Hungarian Labour Law Newsletter 2012

L a w F i r m

NEWSLETTER

www.balazshollo.hu

May-August, 2012no. 22

Regulation under HungarianLabour Law

Special rulesfor leading employeesin the new Labour Code

Introduction to discreet event simulation

FOUNDATION MEMBER OF EAST LEGAL TEAM EEIG AN INTERNATIONAL ASSOCIATION OF EASTERN-EUROPEAN LAW FIRMS

SPECIAL EDITION – Hungarian Labour Law

“Full Service Law Firm of the Year in Hungary”

! !"# $#%&''&'% of 2012 several new laws came into force or were amended in the !eld of business law. Inter alia I mention the new public procurement law, the new data management law, or the important changes regarding the procedure of company incor-poration.

As for the changes in law we have to mention the new La-bour Code coming into force on 1 July 2012. Because of the new Labour Code all the labour contracts and other labour law docu-ments should be reconsidered and – if necessary – amended and complemented at Hungarian companies. In regard to the impor-tance of the changes in labour law in our present Newsletter we would like to call our readers’ attention to the most important changes in a way that we are willing to deal with labour law rela-tions from di"erent aspects.

If you have any questions and/or remarks, we are at your dis-posal to answer them.

Regards, Dr. Tamás BALÁZSManaging Partner

Attorney at law

Dear Readers,

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Regulation under Hungarian Labour Law

Hungarian legislation follows both European legislation and in-ternational trends in the !eld of labour law while showing char-

acteristics inherent in national regulation. "at is why this article attempts to present a brief overview of the main lines of Hungar-ian labour law for those who wish to enter into an employment relationship in Hungary. "e present article summarises regula-

tions introduced by the new Labour Code as of 01 July 2012.

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APPLICABLE LEGISLATIONAs of 01 July 2012 the new Labour Code (Act I of 2012, hereina#er referred to as: the La-bour Code) will contain the e"ective rules of labour law, which code replaces the currently e"ective Labour Code (Act XXII of 1992,). $e provisions of this Act are supplemented by the Civil Code (Act IV of 1959, hereina#er the Civil Code) as the code of private law that sets the scene in the background. Moreover, Act I of 2007 concerning the entry and stay of persons that have the right to free movement and stay as well as Act II of 2007 concerning the entry and stay of nationals of third coun-tries have signi!cance for foreign nationals, as these transpose the rules of the EU directive on long-term stay and the Schengen Code of bor-der control into Hungarian law.

It should be highlighted that the rules of performing work are addressed under separate legislation in the case of employees in the pub-lic sector and in public administration which, in many a case, deviate from the provisions of the Labour Code. Act XXXIII of 1992 on the status of public servants and Act XXIII of 1992 on civil servants contain rules other than the common ones owing to the social role and signi!cance of these two careers. In the case of employees subject to their personal scope, the Labour Code shall be applied to them with a general character or only if other regulation is unavailable.

As regards the public sector, priority regu-lation applies to persons working as members of the regular forces who are subject to di"er-ent regulation for reasons of national and pub-

lic security (Act XLIII of 1996 on the service of the professional members of the armed forces).

BASIC PRINCIPLES, GUARANTEESA system of guarantees based on the basic principles permeates the whole of the regu-lation which protects both the employer and the employee, such as the principles of mutual cooperation, good faith and fairness, the obligation of the parties to provide infor-mation on a mutual basis, the right to rep-resentation of interest and self-organisation, the ban on discrimination, the protection of the weaker party, positive discrimination based on social grounds, the requirement of proper legal practice etc. If legal assurances are violated, the injured party has the right to seek remedy at a court of law. Here we call attention to the fact that as opposed to the 5 years of statute of limitation in civil law, that for claims under labour law is 3 years. Liabil-ity for damage caused by a criminal o"ence prevails for 5 years; if, however, the period of culpability is longer, the statute of limitation will correspond to it.

