Important industrial relations laws adopted

2003 was a very busy year in terms of industrial relations-related legislation in Romania. As well as a new Labour Code, the year saw new or amended legislation on trade unions, the tripartite Economic and Social Council, the tripartite National Adult Training Board and taxation. This article reviews the main new provisions.

A number of important items of legislation with relevance for industrial relations were adopted in 2003. The main new provisions are summarised below.

Labour Code

The old Labour Code had been in force since 1972 and its obsolescence, and the need for fresh regulations, had become more and more apparent. The proposals for a new Code were subject to lengthy debates and consultation between the social partners and it was finally adopted by parliament on 24 January 2003 (RO0308102N). The new Labour Code provides notably for a considerable degree of harmonisation of Romanian employment law with the the 'acquis communautaire' (the body of EU law which new Member States must implement). The main changes are as follows.

• For the first time, special types of employment contract are regulated by the new Labour Code, including temporary agency work, part-time employment, employment on fixed-term contracts and home-based work, while employment performed under a 'civil contract' (as a way of avoiding social security contributions) has been abolished.
• As a measure to fight illegal work, the Labour Code forbids employment on probation for a period of more than six months. This kind of employment can be renewed only once and no more than three consecutive probationary employment contracts can be used for the same job.
• From the beginning of 2004, employers are obliged to keep a general register of employees, to replace the individual 'work books' system.
• The new standard form of employment contract allows for individual contracts to include special clauses, such as non-competition clauses (obliging employees to refrain from carrying out competing activities against the employer), 'mobility clauses' (entitling employees to extra benefits in respect of employment requiring them to move from one place to another) and confidentiality clauses (whereby parties agree not to disclose information acquired during the course of employment).
• The normal working week is set at 40 hours and weekly working time should not exceed 48 hours on average. Overtime can be remunerated by time off or a pay supplement, which cannot be below 75% of basic pay. Employees are entitled to a minimum of 20 days' annual paid leave, in addition to the seven days of statutory holiday.
• Employees under the age of 25 years whose employer has not provided them with any form of vocational training over two consecutive years are entitled to paid leave for training purposes of up to 10 working days. The Labour Code also regulates special types of vocational training contracts initiated by the employer, which are for professional qualification, professional adaptation and apprenticeship at the workplace.
• Employers are obliged to ensure the access of employees to specialised medical care, either independently - by concluding an individual employment contract with an occupational medical practitioner - or by concluding a contract with another employer or with an employers’ association.
• As already laid down by collective agreement, the Labour Code stipulates that in all companies with more than 50 employees, a workplace health and safety committee must be established.
• Employees’ information and consultation rights have been greatly increased. Thus, trade unions or elected employees’ representatives are to be consulted whenever work quotas are to be established or modified and employers should periodically inform their employees about the company’s economic and financial position.
• In the event of temporary cessations of a company's activity, employees are entitled to pay of at least 75% of their basic wage. 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.

Trade Unions Law

Prior to 2003, the existing regulations on trade union organisations were established in 1991. During 2001, a proposal for new legislation was discussed in the tripartite Economic and Social Council (Consiliul Economic şi Social, CES), which issued a favourable opinion. However, it was only in January 2003 that parliament adopted the new Trade Unions Law (Law no. 54/2003) (RO0307101F).

Under the new law, trade unions may be set up in order to protect the rights regulated by national legislation, by the international pacts, treaties and conventions to which Romania is party, and by collective agreements, and also to uphold the professional interests of their members (social, economic, sporting and cultural).

Workers and public servants have the right to set up or join a trade union organisation. Self-employed people, members of cooperative associations, farmers and participants in vocational training courses also have the right to join a trade union organisation, without a need for any prior authorisation. Trade union membership is forbidden for public officials, magistrates and military personnel employed by the Ministry of National Defence (Ministerul Apărării Naţionale, MAN), the Ministry of Public Administration and Interior (Ministerul Administraţiei Publice si Internelor, MAPI), the Ministry of Justice (Ministerul Justiţiei, MJ), the Romanian Intelligence Service (Serviciul Român de Informaţii, SRI), the Guard and Protection Service (Serviciul de Protecţie si Pază, SPP), the Foreign Intelligence Service (Serviciul de Informaţii Externe, SIE) and the Special Telecommunications Service (Serviciul de Telecomunicaţii Speciale, STS).

