The Parliament passed the Act on the Amendment of the Labour Code in its session held on 31 March 2003 ("Amendment"). The Amendment enters into force on 1 July 2003 save for the provisions related to the amendment of Act No. 75 of 1996 on Labour Supervision (hereinafter the "Labour Supervision Act"), which enters into force on 1 May 2003.
The first step in the harmonisation process of the Hungarian Labour Code and other Hungarian labour laws with EU legislation, was the amendment to the Labour Code in 2001, which entered into force on 1 July 2001. At that time, nine labour directives were transplanted into Hungarian law. The next step in the harmonisation of Hungarian law with EU legislation will be the amendment to the Labour Code in 2003, which aims to transplant the following directives into Hungarian law:
- Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses;
- Council Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work;
- Council Directive 1997/81/EC of 28 June 1999 concerning the framework agreement on fixed-term work;
- Directive 2000/34/EC of the European Parliament and of the Council of 22 June 2000 amending Council Directive 93/104/EC concerning certain aspects of the organisation of working time;
- Council Directive 1999/63/EC of 21 June 1999 on the agreement on the organisation of working time of seafarers.
We give you a summary of the main provisions of the Amendment below:
1. Anti-discriminatory Provisions
Section 5(1) of the Labour Code concerning anti-discrimination was amended, as from 1 July 2003 the scope of this provision was extended to forbid discrimination against employees on the basis of whether their jobs are of part-time or fixed-term employment.
2. Trade Union Official
As from 1 July 2003, to temporarily transfer, temporarily assign for more than 15 days or change the scope of work that involves assignment to another place of work an employee holding a trade union office requires the prior consent of the directly superior trade union organ.
3. Workers' Council
The Amendment regulates the status of the workers' council in detail when there is deemed to be a legal succession on the part of the employer.
The Amendment distinguishes between various cases of legal succession:
3.1 As a result of the merger, fusion or demerger of the employer or sites, the workers' council of both the legal predecessor and the legal successor cease to exist.
If there is deemed to be a legal succession on the part of the employer and as a result of the fusion or merger of several employers or sites or the demerger of the employer or site, the workers' council ceases to exist at the employers' establishment after the merger, fusion or demerger, a temporary workers' council will exercise the powers of the workers' council until there is an election of a new workers' council. This must not be more than 6 months after the dissolution of the old workers' councils. Before the old workers councils are dissolved, each of the dissolving workers' council, including the central workers' council, delegates one member to the temporary workers' council. The conditions of the workers' council and its members are to be applied to the members and operation of the temporary workers' council mutatis mutandis. If there was a workers' representative within the employer, then if there is a merger of employers, the workers' representative will form a part of the temporary workers' council. If the employer undergoes a demerger, then the powers of the temporary workers' council will be exercised by the workers' representative or the employees elected as temporary workers' representative, by each additional organisational units that was created as a result of the demerger.
3.2 The workers' council at the legal predecessor ceases to exist and the workers' council at the legal successor continues to operate.
The Amendment provides that if the legal succession on the part of the employer takes place in a way that the employers or sites are not fused or merged (e.g. outsourcing of an activity to another employer), then the workers' council that had been elected by the employees of the organisational unit affected by the legal succession will cease to exist. However, this legal succession will not affect the operation of the workers' council previously elected at the legal successor. When this happens the employees of the organisational unit being transferred are to be granted the right to participate in the operation of the workers' council in the legal successor.
In such a situation, the employees of the organisational unit transferred, delegate a member to the workers' council of the legal successor. If central workers' council operates at the legal successor, then the delegated member participates in the operation of the central workers' council. If there is a workers' representative at the legal successor, then the workers' representative and the delegated member are jointly entitled to exercise the powers of the workers' representative, however both the representative and the delegated member have to be present in order to exercise the right to form opinions and make joint decisions. The delegated member has the full powers of a member of the workers' council of the legal successor. The delegated member is also added to the number of members of the workers' council. The conditions applicable to the members of the workers' council are to be similarly applied to the delegated member. Further, the term of mandate of the delegated member is to be identical to the term of the mandate of the workers' council of the legal successor.
If at the time of the legal succession, the number of employees affected by the legal succession reaches 20% of the number of employees working for the legal successor, the workers' council may only operate for not more than one year after the date of the legal succession. Upon the expiry of this one-year period, new workers' council elections must be held.
