Harmonisation of the Hungarian labour law to the EU regulations

Background

After Hungary's ratification of the accession agreement with the European Communities in 1994, the Hungarian Government constantly made efforts to harmonize its national legal rules in all areas with the relevant EU legislation. This is particularly important in the field of employment law and industrial relations, since from the early nineties, the European Commission increased its efforts to create uniform working conditions in the Member States.

Until today, the Council of the European Communities enacted a number of rules in the field of employment law and industrial relations. Since the relevant EU legislation have been done constantly by Directives since the seventies, these rules had to be implemented into the national rules of the Member States. The reason for this is that Directives are usually framework rules, principles and therefore national legislators have to fill them with the detailed content.

Because of this particular legal form, Directives cannot be applied before national courts in a normal case. However, it must be kept in mind that if the rules in a Directive are sufficiently precise and the Member State failed adopting them within the prescribed time, Directives can have "vertical direct effect". "Vertical direct effect" means that these individual rules can be relied upon before national courts as well as the European Court of Justice, but only against the state and its bodies, including state-owned private enterprises.

The current status of the legal harmonization in the field of labour and employment law in Hungary

In the following paragraphs we listed the Directives enacted in the field of employment law and industrial relations. Under each Directive we prepared a brief summary about the situation of the harmonization process as well as their likely impact in the life of a company operating in Hungary.

• Collective Redundancy Directive (75/129/EEC) This Directive was fully incorporated into the body of the Act XXII of 1992 on the Labour Code ("Labour Code") in paragraphs 94/A § to 94/G §. The requirements of this rules are basically the duty to consult and inform the competent public authorities regarding the planned collective redundancy, following a tight scheme. No changes on proposed by the EU to this directive until this date.
• Safety and Health in Work Directive (91/383/EEC)The Directive is now fully incorporated into the Hungarian laws; it requires the extension of the national regulations on workplace safety to all workers, both part-time and full time. No amendments were proposed by the Commission in the past few years.
• Individual Employment Conditions Directive (91/533/EEC)In Hungary, this directive was fully implemented in 2001; the duty to inform the other party about all relevant information concerning the employment relationship is now concretised. This, however is not a novelty in Hungarian employment law, since it always contained a general rule that the employer and the employee have to inform each other on every relevant facts about their relationship.No change can be expected in the near future.
• Working Time Directive (93/104/EC)After the recent amendments, effective from 1st of July 2003, the Hungarian legislation is in harmony with this Directive. The goal of the working time Directive is to ensure a minimum level of annual leave, break time and the protection of night and shift workers through the European Union. In 2000, there was a major amendment to the Directive (2000/34/EC Directive), which is now also implemented into the Labour Code. This amendment affects drivers, pilots and everybody who works in the field of transportation of goods and personnel. The rules regarding the working time of employees working in this sector became stricter; for example it is not possible now to deviate from the maximum weekly working time of 48 hours. Because of this recent change, there is no proposal by the Commission of the European Communities in the field of working time, thus no changes can be expected in the near future. The Hungarian working time rules are providing the required minimal level, or in most cases, greater protection.
• Protection of Young Workers directive (94/33/EC)This Directive was implemented in 2001. The Labour Code makes restrictions as to the working and leisure time; for example young people cannot work with hazardous materials etc. Extremely important to observe this rules if the company employs young people (people with the age 16 to 18) because the protective rules extend by law to cases when the young workers are not employed with an employment, but with a civil law contract. There is currently no plans to amend this Directive.
• European Works Council Directive (94/45/EC)This directive is implemented, but not yet formally in force in Hungary. The Hungarian Parliament just recently enacted the Act XXI of 2003 on the European Works Councils ("Works Council Act") which will enter into force after the actual EU accession next year. If a multi-national company operates all around the European Communities, it will certainly fall under the scope defined in the Works Council Act. According to this, a company operating in the EU has to set up a European Worker's Council if it has at least 1000 employees in the territory of the Member States and it has at least 150 employees in two different Member States.) A consequence of this rule is that after Hungary's EU Accession, the Hungarian subsidiary will have to send a representative to the European Works Council of the parent company. This representative has to be appointed by the local Hungarian Works Councils. In a case if no Works Council in the company, the Works Council Act sets out a procedure of election in order to select the representative. The Community Directive also prescribes that all costs regarding the European Works Council has to be paid by the central management of the company and not by the Hungarian subsidiary.The purpose of the European Works Council is to establish a consultation channel between the employees and the central management in order to inform the employees about the financial situation, the investment and employment policies, collective redundancies etc. of the company at a Community level. This consultation is mandatory once a European Works Council was set up. These rules will be effective after the EU accession in May, 2004.
• Posting of Workers Directive (96/71/EC)This Directive is implemented into the Hungarian Labour Code in section 106./A § by the recent amendment, effective from 1st of July, 2003. The Directive requires that if an employee of a non-Hungarian company was temporarily transferred to the territory of Hungary, certain rules of the Hungarian Labour law will have to be applied to this employee. These rules are the ones regarding the (i) length of the working time (ii) the minimum level of the annual leave (iii) the minimum wage (iv) the conditions of hiring-out (v) the work safety rules (vi) the prohibition of discrimination (vii) and the rules on the protection of pregnant mothers and young workers.The Hungarian Labour Code must be applied only if the local law of the original employer is less favourable. The application of this rule can be problematic, since it is very hard to conclude that which law is more preferable to the employee if it is cannot be measured in numbers, such as rules on the prohibition of discrimination. This new rule should be kept in mind when there is some employee transfer from the parent company to the Hungarian subsidiary.The European Commission proposed no amendments so far.
• Part-Time Work Directive (97/81/EC)This Directive was implemented also by the recent amendment to the Labour Code, effective from 1st of July, 2003. The two main changes were the extension of the principle of non-discrimination as regards to part-time workers as well as the principle of pro rata temporis which require that every benefits of the employment regulations have to be extended to part-time workers proportionately to the length of their working time.
• Determined Time Employment Contract Directive (99/70/EC)This Directive is implemented; its rules are effective from 1st of July, 2003. There are two new rules in the Labour Code, enacted to harmonize with the Directive:

