March 2020 – The summary below describes some of the legal aspects relevant to our clients regarding the emergence of the novel coronavirus (COVID-19) in Romania. At the outset, we wish to emphasise that the measures that companies are planning to implement or have already put in place in relation to the COVID-19 outbreak must also comply with existing Romanian legislation. It is also necessary to bear in mind that reference to the coronavirus crisis does not automatically override private law relationships. Our summary examines five aspects of the legal impacts of the COVID-19 situation:
- Is the coronavirus epidemic a 'force majeure' in contractual relationships?
- Is the coronavirus epidemic an event subject to borrower obligations in finance agreements?
- What are the privacy aspects of conducting the health checks of persons entering a facility?
- What are the competition law implications of the coordination of measures regarding COVID-19 among market players?
- What are the Employment law aspects of the coronavirus situation regarding quarantine: institutionalised quarantine and domicile-isolation?
1. Is the COVID-19 pandemic a 'force majeure' in contractual relationships?
Due to the COVID-19 pandemic and its recent appearance in Romania, it is expected that more and more questions will be raised in Romania in the near future concerning the impact of the pandemic itself and of the measures taken by authorities (e.g. quarantine, closure, etc.), on the performance of contracts and the exemption from consequences for a delay or other breach of contract.
In the context of a worldwide pandemic such as COVID-19, situations may emerge where a contracting party—referring to force majeure—fails to perform in accordance with a contract or does not carry out the contract in accordance with its terms. According to the Romanian Civil Code, unless the law provides otherwise or the parties do not agree otherwise, civil liability is waived when the damage is caused by force majeure. In this respect, the Romanian Civil Code defines 'force majeure' as any external, unpredictable, absolutely invincible and inevitable event. Therefore, a party may exempt itself from its obligation to pay damages caused by a breach of contract if it can prove that (i) the breach of the contract occurred as a consequence of such invincible and inevitable circumstances that are outside of its control, (ii) such circumstances were not foreseeable at the time of entering into the contract, and (iii) it could not be reasonably expected to avoid such circumstances and to mitigate the resulting damage.
Based on the above, the various events of 'force majeure' qualify as reasons for exemption from contractual performance, although Romanian law does not contain an exact definition or itemised list of 'force majeure' events.
Relevantly, however, according to the Romanian Civil Code and the prevailing Romanian case law, the mere existence of a force majeure event does not automatically result in a party's exemption from the consequences of a breach of contract. It is also necessary that the given force majeure event meets the following criteria:
- it has a direct effect on the performance of the defaulting party;
- it was demonstrably not foreseeable at the time of conclusion of the contract; and
- at the time of its occurrence, it could not be expected from the party concerned to prevent its consequences, even if the concerned party would take the necessary measures to prevent the respective event.
Based on the Romanian Civil Code and case law, the party invoking the force majeure event must evidence the existence of the said circumstances. In practice, in certain situations, the Chamber of Commerce and Industry of Romania and/or its local offices may issue, at the written request of companies and based on the documents submitted, a document certifying the existence of the force majeure event in respect of the respective agreement; nevertheless, such a document does not represent irrefutable proof of the force majeure event.
The Chamber of Commerce and Industry of Romania has already received a significant number of request to certify the existence of the force majeure event in respect of certain contracts, but has indicated that it needs further official information in order to process these request.
In some situations, the parties may have regulated the scope of force majeure events, the notification rules to be followed in the event of a force majeure event, and the legal consequences of force majeure events specifically and in a more detailed way compared to the general rules of the Romanian Civil Code. Where the contract in question contains a specific force majeure clause, it usually contains a notification procedure, and non-compliance with such procedures could have a significant effect on the contractual consequences of force majeure. It is therefore necessary to carefully review such clauses in light of the present situation.
Under Romanian law, the coronavirus outbreak does not necessarily qualify by itself as a force majeure event exempting a party from the legal consequences of a breach of contract. First and foremost, the parties should review the relevant clauses of their contracts. Unless the parties have agreed on specific rules for force majeure events in their contract, the fulfilment of the three requirements described above for the recognition of a force majeure event must be examined and evaluated.
In this respect, the following aspects are generally worth considering, among others:
- for contracts concluded prior to the appearance of COVID-19 in December 2019, it can be generally stated that the parties did not need to anticipate the worldwide spread of COVID-19; for contracts concluded since early 2020, this circumstance needs to be individually assessed and demonstrated;
- the party invoking force majeure must demonstrate, in the specific context of the contract, why and exactly how the COVID-19 outbreak affects the performance of the contract—the mere reference to the appearance of the virus is not usually sufficient to support it; and
- the party invoking force majeure also needs to demonstrate why it cannot be expected to counteract the effects of the COVID-19 outbreak on the performance of a particular contract—e.g., why the effects of the epidemic on the contract cannot be treated by employing another supplier, or advising employees to work from home.
