Employing overqualified employees has long been a source of debate among human resources (HR) professionals. Several practical HR aspects must be addressed when employing such workers, which often give rise to legal issues. This update highlights these issues in the context of Hungarian law.

Definition

In general, 'overqualification' refers to persons with skills, experience or education that exceed the requirements of a particular job. The increasing attention paid to the issue of overqualification is a result of two recent trends in modern economies. One is the growing number of graduate workers in proportion to the number of positions requiring graduate skills. The other is the pace of technological development, which often allows existing roles and tasks to be performed by less qualified or less experienced workers and ultimately results in lower personnel costs for companies. With the increasing use of artificial intelligence, this is likely to become even more prominent in future.

Research shows that HR professionals and supervisors are generally reluctant to hire overqualified employees. There is a common fear that an overqualified employee will find the job less interesting and leave it more easily if a better opportunity arises. The supervision of such employees may also cause difficulties, especially if they are more experienced or better educated than their supervisor. On the other hand, overqualified employees can often bring added value to the employer in several ways (eg, they can be trained more easily, bring new skills and new ideas, and complete tasks more quickly).

Overall, there is no general rule on how to handle these situations and it falls within the responsibility of HR professionals and hiring managers to decide on a case-by-case basis, taking into account the actual circumstances.

Problems in practice

Equal treatment

Problems can arise when the overqualified person is in the process of applying for a job. As the parties are not in a contractual relationship at this point and are only conducting preliminary talks about entering into such a relationship, the applicant's legal protection is weaker.

However, employers and recruiters must ensure that:

  • the selection process provides equal treatment to all candidates;
  • candidate rejections are based on valid and objective grounds (or legitimate concerns); and
  • any reference to being overqualified should not mask age (or any other type of) discrimination.

Although it is uncommon to take legal action for not being selected for a position, and despite the fact that employers are not required to justify the rejection, candidates who feel that their right to equal treatment has been violated may request the Equal Treatment Authority to examine their case. Based on the result of the investigation, the authority may levy fines on companies for violating the principle of equal treatment. Candidates may also turn to the courts to claim compensation if their right to equal treatment has been violated by the company and they suffered damages as a result.

Dismissal

Problems can also arise where an overqualified employee needs to be dismissed. According to the general rules, in the case of a dismissal by the employer, the employer must give sufficient justification for the dismissal. The justification must state clearly why the employment is being terminated. The reasons for dismissal may relate to the employee's abilities or behaviour regarding the employment, or to the employer's operations (ie, economic grounds).

Since employees have the right to challenge the dismissal – and in the event of a dispute, the employer must prove the validity of the grounds of dismissal – preparing proper reasoning for the dismissal can be troublesome even in less complicated cases. Dismissing an employee for being overqualified for a specific position may therefore involve a higher degree of risk in certain cases.

Quality replacement

Hungarian court practice generally accepts the so-called 'quality replacement' as a valid ground for dismissal under certain conditions. This term refers to cases where the employer wishes to hire a more qualified or experienced person for a certain role and dismisses the person occupying that position beforehand.

In practice, this reason for dismissal is mixed: it is related partly to the employee's abilities and partly to the employer's operations. To lawfully dismiss an employee on such grounds, courts usually require employers to present objective grounds that necessitate the employment of a more qualified or more experienced person for that role, such as:

  • changes in the technology to be used or applied;
  • increasing demand for certain skills (eg, languages) in the role; or
  • the acquisition of an International Organisation for Standardisation certification for a certain workflow.

Court practice acknowledges employers' freedom in organising their workforce and setting requirements or standards for persons employed in certain positions. This freedom includes changing such requirements from time to time where necessary. The courts' requirement to base changes to job requirements on certain objective grounds serves to protect employees' interests in the process.

If a dismissal is justified by replacing an employee with a more qualified person, the employer must prove that the qualification or skill in question is necessary to perform or better perform the job. Replacing one employee with another that has undoubtedly better skills or qualifications is unlawful if the skill or qualification in question is unnecessary to perform the job.

In spite of the above, due to the higher probability of a legal dispute arising from such a dismissal (especially as the subjective elements can easily be subject to debate), employers are usually reluctant to dismiss employees on this basis and tend to justify the dismissal with other reasons instead (eg, reorganisation).

Negative quality replacement

In 2013 the Supreme Court formed a committee to examine court practice related to dismissals under the new Labour Code that entered into force in 2012. The committee delivered its findings in a report published in March 2015. A study attached as an appendix to the report examined the aspects of quality replacement as detailed above.

The study noted that the possibility of so-called 'negative quality replacement' has been discussed in professional circles, as practitioners are usually unsure whether it can be a valid reason for dismissal. There are strong arguments that – following the rationale underlying the concept of quality replacement – its opposite should also be accepted in practice. In other words, employers' freedom in organising their workforce should also extend to a decision to fill certain positions with less qualified workers, especially as doing so could result in lower personnel costs and thereby increase efficiency.

The study did not rule out that such reasoning could pass the test of court practice, on the condition that – similarly to the concept of quality replacement – objective circumstances (eg, technological development) make the employment of an overqualified employee unnecessary and a less qualified employee could also perform the job effectively. In the absence of such objective circumstances related to the performance of actual tasks, it is doubtful that dismissing an overqualified employee for economic reasons (ie, replacing that employee with a less qualified, less experienced and 'cheaper' employee) would be regarded as lawful.

As all of the aforementioned issues attest, the answer to the question of whether overqualification can constitute valid grounds for dismissal depends on the specific circumstances of the case.

For further information on this topic please contact Dániel Gera at Schoenherr Hungary by telephone (+36 1 8700 700) or email (d.gera@schoenherr.eu). The Schoenherr website can be accessed at www.schoenherr.eu.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.