2003 Annual Review for Romania

This record reviews 2003's main developments in industrial relations in Romania.

Political developments

The present Social Democratic Party (Partidul Social Democrat, PSD) government was elected in November 2000 for a four-year term. The Prime Minister is Adrian Nastase. The next elections are due in the autumn of 2004.

In December 2002, Romania obtained a schedule from the European Union whereby it will join in 2007. By the end of 2003, 22 chapters of the accession negotiations had been concluded, with the remaining eight chapters to be finalised by October 2004. In November 2002, Romania was also invited to join the North Atlantic Treaty Organisation (NATO). Domestic policy in Romania is largely focused on the country’s integration into these 'Euro-Atlantic' structures.

In 2003, after five previous failures, a 'stand-by agreement' with the International Monetary Fund (IMF), signed in October 2001, was successfully finalised. In its assessment, IMF stated: 'The solid macroeconomic policies, as well as the progress noted in the structural reforms contributed to enforce the deflation process and the vigorous economic development, in spite of the economic weakness of the main trade partners of Romania.'

In the light of criticism of being too large, but also to enhance its efficiency, the government was reorganised in June 2003, reducing the number of ministers from 24 to 15. The number of delegate-ministers was increased from two to six. Some of the new ministries are the result of the unification of former ones - this is the case for the Ministry of Administration and Interior (Ministerul Administratiei si Internelor, MAI), the Ministry of Economy and Commerce (Ministerul Economiei si Comertului, MEC), the Ministry of Agriculture, Forest, Water and Environment (Ministerul Agriculturii, Padurilor, Apelor si Mediului, MAPAM), the Ministry of Transport, Construction and Tourism (Ministerul Transporturilor, Constructiilor si Turismului, MTCT) and the Ministry of Education, Research and Youth (Ministerul Educatiei, Cercetarii si Tineretului, MECT). Also, a 'mega' Ministry of Control (Ministerul Controlului, MC) was created, governing all control bodies. Enhanced competences and a new title were given to the Ministry of Labour, Social Solidarity and Family (Ministerul Muncii, Solidaritatii Sociale si Familiei, MMSSF), and its former minister became the delegate-minister for relations with the social partners. Moreover, the Authority for Privatisation and Management of State Ownership (Autoritatea pentru Privatizare si Administrarea Participatiilor Statului, APAPS) came under direct government subordination, until its liquidation when privatisation is finalised.

Under the present administration, Romania has registered steady, year-on-year economic growth. The initial 5.2% goal for 2003 was later revised to 4.8% and the 2004 growth forecast is 5.5%. Reducing the inflation rate (14.1% in 2003, compared with 22.5% in 2002, 34.5% in 2001, 45.7% in 2000 and 154.8% in 1997) continues to be the most urgent economic issue, and in 2004, for the first time since 1990, a single-figure average annual inflation rate is envisaged (9%).

Collective bargaining

In 2003, approximately 11,200 collective agreements were concluded, while the number of companies with more than 50 employees (in which collective bargaining is mandatory) was between 15,000 and 16,000 (representing only 5% of the total of 321,000 companies).

One collective agreement was concluded at the national level and 20 at multi-employer level, of which 10 were concluded at branch level and 10 for groups of companies. The tripartite 'single national collective agreement' provides a minimum basic framework for employment conditions.

In October, the government proposed a tripartite 'social stability pact', covering 2004, but the initiative seemed doomed to failure at the end of 2003, mainly because of a government decision to set a minimum wage rate far below that demanded by the unions (RO0401104F).

Pay

The average collectively agreed basic pay increase (which in Romania applies to the monthly minimum wage) is estimated in 2003 to have been 41.5% at national level in nominal terms (around 25.1% in real terms), with large differentials between branches - eg 22.5% in electronics, 25% in the transport and food industry and 41.5% in commerce. In some sectors, basic pay increases for qualified and non-qualified workers are negotiated separately. The absolute level of minimum basic pay was ROL 2.5 million a month at national level, ROL 3.5 million in transport and ROL 3.2 million in metalworking.

Working time

All collective agreements stipulate a maximum working day of eight hours and a maximum working month of 170 hours, with the exception of mining (six hours a day) and construction (10 hours a day, but no more than 48 hours a week). On the basis of the tripartite single national collective agreement, the normal working week is set at 40 hours.

