Vol. XVI No.5
May 2011


Flexibility and Transparency in the New Labor Code


Amending Romania’s Labor Code has been the subject of much discussion over many years culminating in a recent government-sponsored revision that sparked controversy and a full national debate on the subject of employment law in Romania. In an extremely difficult economic environment characterized by massive cuts in salaries, protests by employees, significant unemployment, and an increase in the “black” and “grey” labor markets, the transparency and flexibility of labor relations is imperative. Employers argued – as has this publication -- that the former Labor Code was too favorable to employees harming productivity and growth, and therefore detrimental to business and the nation. The trade unions organized huge protests arguing that the newly proposed measures would affect already earned employee rights.

The new Labor Code entered into force on the May 1, 2011 through the decision of the Romanian Government to undertake responsibility for it. The amendments to the former Labor Code enacted by the Government are substantial. It is not the purpose of this article to detail all of them. However, employers intending to enter the Romanian labor market should closely examine the provisions applicable to them. We present below a few of the most significant amendments in the new legislation. 

[ Up to Contents ]

Main amendments to the Labor Code
One of the most significant amendments to the new Labor Code, generating important practical consequences, requires that individual labor agreements be concluded in written form, and in the absence of such a written agreement, the employment arrangement is null and void. Until now, the individual labor agreement could have been concluded orally, but employees preferred to have it executed in written form in order to prove their employment conditions. This meant that labor agreements that were not concluded in writing were not automatically null and void, but it would be difficult to prove the conditions of such employment such as duration, salary, and other rights granted to them according to the provisions of the Labor Code, and be able to claim such rights. Moreover, many times employers chose to hide employment relations through other types of agreements, such as services agreements, thereby avoiding the grant to their employees of the rights pertaining to them under the Labor Code.

The amendment is meant to increase transparency in labor relations and reduce the “black” labor market; not to mention that an enlargement in the number of registered agreements would result in higher amounts of taxes paid to the state. The new Labor Code has also set new infringement sanctions for employers in the event of a breach by them of these provisions. Some employers see this as yet another formality they need to take care of further burdening their activity.

Higher amounts of taxes should be paid to the state budget as a result of the new provisions entitling employees to be hired by different employers based on separate individual labor agreements, and to benefit from the salary corresponding to each of their separate jobs. This amendment was praised by employees who can earn a living from several jobs without any interdiction or formalities. However, employers will be faced with new problems, such as ensuring that their employees’ performance is not affected by their multiple employment and ensuring that they maintain at all times the confidentiality of their business.

The newly amended Labor Code has raised an employer’s level of responsibility in relation to labor law matters with added burdens to their daily activity. New record keeping obligations have been adopted for employers that come as a consequence of the amendment of the structure and activity of the labor authorities, i.e. employment records are no longer kept by the labor authorities, but fall under the obligations of each employer. For instance, the role of the internal registry of employees has been strengthened, meaning that employers must now pay much more attention to the content of the registry, to the manner in which it must be completed, but also to the person entitled to perform this activity. The internal registry of employees has actually become a sort of ID card of an employer as regards its employment matters, and any control to be performed by the labor inspectorates would undoubtedly have as one of their focus points this registry.

As an example of what this entails, any newly concluded individual labor agreement must now be registered in this internal registry of employees, and the registry thus completed must afterwards be transmitted to the labor law inspectorate. Moreover, as compared to the former legal provisions, now the registry must be completed with more information about the employees, including their salary, allowances and the causes and periods of suspension of the individual labor agreement, as well as any period of job relocation. In case of amendments to the individual labor agreements through additional deeds, the amended information must be inserted in the registry and, afterwards, the registry again transmitted to the inspectorate.

The obligation to include in the internal registry of employees all this detailed information, as well as the fact that the registry may be subject to the control of the territorial labor inspectorate at any time, should raise the degree of transparency in labor relations. However, as previously mentioned, considering the significance of this document for an employer, and also considering that the lack of accuracy or timely completion of it may cause significant damages to the employer, close attention should be paid to the person empowered to manage the internal registry of employees. Also, employers are now obligated to issue not only to their current employees, but also to their former employees, at their request, a document attesting to the activity performed and the duration of such activity, as well as the wage, seniority, position and specialty of the employee. In practice, this means that a person seeking new employment, applying for a retirement pension or other labor related right, would have to keep all these documents from former employers and obtain any missing ones, in order to prove his employment record.

