Regulation of the confidentiality obligation as a legal obligation, which survives the termination of the individual employment contract

According to Article 20 para. 2 letter d) of the Labor Code, the employer and the employee may negotiate and include in the individual employment contract (“IEC”), in addition to standard clauses, a confidentiality clause.

Article 26 of the Labor Code details the confidentiality clause as follows:

“(1) By the confidentiality clause, the parties agree that, throughout the duration of the individual employment contract and after its termination, they will not disclose data or information they became aware of during the execution of the contract, under the conditions established in the internal regulations, in the collective labor contracts or in the individual employment contracts.

(2) Breach of this clause by either party results in the culpable party being liable to pay damages.”

Thus, the Labor Code leaves it to the parties to negotiate and include the confidentiality obligation in the IEC, which, only if expressly stipulated in the individual employment contract, survives its termination.

Experience shows that the confidentiality obligation needs to arise ope legis, just like the employee’s duty of loyalty, without requiring negotiation between the parties. Moreover, confidentiality should survive the termination of the IEC, at least for a defined period, as proposed in the draft law amending the Labor Code.

Most cases of unfair competition, which have significantly harmed employer companies, were caused by the disclosure and use by former employees of information they obtained during the execution of the IEC. Ongoing unfair competition lawsuits have originated from the use of customer portfolios, pricing and offer conditions, and other similar information belonging to the employer companies.

Confidentiality should not be negotiable, it is not a whim of the employer, but must be an essential obligation of the employee both during the execution of the IEC and after its termination, regardless of the reason for termination.

In all unfair competition actions, one of the arguments invoked by former employees (defendants) is that the duty of loyalty, which includes the confidentiality component, ceases on the date of IEC termination, and the employer’s omission to negotiate and include a confidentiality clause in the IEC exonerates them, in their opinion, from the obligation not to disclose/use information belonging to the employer and acquired during the execution of the IEC.

Failure to meet performance objectives – grounds for dismissal for professional inadequacy

In practice, we have frequently faced requests from employer companies to offer a legal solution allowing the termination of individual employment contracts in cases of failure to meet the performance objectives agreed and assumed annually by employees. In most cases, the issue raised was the termination of the IEC for not achieving at least 80% of the performance objectives for two consecutive years.

Although the draft law for amending and supplementing the Labor Code provides for the introduction of Article 261, which, in paragraph 4, states that “failure to meet performance objectives cannot constitute grounds for dismissal for professional inadequacy, under Article 61 letter d)”, the practical problems encountered by employers demonstrate the need to qualify such a provision. Failure to meet performance objectives cannot justify termination of the IEC as long as the failure was caused by reasons independent of the employee’s conduct/performance. Otherwise, the introduction of Article 261 para. 4 into the Labor Code could conflict with Article 63 para. 2 of the Labor Code currently in force and could undermine procedures already implemented by employers for employee evaluation.

Employee protection in the event of job elimination due to international-level restructuring of the group to which the Romanian employer belongs

In recent years, and especially since the outbreak of the Coronavirus pandemic, many multinational companies in Romania have eliminated jobs for reasons unrelated to the employees, citing international-level restructuring of the groups to which the respective companies belong. Individual dismissals in these Romanian-based multinationals were justified by the elimination of functions at the international level, reallocation of responsibilities and/or centralization of functions in other countries.

Employment contract termination decisions based on the restructuring of company groups at the international level were, understandably, contested in court by dismissed employees in Romania.

Although Romanian courts are not competent to rule on the real, necessary, and serious nature of restructurings conducted by foreign companies outside Romanian jurisdiction, judicial practice is inconsistent due to the generic wording of Article 65 of the Labor Code:

“(1) Dismissal for reasons not related to the employee represents the termination of the individual employment contract due to the elimination of the position held by the employee, for one or more reasons unrelated to the employee.

(2) The elimination of the job must be effective and have a real and serious cause.”

Thus, there have been courts that upheld such challenges, arguing that restructuring at the group level exceeds the competence and ability of Romanian courts to verify and ensure the real, effective, necessary, and serious nature of the restructuring. The court considered that restructuring at the level of foreign company groups does not automatically justify the real, effective, necessary, and serious character of eliminating the job at the level of the Romanian company.

Contrary to the above opinion, there were also court decisions that legitimized restructuring at the international level, exposing Romanian employees to the risk of abusive measures, with no real possibility to verify the reality and legality of the measures taken at the level of foreign companies, according to the law of jurisdictions outside Romania but with alleged impact on Romanian companies.

Therefore, without disputing the need for and reality of restructuring at the level of foreign company groups, it would be appropriate to further detail Article 65 and following of the Labor Code, in the sense that the real, effective, necessary, and serious character of a job elimination can and must be evaluated at the level of the employing company, and not in relation to affiliated foreign companies.