WORKING RULESIn Hungary, one can become employed from the age of 16 and young employees below the age of 18 are eligible for certain preferences. For example, young employees should not be assigned to work that may have disadvan-tageous consequences with regard to their physical build and development, therefore such jobs can be !lled by them only if spe-ci!c working conditions are met and a#er

Dr. Sára FEKETE senior lawyer, Dr. Klaudia RUPPL lawyer, Dr. Tímea SZABÓ lawyerBALÁZS & HOLLÓ Law Firm

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NEWSLETTERprior medical examination. However, pu-pils of 15 years of age from primary schools, vocational schools and secondary schools may also establish an employment relation-ship, but only during school holidays. In this case, agreement by their legal representative is also required for the establishment of an employment relationship. Moreover, young employees of school age may be employed under rules other than the ones above on an exceptional basis for artistic, sports, model-ling or advertising activities as speci!ed by law, with permission from the public guard-ians’ service.

Employees lacking capacity may only es-tablish employment relationship for a posi-tion they can hold permanently and continu-ously with regard to their health conditions. Legal declarations of such persons shall be made by their legal representative.

Certainly, providing the conditions and tools for the performance of work is the re-sponsibility of the employer in accordance with the European models; similarly, it is a fundamental requirement for the employee to report to work at the beginning of the working hours in a condition that makes him capable of and suitable for performing work.

Total working time is 8 hours per day and 40 hours per week. Rules that apply to the employment relationship or an agree-ment between the parties may prescribe shorter total working time. Based on agree-ment by the parties, total working time may be increased to max. 12 hours per day or max. 60 hours per week (in case of jobs with a stand-by character, or the employment of

close relatives). Since 01 September 2011, the employer may decide to rearrange the work-ing hours not used because of the temporary decrease of the original working hours and to use the remaining time in a subsequent period, increasing the working hours up to maximum 44 hours per week. Employment in a longer working time is possible for a one-year period maximum; in case the em-ployer exceeds this period the employee is entitled to a triple salary. Employees may be employed in a longer working time only a#er one year calculated from the termination of the previous agreement of the parties.

Working time may be speci!ed in terms of working schedule or working time frame; in either case, the decision is to be made by the employer. If the working time frame is used, the beginning and the end of the working time frame has to be stipulated about which the employee has to be informed in writing. $e daily and the weekly working time of an employee must not exceed 12 or 48 hours, respectively; for those employed on a stand-by basis, the daily and the weekly working time must not exceed 24 hors and 72 hours, respectively. In the latter case, the longest pe-riod of the weekly working time includes the total period of the stand-by as well as the pe-riod of extraordinary work called for outside the stand-by period. $e length of the weekly working time shall be taken into account as an average of the working time frame. When using the working time frame, working time can be allocated to working days unevenly; in such cases, however, at least 11 hours of rest must be provided for the employee between

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the end of the last day’s work and the begin-ning of the next day’s work. In such cases, the daily working time must not be less than 4 hours; however, the parties may agree on shorter working time for a day in case of part time work.

$e length of the working time frame may be stipulated in a maximum 4-month and/or 16 weeks time frame. According to the Labour Code, the length of the working time frame can be increased to maximum 6 months and/or 26 weeks on the basis of an agreement concluded by the parties, without any respective collective agreement provi-sion.

As of 01 July 2012, a collective agree-ment can increase the working time frame to a period longer than 16 weeks, stipulating a time frame of maximum one year and/or 52 weeks due to technical or work organisation reasons.

In order to facilitate overseeing of the rules concerning working time and rest, the beginning and the end of the working time frame should be stipulated about which the employee has to be informed in writing; no-tice is considered as served if the dates are an-nounced locally as customary. It is important that using the longer working time frame must not result in evading the rules govern-ing the total working time.

