July 2018 – From 2017, Romanian law empowers labour office inspectors to determine if an activity performed under a "work for hire" contract, i.e., based on a contract other than an employment contract, is in fact rendered under the conditions of an employment relationship.

However, Romanian labour law does not specify the criteria based on which the authorities may conduct this requalification process. The potential implications of requalification are also unregulated.

The potential requalification of contracts to labour agreements may trigger various labour law implications for companies, in addition to those determined by the requalification of activities performed by the tax authorities.

Frequently requalified contracts

In practice, contracts that could be requalified by the labour authorities include management services contracts or contracts entered into by companies with authorised natural persons.

Criteria for establishing employment relations provided by the International Labour Organisation

With the absence of requalification criteria at the national level, guidelines published by the International Labour Organisation (Recommendation No. 198/2006) may be used to define the basic features of an employment relationship, such as:

  • the activity – if the activity is performed per the instructions and under the supervision and control of another entity; the activity is performed only or mainly for the benefit of another entity;
  • remuneration and the conditions for providing remuneratione.g., monthly payment; if the remuneration is the main or the only source of income of the individual.

Criteria provided by the Tax Code

In order to establish the existence of a labour relationship, it is necessary for the labour authorities to assess the legal relationship in its entirety with reference to employment law criteria. In practice, the following practical aspects are usually checked: (i) how the daily activity of the individual is monitored; (ii) the access of the individual to IT systems of the company; (iii) the method of granting and approving annual leave and days off; (iv) if the position of the individual is reflected in the organisational chart of the company; and (iv) the method of controlling or supervising the performance of tasks as well as the remuneration method for the activity performed.

From our experience, we find that labour inspectors in Romania also tend to refer to the criteria regarding independent activity provided by Article 7 of the Tax Code.

However, the dependence concept found in the Tax Code is different from subordination concept, which is specific to Romanian labour legislation. Because of this discrepancy, there are various other aspects that need to be assessed from the employment law perspective. Thus, in our view, the criteria set out in the Tax Code may be looked into only in exceptional cases.

Case law

The relevant case law outlines different perspectives that the labour authorities can refer to in order to assess if contract requalification is necessary.

For example, according to Decision No. 1075/2013 of the High Court of Cassation and Justice, an employment relationship is deemed to exist between a company and an individual if the agreement between the two parties includes the general elements of an employment agreement as set out in Art. 17 of the Labour Code and in special clauses provided by Art. 20 of the Labour Code.

July 2018 – From 2017, Romanian law empowers labour office inspectors to determine if an activity performed under a "work for hire" contract, i.e., based on a contract other than an employment contract, is in fact rendered under the conditions of an employment relationship.

However, Romanian labour law does not specify the criteria based on which the authorities may conduct this requalification process. The potential implications of requalification are also unregulated.

The potential requalification of contracts to labour agreements may trigger various labour law implications for companies, in addition to those determined by the requalification of activities performed by the tax authorities.

Frequently requalified contracts

In practice, contracts that could be requalified by the labour authorities include management services contracts or contracts entered into by companies with authorised natural persons.

Criteria for establishing employment relations provided by the International Labour Organisation

With the absence of requalification criteria at the national level, guidelines published by the International Labour Organisation (Recommendation No. 198/2006) may be used to define the basic features of an employment relationship, such as:

  • the activity – if the activity is performed per the instructions and under the supervision and control of another entity; the activity is performed only or mainly for the benefit of another entity;
  • remuneration and the conditions for providing remuneratione.g., monthly payment; if the remuneration is the main or the only source of income of the individual.

Criteria provided by the Tax Code

In order to establish the existence of a labour relationship, it is necessary for the labour authorities to assess the legal relationship in its entirety with reference to employment law criteria. In practice, the following practical aspects are usually checked: (i) how the daily activity of the individual is monitored; (ii) the access of the individual to IT systems of the company; (iii) the method of granting and approving annual leave and days off; (iv) if the position of the individual is reflected in the organisational chart of the company; and (iv) the method of controlling or supervising the performance of tasks as well as the remuneration method for the activity performed.

From our experience, we find that labour inspectors in Romania also tend to refer to the criteria regarding independent activity provided by Article 7 of the Tax Code.

However, the dependence concept found in the Tax Code is different from subordination concept, which is specific to Romanian labour legislation. Because of this discrepancy, there are various other aspects that need to be assessed from the employment law perspective. Thus, in our view, the criteria set out in the Tax Code may be looked into only in exceptional cases.

Case law

The relevant case law outlines different perspectives that the labour authorities can refer to in order to assess if contract requalification is necessary.

For example, according to Decision No. 1075/2013 of the High Court of Cassation and Justice, an employment relationship is deemed to exist between a company and an individual if the agreement between the two parties includes the general elements of an employment agreement as set out in Art. 17 of the Labour Code and in special clauses provided by Art. 20 of the Labour Code.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.