What will be modified in the Hungarian Labour Code from 1 January 2016?

19 October 2015

Dr. Zoltán Tarján

Many articles were published in the press and on news portals on the planned modifications of the Hungarian Labour Code (Labour Code) entering into force on 1 January 2016. These articles emphasised that one of the main modifications is that employees will be entitled to severance pay in case the employee terminates his employment relationship with immediate effect. This is not entirely correct and misleading from legal perspective. The employee is entitled to severance pay under the present rules if he terminates his employment relationship with immediate effect. The legislator only plans to make minor, technical modifications here which do not affect the severance pay entitlement of the employee.

In order to avoid similar misunderstandings, we summarise below the main planned modifications of the Labour Code.

On 12 October 2015 the government published the draft law on the amendment to the Labour Code and a number of other related laws such as act on civil judicial procedure and act on labour safety (Draft Law). In this article we focus only on the main modifications of the Labour Code which are planned to enter into force on 1 January 2016.

  1. Electronic document: Pursuant to the Labour Code – under certain conditions – an electronic document qualifies as written document. These conditions include that the content of the document can be restored and the person making the declaration and the date of the declaration can be identified. The interpretation of these conditions is not entirely clear in practice. The Draft Law sets out that the qualified electronic signature of the person making the declaration is not a requirement for written document status. This amendment aims to ease the use of electronic documents particularly for employees. According to another modification, if the employment contract, any modification thereof or any employment termination is made in electronic document, then it must also be handed over to the employee in paper based format within 5 days from the date of the agreement/communication.
  2. Information about the place of work: Under the present rules the place of work is not a mandatory part of an employment contract. If the employment contract does not specify the place of work, then the place of work is where the employee regularly performs his work. According to the Draft Law in such case the employee must be informed about the place of work in writing within 15 days from the commencement of the employment. 
  3. Withdrawal of termination: Under the present rules the employee’s pregnancy or employee’s participation in assisted human reproduction only ensure protection against termination if the employee informed the employer about this fact. The previous text of the law added that the information must be provided before the communication of the termination. In 2014 the Constitutional Court decided that this wording is unconstitutional. As a result, a reasonable interpretation might be that even if the employee provides information only after the communication of the termination, the termination will be unlawful. In order to dispel uncertainty and provide fair solution for employers, the Draft Law sets out that the employer can unilaterally revoke the termination in writing within 15 days from the date of receiving information on the employee’s pregnancy or her participation in assisted human reproduction.
  4. Severance pay: Contrary to the media reports, the rules of the Labour Code on severance pay will not change in fact. Under the rules in effect the employee is entitled to severance pay if he terminates his employment with immediate effect. The Draft Law only contains minor, technical modifications. The Draft Law also makes it clear that the employee is entitled to absence fee due for the notice period too (according to the present rules the employee is entitled to absence fee due for the garden leave period).
  5. Lump sum damages in case of employer's unlawful termination: Under the present wording of the Labour Code, in case of the employer's unlawful termination the employee is entitled to claim absence fee due for the notice period instead of claiming damages (including damages for unpaid salary). The Draft Law doubles this amount, so the employee would be entitled to claim two times of absence fee due for the notice period. In practice it is worth claiming lump sum damages if the employee suffered no damage or only minor damage as a result of unlawful termination for example because he managed to find a new workplace immediately or within a few days.
  6. Daily rest time: As a main rule the daily rest time must be at least 11 hours between the end of work on one day and the commencement of work on the other day. In special cases, like in case of uninterrupted or multiple shift work schedule or standby type position, the daily rest time must be at least 8 hours. The Draft Law sets out that two successive daily rest periods must be at least 22 hours. This modification aims harmonization with Directive 2003/88/EC. 
  7. Protection of pregnant women and single mothers: In accordance with the rules in effect, from the establishment of pregnancy up to the child’s age of 3, uneven work schedule can be applied subject to the employee’s consent, while overtime and night shift are prohibited. The Draft Law would maintain these restrictions only from the establishment of pregnancy up to the child’s birth with a view to helping the return to work after unpaid leave. In case of single parent employees the protection would be maintained until the child’s age of 3, except that night shift would be allowed subject to the employee’s consent.
  8. Employer’s liability for damages: Under the Labour Code in effect the employer must compensate for all damages caused for the employee in relation to the employment relationship. As an exception damages caused by the employee’s culpable behaviour or damages resulting from the employee’s failure to mitigate the damage do not need to be compensated. The Draft Law would make it clear that the burden of proof is on the employer in relation the exception mentioned.
  9. Non-competition agreement, study contracts: The Draft Law expressly sets out that the parties can deviate in the employment contract or in the collective bargaining agreement from the rules of the Labour Code on non-competition agreements and study contracts only in favour of the employee.
  10. Executive employees: The Draft Law sets out that in case of executive employees the parties cannot deviate from the rule of the Labour Code according to which the employee is entitled to unpaid leave up to the child’s age of 3 for the purpose of child care.

Authors

image of Zoltan Tarjan

Dr. Zoltán Tarján

Senior Associate
Hungary

Call me on: +36 1 799 2000