Job security

Much sectoral collective bargaining dealt with compensation in the case of redundancy. Generally, agreements provide that compensation upon redundancy is six months’ pay (based on the gross monthly average wage in the company) although the amount varies by sector, up to a maximum of 24 months’ pay.

Equal opportunities and diversity issues

Every collective agreement signed in 2003 included a special clause dealing with equal opportunities for women and for young people, referring mainly to vocational training, job security and social protection.

Other issues

Health and safety was a particular focus for collective bargaining in 2003. The single national collective agreement for 2003 set out the employer’s obligation to ensure a medical examination for all employees at least once a year. It also provides, for the first time, for the establishment of health and safety committees at the company level.

Legislative developments

Perhaps the most important legislation-related event in 2003 was a national referendum held on 18-19 October that approved a revised Constitution. Among the main supplements and modifications to the Constitution, some are directly related to industrial relations (RO0401105F). For example:

• a special article was introduced on trade unions, employers’ organisations and professional associations, stipulating that such bodies shall be established and shall carry out their activity according to their statutes, subject to the law, and shall contribute to the protection of rights and the promotion of their members’ professional, economic, and social interests;

• equal opportunities is guaranteed between men and women in any civilian or military employment;

• the right to work cannot be restrained and this implies freedom to choose one's profession, occupation and employment;

• employees have a right to social protection measures. These are to be provided by special regulations regarding employees’ safety and health, women and young people at work, the establishment of a national minimum wage, weekly rest periods, annual paid leave, work in special and hazardous conditions, vocational training and other specific issues;

• the normal duration of a working day is a maximum of eight hours, on average;

• for equal work with men, women shall receive equal pay;

• the right to collective bargaining and the binding force of collective agreements shall be guaranteed;

• employees have the right to strike in order to protect their professional, economic and social interests; and

• as stated in the law regarding its establishment, organisation and functioning, the tripartite Economic and Social Council (Consiliul Economic si Social, CES) is acknowledged as a consultative body for parliament and the government.

2003 also saw the adoption of a number of framework laws that were extremely important for industrial relations (RO0401107F), and thus subject to prolonged consultations and debates between the social partners. These included a new Labour Code (Law no. 53/ 2003), Law on the Economic and Social Council (see below under 'The organisation and role of the social partners'), Trade Unions Law (Law no. 54/2003) (see below under 'The organisation and role of the social partners') and Fiscal Code.

The new Labour Code provides notably for a considerable degree of harmonisation of Romanian employment law with the 'acquis communautaire' (the body of EU law which new Member States must implement). The main changes related to areas such as: 'atypical' employment contracts (see below under 'New forms of work'); probationary employment contracts; registration of employees; the content of individual employment contracts; maximum working time limits; overtime; annual leave; paid leave for training purposes; the access of employees to specialised medical care; health and safety committees and employee information and consultation rights (see below under 'Employee participation'); temporary shutdowns and collective redundancies. Some parts of the Code were criticised by employers as being inconsistent with the principle of a free market, and the government responded by promising to introduce clearer procedures for applying the new rules (RO0308102N).

The new Fiscal Code was adopted by parliament at the end of 2003, having been strongly criticised by trade unions (RO0310102F). The final version of the Code watered down some of the areas attacked by the unions, but did not fully meet their demands.

The organisation and role of the social partners

Two important items of legislation relating to the organisation and role of the social partners were adopted in 2003.

The tripartite Economic and Social Council (CES) was established in 1997 by Law no. 109. In October 2002, the social partners issued an opinion on a proposal to amend the old regulations and on 28 February 2003 parliament adopted a new law on the organisation and functioning of the CES (Law no. 58/2003), based on the social partners' opinion (RO0401107F). The aim is to enhance the Council’s role and competencies, with specific changes including: allowing the CES to issue opinions on draft programmes and strategies not embodied in laws, prior to their adoption; some modifications to the Council's membership (the government may decide to replace one of its own statutory members with a member representing professional associations, non-governmental associations and other similar civil society organisations); and a new system whereby each of the three parties (trade unions, employers' organisations and government) fills the positions of president and vice-president in rotation.