Employees are eligible for two days of rest every week, one of which should fall on Sun-day; when using the working time frame, the employee may be given an uninterrupted pe-riod of rest on the basis of this work schedule, covering at least 48 hours per week instead of the days of rest, which must include a Sun-day. When using the working time frame – provided that the employee is subject to the provisions of a collective agreement – the day of rest may be provided to the employee, ei-


ther in part or in whole, in a combined form during the period of the working time frame stipulated for the employment of the em-ployee on the basis of the provisions of the collective agreement.

Special rules apply to employees per-forming work on stand-by, doing seasonal work, working on duty, or working in an un-interrupted working order or in 3 shi#s or in multiple shi#s. $ese rules are adapted to the nature of the work performed, the activities of the employer or the character of the sea-sonal work.

Naturally, the law prescribes a ra# of compensations to be provided by the em-ployer with regard to these authorised di"er-ences, such as the di"erent amounts of allow-ances for working in shi#s, the obligation to provide time for rest, allowance for separa-tion, supplement for downtime, supplement for overwork, etc.

ESTABLISHMENT AND TERMINATION OF THE EMPLOYMENT RELATIONSHIPPursuant to the provisions of the Labour Code, any employment relationship can be established, amended and terminated in writing only.

$e Labour Code prescribes a number of fundamental obligations for establishing an employment relationship (e.g. an em-ployment contract in writing, the data of the contracting parties, the amount of the wage, speci!cation of the job, the place and time for the performance of work, etc.), be-yond which the parties are free to stipulate

the content of the employment contract. $e obligation to provide information ex-ists and applies mutually to the parties from the very !rst moment, including the execu-tion of the employment contact when the employer is required to provide all essential information to the employee in connection with the performance of work. $is infor-mation may be provided orally; however, the employer must provide such informa-tion in writing also to the employee within 15 days from the execution of the employ-ment contract at the latest. Employer is not obliged to provide information to the employee, if the duration of employment relationship does not exceed 1 month, or if the weekly regular working hours do not exceed 8 hours a week.

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$e cases for the termination of the em-ployment relationship are listed by name in the Labour Code, classi!ed by cases and grounds. Accordingly, the employment relationship is terminated upon the expiry of the de!nite pe-riod of work, the death of the employee, the liquidation of the employer without legal suc-cessor and in the case when the employee is transferred from being subject to the act on the status of public servants to that on the status of civil servants; the employment relationship can be terminated through either ordinary notice or notice with immediate e"ect, with mutual agreement of the parties, and with immediate e"ect during the trial period. Employer may terminate the employment relationship of an employee employed for a de!nite period with notice by immediate e"ect; in such case how-ever, the employee shall be paid one year’s av-erage salary, or, if the period remaining from the de!nite period is less than one year, his av-erage salary for the remaining period. Below, we describe the two most important cases for termination.

1. Cases of ordinary terminationAn employment relationship established for an inde!nite period of time can be ter-minated both by the employee and the em-ployer; there is no valid deviation from this. On the basis of their mutual agreement, the contracting parties may exclude the right of ordinary termination for 1 year at most. $e employer must provide grounds for its ter-mination of the employment relationship, except if the employee is classi!ed as a pen-sioner. $e reason for the termination must

be clear from the grounds provided. For the bene!t of the employee, the employer must prove the validity and the reasonableness of its explanation for termination in case of any dispute. $e reason for the termination of employment must be in connection with the capabilities of the employee, his behaviour with regard to his employment and the op-eration of the employer.

$e employer must not terminate the employment relationship with ordinary ter-mination during pregnancy, maternity leave, unpaid leave for the purpose of nursing or caring for a child, voluntary secondment military service and also, during a period of maximum six months to be counted from the beginning of treatments complying with the legal regulation related to human repro-duction procedure. $e employee may refer to pregnancy as a legal obstacle of ordinary termination on the employer’s side only, if the employer had been informed about the employee’s pregnancy prior to the announce-ment of ordinary termination.