Another significant amendment in the new Labor Code refers to the extension of the information obligation of employers towards their employees. In addition to the job title itself and their main responsibilities, employers must now inform their employees of their specific job description and the criteria for the evaluation of their professional activity. This new amendment was generated by the practical problems arising in the past when employees, even if informed of their duties, were only provided with a vague framework of their future activity before the conclusion of the agreement. It was only after the conclusion of the labor agreement that many found out exactly what was expected of them, and most of the time what was expected largely exceeded what had been initially disclosed.

Considering all this, the new amendment is meant to increase the level of transparency in employer - employee relations, and also, through the development of the evaluation criteria, to increase employers’ capacity to adequately evaluate the professional activity of their employees and even sanction employees for failure to perform their specific tasks.

Another amendment with potentially significant consequences to both employers and employees refers to the latter’s professional training. Should employees participate at professional training at their employers’ initiative, then the costs are to be entirely incurred by the employers. Not only this, but employees will be able to benefit for the entire duration of the professional training from their salary rights as compared to the situation regulated by the former Labor Code, which stated that the salary rights of those employees participating in professional training could be diminished, corresponding to the daily period of time for which they were not active at work.

Another one of the major amendments to the Labor Code meant to ensure greater flexibility on the labor market refers to the individual labor agreement concluded for a determined period of time. The new legal provisions extended the period for which such an agreement may be concluded from 24 to 36 months. However, in order not to allow employers to indefinitely resort to individual labor agreements for a determined period of time, thus depriving their employees of their rights which they would otherwise have if they were full-time employees, the new code establishes that a maximum of three individual labor agreements for determined periods of time may be concluded between the same parties. The agreements for a determined period of time concluded for a term of 3 months since the termination of the previous agreement are considered successive agreements, and they cannot be concluded for periods longer than 12 months each.

Until the entry into force of the new amendments, employers could resort to work through temporary laborers only in specific cases, as expressly set by law. Now, temporary laborers may be generally used for the execution of a determined task which has a temporary nature. The new code does not impose any further specific conditions which would have to be fulfilled in order to allow work through such temporary laborers. Moreover, the periods for which the work through temporary laborers, as well as through delegated employees, may be used has been extended by the newly amended Labor Code.

There are also significant amendments put in place with regard to overtime, and work at night, as well as during probationary periods, and close attention should be paid to them as well. Moreover, another significant amendment refers to the extension of the prior-notice terms. For instance, a dismissed employee now benefits from a prior-notice term that cannot be less than 20 business days, instead of 15 business days, as before.

Furthermore, in case of resignation, the term to provide notice thereof cannot be longer than 20 business days for employees hired for executive positions, as compared to the previous term of 15-business days, and than 45 business days for employees hired for management positions, as compared to the previous term of 30-business days. Not only have prior-notice terms been extended for resignations, but employers are now obligated by law to register their employees’ resignation. An employers’ refusal to register their employees’ resignation may result in sanctions with an imposed fine.

As regards the collective dismissal procedure, employers have repeatedly argued that it was too difficult to comply with; that it was not supportive of their business and that even when facing economic difficulties and lack of performance by their employees, they were not protected by the provisions of the Labor Code to the extent of being able to dismiss employees. In turn, employees claimed that the collective dismissal procedure was often detrimental to their rights, and this actually raised the number of claims submitted by employees in court against their former employers.

In such a context, the amendments seek to increase the accuracy and transparency of the collective dismissal procedure. For instance, a significant amendment introduced by the amended Labor Code mentions that, in order to establish the order for employees’ dismissals, their individual performance must be first taken into consideration, and only afterwards should other criteria be considered.

There are also amendments prohibiting the hiring of new personnel to replace the dismissed employees’ positions, for which collective dismissals were determined, for a period of nine months following the dismissals. Under the amended Labor Code, an employee dismissed based on a collective dismissal procedure is entitled to be hired back during a 45-calendar day term with priority for the position which has been re-established in the same area of activity, with no obligation to pass any exam or traineeship period. Therefore, if during the aforementioned period, the same activities are recommenced, the employer is obligated to transmit to the dismissed employee whose job area has been recommenced under the same conditions of professional competence, a written document informing the dismissed employee about the recommencement of activities. Following this formality, the dismissed employee may express his consent with regard to accepting the proposed job within 5 calendar days of receipt of the written notice. In case the employee does not express in writing his consent to be re-hired within such 5 calendar days, or in case he refuses the position offered, then the employer is entitled to hire new personnel for the vacant positions.