1. There is now an explicit prohibition on discrimination on the basis of determined time employment relationship and
2. The need of a reasonable justification of the extension of a determined time employment contract by the employer.

The part-time work as well as the determined-time employment as atypical forms of employment relation were for a long-time in the spotlight of the European Commission; however the current rules will not likely to be amended soon became the European Commission first wants to have a feedback: the revision was set to 2005.

• Transfer of Undertakings Directive (2001/23/EC)The Labour Code is now fully harmonized with this Directive. In the case of a transfer, the recent amendments codified the uncertainty about the existence of a Collective Agreement and now it contains more guarantees to protect the employees. No changes can be expected in the near future; the deadline for revision set up by the Commission is 2007.

• Information and Consultation Directive (2002/14/EC)This Directive was enacted in 2002 and thus far was not formally implemented into the Hungarian Labour Code. However, the Hungarian system of Works Councils are able to satisfy the requirements of the Directive on the whole. The only part of the Directive which may trigger change is that it enacts more detailed rules on the duty of secrecy on the part of the members of the Work Council; it is also possible that companies will have to set up a works council with less than 50 members, if they operate in small units.Overall, this Directive will be not likely to trigger a major change in the Labour Code.

• Insolvency Directive (2002/74 EC)The insolvency directive will trigger some major changes in the current regulation of the protection of employees wage in the case of insolvency by raising the level of protection. This can, however only indirectly affect a company in the form of an increased employer's contribution to the Labour Market Fund because of the increased costs of insurance. Currently not in force; the Hungarian Government have to adapt it in the future.

Anticipated EU legislation in the near future

After the EU Accession, Hungary will be under the duty to implement all future legislation. The Directorate-General for Employment and Social Affairs became very active in the past five years and a number of proposals will be accepted soon.

a. A Directive have been already proposed by the Commission of the European Communities on the equal treatment in employment and occupation. This Directive will be adopted soon and it will have a huge impact on the national legislation. Besides, after the accession, the jurisprudence of the European Court of Justice will be binding on Hungarian courts as it contains some detailed jurisprudence on equal treatment, alternative action and on the protection of employees in the care of a transfer of undertaking.

The Hungarian Labour Courts will be forced to deal with the questions of discrimination in more detail and base their decisions on the contemporary European practice. It will be very likely that all major companies will have to adopt a non-discrimination policy and strictly observe its rules in order to avoid costly litigation.

b. In connection with this, the Directorate-General for Employment and Social Affairs works on an equitable wage regulation, but this issue is very debated and it is not likely that is pass the Council of the European Communities.

c. The EU wants to adopt a Directive on data protection in employment relations; however this cannot be expected in the next two years. Since Hungarian data protection rules are providing a substantially greater level of protection than the EU level, it is very likely that this future Directive will not trigger any major change.

d. There is an advanced proposal on the hiring-out of workers. This Directive will be adopted soon, but since the rules of the Hungarian Labour Code are relatively fresh, no major amendments will be necessary.

Summary

It can be generally concluded that the Hungarian Labour law is in harmony with the EU legislation. However, the bulk of the harmonization was done recently in 2003. Thus, the impact of the directives cannot be measured so far, there is no case-law regarding these rules before the Hungarian Courts.

Very important that then Directives do not crate direct obligations to companies and employees cannot rely on them in the course of an employment litigation: in this regard the current situation will be unchanged. However, the interpretation of the national rules enacted to implement a Directive will to be in accordance with the practice of the European Court of Justice. Thus, there will be a considerable indirect impact of EU judicial practice on the Hungarian Labour Courts.

In the future EU legislation will play a major role in Hungarian employment and industrial legislation law. Hungary is obliged to implement any new directives as well as the case-law of the European Court of Justice.

The closer connection of the Member States will increase the importance of the European level industrial relations. This is shown not just by the institution of the European Works Council, but also that the trade unions and the entrepreneur's association play an increasing role in the process of labour legislation of the European Communities.

dr. Gabriella Ormai / dr. Péter Bán