The establishment, organisation and functioning of trade unions are ruled by their statutes. According to the law, unions are 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. Other new provisions include the following:

• 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.

Economic and Social Council

The tripartite Economic and Social Council (CES) was first established in 1997 by the adoption of 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).

According to this law, the CES examines the economic and social situation of the country and make recommendations to the government and parliament on the following themes:

• the restructuring and development of the national economy;
• the privatisation, functioning and increased competitiveness of economic operators;
• labour relations and wage policies;
• social and health protection;
• education, research and culture; and
• monetary, financial, fiscal and incomes policies.

Correspondingly, six permanent commissions are constituted, one for each of the themes listed above, and other temporary commissions may also be set up to cover different topics of economic and social interest. The permanent or temporary commissions are composed of at least nine members, with equal representation for each of the three parties.

A new provision is that the CES is now authorised to issue opinions on draft programmes and strategies not embodied in laws, prior to their adoption. It is mandatory for the initiators of draft laws and draft programmes and strategies not embodied in draft laws, relevant for the fields mentioned above, to request the advisory opinion of the CES, before their adoption.

Even though the number of CES members remains the same - 27 members, of which nine are appointed by employers’ confederations considered representative at national level (RO0310103F), nine by trade union confederations considered representative at national level (RO0307101F) and nine by the government - some modifications were made in respect of membership. Thus, 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.

The president of the CES is appointed by parliament for a term of four years, on a proposal from the plenary session of the CES, adopted by a majority of three-quarters of all members. A novelty is that each of the three parties fills the position of president and vice-president in rotation.

National Adult Training Board

The National Adult Training Board (Consiliul National pentru Formarea Profesionala a Adultilor, CNFPA) is a tripartite institution providing support for adult training and contributing to the elaboration of strategies and policies in the field. It was initially set up by Law no. 132/1999, but in June 2003 a new law was adopted (Law no. 253/2003, on the setting up, organising and functioning of CNFPA), after being discussed in the CES in March.

Important changes to the law resulted from the liquidation of the former Council for Occupational Standards and Assessment (Consiliul pentru Standarde Ocupationale si Atestare, CSOA). The assets and liabilities of this institution, as well as its staff, were transferred to CNFPA. Thus CNFPA's competencies were very much enlarged, and the law specifies 13 responsibilities, compared with only three under the old regulations. According to the new law, CNFPA has an advisory role, but also coordinates and controls at national level activities such as:

• the authorisation of training providers through its authorisation committees set up at the county level;
• the elaboration of occupational standards; and
• the evaluation and certification of occupational competencies achieved by the participants in vocational training programmes.

In fulfilling CNFPA's mission, a key element is the creation of authorisation committees at the county level, which are to be shaped in a tripartite manner to include representatives of trade unions, employers’ organisations and local administration. The process of establishing such committees is still under way and from 2004 they will have an important role, not only in defining vocational training strategies at the regional level, but also in the authorisation of all training providers and in the evaluation and certification of occupational competencies.

However, at the national level the tripartite structure of CNFPA remains much the same, consisting of five members appointed by the Prime Minister (subsequent to proposals made by the Minister of Labour, Social Solidarity and Family and by the Minister of Education, Research and Youth), five members appointed by common agreement of the nationally representative employers’ organisations, and five appointed by common agreement of the nationally representative trade union confederations. In order to fulfil its missions, CNFPA is assisted by a technical secretariat staff, coordinated by a general director appointed by the president of CNFPA.

A key mission of CNFPA is the completion of a national registry of qualifications, a project initiated long ago under the administration of CSOA. The failure to complete this exercise so far is regarded as impeding the recovery and dissemination of vocational training among employees, which was seriously reduced during Romania's period of transition.

