LABOR LAW: GOOD PRACTICES TO SUCCESSFULLY LEAD A CORPORATE REORGANIZATION

By Mihaela NITU, Senior Associate, GRUIA DUFAUT Law Office

 

During the life of a company, reorganization – also known as corporate restructuring – results from the need to adapt to the economic, legal or market environment. Reorganization occurs both when the company faces a difficult situation, likely to trigger insolvency proceedings, and when it is operationally healthy, following a change in business strategy.

Regardless of the reason behind corporate reorganization, this procedure has important legal consequences, bearing not only on the company itself or its activity, but also on employment agreements binding the company and its employees, the company’s relations with the collective representation bodies. Given the social impact of a personnel readjustment – either by individual or collective dismissals, or by termination of employment relations by mutual agreement of the parties – the decision to launch such procedure should only be taken after a thorough analysis of the legal options available to the company.

We will not insist on the distinction made by the law between collective and individual dismissal (which can be performed pursuant to article 68 of the Labor Code). This article aims at underlining several practical and procedural elements which may influence the success or failure of corporate reorganization.

 

Elaborating the Best Dismissal Strategy

 

This means, first and foremost, to identify the objectives of corporate reorganization and to define its motives prior to launching the procedure (for example, activity reduction, closing the company’s operations, reducing losses, increasing efficiency or, possibly, adjusting to technological progress). When establishing the dismissal strategy, the company has to analyze and have thorough knowledge of all applicable provisions of the Labor Code and of any other regulations, including those stipulated in individual employment agreements, in the collective employment agreement, if the case may be, in the Internal Regulation, the company’s policies, HR procedures etc.

 

Compliance with the Procedure and Legal Requirements

 

In order to avoid the invalidation by the Court of the dismissal procedure further to a legal action lodged by an employee, the company has to thoroughly motivate its reorganization decision (with regard to the causes of reorganization), to initiate and organize consultations with the employees (during collective dismissal procedures, as per article 67 of the Labor Code), to notify the competent authorities (as per article 72 of the Labor Code). Another particularly sensitive issue refers compliance with the legal procedure and conditions regarding the notice period (at least 20 business days), the communication and the compulsory content of dismissal decisions, as per article 76 of the Labor Code. All these documents must be correlated in terms of motives for reorganization/dismissal and their issuing/communication must be made so as to ensure compliance with legal deadlines. Thus, during collective dismissal procedures, the authorities must be notified at least 30 days prior to issuing the dismissal decision. Within this period, the notice letters will also be issued and communicated; as mentioned above, notice letters must ensure compliance with the 20 business days notice period.

 

Social Dialogue

 

Social dialogue – which should ensure transparency of reorganization – refers both to the causes and/or motives of the procedure, as well as to any potential measures that can be taken by the company for protecting the employees it dismisses.

Please note that, during collective dismissal procedures, social dialogue is a compulsory stage for the employer. Therefore, firstly, the employer has to initiate consultations with the employees (union representatives or simple representatives) on the dismissal procedure it plans. Nevertheless, social dialogue is also important during individual dismissal procedures, especially taking into account the employer’s obligations provided by Law no. 467/2006 establishing the general framework for employee information and consultation.

Last, but not least, corporate reorganization is a difficult process; however its key elements are compliance with procedures and respecting the social partner, namely the employees.

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