On 20 November 2015 the Moldovan Parliament voted on amending and supplementing the Moldovan Labour Code ("Labour Code"). As a result, Act No. 205/2015 ("Act No. 205") entered into force on 18 December 2015 implementing a series of long-awaited improvements, but also complicating the life of employers in some instances.
Here are some of the changes:
Cannot be a CEO in Two or More Companies?
Since it entered into force in October 2003, the Labour Code (art 258 and 261) precluded local managing directors (sometimes also referred to as CEOs, directors, general managers, members of the executive board, administrators, etc) from exercising the same management duties in two or more companies, regardless of whether the two companies were for example members of the same group. This preclusion complicated matters even more, as it did not specify whether such a limitation applied only to companies based in Moldova, or also from abroad. The sole exception was that a local managing director who was also a shareholder in that company (even holding only one share), could exercise management duties in all other companies in which he was also a shareholder. In practice this caused numerous cases when individuals were made shareholders just to be sure that the right was ensured.
Act No. 205 completely removed this prohibition for private companies, as a result the prohibition is now only applicable to state / municipality owned companies and similar entities. Accordingly, private investors are now capable of organising their local businesses in line with models available in the West.
Much Easier Termination of Labour Relations on Agreed Terms
Act No. 205 inserts art 82¹ into the Labour Code, which allows an employer and employee to agree on the termination of their contract at any time, provided that such termination is in writing. Until recently, termination of a labour relationship (even on agreed terms) was a much more complicated (formalistic) process: initiated by a request (demisie) of an employee, triggering a 14-day notice period. During this notice period, the employee had the right to further request and agree with its employer that the notice period be shortened and parties execute a termination agreement.
As was the case pre-Act No. 205, the termination agreement is still to be followed by an employer on termination of labour relations, and so payment of all due amounts to an employee and the return of an employee's labour book must still be carried out.
Conclusion of Individual Labour Agreement for Determined Period Even More Cumbersome
As was the case before, the Labour Code lists the limited instances in which an individual labour agreement can be executed for a determined period of time (eg, with managing directors of enterprises, for fulfilling concrete limited-scope work, etc). Furthermore, Act No. 205 prohibits parties from entering into individual labour agreements for determined periods for the purpose of circumventing the statutory rights and guarantees which are granted to employees with agreements for an indefinite period. As a consequence, any individual labour agreement concluded for a determined period of time is deemed concluded for an indefinite period, unless the State Labour Inspection confirms the existence of grounds for a determined duration. In practice, these norms will likely cause arbitrary rulings by the State Labour Inspection.
Compulsory to Request Written Explanations from Employee before Sanctioning
According to Act No. 205, each employer is obliged to demand a written explanation from its employee facing the risk of a disciplinary sanction. Such a demand must be made in writing by the employer and be communicated to the employee before application of any disciplinary ruling in respect of that employee. In this case, the employee has the right to present written explanations within five business days as of the receipt of the demand.
An employee's refusal to present explanations must be formalised by the employer in writing (by means of a protocol).
Other Implemented Amendments
- Extension of the maximum duration of a confidentiality undertaking by an employee from three months (maximum), to up to two years (maximum) after the termination of the labour relations.
- Updated rules of dismissal of employees in the case of transfer to a new employer (ie, consented transfer to a new employer).
- Additional formalities (consultations) with the enterprise syndicate before dismissing employees who are not members of the syndicate.
- Amendments to various terms (eg, increased maximum unpaid holiday to 120 days, longer annual leave (unpaid) for employees with two or more children under 14, etc).
- Employer's duty to abide by an order (court judgment)to reinstate an employee who was illegally dismissed.
Conclusion
The abolition of the limitation previously imposed on managing directors, and the possibility to immediately terminate labour relations are big steps forward in stimulating investments in Moldova.
The other amendments are unfortunately meant to further strengthen the Labour Code in its position of one of the most employee-friendly legislation systems in Europe (if not in the world).
By Vladimir Iurkovski, Attorney at Law, Schoenherr
