Strikes and EU accession inflate undersized labor law practice

Newsroom 05/05/2008 | 15:44

Specifically, Dacia workers' walkout last month went on for 19 days and cost the company an estimated EUR 130 to 150 million. About 8,000 union members are estimated to have taken part in the strike and simultaneous protests.
At Arcelor Mittal, some 4,000 employees stopped working for two days, for similar reasons as a year before – salary increases. Back then, the company fought back and sued the Solidaritatea syndicate, one of the eleven syndicates in the company, for USD 3.4 million in damages, but suspended the trial in February this year.
Estimates regarding the cost of last month's strike for the company were not released. However, the Solidaritatea syndicate announced they would ask the administration to pay them RON five million (EUR 1.3 million) in damages because they declared the strike illegal and potentially exposed the employees to a new compensation trial from the company.
Added up, the two recent strikes tally up to about 12,000 workers going on strike for a full month and having potentially produced cumulative losses of hundreds of millions of euros.
These two examples alone go to show that Romania is fertile ground for lawyers specializing in labor litigation and employee benefits.
Still, few law firms specialize in the field and few lawyers have the required know-how to deal with such litigation.
“There are some law firms with good expertise in this field. However, one can notice that despite all expectations some full service law firms tend to have a minimalist approach in this field,” said Anca Grigorescu, partner with the Grigorescu law firm. She added that this line of business counts for up to 10 percent of the monthly fees earned by the practice.
At Musat & Asociatii, the labor and employee benefits practice contributes around 5 percent to the firm's profits, growing in importance year after year, said Ana-Maria Placintescu, partner with Musat & Asociatii.
The Musat & Asociatii and Nestor Nestor Diculescu Kingston Petersen (NNDKP) law firms were both cited by the London legal magazine PLC – Which Lawyer? as “Highly recommended law firms” in employment issues, at the top of their rankings for Romania.
Only four other firms are cited by the magazine as having more or less know-how on this line of business.
“Knowledge of the more complex issues are required by multinational companies or by personnel intensive companies or industries. In many cases referral work from abroad involving cross-border overviews/services generates the need for sophisticated work. The overall impression is that the Romanian approach is relatively basic,” said Grigorescu.
“Our development follows the client. If our clients need us to assist them with such cases, then we will assist them but we do not aim at strengthening a certain practice if the market does not need it,” said Anda Todor, managing partner at Salans.
She added that firms' focus on labor-related practices increases with the number of multinationals settling in locally.
“Most of out clients come with a very rich international experience and in all countries where they operate they have long established practices due to very tough anti-discriminatory legislation, and they bring along those practices,” said Todor.
“As a general comment, the largest law firms in Romania that emerged as full service law practices have developed a consistent amount of expertise in this area over the past years. However, it is worth mentioning that the market still lacks specialized employment lawyers,” said Andreea Ionescu, partner with the Tuca Zbarcea & Asociatii firm. The practice has major employers as clients, such as CEZ, Carrefour, Erste Bank,
OMV Group/Petrom, Philip Morris and Alstom Transport among others.
“Theoretically, local firms claim they offer labor law services, but in reality these services lack the complexity offered by external firms. In other countries, there are niche law firms specializing in labor law exclusively. They employ hundreds of lawyers who specialize at their turn in fiscal policies, immigration, discrimination, pensions and so on,” said Luminita Dima, senior associate with NNDKP. When requests for this type of services increase, so will the sophistication of local firms' services, she added.
“Over the past few years, the volume of services required by our clients in the field has gone up about 50 percent each year,” said Dima.
“Year by year, this sector is growing, however it is impossible to give a correct estimate. For example, last year we almost doubled our portfolio in this area and expect a further increase in demand from clients for specialized legal services in labor and employment matters,” said Ionescu.

Growth fueled by EU accession and Labor Code changes
Most companies have seen a surge in this particular line of business in recent years.
“This area of practice has definitely been on a growth trend for the entire market. One of the main drivers for this growth was Romania's EU accession. It brought important legal amendments in the period prior to accession, which further complicated the legal framework and fuelled the need for professional legal advice, complimentary to the in-house expertise of the legal departments. As well, the numerous entries of foreign investors imported various Human Resources practices from abroad that are being implemented also in Romania,” said Placintescu.
“In many cases employment expertise is a very good selling instrument for the entire firm, because almost all companies encounter employment issues. This field of activity at our firm is growing constantly, following the general growth trend, proportionally,” said Grigorescu of bpv Grigorescu.
Another growth factor has been the labor legislation itself, which is quite restrictive for employers, but strongly defends employees' rights, she added. “The detailed procedures must be strictly followed; otherwise it can lead to annulments, especially in complex projects, such as collective lay-offs,” said Placintescu, whose firm handled about eight cases in the labor and employee benefits practice last year.
Todor of Salans said the firm had at least ten cases dealing with employment issues in 2007.
“However while there are more employment matters, there is fewer litigation. The most frequent cases are abuses on both sides, either on the employer's side or the employee's side. The Romanian legislation favors the employees while multinationals want to harmonize their practices and procedures across all jurisdictions,” said Todor.
Changes to the Labor Code last year have also added to lawyers' workload.
“There has been a certain growth. The new Labour Code enforced in 2003 institutes an added regime of protection for employees, also the procedures are more rigorous and complex, thus even more problems occur. All these amendments have contributed to an increase in the number of trials, but mostly had an impact on emphasizing the need of conferring in order to avoid unnecessary conflict situations,” said Ionescu.
Placintescu said the exact effects of the changes in the Labor Code are difficult to asses.
“The last significant amendments to the Labor Code were implemented only months before Romania's EU accession, so it is difficult to assess whether the growing interest from companies and the increase we noticed in the level and complexity of requests was triggered by the amendments to the Labor Code or rather by the EU membership. Definitely, 2007 was a year of accelerated growth in the number and complexity of clients' demands,” Placintescu said.
Grigorescu said the latest amendments to the Code, referring to employees' right to claim moral damages, have led to an abuse in invoking the new provisions by the employees against their employers.
“Further novelties introduced by the collective bargaining agreement are imposing disciplinary procedure even when issuing warning letters to the employees. This procedure definitely appears to be excessive from the employer's perspective and therefore employers tend not to observe such mandatory provisions,” said Grigorescu.
Dima said neither the new Code nor its subsequent changes are the main growth driver for the firm's labor law expertise.
“These factors have certainly increased the number of clients, but there are also other causes that need to be taken into account. They are mainly linked to employees' degree of awareness regarding their rights, the balance of forces between unions and employers and, last but not least, the probes conducted by authorities regarding employers' compliance with labor regulations,” said Dima.

By Ana-Maria David

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