Category Archives: Employment

To be or not to be an Employee

Romania being Romania has a different approach to directors of companies and their relationship with such companies. It is very easy for someone not from Romania to use the word director. The word director has a different meaning in Romanian commercial parlance. A director is more akin to a manager. They do not have “director’s powers and responsibilities”. The correct expression is to describe them as an Administrator.

Originally under the Companies Law (Law no 31/1990) it was prohibited for an Administrator to be an employee of the Company. This led to a number of abuses which resulted in the law being changed and the law then requiring an Administrator to enter a Management Contracts. Even under the current legislation the provisions of Law 31/1990 expressly prohibit the administrator of a joint stock company having an employment contract with the company during his appointment.

Concerning a limited liability company the law does not impose such a restriction. Further the administration of a commercial company is classified as an occupation under the Romanian legislation (COR code 242111). It should be noted that the role of a general manager of a company is also classified as a distinct occupation under the legislation (COR code 112011). The law does not provide that it is mandatory for an administrator to be employed by the company where they are an Administrator. This position will depend upon the will of the parties. The question therefore arises as to whether it is better for an Administrator to be an employee of a company or not?

In the light of the above, the parties have a choice in respect to the type of contract which should be concluded between the administrator/general director and a company (SRL). The administrator may be appointed as an employee to fill other positions conditional upon the contract observing the provisions of the Labour Code, including those related to the organization of the hours worked. The provisions in the Romanian Labour Code include the right for the employee to have two or more employment agreements with the same employer. Therefore, any employee is entitled to work for the same employer or for different employers, based on individual labor contracts and receiving more than one salary.

It should be noted that the law does not contain any restrictions regarding the use of two or more full-time employment agreements or of two or more employment agreements regarding the same activity. However, if more than one contract with the same employer is involved care must be taken regarding the terms and conditions and caution is advised as there maybe unintentional breaches of the law for example about compliance with the provisions in respect to the total number of working hours that the employee maybe asked to undertake. According to the EU Working Time Directive, the maximum legal working week is 48 hours, including overtime (with some exceptions). This duration of work is related to the employee, not to the employment agreement.

Other terms and conditions relating to an employer/employee relationship will apply as will the normal taxation requirements and other terms implied by law in an employer/employee relationship such as termination of the agreement, disciplinary requirements, as between the parties covered by the Labor Code. The signing of a management/administration agreement does not create an employer/employee relationship between the Parties.

Consequently, the relationship has the hall marks of a commercial agreement and as such it is regulated by the provisions of the Company Law regarding the management of companies, the Romanian Civil Code and the provisions of the Statutes of the relevant company. Further as there is no relationship of employer/employee the management/administration agreement is not required to be registered in the General Register of the Employees Persons (Revisal) of the relevant company.

The execution of a Management/Administration agreement has several consequences. The duration of the contractual relationship is perhaps one of the most important. It can be for a definite term or an indefinite term compared to an employment agreement, which can be executed either for a fixed term or if no term is fixed then it is for an indefinite period. Therefore, in a management/administration contract terms and conditions can be inserted as to the length of the contract, termination, compensation and other provisions as required by the parties.

The provisions of the Civil Code create legal grounds for both parties to allow them to revoke the contract at any given time, without complying with any legal procedures other than those agreed between the parties. In case of termination of an employment contract, such the termination is required to comply with the procedures expressly provided by the Labor Code.

Regarding fiscal and social security systems contributions These will be per the relevant fiscal legislation. There are several allowances that the Administrator is entitled to which are exempted from social taxes payable by the employer and the employee, which normally would apply in the case of an individual employment contract.

According to the current law a management agreement may include clauses which would not be allowed in an employment agreement, such as the notice period for termination being less than 20 days, compensation on termination and working conditions etc.

All the above means that when appointing an Administrator, the company needs to consider the appointment carefully. What is best for the company may not be the best solution for the person being appointed as the Administrator. In many cases, they will wish to be an employee as this will give more employment protection.