How far can employers rely on Force Majeure in the context of COVID-19
The rapid spread of the virus COVID-19 in Romania and the restrictions imposed by the authorities for combating this pandemic are severely affecting all kind of undertakings, from the HoReCa industry to the real estate, retail, or entertainment sector.
In this context, employers are faced with business decisions that can have a direct impact on their employees.
The Minister for Labour in Romania has issued a public statement asking employers to refrain from abusively using the force majeure clause in order to avoid paying wages, or other related rights, to employees, unless they have no other option.
But what is Force Majeure in employment situations?
The Romanian Labour Code refers to force majeure in situations when forced work may be decided by the employer, as follows: war, disasters or risk of disasters such as fires, floods, earthquakes, epidemics, plague of insects and generally, in any circumstances which endanger life or normal conditions of life of the overall population or of a part thereof [Art. 4 para (3) (d)).
As a rule, the parties may include in the employment contract the circumstances in which the employer can consider itself in a force majeure scenario. In the current situation, the clauses should stick to the general lines of the definition of force majeure set by the Civil Code: “force majeure is any external event, unpredictable, entirely unavoidable and inevitable.”
The President of Romania announced that, at the beginning of this week, it shall issue by decree a state of emergency (in Romanian: “stare de urgenta”). This shall include measures for the prevention, limitation or removing, as the case may be, of the consequences of a disaster (e.g. restrictions to circulation rights, etc) and the period for the state of emergency. Depending on whether the COVID-19 pandemic is identified, under this decree, as constituting a state of emergency, employers may take this into account as a ground for invoking force majeure in the employment context.
We consider that an employer invoking a force majeure should consider whether it is able to prove why the work performed by the employees creates a danger for them and for others. For instance, currently in Romania, one could hardly argue that software developers are under force majeure as their work can easily be performed remotely.
An employer arguing, in respect of contracts entered into these days, that it did not see epidemics like COVID-19 coming, might be questionable.
Nevertheless, it is generally considered that an employer invoking force majeure should have to prove it by passing the predictability test of the relevant event.
Wrapping up the above, employers declaring force majeure should bear in mind and check whether:
the event has been recognised by an official enactment.
the employer can prove the event was unpredictable.
the outbreak represents a specific danger to life or normal conditions of life for a group of employees.
any force majeure clause in the employment contracts includes any type of epidemics.
A proven force majeure event can lead, under the Romanian Labour Code, to:
a unilateral amendment of the work place and the employees’ type of work (without their consent); or
the suspension de jure of the employment contract.
But how can an employer establish which of these two options is applicable?
If the force majeure triggers the impossibility of performing the work, then the employer may suspend the employment contract. If this is not the situation, then the employer may unilaterally decide to amend the employees’ place, or type, of work by requiring the employee to work from home, for example.
In any event, an employer should analyse its own business and the extent to which the circumstances representing a force majeure disrupt its activity.
1. Unilateral change of the employees’ work place
Employers in Romania may unilaterally decide to temporarily amend the place, and type, of work of its employees, without their consent, in situations of force majeure (Art 48 of the Labour Code).
So a unilateral change of the work place, and type of work, should meet the following conditions:
a) it should be temporary,
b) it should rely on a force majeure event
c) it should take place only during the ongoing existence of the force majeure event.
These measures are generally taken to protect the employees’ health and safety at the work place. For example, in the context of COVID-19, employers are encouraged to ask their employees to telework, in the case of employees which use information and communications technology in their work, or work from home for the employees which perform manual work/crafting. In both cases, the special conditions established by the Labour Code shall be observed.
What’s the effect?
During this unilateral change of the employees’ work place or their type of work, their salary rights should remain the same.
The employers making this decision should issue individual decisions for each employee and provide details on the employees’ rights and obligations during the period in which their place, or type, of work is unilaterally amended by employer.
2. Suspension de jure of the employment contract
The suspension of the employment contract (Art 50 (f) of the Labour Code) should occur if the force majeure event is ascertained based on an official public document or legal act. For example, a state of emergency declared by the President of Romania, as a result of the pandemic, through which measures are brought into effect that restrict the way an employer can continue carrying on its business, may qualify as a force majeure event triggering a suspension de jure of the employment contract.
What’s the effect?
During the force majeure event, the performance of business is impossible. As result, the employee cannot perform his/her work and is, therefore, not entitled to be payed, whilst the employer has no duty to pay the employee during the force majeure.
3. Force majeure = termination of employment?
As a rule, an employer may not terminate any employment outside the specific cases provided for in the Labour Code.
Force majeure is not specifically stated as a ground for termination of employment in the Code. So an employer cannot decide to automatically terminate simply based on force majeure.
However, in the context of the severe financial ramifications of COVID-19, companies may decide to restructure their business and this could involve also redundancies. The redundancy process includes terminating employment for reasons not specifically related to the employee (i.e. individual or collective dismissal). In this dismissal scenario, employers bear the burden of proof that the removal of the employee's position from the company’s business should be effective and have a real and serious reason. For example, when taking the business decision to reduce personnel due to the economic effects of the COVID-19 pandemic, employers should have registered losses, a significant decrease of their business activity or be unable to foresee an upswing in the next period.
Additionally, in cases of companies with a minimum 20 employees, if the redundancy process leads to substantial changes in work organisation, it is advisable that consultation with the employees’ representatives is carried out. Employers need to follow closely the mandatory procedure when terminating employment due to a business restructuring such as: granting prior notice, issuing and communicating the dismissal decision and severance payments, if employees are entitled to these based on the employment documents entered into with their employers.
4. Practical solutions
When assessing whether employers are under a force majeure event or not, attention should be given to the following:
a) checking the force majeure clause in the employment contract and, if the criterion provided for are met, use the force majeure provisions against the employee;
b) follow precisely any measures officially imposed by local councils, city halls, Parliament, Government or the President of Romania and, depending on the measures imposed by the government authorities, assess whether there is a force majeure event or not, how it affects the work of the employees and whether the work is, in practical terms, impossible or not;
c) consider whether alternate measures, with some financial impact on employers, could be used regarding the flexibility of work and to diminish the general concern of the employees regarding the epidemic, such as:
- implementing a flexible work schedule so employees can arrive/leave the employer’s premises at various times so that human interaction and contact is limited.
- agreeing annual holiday with some of the employees during this period.
- granting in advance free paid days for the upcoming overtime to be performed by the employees.
- consider a temporary suspension of the company’s business, or of a part of its business, for economic, technical, structural or similar reasons, by paying only 75% of the gross base salary to the employees.
For further information, please contact:
Partner, Head of Employment
Phone: +40 217 96 52 61