4. Legal Succession
Pursuant to the provisions of the Amendment, all rules concerning legal succession are contained in Section 85 of the Labour Code.
Legal succession constitutes:
(a) legal succession based on the law; and
(b) the transfer and take-over of the employer's separate and organised group of material and non-material resources (e.g. business unit, plant, business, shop, site, workplace or a part of the foregoing) by an organisation or a person that is subject to the effects of the Labour Code, with the intention of continued operation or resuming the operation of the business, under an agreement, in particular, by means of sale, exchange, lease or by way of contribution of assets by acquiring a quota of a company.
Under the prevailing Hungarian regulations, it does not constitute legal succession if the employer takes over and continues to operate a company without any interruption, carrying out similar activities, but does not retain the services of any of the employees. On the other hand, EU law provides that the obligation of continuing to employ employees is one of the legal consequences of and not a condition for legal succession. Therefore, the new regulation also deems it to be legal succession if a plant, industrial unit, site or a part of the foregoing continues to operate or resumes operation.
Upon legal succession, the rights and obligations arising from the employment pass from the legal predecessor to the legal successor. The predecessor is obliged to inform the successor about these rights and obligations, however, the employees' rights to enforce claims under these rights are not affected if the predecessor does not meet this obligation.
The Amendment provides that the representatives of the employees must be informed about the date or planned date of the legal succession, the reason for the legal succession and its legal, economic and social consequences, at least 15 days before the legal succession will occur and they must be consulted on other planned measures that will affect employees. This consultation must discuss what the key principles behind the measures are, the steps that will be taken to avoid any detrimental consequences and the means by which any such unavoidable consequences can be mitigated. The predecessor and the successor are obliged to provide information to the representatives and to initiate a consultation even if the decision concerning the legal succession was made by an organisation or person supervising the predecessor.
5. Reclassification of Agency and Service Contracts as Employment Contracts
It is a common practice in Hungary that, instead of employment contracts, employers formally conclude agency or service contracts with individuals, while, based on the reality of the situation, these legal relationships in fact correspond to employment relationships. In order to curb this practice, the Amendment specifies the classification criteria for the different contracts. Thus, the Amendment provides that the selection of the type of the contract, under which work is to be done, may not be selected with the aim of restricting or impairing the effect of provisions protecting employees' rightful interests. To decide or determine the type of a contract, irrespective of the title that the contract is given, all the circumstances of the case must be taken into consideration, paying particular regard to legal statements made upon execution of the contract or during the working relationship, the nature of the actual work carried out, the scope of the power to give instructions and the existence of an obligation on the part of the worker to make themselves available to the principle at all times.
6. Labour Supervision
The Amendment also amends certain provisions of the Labour Supervision Act. As such, from 1 May 2003 the supervisor is entitled to classify the legal relationship between the employer and the person carrying out work and the relationship established during the employment, based on the circumstances. Thus, in a labour investigation it is examined whether or not adequate legal statements have been made to establish a specific legal relationship, whether or not such statements contain all the necessary elements and whether or not the employer has complied with its obligation to provide certain information in writing.
In accordance with the above, the legal relationship is to be deemed to be an employment relationship regardless of what title the contract is given, if all circumstances of the case imply that it was an employment relationship that was established between the parties. When looking at such circumstances, particular regard must be paid to the negotiations between the parties prior to the execution of the contract, the legal statements made by the parties upon the execution of the contract or during the carrying out of the work, the nature of the actual work carried out, the nature of the rights exercised by the parties and the obligations met by the parties. With respect to the classification that is given to the legal relationships under which the work is carried out, a court procedure can be initiated, thus any decision classifying the working relationship made as a result of a labour investigation can be challenged in the courts.
With respect to labour investigations, a further amendment provides that the amount of the labour fine will increase as from 1 May 2003. Thus, on the first occasion of violating a provision of labour law, the fine can range from HUF 50,000 to HUF 2,000,000. If several provisions are violated or a second violation takes place within three years of the previous fine becoming final and conclusive, the fine can range from HUF 50,000 to HUF 6,000,000. However, the amount of the fine cannot exceed HUF 3,000,000 if the number of employees at the employer being investigated does not exceed 20 upon the commencement of the investigation.
7. Part-time Employment
It is forbidden to discriminate against employees on the basis of the fact that they work part-time. The Amendment requires that the remunerations of the employees working part-time should be calculated in proportion to their working hours, if remuneration is based on the number of hours worked. Pursuant to the Amendment, it is to be ensured that part-time employee are entitled to possibly take up full-time employment and vice versa under the direction of the employer.
