The New Civil Code

A new Civil Code, which has introduced some significant employment law changes, came into force on 15th March 2014.

First, the rules regarding non-pecuniary damages, such as the right to human dignity; the right not to be discriminated against; the right to protection of personal data; and the right to privacy, have changed both in name and content.

Where privacy rights are infringed, it remains the case that financial compensation will be paid. However the name and nature of that compensation has slightly changed from “compensation”(“kártérítés”) to “restitution” (“sérelemdíj”). So, “restitution” will be paid for non-pecuniary damages, while “compensation” will be paid for pecuniary damages.

In contrast to both the previous rules on non-pecuniary damages and the existing rules on liability for pecuniary damages, an essential change is that, apart from the actual infringement of the right, no other harm or consequences of the breach needs to be proved by the injured party for them to be entitled to restitution.

The consequence of this is that it is enough for an employee to show that the employer has breached one of the rights related to his or her personality, such as the right not to be discriminated against, the right not to be defamed or the right to privacy, in order to be entitled to financial restitution. It is not necessary for the employee to demonstrate that damage has been suffered before restitution can be awarded. However, it is envisaged that, in the future, the more the employee is able to prove that physical, psychological and/or sociological damage has been caused by the employer’s unlawful act, the higher the amount of restitution he or she will obtain from the courts. Future case law will demonstrate how an infringement of an employee’s rights will be compensated if no, or only minor damage, has occurred.

Where the infringement is in some way connected to the employment relationship, an employee can seek a remedy within the general three year limitation period. The limitation period is extended to five years if there is an infringement caused by a crime, such as libel.

It is very likely that these changes will increase the number of claims made by  employees, particularly as, in some cases, it may previously have been difficult to prove that any disadvantage was caused by the breach.

Interestingly, these rules also apply to companies, and so, for example, it is likely to become easier for employers to enforce claims against employees who breach business secrets.

Liability of executive officers 

Executive officers and managers who work under a “mandate contract”  are only exempt from liability if they are able to prove that any damage occurred as a result of unforeseen circumstances beyond their control, and there had been no reasonable cause to take action to prevent or mitigate the damage.

The rules which govern a manager’s liability, where that manager is employed in an employment relationship, have not changed. As a result, the employee manager must reimburse the employer for any damage if he or she has not acted reasonably. That damage payment will not be reimbursed unless the damage was not foreseeable at the time it was caused; was caused by the employer’s culpability; or originated from the fact that the employee had not mitigated his loss.

As regards non-contractual damages to a third person, the new Civil Code introduces a new rule regarding liability for damages caused by a company’s executive officers. Previously, the general liability provisions for damages caused by employees applied. As a result of the changes, if an executive officer causes damage to a third party, the executive officer and the legal entity (employer) will have joint and several liability towards the injured third party.

Future case law will establish how these changes will work in practice.