at least 30 days prior to the issuance of the individual dismissal decisions.
Prior Notice Term. The Dismissal Decision
According to the National CBA, employees that are affected by a collective dismissal decision must be given a 20 business-day notice before their termination takes effect. Provisions of CBAs adopted at a lower level must also be observed, as well as the provisions of the individual labor agreements, which may create even more favorable notice terms for employees.
The legal provisions with regard to whether the prior notice term should be communicated to the employees as a distinct document, or as part of the dismissal decision, have proven to be confusing in practice. Pursuant to the Labor Code, the dismissal decision must indicate, among other mandatory elements, the duration of the notice term. Consequently, this notice term runs from the date when the decision is communicated to the employee. If employers communicate the notice as a different document and prior to the dismissal decision, they may risk having the entire dismissal procedure annulled in court.
Another potential reason for annulment is where the dismissal decision does not include any of the mandatory elements provided by the Labor Code, i.e.: the reasons for dismissal; the duration of the notice term; the criteria to be fulfilled by the collective dismissal procedure; the list of all vacant positions in the unit, if applicable, and; the term within which the employees have to express their intention to accept a vacant position (if there are no vacant positions, a mention of this is to be made). Dismissal decisions produce effects from the date of their communication, which is the date when the decisions are communicated by registered mail with acknowledgement of receipt, or the date when the decisions are communicated by means of service. Since there are many cases when employees refuse to sign the receipt of the document, and consequently employers cannot provide such proof, it is best that such decisions be communicated through official service.
Effects of Collective Dismissals
Compensations for Employees
According to the National CBA, the parties in collective dismissals must negotiate the awarding of pecuniary compensation for employees, in compliance with the law and with the provisions of the applicable CBAs. Romanian law regards employees’ claims against employers as extremely significant; in that regard, the Insolvency Law, i.e. Law 85/2006, states that, in case of employers’ bankruptcy, employees’ claims arising from labor relations have priority over other types of claims.
Prohibition to hire new personnel
The Labor Code and the National CBA prohibit employers that proceeded with collective dismissals to hire new staff in the positions formerly occupied by the dismissed employees for a period of nine months from the date when the collective dismissal took place. In the event that the employer’s economic situation has been rectified, and the employer consequently seeks to hire personnel to fill the vacant positions, the employer must first notify the dismissed employees; only if the dismissed employees refuse to return to their former now vacant positions, may the employer hire new personnel for the respective positions.
An individual employee dismissed by a collective dismissal decision may challenge it in court within a 30-day period from the date when the decision was communicated to the employee. Since the right of employees’ to information with regard to the possibility to contest the decision is essential, even though the Labor Code does not expressly provide for it, the individual dismissal decision should also include the term in which it may be contested by the employee. The competent court is the tribunal where the claimant, i.e. the dismissed employee, has a primary residence.
Collective dismissals may prove to be advantageous for employers facing serious and real financial problems, and may provide them with the necessary solution for their economic revival. However, if employers have only temporary and limited problems, they may resort to other procedures put in place by Romanian law. For instance, companies facing economic difficulties may decide to suspend their employment agreements and to send their employees home under a so-called “technical unemployment”, providing employees with 75% of their salaries. However, when the collective dismissal procedure is chosen, each step of the process must be carefully planned and implemented so that there is no room for any claims prejudicing the company.
The article was published based upon approval of:
Rubin Meyer Doru & Trandafir
SOCIETATE CIVILA DE AVOCATI / LAWYERS PROFESSIONAL CORPORATION
IN ASOCIERE CU / AFFILIATED WITH HERZFELD & RUBIN, P.C.