• Recent Rulings by Romania's High Court Clarify Thorny Issues in Labor and Employment Law
  • April 23, 2015
  • Law Firm: Dentons Canada LLP - Toronto Office
  • In Romania, the inconsistent interpretation and application of legal provisions by the courts have resulted in uneven and confusing case law and, in general, in an increased degree of uncertainty with respect to the predictability of litigation outcome. Under the Romanian legal system, the High Court of Cassation and Justice (High Court) has final authority in unifying divergent case law through a special type of ruling—one that is issued following a so-called “appeal in the interest of law” (“recurs in interesul legii”) filed by the country’s General Prosecutor to restore legal certainty if, as the jurisprudence around existing legal provisions evolves, different opinions or interpretations of the lower courts are reported.

    Labor law has finally made it to the agenda of Romania’s High Court, which has recently ruled on three important topics, outlined below. In doing so, the High Court has created a binding judicial precedent which sets out the mandatory rules for any subsequent cases involving identical or similar situations, trialed in front of the High Court itself or in lower courts in the judicial hierarchy.

    The capacity of unions to bring court actions on behalf of their members

    Through Decision no. 1/2013, the High Court has shed light on a matter that initially arose under the previous law on unions, Law 54/2003, as amended, now replaced by Law 62/2011 on the Social Dialogue, which, even if it brought about great reforms, failed to clarify this issue. There were two different opinions in the jurisprudence regarding the capacity of unions to bring a direct court action in connection with the rights and interests of its members. One opinion says that the union itself did not have litigation standing in its own name and it could only represent its members, to the extent to which union members themselves launched a court action. Another opinion says that unions were allowed to initiate a court action even in the absence of a direct mandate from its members, to defend their rights and interests.

    The latter opinion has prevailed and been acknowledged by the High Court, which has thus consecrated the independent standing of unions in court. As a result, unions can initiate litigation to the individual or collective benefit of their members.

    It is important to note that union members retain the so-called “litigation disposition rights” at all times, which means that they may withdraw the claim and thus stop the trial if they choose to do so. The court which has jurisdiction with respect to the union’s headquarters is invested to rule on the case.

    A court’s possibility to change a disciplinary sanction imposed by an employer

    Before the High Court’s Decision no. 11/2013, the dominant view of the courts hearing challenges brought to disciplinary sanctions by disgruntled employees, was that the disciplinary prerogative belonged solely to the employer and, as such, judges could only rule with respect to the legality and soundness of the disciplinary investigation process, but not with respect to the actual sanction imposed. If this disciplinary investigation process had been carried out in violation of the applicable legal rules, a court would declare it void and render it without effects, but it could never change the disciplinary sanction imposed on the employee, as this would equate to a substitution into the employer’s position and rights.

    In its decision, the High Court stated that the disciplinary prerogative of employers end at the point where the oversight powers of the courts begin, so the courts have the power to not only control the legality of the disciplinary process, but to materially change its outcome as well. The High Court ruled that, under the pre-existing dominant interpretation of the courts’ powers, the employer’s disciplinary prerogative would be absolute and discretionary, and that courts should be allowed and able to check if the sanctions are appropriate, tailored to the employee’s track record and work history and, in general, adequate considering a particular disciplinary breach.

    We note that, under Romanian labor law, there is a range of disciplinary sanctions that may be applied by employers, depending on the seriousness and circumstances of the breach and the employee's record, as follows: (i) written warning; (ii) demotion of the employee up to 60 days with a corresponding salary reduction; (iii) 5 to 10 percent salary reduction for one to three months; (iv) 5 to 10 percent salary reduction and/or, as applicable, reduction of the management compensation for one to three months and (v) dismissal.

    The timeframe to be followed by employers when taking disciplinary action against their employees

    According to the Romanian Labor Code, employers may take disciplinary action against employees only upon following a prescribed procedure. The procedure includes an investigation phase, within 30 calendar days of when the breach is acknowledged by the employer (subjective moment), but not later than six months from the occurrence of the alleged breach (objective moment). The jurisprudence was not uniform in identifying the subjective moment from which the 30-day term is calculated. Some courts considered that the subjective moment is the initial moment when the employer is first alerted (usually, by another employee or a third party, through a note, a written statement, letter, etc.) that a potential disciplinary breach could have occurred, while others considered that a formal and meaningful acknowledgement occurs only upon conclusion of the investigation phase by the employer’s representatives.

    The latter position was deemed more accurate by the High Court which stated, through Decision 16/2012, that at the initial moment when the employer is first alerted, it is not certain yet if the deed allegedly committed by an employee amounts to a disciplinary breach (with the consequence that the employee is still presumed not guilty at that time) since the investigation phase has not been completed yet. As such, the High Court has confirmed that, in fact, employers have 30 days from the moment when the investigation commission issues its final report determining if a breach has been committed to sanction the responsible employee.

    However, we caution that many collective bargaining agreements and company-level internal regulations may refer to the initial alert of the employer as being the subjective moment from which the 30-day deadline starts to run. Although it could be argued that the ruling of the High Court has full legal force and prevails over conflicting provisions in such documents, going forward, a rewording of the relevant sections in collective bargaining agreements and company-level internal regulations may be advisable.