Romania: Emergency Ordinance amends the Labour Code and introduces new Provisions on “Under-declared” Employment
Emergency Government Ordinance No. 117/2021 modifies the Labour Code and introduces the new notion of “under-declared” employment, a new form of undeclared employment, and new rules on how employers can compensate overtime with paid time off. The ordinance also introduces new administrative fines.
According to the Emergency Government Ordinance, a new form of undeclared employment consists of using the work of part-time employees for a period of time that exceeds the working hours agreed upon within the employment agreement, with the exception of force majeure or the need to perform urgent work intended to prevent accidents or remove their consequences. Previously undeclared employment in relation with part-time employees, was considered to consist of using the work of part-time employees for a period of time outside the working hours agreed upon within the employment agreement. This conduct will result in an administrative fine of RON 10.000 (approximately Euro 2.020) for each employee whose working hours were exceeded (the same administrative fine as for the previous form of undeclared employment), with the introduction of a cumulative cap for the applicable administrative fines at RON 200.000 (approximately Euro 40.416).
The Emergency Government Ordinance also introduces the notion of “under-declared” employment, defined as paying to the employees a higher net salary than the one inserted in the payroll and declared to the tax authorities. This conduct will result in an administrative fine between RON 8.000 and RON 10.000 (approximately between Euro 1.616 and Euro 2.020) for each employee who receives higher net salaries, with a cumulative cap for the applicable administrative fines at RON 100.000 (approximately Euro 20.208).
According to the Emergency Government Ordinance overtime can be compensated with paid time off within 90 days from the time the overtime was performed by the employee. Previously, the period of time was limited to 60 days. After the 90-day period, overtime needs to be compensated by payment of a bonus that cannot be lower than 75% of the salary for the period that the employee performed work as overtime.
The final addition to the Labour Code made by Emergency Government Ordinance No. 117/2021 is the introduction of an administrative fine for delaying the payment of the monthly salary for more than a month after the agreed date of payment of the salary. The fine can range from RON 5.000 to RON 10.000 (approximately from Euro 1.010 to Euro 2.020) with no cumulative cap.
Key Action Points for Human Resources and In-house Counsel
Existing Collective Agreements and Internal Regulations might include mention of the previously applicable 60-day period for compensating overtime with paid time off. These documents will need to be updated. However, the longer 90-day period can be applied as a result of the new form of the Labour Code, since compensation with paid time off is the rule and is considered more favourable to the employees, while paying the bonus is considered an exception.