Scope
Cooperation obligation
Personal data rights
Equal treatment
Restrictive covenants
Exercise of employer's rights
'Veiled' employment agreements
Commencement of employment
Performance
Liability for damages
Termination and protection
Working time
Salary
Collective employment law
Act 1/2012, which amends the Labour Code, will come into force on July 1 2012. This update summarises the most significant changes to be introduced.
From July 2012 the new code will expressly and individually affect not only employers and employees, but also trade unions and works councils, thereby clarifying the position of employee representative bodies. Furthermore, if work is carried out regularly in Hungary, the code will apply to the relevant employment relationship. The code specifies that its provisions are to be interpreted in line with EU law.
The cooperation obligation between employee and employer is one of the main mutual obligations that characterises an employment relationship. Under the principle of cooperation, the new code protects the employer's goodwill by prohibiting unfair or adverse statements by employees through online media. The disadvantageous or harmful publication of such statements may result in dismissal for cause.
A new chapter of the code provides for the protection of an employee's rights in his or her own personal information. The obligations and rules for employers and employees are set out in detail in the Data Protection Act.
The code emphasises the right to equal wages, although the rules prohibiting discriminatory behaviour are still found in a separate piece of legislation. The code provides that employers may vary wages on a regional level. However, since wage discrimination is considered a serious breach of employment law and may have significant adverse consequences, it is advisable for employers to implement internal policies to regulate the legal conditions and procedures for lawful differentiation in wages.
A new rule resolves a long-running debate on appropriate compensation under restrictive covenants, stating that the remuneration to be paid for each month in which the restriction applies must be no less than one-third of the employee's final salary. It also states that a restrictive covenant may be concluded for a maximum of two years from the date of termination.
An employer's declaration is not automatically null and void if it is signed by a person who is not appointed to exercise the employer's right over its employees, provided that the person who holds that right subsequently approves the document signed or the measure taken in his or her name. A significant new provision establishes that in certain circumstances, electronic documents are acceptable for this purpose and have the status of hard-copy documents.
'Veiled' employment agreements
Reflecting the Civil Code provisions on nullity of agreements, so-called 'veiled' employment contracts and working arrangements that circumvent labour rules (in particular, to avoid tax and social security payments) are deemed null, void and unlawful. There is no time limit to invoke the invalidity of such a contract or arrangement before the courts or other authorities, and anyone may do so. The provisions on such agreements are a reminder that all employment relationships must be transparent and that employees must have legally valid contracts, as the financial and legal consequences of unlawful employment are serious.
Commencement of employment
The start date of an individual's employment will be the date defined in the employment contract or, if no such date is defined, the day following the date of the employment agreement. A new rule provides that the employer and the employee both have the right to withdraw from the agreement if changes in circumstances mean that commencement of employment is not reasonably foreseeable. This rule implements the concept of contractual withdrawal in labour law; however, the exact interpretation and application of this right will need to be developed in practice.
The employee may not accept wages for work from a third party without the employer's prior consent, so additional employment may be lawfully restricted.
The code now acknowledges the common practice of suspending an employee from work during a disciplinary investigation for at least 30 days.
An employer must accede to an employee's request to work part time if the employee has a child aged under three.
The code states that if an employee causes damage, he or she is liable in the amount of a four monthly absence fee.(1) If the damages were caused wilfully or as a result of gross negligence, the employee must pay for them in full.
Under the new code, parties may agree to exclude the regular termination period for one year. In certain cases, both the employer and the employee may terminate the employment relationship for a specified term through the ordinary termination procedure - a significant change from the existing regime.
Another new regulation provides that if employment is terminated due to unacceptable behaviour or the inability to perform the required tasks (for reasons other than illness), the employee is ineligible for severance.
The new code alters the concept of 'termination protection'. An employment relationship may not be terminated:
- during the employee's pregnancy (provided that this has previously been disclosed to the employer);
- during maternity leave;
- during military service; or
- for a six-month period while the employee undergoes fertility treatment.
Employees on sick leave (including employees who take leave because of their child's ill health) are no longer protected from ordinary termination; therefore, the employer may serve notice of ordinary termination during the employee's sick leave. However, the notice period will begin when the employee returns to work from sick leave or one year after the first day of sick leave, whichever is earlier.
Certain extended periods of protection - such as 15 or 30 days after sick leave, three months after giving birth and six months after adopting a child - have been repealed under the new code.
Maternity leave
The maternity protection period starts from the day on which the employee becomes pregnant and lasts until she returns to work or until the child reaches three years of age, whichever is earlier. Fathers are also entitled to protection on the same conditions. Once previously protected employees return to work, they may be dismissed for reasons of reorganisation or mass redundancy, or due to their inability to fulfil the role. In the event of reorganisation or mass dismissal, a degree of protection applies, in that the parent of a child under three can be made redundant only if there is no suitable vacant position or if the employee refuses such a position. Under a new provision, an employee has a right to return to work on a part-time basis, and the employer is obliged to accommodate such a request.
Protected age and rehabilitation
Within five years of the mandatory retirement age or during a period of rehabilitation, the employment relationship may be terminated only if there is no suitable vacant position or if the employee refuses such a position.
Consequences of unlawful termination
A long-awaited clarification on the limits of compensation for unlawful termination sets the maximum compensation for lost wages at the equivalent of 12 times the average monthly salary. This rule ends a highly controversial practice whereby employers found themselves obliged to continue paying the average salary - sometimes for years - until a final judgment was reached.
Mass redundancy
The rules on mass redundancy remain essentially unchanged; however, the code provides that termination is unlawful only if the employer breaches the rules on the 30-day protection period that follows the employee's receipt of the preliminary notification of redundancy. However, the consequences of a termination that contravenes the agreement signed with the employee representatives remains an open issue.
The code sets out more straightforward provisions concerning flexible working time. Thus, if an employee schedules at least half of his or her working time at his or her own discretion, this is considered flexible working time, provided that it is stated to be so in writing. The rules concerning work scheduling, overtime work and standby and on-call duty do not apply.
Extraordinary work (ie, exceptional working periods outside the employee's normal working times) may be the subject of a written order at the employee's request. It is advisable to prepare an internal policy for such circumstances.
The maximal annual overtime that an employer may require has been increased to 250 hours.
The code expressly requires the employer to record working time, on-call and standby duty and annual leave in such a way that each employee's daily working time can be exactly calculated.
The code states that the government sets minimum wage levels and the guaranteed minimum wage.
Collective employment law provisions will also change significantly under the new code. In addition to the chief officer of the works council, officers appointed by the trade union are protected, but only if they operate at the employer's independent place of business. The number of protected officers is defined on the basis of the average headcount for the previous year. Where there are more than 4,000 employees, only five people are eligible for such protection.
The new rules affect the working time benefit granted to officers. The president of the works council is entitled to 15% working time benefit, with 10% for members. Notwithstanding the rules in effect at present, unused working time benefits cannot be paid.
For further information on this topic please contact Marianna Csabai at CLV Partners Law Firm by telephone (+36 1 488 7008), fax (+36 1 488 7009) or email ([email protected]).
Endnotes
(1) In summary, the absence fee is equal to the sum of:
- the base salary or average of the last six monthly piece payments; and
- the one-month average of six monthly additional remuneration paid for extra work, such as overtime and shift allowances, but excluding bonuses or other extra payments.
Under current employment law and practice, an absence fee is payable for the period during which an employee do not work, but with justified reasons, so it is restricted to the wage received for actual work.