We report on the clarifications provided by the Ministry of Economy, Energy and Environment’s Decree n. 32 / 30.03.2020 on the granting of the technical unemployment benefit (the equivalent of the Italian cassa integrazione in deroga) for employees of the economic operators whose activity is affected in the context of the SARS-CoV-2 pandemic; this latest regulatory act significantly amends the previous No. 30 issued on March 24, 2020. This is an interpretative document, from a prudential perspective , of the updated legislation on the subject and consequently should be considered without dogmatic pretensions.

Recall in the first line that:

During the emergency period established by Decree No. 195/2020, for the period of temporary suspension of the individual employment contract, at the initiative of the employer, pursuant to Article 52 paragraph (1) lit. c) of Law No. 53/2003 – “Labor Code” (technical unemployment benefits), as a result of the effects produced by the SARS-CoV-2 coronavirus, the benefits received by employees shall be set at 75% of the base salary corresponding to the work occupied and shall be borne by the unemployment insurance fund budget, but not more than 75% of the average gross salary stipulated in Law No. 20/06 concerning the state social insurance budget for 2020.

1- Conditions of access to technical unemployment benefit: first criticality

The changes introduced by Decree No. 32, concern the conditions required for employers to apply for the employee subsudio and specifically the following are no longer present:

1. The lack of financial capacity to pay all salaries;

2. The reduction in revenue (collections) from the month prior to the submission of the declaration under one’s own responsibility, with a percentage of at least 25% compared to the average of collections from January to February 2020.

The first critical issue is related to the new conditions required, and in particular, the changes made by Decree 32/2020, concern paragraph 2 of Article XI of the previous Decree 30/2020; paragraph 1, of Article IX which has remained unchanged, provides for the possibility by the employer, for the period of the state of emergency, and in the manner we will see below (75% etc.), to suspend the employment contracts of employees, according to the provisions of Article 52, paragraph 1, letter c) of Law 53/2003, due to the ongoing epidemic.

The second paragraph, we repeat amended, provides that economic operators who have reduced or temporarily stopped their economic activity as a result of the epidemic are beneficiaries of the previous rule (paragraph 1 cited above), and this status must be the subject of self-declaration by the director of the applicant company.

So from the careful reading of the combined paragraph 1 and 2 quoted together with subparagraph (c) of Article 52 of the “Labor Code” it would seem, that during the emergency period, due to the decrease or interruption of the employer’s economic activity as a result of the epidemic, the same employer may suspend the employment contracts of its employees under Article

52 paragraph 1 (c) which provides, however, and further what (additional) conditions the

presence and demonstration of economic, structural, technological and similar reasons.

Thus, again according to this prudent and literal interpretation of the normative texts, using the conditional pending further clarification, and allowing for other interpretations, it would seem that a simple reduction in economic activity would not be sufficient to invoke the suspension of labor contracts and the request for access to the state subsidy for employees, but further, a broader and deeper reflection (documented and convincing) of the economic-structural (if not technological etc.) framework in which the employer operates and which as a result of the epidemic does not allow him to bear, even temporarily, the cost represented by the employees.

2- Mode and coverage of technical unemployment subsidy: second criticality

Recall also that coverage through the application for technical unemployment benefits is within the maximum limit of 75 percent of employees who have individual employment contracts active on the effective date of the state of emergency. Lastly, the average gross wage used as the maximum threshold for subsidy disbursement by the state social insurance fund for 2020 is 5,429 lei.

If the employer’s budget for paying personnel expenses allows, the “technical unemployment” allowance can be supplemented by the employer with amounts cover the difference from 75%, provided as the legal minimum, of the basic salary corresponding to the work occupied, in accordance with the provisions of Article 53 paragraph (1) of Law No. 53/2003, as amended.

Thus the technical unemployment benefit by law, provided by the state, is in the maximum amount of 75% of the employee’s gross salary with a maximum threshold ceiling of 5,429 lei. In fact, employees with gross wages higher than 5,429 lei will be paid a subsidy of less than 75% of the their gross salary. This difference between 75% of the gross salary of 5,429 lei and 75% of the Actual gross salary of the individual employee may be covered by the employer if his or her budget permits.

This option granted to the employer not to supplement the state subsidy is in fact conditional on demonstrating that they are not in the economic and financial condition to bear this difference from the ceiling of 75 percent of their gross salary. This point is particularly delicate and a harbinger of possible litigation between the employer and employees; added to this critical issue are possible discretionary supplements between different workers and therefore discriminatory etc.

3- procedural steps and final warnings

From a procedural point of view, before suspending individual employment contracts due to technical unemployment, the employer must perform the following steps:

1. Preparation of a contract suspension note, according to supporting documents, stating the economic, technological, structural, or similar reasons caused by the effects of the SARS-CoV-2 coronavirus outbreak, due to which it is proposed to discontinue all or part of the activity and suspend individual employment contracts of all employees or only certain categories of employees;

2. The Resolution of the General Assembly of Members on the total or partial discontinuation of business and suspension of individual employment contracts of all employees or only certain categories of employees;

3. Disclosure to employees pursuant to Law No. 467/2006, regarding the Resolution of the General Meeting of Shareholders to discontinue all or part of the business and the suspension of individual employment contracts of all employees or only certain categories of employees;

4. The decision of the Administrator, collectively or individually, to suspend the individual employment contracts of all employees or only certain categories of employees, due to the total or partial cessation of the company’s business.

5. Registration of suspension in REVISAL for individual employment contracts of employees affected by the technical unemployment measure.

We would also like to remind you that during the period of suspension of individual labor contracts, work performance is suspended and employees will not be present at the workplace, being unemployed in technical unemployment.

4- Conclusions

In view of the examination carried out and related to the issue at hand, we conservatively believe that technical unemployment benefit cannot be invoked by

• employers who cannot further prove to the reduction of activity due to the effect of the epidemic also the existence of documented economic, technological, structural or similar reasons;

• Employers who have not put in place all legal and enforcement measures to recover debts owed to customers, past due according to contractual terms;

• employers who, from the analysis of accounting, financial-banking documents, bank statements, economic reports, appear to possess the necessary liquidity to pay employees’ salaries and cover current monthly expenses to ensure the continuity of production.

• employer who hires staff and at the same time has placed and is willing to place some employees of the company on technical unemployment during the emergency period.

Finally, recall the absolute prohibition of receiving one or more employees at work during the period when the employer has suspended the respective individual employment contract, failure to comply with this prohibition is punished with a penalty of 20,000 lei for each person identified, not to exceed the accumulated value of 200,000 lei.