More flexible labor relationships

22 December 2005 (Invest Romania)

Considered one of the most significant legislative modifications of the year, the amendment of Law no. 53/2003 („Labor Code”) by Government Emergency Ordinance 65/2005 recently, envisaged fostering the economic activity by emerging labor relations from the grey zone as well as the elimination of corruption and bureaucracy.

Justified both by the necessity to harmonize Romanian legislation with the community one, as well as to observe the other international treaties, the referred amendments contemplate removal of certain excessively restrictive provisions from the Labor Code, ensuring an incentive for the foreign investors. Below is a summary of the main novelty elements of the Government Emergency Ordinance 65/2005.

In order to avoid the discontinuity of labor contractual relationships for definite period, the new enactment extended the duration of labor agreements for definite period from 18 to 24 months, also enlarging the applicability of this agreement-type to new situations, such as (i) employment of a person in search of a job, who within 5 years after his/her employment meets the retirement conditions for the age limit; (ii) the pensioners’ employment who, as per the relevant legal provisions, may cumulate the pension with the salary, as well as (iii) other situations expressly provided by special laws or for the performance of certain works, projects, programs under the conditions settled through the collective labor agreement concluded at the national level and/or branch level.

Another set of amendments envisage the regime of employee’s non-competition obligation, adjusted under two important points: (i) differently from the former regulations, employee’s non-competition obligation subsists during the validity period of the labor agreement without the need of an express clause in this respect and payment of a special indemnification, this falling under the general fidelity obligation toward the employer, (ii) the explicit non-competition clause is necessary only if the employer intends to extend this obligation subsequent to the cessation of labor relations, but for a maximum general period of 2 years, without the previous distinction between operational and management personnel; in the latter situation, to produce effects, the clause has to also expressly indicate, among others, the activities forbidden to the employee and the non-competition indemnification, of at least 50% of the average of employee’s gross income for the last 6 months before termination of the individual labor agreement for agreements lasting more than 6 months and the income average for agreements lasting shorter periods of time.

As regards the fiscal treatment, the non-competition indemnification represents an expense born by the employer, is tax deductible and is levied on the beneficiary natural person.

Government Emergency Ordinance no. 65/2005 removed from the de jure termination situations of the labor individual agreement the event where the cumulative standard age conditions and the minimum contribution periods required for retirement are met. It is provided instead the termination of labor agreement upon the date the advance retirement decision or the partly advance retirement decision is communicated.

It has also been regulated the possibility to extend the working time period, as an exception, over 48 hours per week (including the extra-work hours), provided that working hours average calculated for a reference period of one calendar month does not exceed 48 hours per week.

For certain fields of activity, entities or professions established under the collective labor agreement at national level, there may be negotiated reference periods longer than three months, but no more than 12 months, through the collective labor agreement at each branch level.

As concerns the employees’ professional training, employer’s obligation to ensure employees’ attendance to the training programs has been tailored to the number of employees, the concrete implementation modalities being settled upon parties’ agreement by addenda to the individual labor agreements.



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