EMPLOYEE LAYOFF – another form of terminating a labour agreement

I. INTRODUCTION

The National Trade Register Office (ONRC) recently made an important announcement, namely that over 8.000 Romanian companies suspended their activity in the first half of 2022.

In difficult economic times, employers look to implement the handiest measures to safeguard their business; so they reduce costs, reorganize the company from an economic point of view and change the structure or organizational chart of the company.

One form of financial “relaxation” they turn to is employee layoff or elimination of one or several positions in the company organization chart. If you’ve been following the news recently, you’re surely familiar with the following wording ,,Ford confirms about 3,000 job cuts...” or ,,TAROM launches over 110 job cuts…

But what is employee layoff in reality? How much freedom does the employer have in ordering it and what is the legal framework that allows it?

We have already discussed the dismissal for reasons related to the employee (individual dismissal), and I also explained the disciplinary sanctions procedure. In short, I remind you that an employee can be dismissed for subjective reasons (for example, because he does not correspond professionally or for a disciplinary misconduct) or objective reasons.

The reason for the dismissal in question here is an objective one, that is, it is not about disciplinary violations, physical or mental unfitness, etc., but about a fact external to the employee; the termination of employment cannot in any way be considered the employee’s fault. Even more importantly, the abolition of the position cannot be imputed to the employer either, but, as we will see, it will take place as a result of a reorganization of the unit, an organization that is imposed for certain objective reasons (such as economic losses, poor results in the circuit commercial, profit optimization by reducing expenses, etc.). Collective dismissal is another case of objective dismissal and will be dealt with in another material.

The purpose of this article is to provide information – theoretical but also acquired through the practice of law – about the cases in which the objective dismissal can be ordered by layoff, so that these provisions of the Labor Code no longer seem so encrypted.

II. LEGAL FRAMEWORK

Employee layoff is regulamted r in art. 65-67 of the Romanian Labor Code (the section being called Dismissal for reasons unrelated to the employee).

As we stated in the introductory part and as the title of the Romanian Labour Code Section suggests, layoff will occur for one or more reasons that are not related to the employee’s person, behaviour or actions. Layoff is based on a form of reorganization of the unit (i.e., not to be misinterpreted as company reorganization, such as merger, division etc.); its internal modification and any organizational measure aimed at increasing performance in the activity, and the only entity or person authorised and capabile of making such a decision if the employer.

Therefore, the first step of the layoff process is a formal decision of restructuring the unit and its activity. In no case whatsoever (as we often encounter in practice), the process starts inversely – by first identifying the employee, for exemple. And this is because layoffs have to be effective and have a real serious cause, and compliance with these conditions will be verified by the courts. Otherwise, the employee shall have cause for annulment of employer layoff decision.

III. THE EFFECTIVE NATURE OF EMPLOYMENT LAYOFF

Employee layoff is effective when the former job is no longer found in the company’s organization chart and/or the operating regulation.

In court, the employer will present the new and former organization chart and the new and former operating regulation from which it will be clear that the position was effectively eliminated from the organization. The court will not check and doesn’t have the power to censor the appropriateness of the decision taken by the employer with regard to the general business (i.e. if it was a good or bad for the business).

The governing bodies of the company are the only ones having authority to make any changes in its activity by taking into account economic and social factors, internal structure and future goals. It is therefore natural that the employer shall be the only one entitled to remove certain jobs from organization’s unit, if, based on the factors set out above, these are no longer appropriate for the company.

Other issues identified in the practice of law, and which have not gone unsanctioned by the courts, concerned re-establishment of the same position after a very short time or a simple change of the job title (name). In this situation, the Bucharest Court of Appeal, Section VII for civil and for labor disputes, in decision 296/R/2011, held that:

“We cannot talk about an effective reorganization if the newly established positions under other names have taken over the duties of the positions removed from the organization chart, hence, employees layoff and their replacement with others is not legal.”

IV. THE REAL AND SERIOUS CAUSE

To be real, the cause must present an objective character for the employee. In other words, layoff must derive from reasons independent of the employee’s person or from objective reasons, such as the employer’s decision to reduce company expenses, to avoid financial difficulties, to adapt to new technologies etc.

On the other hand, the character of a serious cause will be determined based on the employer’s intentions to pursue the efficiency of its activity and to use human and financial resources with maximum efficiency. Of course, these intentions will also be proven with the help of studies aimed at improving the activity.

In other words, the cause must reflect the reality and necessity of layoff. The Constitutional Court explained in Decision no. 420/2013 what is meant by real and serious cause as follows:

“The phrase ‘real and serious cause’ evokes facts, determinable hypotheses that exclude subjective approaches. The cause is real when it presents an objective character, being imposed by the need to overcome some technical and economic difficulties, by the economic imperative of increasing labor productivity, of adapting to the evolution of new technologies.”

V. PROCEDURE AND DOCUMENTS NECESSARY FOR TERMINATION OF THE POST

The decision-making body with powers to adopt the decision in question is the management body of the employer.

To make a connection with the information provided above, before removing the position per se, the employer will analyze the objective circumstances that led to this decision.

The employer has the prerogative to establish the organization and operation of the company, including the efficient organization of the internal structures and the selection of those positions which shall be removed, insofar as it appreciates that this shall bring efficiency of the activity. The court cannot substitute the employer’s will in this regard.


As we explained above, beyond the decision to reorganize and remove a position, the employer will also present the new organizational chart of the unit. This is necessary to justify the effective nature of the job termination.

By decision no. 3224/2011, the Bucharest Court, VIIIth Section for labor disputes ruled that

“it does not matter if the remiving the position is likely to ensure the economic prosperity of the employer or not. It is completely irrelevant if the said economic measure leads to the economic growth of the company or its bankruptcy, as long as the legal entity whose service was outsourced will perform a better activity or not than the one carried out by the former employee”.

Once the decision to terminate the job has been taken, the employer will proceed to issue a decision to dismiss and grant notice of at least 20 working days.

Thus, according to art. 76 of the Romanian Labor Code, in this case of dismissal, the dismissal decision is communicated to the employee in writing and must contain:

a) the reasons that determine the dismissal;

b) the duration of the notice;

The romanian Labour Code expressly stipulates that, if during the notice period the employment agreement is suspended, then the notice period is also suspended accordingly, except for the situation where the suspension of the individual employment contract was ordered due to the employee’s unjustified absence from work.

In short, therefore, the employer must present, in the event of a legality check in court, the following documents:

  1. The decision of the management body approving the reorganization and removing the job position;
  2. The decision by which the new organizational chart and the new status of functions were adopted;
  3. The dismissal decision.

Starting with the communication date of the dismissal decision, the employee has 45 days for petitioning the court and contesting this decision, as provided in the art. 268 lit. a from the romanian Labor Code.

VI. CONCLUSIONS

It is important for the employer faced with a decision of such magnitude to seek specialized and competent advice before undertaking any action on their own. A simple error in form or procedure could mean a waste of money and time for the company.

Call on an expert in labour law and contribute to the positive growth of Romanian companies that manage to overcome the current obstacles.

Also, don’t forget that the legal provisions must be interpreted as a whole, so I suggest you consult other materials that I have written on related topics, but in the same category (Labour law).

 

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