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There are not many legal sectors that experience the ground-breaking changes which employment law faces every year on the Romanian market. In the past 3 years, our legislator’s appetite to regulate and overregulate matters like avoiding harassment at work, amending long established legal templates, or the new law on social dialogue have strongly shaken the peaceful climate of employment relationships.

In 2025, the interplay of digitalization, regional reorganizations, increased human mobility and an unprecedent number of disciplinary cases will reach a pinnacle massively impacting local workforce. Amidst this unstable political, social and economic climate, the dynamic of the work relations shall confront unprecedented changes. HR specialists and in-house counsels have no option but to stay ahead of the curve to ensure compliance and mitigate legal risks.

Here is a selection of the issues we believe will become top priorities for employment specialists in the coming months:

1. Global and regional restructuring

After the post-pandemic echoes started settling, we see more and more multinational companies adopting new trends on regional clusters, managed by group appointed directors. This usually comes with measures aimed at optimizing local structures, by mirroring them to the central ones, where costs can be controlled with more ease. At group level, companies are increasingly investing in digital technologies to streamline operations, enhance customer experience, and improve efficiency, while integrating artificial intelligence, big data analytics or cloud computing. Investments like this require long-term optimization plans, with direct and immediate impact on the local subsidiaries.

How does this impact on the local workforce? Digital transformation often leads to the reorganization of business processes, by either transforming functions or crucial roles, and/ or by completely disregarding some of them.

What’s to remember? Romanian laws require restrictive conditions under which reorganizations can take place. The underlying business case should go beyond “this is what the group wants” and focus on the exact reasons justifying those measures.

In practice, we do this in two steps: the macro cause, where we identify the financial difficulties, the delta between the expected KPIs and what was reached in the previous year, loss of clients/major projects, reduced workload. Second, we delve into the micro cause, where we explain how cutting a certain position is expected to help the company recover some of the losses or at least head in the right financial direction. For instance, cutting a hierarchical level may bring benefits such as faster decision-making, avoiding redundancies and resources optimization, increased agility and responsiveness to change, simpler, streamlined workflows, and, lastly, this can reduce overhead costs (this should never be the sole reason).

2. Unionization Trends

While many of the trade unions registered in Romania do not meet the conditions to be representative at company level (which would imply gathering at least 35% of the employees in that company), their voice is stronger than ever thanks to the powers granted to them by the new law on social dialogue, to the detriment of the democratically elected employees’ representatives. In other words, in a company of 1000 employees, employees representatives elected by +500 employees need to stay silent and make room for the newly formed unions, even if these would have around 10 employees (which is the minimum legal threshold to register a trade union).

While employers cannot intrude in this election process, employees themselves should stay vigilant when it comes to empowering a certain person to represent them or to negotiate on their behalf.

A transparent, reasonable and mature social dialogue can bring prosperity to any company, and this should be the common aim of both parties. In our experience, some union leaders find it hard to understand that substantial changes in the salary budget risk deviating that company off track and may bring financial difficulties, in the long term, with positions being cut and employees losing their jobs permanently.

Amidst the complicated social and political environment, the rise of unionization efforts and collective bargaining movements oblige companies allocating serious resources (both human and financial) to manage such actions. These trends require proactive legal strategies, key steps including:

• Preparing for potential collective bargaining negotiations with reliable and comprehensive financial data on what can be granted and what cannot (group level statistics can help);
• Ensuring constant communication with the employees, making them aware of the market challenges and company’s financial evolution, to manage expectations timely;
• Social dialogue should be a priority irrespective of whether there are formal employees’ representatives or a trade union or not. Being fair and transparent towards all of the employees should be a priority;
• Timely training HR and leadership teams about union-related legal risks, to avoid hasty measures with irreversible impact.

3. Employee wellbeing – workplace harassment compliance

Employee well-being focus is increasing in the context of anti-harassment initiatives, which remain a priority for the Romanian legislator. Our team keeps our clients well informed of these changes via our monthly newsletter, the Employment Essentials.

Courts can order payment of moral damages especially if companies have stayed passive, taking no or insufficient actions when facing workplace harassment issues. Of course, this implies the victim having raised the issue with the management or the relevant body (usually, HR or legal), but this is not mandatory –there are quite a few companies finding out about the accusations for the first time when being summoned by the court. The victims have 3 years to go to court asking for damages, and they can (and usually, they do) call the potential perpetrator as a defendant as well, which can bring serious risks reputational wise. Also worth mentioning –  the National Council on Fighting Discrimination can order companies to publish its decision on their website, even if that decision is not final (as it can be challenged in court).

In this context, companies must prioritize:

• ensuring compliance with the new rules, updating the Internal Regulations and the Policy on fighting harassment at work;
• implementing and strengthening the anti-harassment policies;
• enforcing the internal reporting channels (more recently, anonymous complaints must be considered and investigated as well);
• put in place specialized training programs – these are the best tool to raise awareness among the employees.

