Romanian laws block collective bargaining and cut workers’ salaries

Interview with Petru Dandea, General Secretary, Cartel-ALFA

In Romania, the law on trade union representation is so harsh that collective bargaining at national and sector levels is virtually impossible. Despite union pressure, the current Social-Democratic government has done nothing to reverse measures imposed in 2011 by the previous administration.

“It’s a disaster,” says Petru Dandea, General Secretary of Cartel-ALFA, one of the ETUC’s four national affiliates. “We just have a small number of collective labour agreements at company level. The labour inspectorate in December said there were 9,000 of these, but only 2,000 are ‘real’ collective labour agreements negotiated by local unions. The other 7,000 are agreed by ‘employee representatives’. The law says trade unions must represent 50%+1 of the total company workforce. If you don’t have that proportion, collective agreements are negotiated by representatives who are usually chosen by the management of the company and are not negotiating in good faith.” None of the employers’ associations would satisfy the same criterion, he points out.

Why have the Social Democrats, who have been in power for five years, done nothing? “They are under huge pressure from multinational corporations and therefore the government is afraid to act.”

Many multinational companies that negotiate in other Member States, refuse to do so in Romania, adds Petru Dandea. “One strong voice in the Foreign Investors Council, supporting this legislation, comes from Renault. I know they have a strong union which has no problem negotiating collective agreements in France, but in Romania they are opposing modification of this legislation which no longer allows unions to negotiate. They are not alone. Although the US is not a top foreign investor, the most hostile companies that want to keep the legislation are American. For example, Ford has a large factory in Romania and is very active among the leading group of companies in the FIC.”

Workers pay for social protection
The ETUC’s trade union affiliates in Romania, Cartel-ALFA, BNS, CSDR and CNSLR-Fratia, are also united in fighting to reverse a government reform that is just now – in February – taking thousands of euro out of workers’ pay packets.

The ETUC has written to the Romanian government protesting at the decision to transfer the full cost of social security to employees. The measure, which came into force on 1 January, has provoked administrative chaos and is now due to be tested in the courts. No other country in Europe exempts employers from responsibility for social protection. The unions believe the measure contravenes ILO Conventions and EU principles.

Workers in the private sector are at risk of losing up to 22% of their net wage if companies withhold contributions from their pay. “It’s a nightmare in both private and public sectors,” explains Petru Dandea. It all started in July, when the government sent new legislation to Parliament providing for a 25% pay rise for more than 1.3 million public sector employees. The unions pointed out that there was not enough money in the budget to implement this, but Parliament went ahead.

The warnings proved to be right. “So at the end of 2017 they came forward with a fiscal revolution transferring the part of social contributions paid by employers to employees alone. In this way, the 25% increase in gross salary in the public sector was reduced in real terms to less than 3%. Instead of saying ‘we don’t have money for this increase’, they said ‘no, we are moving on’. They are giving with the right hand, but they are getting it back with the left hand.

“Human resources and finance departments in companies and public institutions no longer know how to apply this legislation,” explains Petru Dandea. The impact is being felt this month, in February, as workers receive their first salaries since the change came into force. “It’s incredible. One of the fiscal measures taken by the government at the same time means that the social contributions paid by employees, even for part-time labour contracts which might be as little as two hours a day, must be paid at same level as a minimum wage earner. There are employees today with salaries of €200 and contributions of €300. That’s why it’s a nightmare.”

The government pledged that nobody in the public system would lose money. All salaries would increase: some by a lot, some by a little, continues Petru Dandea. However, the new legislation also states that bonuses paid on top of salary must not go above 30%, although in public services like health, education and the police, some employees rely on bonuses to make up a higher proportion of their income. “It’s clear that workers will lose money. We calculated last week that more than 400,000 employees will see their salary falling this month because of this.

“There are many similar situations. For example, sick leave calculations changed. Before, you had to have made at least one month’s contribution to the health security system before your request for sick leave could be granted. Now, the government says it has to be at least six months! There are many people who can no longer benefit from sick leave.”

Another example concerns some 100,000 workers in IT, where companies used to have a special regime to stimulate the sector. The legislation cancels this advantage, so the government is introducing discriminatory legislation that compensates companies that raised wages to cover contributions, but not those that chose to pay bonuses instead. “This is discrimination, because both types of companies acted in favour of the employees, choosing different methods,” argues Petru Dandea.

A social experiment
In a bid to halt the reforms, the unions launched a campaign: ‘No to social experiments on Romanians’. In November last year, some 50,000 people took to the streets in Bucharest and other cities. Now, opposition has moved to the courts, says Petru Dandea. “Some private companies are suing the government and during the court procedure will ask the judge for a constitutional court evaluation. Although the law looks like an advantage for the employers, it is too complicated, and the red tape is very costly. In November, the most important employers’ federations asked the government not to implement it. For the first time, trade unions and Foreign Investors Council are speaking the same language. It’s crazy, because in the past we never agreed!”

Two large companies have already said they will ask for an evaluation: steel producer Arcelor-Mittal, and a Swiss/Russian aluminium company with more than 5,000 employees in Romania.

And the long-term impact on welfare systems? “Nobody knows!” admits Petru Dandea. “But frankly, we are going to have a big problem with pensions this year. In this fiscal revolution, government has reduced contributions for pensions – now all paid by employee – by five percentage points, from 30 to 25%. In 2017, when the contributions paid by employer and employee were 30% for each worker, the budget deficit of the national pension house was already €4 billion. Now the deficit will be increased.

The Romanian trade unions need European solidarity. “We believe that the ETUC can help us to inform the European Commission and ask it to evaluate whether the legislation complies with, for example, the Competition and State Aid Directives. In our opinion it contravenes this legislation. Even in Romania it’s not constitutional because companies have a social responsibility for the welfare of their own employees.”

Last year, following a meeting between ETUC General Secretary Luca Visentini and the heads of cabinet of Commissioners Dombrovskis and Thyssen, the 2017 Country Specific Recommendations to Romania urged the government to improve the lamentable state of social dialogue. “The Commission knows the situation on collective bargaining very well, and that’s good,” says Petru Dandea. “If in the European Semester the social scoreboard gets more influence, we hope the Commission will support trade unions in Romania in pushing the government to step back from this course.”

Cartel-ALFA’s General Secretary is candid about the potential threat across Europe. “Listen, over the last year in Romania, with what’s happening on collective bargaining and wages and fiscal issues, we have the feeling that Romania is an experimental country. These guys from the multinational giants want to see if it is possible to dismantle the European social model. They are saying no social model, no protection for employees, nothing. It is vital for trade unions across the EU to resist.”