That is the question we are often asked by our clients.
Therefore, in the following, we will comparatively present the main distinctions between the mandate agreement and the employment agreement.
Termination by the company
Employment agreement
- The dismissal is allowed only in limited cases, expressly provided by the labour legislation, e. the dismissal may occur: (a) due to disciplinary reasons; (b) due to physical or mental incapacity of the employee; (c) due to professional incapacity of the employee, (d) in case the employee is under police custody or house arrest for more than 30 days and (e) due to restructuring of the employee’s position.
- Thus, the employer is entitled to dismiss an employee only for reasons expressly provided by the labour law and by observing the procedural steps and requirements imposed in this
- The employer is not allowed to dismiss an employee without cause/reason, the wish of the employer being therefore not sufficient by itself to justify dismissal, even if the employee is granted severance payments.
- In case the employee is dismissed without the strict observance of the Labour Code, the employee is entitled to indemnifications equal to the indexed, increased, and actualised salaries as of the dismissal date until the court finally rules in favour of the employee. The employee is also entitled to be re-instated in his/her initial job position.
- The employer and the employee may not priory agree the indemnifications the employer would pay in case of wrongful termination.
Mandate (management) agreement
- As a rule, the mandate agreement may be terminated unilaterally by the company at any time, as, as a rule, it is concluded intuitu personae, i.e. in consideration of the individual qualities of the proxy.
- Thus, even if there is no precise provision in the mandate (management) agreement in this respect, the company is still allowed to unilaterally terminate the mandate (management) agreement.
- Furthermore, even if the parties would expressly agree not to unilaterally terminate the mandate (management) agreement, such clause would be deemed unwritten and therefore ineffective.
- If the proxy is revoked without justified grounds, he/she is entitled to indemnifications. Nevertheless, such indemnifications may be priory agreed by the mandate (management) agreement itself and limited to a specific amount.
Comparison. Remarks
- Termination of the mandate (management) agreement may be undertaken by the company at any time without being required to justify the decision and without following a prior procedure while dismissal of an employees is allowed in specific and limited cases, for justified reasons and with the strict observance of the procedure provided by the Labour Code.
- Of course, if a specific procedure/term for termination (e.g. a specific prior notice) is mutually agreed by way of the mandate (management) agreement such procedure/term must be observed.
- The employer and the employees are not allowed to priory agree by way of the employment agreement the indemnifications the employer would pay in case of wrongful termination, while by way of the mandate (management) agreement, such indemnifications may be agreed.
Rules to be observed following restructuring
Employment agreement
- In case of dismissal due to restructuring of the employee job position, the employer is not allowed to re-create the job position shortly after dismissal.
Mandate (management) agreement
- No rules to be observed.
Comparison. Remarks
- Specific rules to be observed in case of employment agreements while no rules are to be observed in case of mandate (management) agreements.
Reinstatement in the initial job position
Employment agreement
- The employee is granted the right to challenge in court the dismissal decision and be re-instated in his/her initial job position he/she had priory to dismissal.
Mandate (management) agreement
- The proxy is not allowed to claim to be re-instated in his/her initial position had before revocation.
Comparison. Remarks
- The proxy is not allowed to be re-instated in the previous job position while the employee is expressly granted such right.
Indemnifications in case of wrongful termination
Employment agreement
- May not be priory agreed between the parties.
- The employer may be obliged by the court to indemnify the employee with all the wages the employee would have been entitled if not dismissed, during the whole period between dismissal and the final court decision (1–2 year period).
Mandate (management) agreement
- May be priory agreed between the parties.
- By way of the mandate (management) agreement itself, the parties may agree the indemnification the company would pay in case of termination without cause.
- In case of a litigation, the proxy is not entitled to claim indemnification exceeding the amount mutually agreed by way of the mandate (management) agreement.
Comparison. Remarks
- Indemnifications in case of wrongful termination are allowed to be mutually and priory agreed by the parties of mandate (management) agreements while forbidden by way of employment agreements.
Indemnifications priory agreed between the parties
Employment agreement
- Not allowed under the labour legislation.
Mandate (management) agreement
- Allowed for any breach.
Comparison. Remarks
- Indemnifications priory agreed between the parties are not allowed under Labour Code but are allowed in case of mandate (management) agreement.
Prior notice of resignation
Employment agreement
- Mandatorily provided by the law, i.e. maximum 20 business days in case of non-management positions and maximum 45 business days in case of management position.
Mandate (management) agreement
- The parties may agree the term of the prior notice in case of resignation, without limitation.
Comparison. Remarks
- Prior notice of resignation expressly regulated by the Labour Code in terms of its maximum duration, while in case of mandate (management) agreement is allowed as per the parties mutual consent.
Prior notice of dismissal
Employment agreement
- Mandatorily provided by the law, i.e. minimum 20 business days.
Mandate (management) agreement
- As mutually agreed by the parties by way of the mandate (management) agreement.
Comparison. Remarks
- Prior notice of dismissal expressly regulated by the Labour Code while in case of mandate (management) agreement is allowed as per the parties’ mutual consent.
Duration of the agreement
Employment agreement
- Unlimited term employment agreements are the rule as per the Romanian Labour Code.
- Fixed term employment agreements are allowed only in specific and limited cases expressly provided by the Romanian Labour Code i.e. for:
- replacing an employee whose agreement has been suspended, unless that employee participates in a strike;
- meeting a temporary increase or change in the employer’s work structure;
- carrying-out a seasonal activity;
- employing a person under legal provisions issued to promote the temporary employment of certain categories of unemployed persons;
- employing a person who, within 5 years from the date of employment meets the age condition for retirement;
- employing an individual who may cumulate the retirement benefits with the wage;
- occupying an elective position within trade unions, employers’ organizations or non-governmental organizations, during the mandate;
- performing works, projects or programmes; as well as in other cases expressly provided by special legislation.
- Fixed term employment agreements may convert to unlimited term employment agreements if concluded without observance of the legal provisions in force, especially in case of their conclusion in other cases than those limited ones provided by the law.
Mandate (management) agreement
- Mandate agreements may be concluded for fixed term duration.
Comparison. Remarks
- No rules to be observed in case of mandate (management) agreements, fixed term mandate agreements being allowed without limitation.
Special protection against dismissal
Employment agreement
- The Romanian labour legislation expressly provides certain situations when dismissals are forbidden: (a) during the illness leave of the employees, attested by a medical certificate according to the law; (b) during the quarantine leave; (c) during the pregnancy, provided that the employer knew about the pregnancy before issuing the dismissal decision; (d) during the maternity leave; (e) during the leave for raising a child up to the age of two and in case of a disabled child, up to the age of three; (f) during the leave for taking care of the sick child up to the age of seven or, in case of a disabled child, for inter-current diseases, up to the age of eighteen; (g) during the rest leave; (h) during the period the employees benefits of payments from the state for returning to work before the expiry of the leave for raising the child (Stimulent de Inserție); (i) if grounded on criteria of sex, sexual orientation, genetic characteristics, age, nationality, race, colour, ethnic, religion, political options, social origin, disability, familial situation or responsibility.
Mandate (management) agreement
- No special protection provided by the law.
bnt Gilescu, Văleanu & Partners team is at your disposal for any further information and assistance.