As of 01 July 2012, termination by em-ployer can be disclosed during the so called Protection period, i.e. incapacity to work due to illness, unpaid leave for the purpose of car-ing for a sick child, unpaid leave for nursing or caring for a close relative at home. $e ter-mination notice can be disclosed during such period but the notice period will start only following cease of the obstacle.

Also as a consequence of the modi!ca-tion of the Labour Code in September 2011, voluntary termination of employment is possible also for employment relationships

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of determined period: the employer can ex-ercise this right if it is under liquidation or bankruptcy procedure, in case of inaptitude of the employee or if the maintenance of the employment relationship is impossible due to events a"ecting directly and seriously the activity of the employer.

2. Cases of termination through notice with immediate e(ect$e employer or the employee may termi-nate the employment relationship through notice with immediate e"ect if the other party has violated his ma-terial obligation arising from the employment relationship wilfully or through gross neg-ligence or otherwise shows any behaviour that makes maintenance of the employment relationship impossible. $e right to termination through notice with imme-diate e"ect can be exercised within 15 days from the date on which the grounds thereto became known, but not later than within one year from the onset of the reason thereto; in case a criminal o"ence is committed, it can be exercised until the statute of limitation. If the right of termination through notice with im-mediate e"ect is to be exercised by a body, the date on which it learns about the cause is the date on which the body – as the body exercis-ing the employer’s rights – is informed about the cause for immediate termination.

Both the employee and the employer are entitled to exercise the right of termi-nation with notice by immediate e"ect.

$e general rule is that the employee and the employer are alike obliged to provide grounds for such termination, however, no argument is necessary, if the employment relationship is terminated during proba-tion period or if the employee terminates a !xed-term employment relationship.

Regarding legal status of employees in senior positions, the length of defence period preceding fulfilment of retirement age remains 5 years, but the employer may terminate the employee’s fixed-term

employment relationship only, if the other party

violates his material ob-ligation arising from the employment relation-ship wilfully or other-

wise behaves in a way that makes maintenance of

the employment relationship impossible.

3. )e general rules of terminating the employment relationshipUpon termination of the employment rela-tionship, the employee must hand over his position as prescribed and make settlement with his employer. $e conditions for hand-ing over the position and making settlement must be provided by the employer. Upon termination of the employment relationship wages and other amounts due to the employ-ee must be paid to him and the certi!cates stipulated in laws and other legislation con-cerning the employment relationship must be issued to him.

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LEGAL CHANGES REGARDING LABOUR RELATIONS1. Legal changes regarding the workers’ council (workers’ representative)Workers’ council is a representative organi-sation of employees, which represents em-ployees towards employers in connection with exercising of rights deriving from the Labour Code; its main task is monitoring of observance of labour regulations. Workers’ councils must be established at every work-place or respectively, in every independent business establishment (department) of the employer, where the number of employees exceeds 50. Workers’ representative must be chosen, if the number of employees is less than 51 persons, but it exceeds 15 persons. Workers’ councils or respectively, workers’ representatives may be elected for 5 years by employees entitled to vote. As of 01 July 2012, workers’ councils of the same employ-er may establish not only a central workers’ council, but a workers’ council on the high-est level of the enterprise group.

$e employer and the workers’ council (workers’ representative) may conclude an agreement in order to facilitate their coopera-tion. $e agreement may contain regulations regarding rights and obligations of employees and the employer, provided that no such trade union has been established at the workplace in question, which is entitled to conclude a collective agreement or respectively, if the employer does not fall within the scope of a collective agreement previously concluded by it. Workers’ agreement may be concluded for a de!nite period i.e. for the duration of

the assignment period of the workers’ council (workers’ representative) – but for 5 years at most.

2. Legal changes regarding trade unions$e primary aim of trade unions as repre-sentative organisations is the promotion and protection of employees’ interests. $ose trade unions, which operate a representative organisation by the employer or have perma-nent o%cers, are considered as organisations entitled to employee representation.