Individual labor agreements may also be suspended where there is a temporary reduction of activity, and there are provisions in the new Labor Code detailing the causes for lawful termination of such individual labor agreements, but it is not the purpose of this article to enter into discussion of such terms. Employers should closely check the new and more severe sanctions in place applicable to the infringement of such provisions.

While the amended legal provisions are applicable to any new individual labor agreement which is concluded, the question of how the on-going agreements are to be regulated so as to be in compliance with the new legal provisions are explored below.

[ Up to Contents ]

Elements of an Additional Amendment to the Individual Labor Agreement
According to the amended Labor Code, an additional amendment to an individual labor agreement must be concluded within a term of 20 business days following agreement on the terms, as compared to the 15-day term following the written notice to the employee with regard to the respective amendment, except for cases where such an amendment has been established by law.

Because the current amendments are set by law, they are in any event applicable to existing individual labor agreements. However, certain newly introduced obligations make it advisable that additional amendments to individual labor agreements be concluded. For example, since employees must now be informed about their job description, employers should focus on drafting the corresponding job descriptions for all their existing employees and, afterwards, include them as annexes to the individual labor agreements concluded with them.

Another significant aspect refers to the individual performance objectives and the evaluation criteria of employees’ professional activity. Employers should focus on elaborating both the objectives, as well as the evaluation criteria, and include them in the internal regulations of the employer. The same should be included in amendments to the individual labor agreements concluded with the employees.

Should the existing labor agreement include a mobility clause, which is a clause that stipulates the extent to which workers may be asked to move from one job to another or from one place to another then, according to the new legal provisions, an amendment should include the exact amount which should be paid to the respective employee in consideration for this mobility clause. Also, in case the respective employee has benefited from professional training at the employer’s initiative, having all the costs paid by such employer, an amendment should specify a certain period of time within which the respective employee cannot initiate the termination of its individual labor agreement. Such an amendment would include all the other amendments established by the new law such as, for instance, the prior-notice terms or the allowances granted for work at night, if applicable. However, one should always keep in mind that beside compliance with the provisions of the amended Labor Code, compliance with the provisions of the applicable collective labor agreement is also required.

[ Up to Contents ]

The new provisions of the Labor Code are intended to bring more transparency to the relations between employers and employees. The new provisions intend to make the labor market more flexible, for instance, through the extension of the period for which individual labor agreements for a determined period of time may be concluded; or through the increase of work opportunities through temporary laborers. It was high time that the Romanian labor market ceased to be regulated in terms of a national market, and be seen more as part of the common EU market, characterized through flexibility and transparency. Moreover, the larger sanctions imposed on violations should diminish the “black” market and bring more tax money to the state budget.

[ Up to Contents ]

Editors Note: It is our policy not to mention our clients by name in The Romanian Digest™ or discuss their business unless it is a matter of public record and our clients approve. The information herein is correct to the best of our knowledge and belief at press time. Specific advice should be sought from us, however, before investment or other decisions are made.

Copyright 2011 Rubin Meyer Doru & Trandafir, societate civila de avocati. All rights reserved. No part of The Romanian Digest™ may be reproduced, reused or redistributed in any form without prior written permission from the publisher.

societate civila de avocati
Str. Putul cu Plopi, Nr.7, Sector 1
Bucharest, Romania
Tel: (40) (21) 311 14 60
Fax: (40) (21) 311 14 65
E-Mail: office@hr.ro

The Romanian Digest Archive



Herzfeld & Rubin, P.C.
125 Broad Street
New York, New York 10004
Tel: (212) 471-8500
Fax: (212) 344-3333

Long Island Office
Herzfeld & Rubin, P.C.
1225 Franklin Avenue, Suite 315
Garden City, New York 11530
Tel: (212) 471-3231

Herzfeld & Rubin LLP
1925 Century Park East
Los Angeles, California 90067
Tel: (310) 553-0451
Fax: (310) 553-0648

Chase Kurshan Herzfeld & Rubin
354 Eisenhower Parkway, Suite1100
Livingston, New Jersey 07039-1022
Tel: (973) 535-8840
Fax: (973) 535-8841

Israeli Affiliated Law Firm
Balter Guth Aloni & Co.
96 Yigal Alon Street,
Tel Aviv, 67891, Israel
Tel: +972-3-511-1111
Fax: +972-3-624-6000


New York — California — New Jersey — Romania
If you no longer wish to receive emails from us, please send an e-mail with UNSUBSCRIBE in the subject line to Romanian.Digest@hr.ro.