The Trade Unions Law (Law no. 54/2003) (RO0401107F) was adopted in January. The changes from the previous regulations, dating from 1991, include the following:

• unions are defined as independent organisations, comprising at least 15 individuals working in the same field or industry, but not necessarily for the same employer. This last provision was introduced as a response to criticisms of the former law for restricting trade unions in the emerging private sector, which mainly consists of small and medium-sized enterprises;

• workers and public servants have the right to set up or join a trade union organisation. Furthermore, self-employed people, members of cooperative associations, farmers and participants in vocational training courses now also have the right to join a trade union organisation, without a need for any prior authorisation;

• trade unions’ rights include the right to bring a court action to defend the interests of any of their members, even without power of attorney;

• elected trade union representatives cannot be dismissed during their term of office and for a period of two years beyond the end of their term; and

• employers are under an obligation to invite trade union representatives to board meetings. Resolutions carried by the board of directors must be notified to the trade unions within 48 hours of being passed.

In 2003, the number of nationally representative social partner organisations remained unchanged at 12 employers’ organisations (RO0310103F) - of which only seven were involved in collective bargaining - and five trade unions confederations (RO0307101F). However, there were a number of internal changes on the trade union side.

The Meridian trade union confederation signed an alliance with the National Association of Craft Cooperatives (Asociatia Nationala a Cooperatiei Mestesugaresti, UCECOM) and with the National Union of Consumer Cooperatives in Romania (Uniunea Nationala a Cooperativelor de Consum din Romania, CENTROCOOP). This gave much greater negotiating power to Meridian, which is now arguably the most important of Romanian trade union organisations.

The National Confederation of Free Trade Unions in Romania Brotherhood (Confederatia Nationala a Sindicatelor Libere din Romania Fratia, CNSRL Fratia) was joined by seven new federations, with a total of 62,000 members, and signed a convention with the ruling Social Democrat Party for the 2004 electoral year. Four federations joined the National Trade Union Bloc (Blocul National Sindical, BNS) in 2003. While preparing for its congress in October (RO0312101N), BNS canvassed its members about the future political involvement of the confederation, but no final decision was taken. The Cartel Alfa confederation lost one federation, which joined CNSRL Fratia, but was joined by three new federations, so its membership remained approximately unchanged.

On the employers' side, the idea of merging some central organisations was discussed during 2003, but without being realised during the year (some progress was eventually made in this area in spring 2004 - RO0404101F), and their fragmentation continued.

Industrial action

Official statistics on strikes are not yet available for 2003. Nevertheless, in recent years, the number of strikes has diminished. The number of collective labour disputes (not necessarily leading to industrial action), after a peak in 1999 (653), stood at only 103 in 2001 and 114 in 2002, while the participants represented 21% of all employees in 1999 and only 5.9% in 2001 and 3.6% in 2002. Approximately half of the number of disputes and 20%-30% of participants were in the manufacturing sector in 2002. The number of strikes diminished from 85 in 1999 to five in 2001 and 13 in 2002. Strike participants represented 5% of all employees in 1999 and below 1% in 2001 and 2002. There is a clear tendency for the parties to succeed in resolving collective disputes before they turn into strikes.

In 2003, the main action organised by trade unions consisted of two major national protests in the spring and autumn, both against what the unions see as the excessive tax burden on labour and pay (RO0310102F). Fewer than 10 important sectoral strikes appear to have taken place in 2003 - eg among public servants, public utility workers, railway workers (RO0309101N) and workers in the automotive sector RO0311102F). At company level, action occurred in particular in the automotive industry (RO0311102F) - at Roman SA, ARO Campulung, RODAE Automobile Craiova and ROCAR Bucharest- tractor manufacturing (Tractorul Brasov SA), steel (Siderurgica Hunedoara, Republica Bucharest and Petrotub Roman) (RO0311101N), chemicals, oil processing and education. The main reason for the various protests was collective redundancies generated by the process of restructuring and privatisation.

Employee participation

At company level, employees’ information and consultation rights are explicitly recognised by the new Labour Code (see above under 'Legislative developments'), which also recognises their right to take part in establishing and improving working conditions and the working environment. In companies with more than 20 employees in which no trade union is present, elected representatives may promote employees’ interests. Employees and their representatives must be periodically informed about the economic and financial situation of the company, and consulted whenever decisions that will substantially influence their interests are to be taken. Trade unions or elected representatives are to be consulted whenever work quotas are to be established or modified. Collective redundancies may be made only after previous consultations with trade unions or employees’ representatives. The employer is required to give notice of the workforce reduction at least 45 days in advance and employees may propose measures to avoid or reduce the redundancies, within a period of 20 days after notification. The new Code also stipulates (as already laid down by national collective agreement) that in all companies with more than 50 employees, a workplace health and safety committee must be established.