Trade unions ful!l their representative functions primarily by concluding collec-tive agreements. As of 01 July 2012 the new Labour Code abolishes the category of rep-resentative trade unions, and prescribes that trade unions are entitled to conclude collec-tive agreements with the employer or respec-tively, with the representative organisation of the employer only, if the six-month average number of their members reach the number of employees engaged in employment rela-tionship with the employer or respectively, 10 % of the employees falling within the scope of collective agreement concluded by the em-ployer’s representative organisation.

Collective agreements may regulate rights and obligations derived from or con-nected to the employment relationship. Col-lective agreements may regulate the parties’ behaviour regarding conclusion and termi-nation of the collective agreement, exercising of rights and ful!lment of duties arising from the agreement. Each employer may conclude only one collective agreement. Collective agreements must be concluded in writing.


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!" H#$%&'(&$ L&)*#' C*+" provides for special rules regarding the leading employees (the CEO of the employer and his sub-stitute), and di"erentiates between employees in the

position of an executive o%cer and employees who are leading employees by virtue of the de-cision of the employer, because of the impor-tance of their position. $e latter employees

can be employed based on a labour contract only. In this chapter, we will summarize the rules concerning the second type of employees in leading position according to the regula-tions of the Hungarian Labour Code (Act No. I of 2012), which is going to come into e"ect on 01 July 2012.

In order to qualify as leading employee, the following conditions must be met: on the one hand, the sphere of activity of the employee as determined by the employer must be either of

Special rules for leading employees in the new

Labour Code"e managing director of a company can perform his activities in two relationships; within the frames of either an assignment agreement according to the Hungarian Civil Code or a labour

contract according to the Hungarian Labour Code.

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high signi!cance as regards the operation of the employer or of highly con!dential in na-ture; on the other hand, the salary of the em-ployee has to reach the amount equalling seven times the minimum salary.

$e employer has to inform the leading employee at the beginning of the labour rela-tionship that he is in leading position based on the decision of his employer and that he is submitted to speci!c rules of the Hungarian Labour Code.

$e Hungarian Labour Code gives special rules for leading employees concerning the notice period in case of termination with im-mediate e"ect. For example, the right to give notice can be exercised in three years begin-ning from the occurrence of the cause or, if qualifying a crime, it can be exercised during the limitation period. Moreover, the employer can terminate the labour relationship of the leading employee, if a close relative of the em-ployee creates a relationship for work in the same sphere of activities, or in the same com-mercial relationship, or with an employer be-ing in business contact with the employer of the leading employee.

$e leading employee can not establish further labour relationship nor can he enter into an assignment agreement. $ere are fur-ther rules applicable to these leading employ-ees, e. g.: they can not carry out the same or similar activities like the activities of their em-ployer, they can not create any contract in this sphere of activities, they can not hold shares in a company with the same sphere of activities; furthermore, they are obligated to notify their employer of such kind of activities carried out by their close relatives. In case of violation of

these rules, the leading employee shall be liable according to the general rules of civil law.

Furthermore, the leading employee is fully liable for any damage committed negligently. Di"erently from the general rules, if the labour relationship is illegally terminated by the lead-ing employee, he is liable with his absence fee for twelve months.

Within the frames of the labour contract, the leading employee – with regard to his po-sition – shall dispose individually of his work time, and he has no right to receive remunera-tion for overtime work.

We would like to stress that the liability rules for executive chief o%cers and for their substitutes, e.g.: managing directors, general managers are even stricter.

In comparison with the general regula-tion, it is a substantial di"erence that in case of termination of the leading employee’s employ-ment in the course of bankruptcy or liquida-tion proceedings, rules relating to remunera-tion to be paid in case of termination of the employment must be applied by way of the following derogation: the employer is obliged to pay in advance the amount equalling the ab-sence fee of the employee for the period of 6 months at the most. Remuneration that must be paid to the leading employee in excess of the above amount becomes due upon the end of the bankruptcy or liquidation proceedings.

