The Amendment Law has ambitious objectives to combat and dissuade any form of so-called 'undeclared work' - which it explicitly confirms adversely impacts both employees (by depriving them of the protection typically afforded in the context of employment), as well as the state budget (as a result of a failure to pay relevant taxes and social security contributions) - by enforcing several changes intended to instantly facilitate and further strengthen the effectiveness of Romanian authorities' dawn-raids.
The summary below provides an outline of the core changes.
'Undeclared work' clearly defined. More severe financial and/or operational sanctions
For the first time in Romanian employment law, the Amendment Law expressly defines 'undeclared work', as a catch-all concept, comprehensively covering both:
a. previously regulated circumstances, namely: any work carried out in the absence of a written individual employment agreement (IEA) both executed and registered in the employees' general register (REVISAL), on the day preceding the start of the activity, at the latest;
b. new circumstances falling within 'undeclared work', namely: (i) any work while the IEA is suspended, irrespective of the suspension ground; and (ii) any work based on a part-time IEA and performed outside the agreed working schedule.
Each of the above forms of 'undeclared work' constitutes a stand-alone administrative offence and can be sanctioned with a fine of approx. EUR 4,500 (in the circumstances covered by (a) and (b)(i) above) or of approx. EUR 2,250 (in the circumstances set out in (b)(ii) above).
For clarity, these sanctions apply:
- in these exact amounts - as the Amendment Law no longer allows any appreciation by labor inspectors, in relation to the amount of the administrative fine. On the contrary, the Amendment Law provides a single fine level for 'undeclared work', in most cases increased to the maximum previously applicable in the case of circumstances set out in (a) above. In practice, this rule will only be tempered in the event of prompt payment of the fine (ie within 48 hours of being applied) - in which case the fine level is reduced to half, as expressly confirmed by the Amendment Law. This is consistent with the generally applicable regime of administrative sanctions;
- irrespective of the number of individuals concerned - as the Amendment Law repeals the previously applicable threshold of 5 individuals used to distinguish between the employer's administrative/criminal liability. In fact, strictly from an employment legislation perspective, 'undeclared work' can no longer potentially trigger the employer's criminal liability. This is because the Amendment Law seems to acknowledge that previously incriminating 'undeclared work' did not have the expected dissuasive effect - as, apparently, criminal charges have rarely been fully prosecuted and, in those limited situations, the criminal fines finally imposed were lower than the administrative fines. On this basis, the Amendment Law has opted to prohibit 'undeclared work' as an administrative offence only, but in the multiple forms and with the increased fine levels, as outlined above - overall with the aim of imposing a higher financial burden;
alongside the sanction of closing-down the activity of the relevant workplace, as an ancillary administrative sanction (only for the circumstances set out in (a) and (b)(i) above) - while this possibility arguably applied even prior to the Amendment Law (consistently with the generally applicable regime of administrative sanctions), the Amendment Law seems to take this to an even greater level. Apparently, there is no opt-out of this ancillary administrative sanction, which therefore seems to become mandatory (rather than possible only), every time 'undeclared work' is ascertained - overall intending a more severe operational burden.
Tighter deadline for executing IEA amendments
Under the Amendment Law, an amendment of any relevant IEA element requires the execution of an IEA amendment prior to the relevant change's entry into force. Therefore, the previously applicable flexible deadline of 20 working days starting to run post-entry into force of the relevant change is replaced with an obligation to handle this (and correspondingly registering this in the employees' general register (REVISAL)) pre-entry into force of the relevant change.
Given the Amendment Law's instant entry into force, employers are likely to need to consider - on a case-by-case basis - immediate action to address the abovementioned change.
Exceptionally, no IEA amendment is required if the relevant change is explicitly triggered by law or - as now set out by the Amendment Law (consistently with pre-2011 versions of Romanian employment laws) - by an applicable collective bargaining agreement.
Enhanced documentation requirements for employers
The Amendment Law requires employers to both:
- maintain a copy of the IEA at the workplace for all employees performing work from the respective workplace. For clarity, this appears to be on top of an employer's general obligation to maintain at its headquarters a personnel file for each of its employees, as this applies to each employee's effective workplace (such as a working unit of the employer, another employer's headquarters in case of secondment etc.); and
- maintain descriptive timesheets of the employees' working hours, expressly including the start and end date of the working schedule,
while ensuring they are readily available in case of a dawn-raid by labor inspectors. Failure to observe any of the above constitutes an administrative offence.
Again, given the Amendment Law's instant entry into force, employers are likely to need to consider - on a case-by-case basis - immediate action to address the abovementioned changes, as well as to explore practical options to meet these obligations.