The new Labour Code states that Romania will transpose the EU European Works Councils Directive (94/45/EC) and the employee involvement Directive (2001/86/EC) linked to the European Company Statute (EU0206202F) by the time it joins the EU.

During national-level collective bargaining, proposals for the creation of works councils have been discussed, but no agreement has been reached.

Stress at work

There were no major actions to combat stress at work introduced during 2003, apart from general provisions regarding health and safety at work stipulated in the new Labour Code and agreed in collective bargaining (see above). However, during consultations, the social partners discussed the modification of labour inspection legislation, including the recognition of stress as an occupational disease. A study on stress is under way (undertaken by the Cartel Alfa trade union confederation) and some trade unions have organised special seminars on this topic.

Commentators believes that considerable stress has been generated by Romania's economic transition process. For example, employment uncertainty has grown over the past decade (the number of employees has fallen from 8.1 million in 1990 to 4.5 million in 2003), real wages have fallen dramatically (down to 60% of 1990 levels by 2003), and one-third of employees earn the national minimum wage (EUR 70 a month).

Undeclared work

The high level of taxation of wages - imposed by the need to finance the pensions system, unemployment benefits and health insurance - is deemed by many commentators to be pushing both employers and employees into the use of undeclared work. Official statistics indicate that the 'underground' economy’s share of GDP was 18% in July 2003, compared with 20% in 2002 (according to the Organisation for Economic Cooperation and Development) and 30%-45% in 2001 (according to the United States Agency for International Development). Moreover, government officials estimated that in 2003 approximately 45% of unemployed people were working illegally. The Alliance for the Economic Development of Romania (ADER) estimated that in 2003 some 10%-17% of employers used undeclared work, accounting for 1.8 million-2 million people (total employment is around 8 million). Besides these figures, over 1 million Romanians are working abroad, many of them probably illegally.

Both trade unions and employers’ organisations believe that lowering the tax burden is the main way to change the situation and bring those engaged in the informal economy back into the formal economy.

New forms of work

The new Labour Code adopted in 2003 (see above under 'Legislative developments') introduced legal regulation of 'atypical' forms of work for the first time. The 'special' types of employment contract regulated by the Code include temporary agency work, part-time employment, employment on fixed-term contracts and home-based work, while employment performed under a 'civil contract' (used instead of employment contracts as a way of avoiding tax and social security contributions) has been abolished.

In the second quarter of 2003, full-time workers represented 88.1% of total employment (88.4% in 2002) and part-time workers 11.9% (11.6% in 2002). Home workers’ share of total employment remained low, at 3.2% in 2003, compared with 3.3% in 2002. Over two-thirds (67%) of employees worked in the evenings and at night and on Saturday and Sunday (compared with 65.5% in 2002), of which the majority (60%) were in rural areas (mainly in agriculture).

Other relevant developments

The privatisation process has now almost been completed. In November 2003, only 65 state-owned companies with more than 100 employees were still under APAPS administration. Thus, in many respects, the state’s role in industrial relations will now be transferred to the employers’ organisations, which some observers believe urgently need to improve their way of operating, as trade unions have largely succeeded in doing. Moreover, foreign investors’ involvement in privatisation is increasing the complexity of social dialogue in and, it is claimed, calls for a more neutral government approach.

Outlook

Major events in 2004 will include local elections (on 6 June) and general elections (on 28 November), the conclusion of the EU accession negotiations, joining NATO and signing a new type of 'precautionary stand-by' agreement with the IMF (RO0403102F). Economic forecasts are encouraging: GDP growth is forecast to be 5.5% and inflation 9%. It is expected that the privatisation process will be concluded in 2004.

The reconciliation of Romania’s main economic and political objectives and people’s expectations in an electoral year constitute a major challenge for 2004. A 'social stability pact' is desirable (see above under 'Collective bargaining'), but its chances of emerging are quite low (RO0401104F). (Constantin Ciutacu, Institute of National Economy, Romanian Academy)