8. Fixed-term Employment
With respect to fixed-term employment, Hungarian regulations are mostly consistent with EU norms, however, the Amendment contains further additions.
The same parties may establish repeated fixed-terms of employment or extend the fixed-term if it is justified by the employer's rightful interest and it is not aimed at impairing the employee's rightful interest. Any employment established or extended in violation of this rule is to be considered to be employment for an indefinite period of time.
A fixed-term of employment must not exceed five years and this includes the cumulative term of numerous fixed-terms of employment when the latter term is established within six months of the termination of the previous fixed-term.
9. The transfer of an employer to another employer subject to the effect of the act on the Legal Status of Public Servants or State Employees
If the employer changes because the whole or a part of the employer is transferred to an employer, who is subject to the effect of the Act on the Legal Status of Public Servants or State Employees, then the employment of employees employed by or engaged in the activity of the employer terminates upon transfer.
10. Temporary assignment within Hungary
In the event of an employee being temporarily assigned within Hungary, if the time of travel is not included in the working hours of the employee, the employee is to be entitled to 40% of his/her personal base salary unless the collective agreement provides otherwise.
11. Working Hours
A collective agreement can depart from the provisions concerning breaks at work, daily time for rest, weekly days of rest, time for rest and work carried out on Sundays. In addition, a collective agreement can provide the number of working hours that must be worked by each employee (a working time frame) for the maximum of a one year or 52 week period, only with respect to the following employees:
- flight attendants in civil aviation, aeroplane engineers and employees operating and controlling the equipment providing service for aircrafts;
- employees working in the national and international passenger transport by road and transport of goods;
- employees providing transport and ensuring undisturbed traffic in the scheduled public transport in towns;
- employees employed in the international passenger transport by railway, national and international transport of goods by railway or employees ensuring undisturbed rail traffic.
12. Duty and Stand-by
The Amendment regulates different forms of stand-by in a different way as the related EU directive allows national law to define stand-by. The Amendment divides the notion of stand-by into two forms:
- duty: the Amendment deems it to be duty if the employee is available to carry out work at a place specified by the employer;
- stand-by: the Amendment deems it to be stand-by if the employee is at a place chosen by himself/herself but he/she is available and ready to carry out work at any time (according to the employer's instructions).
Pursuant to the Amendment, no more than 160 hours of stand-by can be performed in a month. If a working time frame is applied, the number of hours of stand-by in a month or four weeks is to be calculated on the average hours of stand-by in the working time frame. Unless otherwise provided for in the collective agreement, stand-by may not be ordered during the weekly day of rest if the employee has been on stand-by on his/her weekly day of rest or during weekly time for rest in the previous 168 hours. If an employee is required to be on duty or stand-by, it has to be communicated to him/her at least one week before its commencement and the period must be for at least one month.
The Amendment provides the remuneration for stand-by, which is less burdensome with respect to employees, in the amount of 20% of the personal base salary. An employee is entitled to 40% of the personal base salary for duty.
The above provisions of the Labour Code are only to be applied to health care employees in the absence of alternative statutory provisions.
13. Sick-leave on Public Holidays
The Amendment makes it clear that if any day of sick-leave falls on a public holiday, such a public holiday is to be considered as a business day, thus the period of sick-leave does not break on and is not interrupted by such public holiday.
14. Obligation of Registration
The employer's obligation of registration has been expanded. The employer will now be obliged to keep a register of data concerning the duty and stand-by carried out by the employees.
15. Performance Requirements
The employer is to determine performance requirements by way of a procedure based on previously specified objective measurements and calculations, which should include the examination of whether the criteria can be fulfilled fully and completely in normal working hours. Employees are to be informed in writing, prior to their application of the performance requirements, on how the salary will vary on the basis of their performance. In the case of a dispute concerning the determination of the performance requirements, the burden of proof is on the employer to prove that its procedure did not violate the requirements of good faith and fairness.
16. Labour Litigation
The Amendment expressly states that the deadline of thirty days within which a statement of claim must be submitted, is considered to be met if the statement of claim addressed to the court was posted, at the latest, on the last day of the deadline. If the party does not meet the deadline for the submission of the statement of claim, it is possible for him/her to present a justified excuse.