New Fiscal Code

A new Fiscal Code was one of the most important governmental projects in 2003, as a response to heavy criticism levelled not only against the high level of taxation but also against the complicated manner in which tax payers had to assess and pay their taxes, as over the last decade hundreds of regulations had been added in this field. Therefore, the new Code was intended to unify the previous tax legislation into a single document, applying to all taxes, duties and contributions payable to the state budget, local budgets or other budgets.

The new fiscal regulations were subject to lengthy debates and consultations between the social partners, and a government plan to modify the draft Fiscal Code at the last minute by introducing a fixed-rate income tax on wages (rather than the existing system of progressive income tax) resulted in trade union protests (RO0310102F). Finally, parliament made a concession to this opposition and postponed the introduction of what had proved to be an unpopular measure. The new Fiscal Code was adopted in December 2003 and came into force from 1 January 2004.

Progressive income taxation, as well as the 'global' income tax remained in force and additional allowances have been introduced for items such as private pension schemes, private health insurance schemes and housing repair and insurance.

The social security contribution levy payable by employers for 2004 was reduced by 2.5 percentage points, and the standard contribution is thus 22% of pay (down from 24.5%). Also, from January 2004 the contribution to the unemployment fund payable by the employer has been reduced from 3.5% of pay to 3%.

In order to address an important trade union demand, value added tax (VAT) has been set at two levels - a standard rate of 19% and a reduced rate of 9% to be applied only to a few items (medicines, books and newspapers, and tourist accommodation). VAT exemptions are also stipulated, mainly relating to health, education and social protection services.

Commentary

The adoption and modification of some important laws in 2003 helped to ensure the 'institution-building' which may allow wide-ranging tripartite social dialogue and well-constructed industrial relations in Romania, and also provided harmonisation with EU regulations. Nevertheless, both employers’ organisations and trade unions criticise current social dialogue as being merely formal and wish to gain more bargaining power. Moreover, some actors often suspect others of a lack of interest in developing common projects, such as those foreseen for vocational training.

The legal framework for industrial relations is not yet complete and may still be subject to further changes and extensions. A number of framework regulations contained in the Labour Code are to be subsequently detailed by special laws, such as a law on collective labour conflicts, or rules on the setting up of a 'wage guarantee fund' in order to guarantee workers’ pay in the event of their employer's bankruptcy (RO0401104F). Further, a law governing the legal treatment of occupational medical services is due to be tabled in parliament. Importantly, given the increasing presence of multinationals in the domestic market, the Labour Code envisages that special regulations will be issued on European Works Councils.

During 2003, CES plenary meetings were held mostly every week. The Council's agenda was very demanding, as 215 draft acts were examined and an opinion was issued for each of them, compared with 192 in 2002.

In order to meet employers’ demands ( RO0308102N), the government made many attempts to modify some articles of the new Labour Code, but they all failed as they were rejected by the CES during 2003. Such amendments might, however, prove to be bargaining chips in future trade-offs between the social partners.

Trade unions would like some further amendments in the new law that rules their own activities, eg by allowing magistrates to join a trade union organisation, while some political parties are alarmed by a lack of explicit provisions in law which, in their view, may allow too much freedom for trade union involvement in political life.

The Fiscal Code succeeded in unifying the intricate fiscal legislation into one document, but fiscal and budgetary policy will remain the most commented upon and disputed theme of dialogue between the government and social partners (RO0401106F). The Minister of Public Finances has announced that discussions about a fixed-rate income tax from 2005 will be resumed, and the social partners still have many demands in this area.

In the trade unions’ opinion, a reduced rate of VAT was necessary not only for medicines, as provided in the new Fiscal Code, but also for all the basic goods included in the 'minimum consumption basket'. The new Code did not satisfy their demands on this matter, and also failed to respond to their expectations regarding a much lower tax rate on wages (the rate remained unchanged). Employers’ organisations were also discontent because their proposal to exempt reinvested profits from taxation was not taken up. (Diana Preda, Institute of National Economy)