In summary: the COVID-19 virus is not a generic "blank cheque" for refusing to perform contracts. The effects of the outbreak must be examined individually in the context of the specific contract, which involves assessing the specific terms of the contract and the legal requirements described above. In addition to the force majeure provisions in contracts, it is essential for companies concerned to review the situation and prepare for the necessary steps by reviewing contractual notification and dispute resolution provisions.
2. Is COVID-19 an event subject to borrower obligations in finance agreements?
As a result of the COVID-19 pandemic, some companies may suffer significant business disadvantages or at least go through changes that they may need to report to their creditors (e.g., banks, bondholders) under the terms of their financing arrangements. To this end, it is particularly important for such companies to review the relevant provisions of their credit agreements and bond prospectuses, including, in particular, the notice, consent, approval and termination provisions thereof.
3. Privacy aspects of health checks of persons entering a facility
As part of the protection against COVID-19, employers and facility managers may decide to screen their employees and/or guests by asking them to provide information on their medical condition, personal contacts, and/or recent travels, in order to be able to identify persons potentially infected with the coronavirus. Such screening methods might include applying surveys and tests, or the measurement of body temperature, typically with the assistance of receptionist colleagues or security guards.
It is important to note that health data is considered a special category of personal data. The processing of such data is generally prohibited pursuant to the General Data Protection Regulation of the EU (the GDPR) and is allowed only under exceptional circumstances defined under Article 9 (2) of the GDPR.
While the explicit consent of the data subjects may be a possible legal basis for the processing of such sensitive personal data, in the case of employees, this solution might not be feasible, as their consent is not always regarded as voluntary, which is a condition for the consent to be valid. This could be the case, for example, if the control is mandatory or the data subjects consider that they have no choice in giving their consent.
Further provisions of the GDPR that allow the processing of health data for important public interest and labour safety reasons may be considered as a possible legal basis. The use of such legal bases, however, is only permitted if the Member State legislation makes it possible by providing adequate safeguards in addition to the GDPR. Such additional Romanian legislation does not currently exist for epidemiological situations, and at most, the employer's general obligation to ensure circumstances of safe work as set out in the Romanian Labour Code might be considered as a legal basis.
If, however, the employer implements a measure involving the processing of health data in relation to the COVID-19 situation, it must exercise caution. In particular, the employer must consider the principles of data minimisation, necessity and proportionality in order to determine whether it is possible to achieve the intended purpose by other means that do not involve the processing of health data, which is considered to be sensitive personal data.
The Romanian National Authority for Data Protection has not issued any guidance on processing health data for the current COVID-19 situation. The primary duty of an employer is to ensure the safety and health of its employees by providing information to them (e.g., information about COVID-19) and implementing organisational measures (e.g., rescheduling business travel, the application of disinfectants, providing opportunities for home office, restriction of customer interaction, etc.). The measures taken by employers in relation to the coronavirus outbreak must therefore always be evaluated in terms of compliance with data protection-related rules, as employers have increased obligations in the case of special categories of personal data, and the exposure to fines is higher in the event of infringements.
4. Competition law implications of coordination among market players and price increases in relation to COVID-19
In light of the COVID-19 situation, businesses may need to adapt the measures they have taken for precaution and safety or to maintain their undisturbed operation, so as to match the measures taken by their business partners. This might be required either because the partners themselves have already adopted such measures, or because the partners might be unable to continuously supply or operate. Nevertheless, companies must assess the possible effects of their response to this new situation and the measures taken pursuant thereto on other businesses, consumers, and clients alike. For example, depending on the market position of the parties, practices such as reserving scarce resources and goods could have the effect of precluding other market players. Thus, measures relating to market behaviour, supply or sale should also be considered from a competition law perspective. In fact, given the increase of customer demand triggered by COVID-19, the Romanian Competition Council is now investigating certain businesses for fixing exorbitant prices for protective medical and labour equipment¹. Likewise, the Italian competition authority is investigating Amazon and Ebay for similar behaviour².