Consequently, the labour contract of these leading employees contains special rules and if the Hungarian Labour Code does not al-low deviation in case of a certain rule, it will become part of the labour contract without being indicated or being otherwise indicated therein.

Dr. Sára FEKETE senior lawyer BALÁZS & HOLLÓ Law Firm

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Introduction to discreet event simulation

Regardless of a company’s !eld of operation, its actual day by day operation is the cumulation of the work of several di#erent divisions and their – inner or overlapping – processes, which

are also likely to run paralleled. Generally speaking, the bigger a company is, the wider the scopes of its operations are, its net-work of processes becomes more and more complex. Now, what

exactly does follow from these statements?

&*+,- +.!, !"# /0#12,, +#13/1*2'4# /3 !"# 4/*+2'- is determined by a number of factors af-fecting the performance of individual processes and their sub-processes. For example, it might just

prove to be worthless to increase marketing spending or employ more sales personnel, if the company is unable to ful!l the grow-ing demand for its products with its current production capacities. $e relation between the growing demand generated by enhanced sales e"orts and the capability of the com-pany to ful!l such demand is admittedly ob-vious. However, in daily practice, relations between performances of various processes are o#en far from being apparent, let alone they’re mainly determined by factors, which are particularly di%cult to measure, such as the competence of employees or the e"ect of

a technological paradigm shi# on the mar-ket. $en again, it’s somewhat vital to reveal the exact nature of relations between pro-cesses in order to maintain a cost-e"ective manner of operation, enhance performance and determine the focus of developments. Or simply to make information available that is necessary for all kinds of decision making from associating tasks to employees to management-level risk management.

A BLANK CANVAS AND MORE$e tool, which can do this very job, is called discreet event simulation (DES). With the help of DES it is possible to inter-pret and simulate processes exactly as they go through in reality no matter if they’re as simple as linear back o%ce processes or as complex as manufacturing systems or mar-ket entry strategy evaluations.In simplest terms, DES virtually rebuilds processes from the most basic building blocks: a cus-

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Anita TOMAYER, QualiDat K#.,+36 20-471-3958, [email protected], www.qualidat.hu

tomer’s call is received by the call centre – the call centre’s IVR reads up menu points and their associated dialling numbers – the relevant menu point is chosen by the cus-tomer -- the call is queued up behind pre-vious calls yet waiting to be answered – a customer service representative becomes available to answer the customer’s call – the customer service representative answers the call – etc.

$e use of the word “tool” is by no means accidental. Just like a knife might be used to cut the bread !rst and then optionally also to spread butter over it, DES is utilised accord-ing to the speci!c needs of a given company. Once the foundations are laid -- a model, capable of representing processes as they are in reality, is developed – it’s only up to pa-rameterisation and constraints of optimisa-tion to determine how and what the model is used for.

Do you need to know the exact amount of production cost per product per process? A DES model which measures the processing and idle times and applies Time-Driven-Ac-tivity-Based-Cost-Analysis will tell you that. Due to the nature of your industry, workload is &uctuating at your company and you want to know the optimal number of human re-sources? A DES model, which incorporates the rate of said &uctuation and runs tens of thousands of simulations, will quite likely come up with the correct answer.

To sum it up, discreet event simulation comes particularly useful when the complex-ity of the processes doesn’t make it possible to precisely understand and evaluate the possible outcomes of a decision; when making actual measurements would be unreasonably time-consuming and/or costly; practically whenever you have to deal with uncertainty – something that surely comes around once in a while.

BALÁZS & HOLLÓ LAW FIRM H-1066 Budapest, Teréz krt. 46., Mark Center 4th &oor.Tel/Fax: (36-1)302-5697; (36-1)302-7938; (36-1)312-1103 E-mail: o%[email protected]; www.balazshollo.hu

Contact Persons:Dr. Tamás BALÁZS

Attorney at Law, Senior PartnerDr. Dóra HOLLÓ

Attorney at Law, Partner

Documents

Hungarian Labour Law Newsletter 2012