4. Remote work and international mobility

Not less than 37% of workers in the EU started working from home during a lockdown. Nowadays, hybrid and remote work models are still mainstream, but legal complexities persist. Key areas of focus include:

• the need to comply with multi-jurisdictional labor laws for remote employees (as the imperative provisions protecting the employees applicable in their place of work usually apply with priority);
• drafting smart policies on flexible work arrangements, keeping the right dose of discretion to call employees back at work;
• prior assessments of the tax and health and safety issues; or
• addressing cybersecurity risks related to remote work.

5. Other topics of interest:

1. Work-life balance: the right to switch off. In January 2021, the European Parliament adopted a resolution calling on the European Commission to propose a directive on the right to disconnect. The resolution emphasizes the need for EU-wide legislation to protect workers’ rights to disconnect from work-related tasks outside of working hours without facing negative consequences. The Commission launched consultations of social partners on fair telework and the right to disconnect, so this is a topic where we are expecting considerable news in the following year.
2. Increased interest in the whistleblowing cases. As a matter of novelty, last year, several courts suspended (via special procedural mechanism, called presidential ordinance) dismissal decisions of alleged whistleblowers, until the formal challenge against that decision is finalized.
3. Employee monitoring. As workplace surveillance tools increase, so do concerns over data privacy. The amount of the fines applied by the national authority increases year by year, so companies must consider complying with the EU and domestic privacy laws affecting employee data collection. Establishing clear policies on monitoring remote employees and preparing the relevant documents before resorting to monitoring is key to protecting the validity of said evidence and avoid legal risks.

Therefore, 2025 promises to be a pivotal year for employment law, with in-house teams playing a critical role in navigating these challenges. By staying proactive, embracing compliance best practices, and fostering a legally sound workplace culture, organizations can minimize risks while supporting a dynamic and evolving workforce. Law firms should be contacted timely and proactively, as prevention is more effective than any damage control efforts post-factum.

By Ioan Dumitrascu and Cristina Tudoran, Partners, Filip & Company

In an eagerly awaited development, Romania has taken a step forward in fostering more clarity on essential concepts relevant for foreign direct investment (FDI) screening, by publishing draft guidelines (the “Guidelines”), anticipated to enter into force in March 2025. While the Guidelines may not bring major surprises for practitioners who have been working in the FDI trenches since the regime came into force in April 2022, the formal codification of the authority’s practice is a welcome step toward greater transparency and predictability.

Short recap: investments covered by the Romanian FDI regime

Before delving into the key takeaways of the Guidelines, we remind you that the Romanian FDI regime covers a broad range of investments:

• acquisitions of control (or decisive influence);
• acquisitions of minority interests, allowing effective participation in the target’s management through the appointment of board members, other executives or even observers in certain circumstances, who may gain access to commercially sensitive information;
• expansions of capacities or production, entering new lines of business (for already established investors);
• internal restructurings (in some circumstances).

Key takeaways of the Guidelines

Investment value

One of the biggest challenges when assessing the FDI jurisdictional test has been making a best guess on how to calculate or reverse-engineer the local investment value.

The Guidelines now clarify that the investment value needs to factor in all funds made available by the investor in the context of a deal, which may include both cash and non-cash consideration (such as assets, shares, debt conversions or relief, services or other in-kind consideration), all assessed at fair market value.

Below is a breakdown of how the investment value should be calculated for various types of investments:

[Type of investment: Investment value]

• Share deals: Price paid for the shares and/or additional capital brought by the investor to the target company
• Share capital increases or share capital contributions or debt-to-capital conversions: Value of the entire contribution (including any initial contribution, follow-on contributions already known and applicable premiums)
• In-kind (non-cash) investments: Fair market value, evaluation made by the investor
• Loans / financing by the investor: Principal and interest
• Multi-step transactions: Cumulative value of all prior acquisitions or contributions until a filing is triggered
• Multi-jurisdictional deals: If a specific local deal value (price) is not allocated for the Romanian undertaking or assets, the valuation provided by the parties will be factored in; otherwise, the global deal value will apply
• Publicly traded securities: Investment value determined based on the stock exchange price the day prior to submitting the filing (or the latest publicly traded price)

  More clarity is likely to come with more accountability. Since the Guidelines now largely eliminate ambiguities and grey areas, it is reasonable to expect that the authority will adopt a harsher stance on attempts to evade the FDI regime by allocating artificial investment values.

Filing based on MoUs

The Guidelines also clarify that investors may notify based on any preliminary agreement, not just a signed SPA, documenting the firm intention to proceed with the investment. The underlying document used for filing purposes should at a minimum include details of the parties, the scope of the transaction, the price and the funding.

Filing in a still early stage, based on a signed MoU or LoI, can significantly streamline the transaction timeline.

Control

The Guidelines also clarify that the concept of “control” has the same meaning as under merger control rules. Gaining negative control is also a trigger.

The Guidelines do not provide further clarity on the alternative trigger (gaining an “effective participation to the management” of the target), which is specific to the FDI legislation.

What comes next

All relevant stakeholders are now invited to provide their input on the Guidelines by 11 March 2025.

