Redundancy

We are currently dealing in Romania with a number of employment issues. As Romanian Employment law specialists we are acutely aware that whist Romania is currently going through a period of economic expansion, there are still reasons where it is necessary for an employer to make employees redundant. The method and steps required are covered in the Romanian Labour Code.

According to the Code, an employee maybe dismissed for redundancy under the provisions of Art. 65 of the Romanian Labour Code and the procedure set out in the Code.

Art 65 of the Romanian Labour Code stipulates that an employer is entitled to make an employee redundant if the employee’s employment position ceases to exist. The dismissal and the procedure for the decision have to be carried out strictly in accordance with the provisions of Art 65. The dismissal must follow the requirements of the Code and be for an actual, real and proper reason. The cancellation of the employment position has to be shown in the new organisational chart of the employer which must show the cancellation of the redundant position.

The legislation does not provide a definition as to what is a real and proper reason for the position to be eliminated. This means that the criteria are subject to various interpretations by the courts, as they do not have a unitary jurisprudence regarding this subject. Examples of what complies with the conditions could be the closure of a major project, thereby causing the employer to have excess staff, or the reorganisation of the workforce of the employer for other cogent economic reasons.

In order to dismiss an employee based on the ground of redundancy, the employer must follow and comply with the steps set out in the Code. Failure to do so will negate the whole procedure and may give the dismissed member of staff grounds to claim that the reasons for the redundancy do not exist.

The basic steps to be followed are: i) the shareholders of the employer will convene a meeting to discuss the position and decide upon the reduction of staff and the cancellation of the work position; ii) the employer will then prepare a new organisational chart without the redundant positions. The Code provides that where an employer has more than 20 employees, it is necessary for the employer to consult with the representative of the staff prior to the issue of any decision. The Code also covers the position where the employer is an individual, provided that the employees are working with him under a labour contract.

Following the decision, the employer will then issue the dismissal decision for each redundant employee. The decision notice must contain the following information: (i) the reasons for the dismissal based on the facts and the law; (ii) the notice period terminating the employment, which must be at least 20 working days; (iii) the list of any vacant positions that the employer has and which are open to the employee; (iv) the period during which the employee may appeal the decision; and, (v) details of the competent court to resolve any appeal against the decision.

The employer must communicate the redundancy decision personally or by recorded post to the employee. If the dismissal decision does not follow the legal conditions and requirements, the decision will be void.

An affected employee may appeal the decision within thirty (30) days starting from the date of receipt of the notice advising him that he is being made redundant. If the employee decides that he wants to go to court, the employee will apply for the annulment of the employer’s decision, his re-instatement and payment of salary from the date of dismissal to the date of rehiring.

In practice, the employee that appeals will succeed if he proves that the dismissal is based on an incorrect application of the facts and the law, and that making the employee redundant is being used as a pretext and not supported by the facts.

The appeal will also be successful if the employee can show that at the time of the service of the notice they were subject to one of the cases mentioned in Art 60 of the Labour Code. These cases are temporary incapacity of work, annual leave, pregnancy, maternity or child-raising leave, etc. When an employee is covered by these provisions, he cannot be made redundant until such incapacity has ceased.

Other grounds for an appeal that can be brought by an employee are that during the period that he was dismissed, the company was hiring other people in similar positions; the procedural steps were not correctly followed, i.e., the employee did not receive a proper notice; the decision is void for the lack of all elements that have to be observed; or the employer could have avoided the redundancy.

It is important for the employer to be aware that after the dismissal, the employer must not employ another person immediately for the same position as the post that became redundant or for a period of time after the decision. There is no legal provision as to what stipulates a specific period of time, and in practice, it has been held that a dismissal is not for redundancy and is fictitious if the employer continues to hire new employees for the redundant position or a similar one.

In practice, to ensure the Romanian employment law is correctly followed, we recommend that this period of non-hiring should be for at least six (6) months, starting from the date of the issue of the redundancy decision.

During the notice period, the employer has to pay the employee’s salary, and the employee has to fulfil his contractual obligations. Any obligation to pay additional wages or compensation must be contained in the labour contract and/or the internal rules of the employer. The employer is legally bound to pay the dismissed employee any additional payments provided for in any contracts.

If there is no provision in any document, then the employer is not obliged to make any additional payment, although in practice they may, as an inducement for the employee, not to take the employer to court. In practice, employers often offer an additional payment in order to substantiate the reason for the redundancy and to show goodwill toward the employee.

Although the Labour Code does not provide for it, some employers offer the employee a similar post inside the company if such a position is available. Some judges hold the view that the dismissal decision is unlawful if the employer does not offer a similar position to the employee if it had this possibility.

Where possible, i.e. a small number of employees are involved, we advise the employer to try to conclude with each employee an amicable termination of the labour contract. In such cases, the employer is not obliged to pay compensation other than that which is set out in ant contract. The employer can, as mentioned above, consider offering an additional sum of money as compensation in order to avoid a future legal action.

Where the matter of redundancy cannot be dealt with amicably, great care must be taken by the employer to ensure that the requirements of Art 65 are followed to ensure that the employer is properly protected. If the legal provisions are followed, then the employer will be entitled to dismiss its employees legally and quickly with the minimum of fuss for the reason of redundancy.

Should you require any further information please contact the Firm at enquiries@hplegal.ro