THE FOREIGN INVESTORS COUNCIL MEETS WITH DELEGATED MINISTER
SARBU TO DISCUSS THE LABOR CODE
Foreign Investors Council (FIC) met on July 16 with
Mr. Marian Sarbu, Delegated Minister for Relationships
with Social Partners, to discuss issues related to the
Labor Code. The new Labor Code is a comprehensive piece
of legislation that has a wide impact on virtually all
Romanian companies. Unfortunately, certain clauses of
the Labor Code are restrictive and not well-suited for
companies operating in a market economy.
Since its enforcement on March 1, the Labor
Code has produced adverse effects for both employers
and employees. Employers find it difficult
to implement and employees are directly affected by
a reduced flexibility of the labor market.
The main objective of the FIC’s recommendations
on the Labor code is to improve the business climate
for the benefit of all parties involved, including employees,
and not only to increase the profits of employers.
A Labor Code that lacks flexibility and prevents employers
from hiring people will result in a vicious circle of
less jobs leading to less taxes paid by taxpayers, less
money available for consumption, less money available
for purchasing of equipment, less savings to be invested
in the economy and ultimately less growth for the country.
Out of the 300 articles of the Labor Code, the FIC believes
that there are six critical issues that need to be addressed
with priority by the Government. These issues include:
• the wage guarantee fund
• the 48 hours workweek
• the procedures for hiring and dismissing employees
• the non-competition clause for employees
• the role of trade unions in relations with work
• the training requirements.
In very brief terms, the FIC’s analysis and recommendations
with regard to each of these six points is as follows:
• The requirement to provide a “wage
guarantee fund” to be used in case of
bankruptcy of an employer is onerous and is not common
in market economies. The FIC recommends that the wage
guarantee fund be eliminated. However, we must stress
that the FIC is not against the principle of compensating
employees who are victims of bankrupt companies, which
the FIC believes should come from unemployment insurance.
• The limitation of the workweek to 48
hours is not practical in many industries and
should be relaxed to allow employees to work additional
overtime if they so desire. The FIC recommends that
in line with the EU Directive 93/104/CE, employees be
permitted to work a maximum of 48 hours per week on
average over a period of one year.
• The documentation requirements
associated with hiring new employees and dismissing
existing employees that are incompetent or that fail
to pass probationary periods are bureaucratic, cumbersome
and time consuming. This bureaucracy will act as a disincentive
for companies to hire new personnel. The FIC recommends
that the procedure to dismiss incompetent or unsuitable
employees be simplified and streamlined.
• The requirement to pay a premium to
employees who agree to a “non-competition
clause” is not found in market economies. Furthermore,
in competitive market economies, it is the norm to restrict
employees from working concurrently with a competing
company, which is an obvious conflict of interest. The
FIC recommends that the requirement for an employer
to pay additional wages for an employee’s loyalty
• In market economies, employers and not
trade unions are responsible for the production efficiency
and overall management of their companies.
Therefore, the requirement for employers to establish
“work quotas” (which legislate the work
rate of both “blue collar” and “white
collar” employees) in conjunction with their trade
unions is a step backwards. The FIC recommends that
the requirement to establish work quotas be eliminated.
• The requirement to provide training
for all employees on an annual basis is excessive.
The FIC recommends that employers train their employees
on an “as needed” basis.
The FIC’s six recommendations were discussed thoroughly
during the meeting between Minister Sarbu, representatives
of the Ministry of Labor and representatives of FIC
The Minister advised that the law on the wage guarantee
fund is an open issue and that the Government is looking
for an acceptable solution. In any case the Minister
stated that this fund will not add to the costs of the
labor force. On the other specific issues raised by
the FIC, the Minister informed that further clarifications
will be provided through norms of application which
will be issued by the Ministry of Labor.
The Minister stressed that the current Labor code is
the result of the negotiations between the trade unions
and the association of employers represented at the
national level. The FIC expressed its availability for
discussions with trade unions since it advocates for
a Labor Code serving the interests of both employers
Minister Sarbu repeatedly stressed that several provisions
of the Labor Code are not mandatory on either the employer
or employee, and that article 20 permits broad flexibility
to negotiate the specific terms of the employment contract.
Although the FIC welcomes the Minister’s laissez-faire
attitude, the FIC doubts that the Courts will be so
flexible in their interpretation of the Labor Code.
This year’s EU country report for Romania will
include a broad assessment of where Romania stands in
relation to the criteria for a “functioning market
economy”, and the result will be crucial for Romania’s
accession to the EU. Since labor market flexibility
is one of the benchmarks against which Romania’s
performance will be measured, the improvement of the
Labor Code is a high priority.
The Foreign Investors Council and the European Roundtable of Industrialists together with the Government of Romania will jointly assess the progress towards a functional market economy
The Foreign Investors Council Meets with Delegated Minister
Sarbu to Discuss the Labor Code
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