Even more prudence is required if companies align their planned or implemented measures with competitors. In some cases, such coordination is lawful (for example, the design of strictly safety and health-related measures within an industry association, without disclosing any confidential information). However, if the coordination is set to have an impact and influence the market behaviour of competitors, such behaviour is likely to raise serious competition law concerns. Thus, in crisis situations, when the risks of market operations are higher, and, thus, the incentive to coordinate competitors' market behaviour is stronger, companies must be particularly mindful of such competition law risks, as Romania's competition authority will surely investigate any cartelistic and/or collusive behaviour and, as such, could apply drastic sanctions.
5. Employment law aspects of the COVID-19 situation
What is quarantine?
As per the enactment of Romania's Minister of Health that entered into force on 12 March 2020 (i.e., Order no. 414/2020), quarantine comprises both institutionalised quarantine and domicile-isolation.
Institutionalised quarantine is a measure taken for asymptomatic individuals entering Romania from areas with extended COVID-19 infection (i.e., red zone), for 14 days, in areas specially equipped by the local authorities.
Domicile-isolation is a measure taken for the following categories of individuals:
- individuals who travelled in the last 14 days to areas affected by COVID-19 other than the areas with extended COVID-19 infection (i.e., yellow zone);
- individuals who entered into direct contact with individuals who (i) have COVID-19 symptoms and (ii) travelled in areas with extended COVID-19 infection;
- individuals that entered into direct contact with individuals confirmed with COVID-19;
- family members of the individuals of one of the above-mentioned categories.
The lists with the red and yellow zones are available on the website of the Romanian National Institute of Public Health: www.cnscbt.ro.
What happens if an employee is quarantined?
The employee should immediately inform the employer that a measure of institutionalised quarantine/self-isolation has been taken with respect to them. Quarantine is a legitimate absence from work.
In principle, the employee's individual employment agreement is suspended and they benefit from sick leave, under which they are entitled to an indemnity of 75% of their average gross monthly income for the last six months, within the limit of 12 minimum gross wages at the national level on a monthly basis. The indemnity is fully paid from the budget of Romania's Unitary National Social Insurance and Health Fund.
Is there any other legitimate absence from work in addition to institutionalised quarantine/domicile-isolation?
There are two categories of situations:
1. Jobs that could be performed work via telework or work from home
Telework applies when an employee performs their job duties by using information and communication technology systems (e.g., laptop) in another workplace than the one organised by the employer (e.g., the domicile of the employee) at least one day per month. Telework can only be implemented if the employer contractually agrees with each employee on the various telework-related clauses.
If an employee does not use communication and information technology for the performance of their activity, work from home may be implemented. However, these cases are rather rare in practice, as most such positions imply duties performed by using technology systems at the employer's premises.
In both cases, the contractual implementation of a health and safety at work ("HSE") policy is necessary. Thus, particular attention should be given on preparing the telework/work from home-related HSE documentation (e.g., annex to the individual employment agreement providing HSE instructions in case of telework/work from home) with the support of your HSE adviser.
2. Jobs that cannot be carried out via telework / work from home (e.g., cleaning personnel)
In this case, the parties can take into consideration the following options:
- annual leave - in case the employee agrees to use their annual leave;
- advance compensation of overtime - employees may benefit from an advance compensation of overtime, by receiving paid time-off (the overtime that will be done during the following 12 months will be compensated thereby);
- unpaid leave - the parties can agree that the employee takes unpaid leave;
- technical unemployment – the individual employment agreements of employees may be temporarily suspended based on technical and economic reasons that justify the temporary decrease/interruption of activity, subject to the payment of an indemnity of 75% of their base salary;
- suspension of the individual employment agreement due to force majeure – such solution would not be recommended at this moment, as it is debatable whether the COVID-19 outbreak in Romania could be seen now as a force majeure case.
Is an employee entitled to refuse to work referring to the fear of COVID-19?
From the high-level perspective, an employee cannot refuse to be present and work at the workplace by referring only to a fear of COVID-19. If an employee refuses to work and does not properly justify his/her absence, he/she would be in breach of the duty to be available at the employer's disposal and to perform work, which could serve as grounds for disciplinary termination.
Possible preventive measures by employers
- Inform employees about the measures to be taken to prevent COVID-19 (including the recommendations of the Romanian Minister of Health), which should be regularly reviewed and repeated;
- Appropriate hygiene equipment necessary for occupational safety (e.g., hand sanitizer) must be provided and regular disinfection of offices needs to be ensured;
- Inform employees of their obligation to inform the employer if a quarantine/self-isolation measure is established in relation to them;
- Where possible, implement the options mentioned above.
Reduction of employment costs
There are several aspects to take into account when business leaders are required to look at reduction of employment costs under these circumstances. We will be happy to discuss the particular situation of each business, to tailor a solution.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.