Nonetheless, the Guidelines represent just the first step in providing clarity on the FDI regime in Romania. Further guidance is still eagerly awaited regarding the 13 sensitive sectors that dictate the scope of the regime, the concept of “effective participation”, potential de-scoping of non-sensitive transactions, and a more streamlined approach for non-problematic deals involving either EU or non-EU investors.

Notably, a more streamlined approach appears to be prompted by the authority’s workload in 2024, with a steep increase to 600 filings submitted, of which 471 were reviewed and 129 remained pending at year-end.

By Georgiana Badescu, Partner, Cristiana Manea, Managing Attorney at Law, Sabina Aionesei, Attorney at Law, and Teodora Burduja, Associate, Schoenherr

Effective from 2 February 2025, the provisions of Chapter 1 and 2 of the EU Regulation no. 2024/1689 laying down harmonised rules on artificial intelligence (“EU AI Act”) regarding AI literacy and the ban on use of AI systems that pose unacceptable risks have entered into force.

The EU AI Act provides for a phased approach regarding its entering into force, different parts of the act being applicable as of 6, 12, 18, 24 and 36 months from the act’s initial adoption of 1 August 2024. The first of such time markers has been reached as of 2 February 2025, which marks the entering into force of Chapter 1 (“General provisions”) and Chapter 2 (“Prohibited AI Practices”) of the EU AI Act.

1. AI LITERACY OBLIGATIONS

Starting with 2 February 2025, providers of AI systems (meaning entities which develop AI systems, place AI systems on the market or put AI systems into service under its own name or trademark) as well as deployers of AI systems (meaning entities using AI systems under their authority in the course of professional activities) have the obligation to take measures to ensure, to the largest extent possible, a sufficient level of AI literacy of their staff and other persons dealing with the operation and use of AI systems on their behalf. The EU AI Act defines AI literacy as the skills, knowledge and understanding required to facilitate the informed deployment of AI systems and to gain awareness about the opportunities and risks of AI and possible harm it can cause.

At the moment, no specific sanctions are provided for breaches of AI literacy obligations, however, it can be reasonably expected that the performance or non-performance of such obligations may be regarded by the competent authorities as a factor when considering the appropriate sanction to be applied to a provider of deployer for other breaches of the EU AI Act.

2. PROHIBITED AI SYSTEMS

Also, as of 2 February 2025, the so-called “unacceptable risks”, referring to AI systems that pose unacceptable risks to the fundamental rights, rule of law and the European Union’s values, are prohibited under Chapter 2 of the EU AI Act. The prohibited AI practices are as follows:

• Manipulation and deceptive techniques: placing on the market, putting into service or use of AI systems employing subliminal, purposefully manipulative, or deceptive techniques with the objective or effect of materially distorting human behavior, by appreciably impairing their ability to make an informed decision.
• Exploitation of vulnerabilities: placing on the market, putting into service or use of AI systems that exploit any vulnerabilities of natural persons arising from age, disability, or socio-economic conditions with the objective or the effect of materially distorting their behaviour in a manner that causes or is likely to cause significant harm.
• Social scoring: placing on the market, putting into service or use of AI systems for enacting social scoring (i.e. evaluation or classification of people) based on behavioral or personal attributes, leading to detrimental or unfavourable treatment in contexts that are unrelated to those in which the data was gathered or which are unjustified in relation to their social behaviour or its gravity.
• Individual criminal offence risk assessment and prediction: placing on the market, putting into service or use of AI systems exclusively for profiling individuals to asses or predict chances of criminal behaviour.
• Unauthorized facial recognition databases: placing on the market, putting into service or use of AI systems that create or expand facial recognition databases through untargeted scraping of facial images from the internet or CCTV footage;
• Emotion recognition in work and education: placing on the market, putting into service or use of AI systems used to infer emotions in workplace or educational settings are prohibited, except when justified for medical or safety purposes.
• Biometric Categorization: placing on the market, putting into service or use of AI systems categorizing individuals based on biometric data to deduce sensitive information, such as race, political opinions, religion, trade union membership or sexual orientation, are restricted.
• Usage by law-enforcement of real-time biometric identification: The use of real-time remote biometric identification systems in publicly accessible spaces for law enforcement is largely banned, unless for narrowly defined exceptions.
• Sanctions for non-compliance with the prohibitions above have not yet entered into force, such being delayed until 2 August 2025 as per the EU AI Act’s phased approach. Upon their entering into force, the sanctions provide for administrative fines of up to the higher of EUR 35,000,000 or 7% of total worldwide annual turnover of the entity in breach.

3. DOES THIS APPLY TO YOU?

The EU AI Act’s regulatory scope is comprehensive, encompassing a wide range of AI activities and stakeholders. It applies to providers placing on the EU market AI systems or models, irrespective of their country of origin, as well as deployers of AI systems within the EU and even extending to entities established in third-party countries whose AI system outputs are utilized within the EU.

Organizations involved in importing, distributing, or manufacturing products which integrate AI systems are also subject to the EU AI Act’s requirements. Further, the EU AI Act also applies to affected persons which are located in the EU.

By Monica Statescu, Partner, and Eduard Maxim, Associate, Filip & Company