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Moldova: Modernization of Moldovan Labor Law

Moldova: Modernization of Moldovan Labor Law

Issue 10.9
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Following its separation from the Soviet Union, the Republic of Moldova has pitched upon a rigid labor law system defined by overly protective conditions toward employees.

Driven by the aim to maximize security for employees, up until recent years, the Moldovan labor system mainly consisted of the standard employment model, which hindered the opportunity for greater flexibility for both workers and employers alike. However, the impact of digital progress and modern information and communication technologies has created the need for increased adjustability in labor relations. Alternative models of contractual relations have emerged, improving employment relationships in terms of effectiveness and comfort for both the employer and the employee.

Labor Law Today – What Has Changed?

Recent regulatory amendments have allowed non-standard and flexible contractual arrangements to emerge in labor relationships. The most recent changes to Moldovan labor law offer a cutting-edge regulatory framework by relieving the employer of customary formalities, granting more negotiating leeway, and opening the door to the incorporation of digitalization into employment interactions. The revisions’ main modifications impact non-competition agreements between employers and employees, flexible employment models, employees’ individual performance evaluations, and digitizing employees’ informing procedures.

Until recently prohibited, non-compete clauses in employment relationships have been introduced in 2022. Aiming to protect the interests of the employer, the non-compete clause creates a restrictive covenant for the employee, who is bound to refrain from engaging in any activity competing with the one pursued by the employer.

This is an effective tool used by employers to protect the investments made within a certain employee in terms of time, knowledge, and particular data disclosed during the labor relationship. No limits regarding the extent of a former employee’s liability for damages in case of breaching the non-compete obligation are set by law.

However, by keeping in mind the interests of employees and to avoid eventual abuses by employers, Moldovan labor law has restricted non-compete clauses to certain features. This ensured a balanced approach toward the need to protect the business interests of the employer while securing the interests of employees.

To be enforceable, the non-compete obligation shall be limited in terms of duration, scope, and geographical area it extends to. The employee shall also be rewarded in return for observing the non-compete limitation for the specified time of its validity. Failure of an employer to pay the necessary remuneration entitles the former employee to release themselves from the non-compete obligation, subject to observing certain formalities.

The introduction of a performance improvement plan (PIP) provides another tool in ensuring the modernization of the up-until-recently rigid Moldovan labor law system, allowing the employer to foster effectiveness and productivity among its workforce.

Until 2022, terminating an employment relationship with a poor-performing employee was an option almost impossible for the employer due to missing applicable procedures. To avoid eventual legal actions with the employees, employers were often forced to recur to other, often burdensome tools. Improving the performance of a certain employee was also a difficult task for the employer.

The recently introduced PIP offered straightforward rules in terms of evaluating an employee’s individual performance. By assessing the outcomes of the employee, the employer is now able to pinpoint areas requiring professional development, address the deficiencies established, and set a roadmap toward meeting certain performance objectives. Termination of employment with a poor-performing employee is also now backed up by a clear procedure.

Introducing flexible contractual arrangements within employment relationships such as remote work, work from home, and part-time or partial workweek is another example of Moldovan labor law responding to swiftly changing employment and social needs. Employees are now afforded a greater possibility to ensure a balance between personal and professional life, which, in turn, leads to increased efficiency and individual accountability.

Although most of the amendments were enacted in 2022, their practical implementation picks up steam in 2023, as companies are given newfound latitude in how they interact with employees. Overall, these amendments create the premise to increase the efficiency of employment activity while maintaining the special protection enjoyed by employees.

By Doina Doga, Head of Practice, and Domnica Bejan, Junior Associate, ACI Partners

This article was originally published in Issue 10.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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