Some provisions from the new draft Labour Code

The Proposal was drafted without any consultation with the social partners; national employers’ and employees’ organisations can submit their written proposals within a very short deadline of less than two weeks.

The aim of the new LC is admittedly the flexibilisation of employment and the improvement of competitiveness. In line with these objectives, the Proposal increases the possibilities of the employer to support his market and production needs and pushes employees into a more subordinated and dependant position than they are today. The Proposal decreases the protection of employees’ rights to such a decree that it does not even fulfil the ILO requirements of decent works.

There is hardly any paragraph in the new draft which would not - even to a small extent - result in negative impacts on employees. The Proposal changes the regulatory approach: many guarantee elements (under the current regulation banning any possibility of divergence) will lose their guarantee nature; divergence will be allowed through collective agreements or other agreements between the parties, while the current regulations allow changes only to the benefit of the employees. As a result of impairment of their rights, trade unions will have hardly any possibility to fight for better conditions for the employees through the collective bargaining.

Hereafter we quote some of the measures that impair individual or collective workers’ rights, will presumably result in income losses for employees or that are contradictory to international obligations.

I. Measures impairing workers rights

1. Termination of employment by the employer becomes simpler.

Under the current LC the reason for an ordinary dismissal by the employer must be real (objectively true), clear (should unambiguously reveal the reason of the dismissal) and sound (the reason of the dismissal must be linked to the fact that the work of the employee is not needed any longer); in case of a dispute the employer must prove the realness and soundness of the reasoning.

Pursuant to the Proposal, the reasoning must be clear, but the Proposal does not mention the employer having the burden of proof, therefore in case of a dispute the employee will have to prove that the dismissal was unfounded.

2. Legal consequences of wrongful termination of employment will result in negative changes for employees.

Under the current regulations the legal consequence of a wrongful dismissal by the employer is the obligation of restoring the employment, recovering unpaid wages with a deduction of the income from other sources and the recovery of losses and damages. Should the employee not request the recovery of his/her employment or should the court not require it on the request of the employer, the employee is entitled to receive further 2-12 months’ average wages.

Pursuant to the Proposal, in case the court decides that the termination of the employment by the employer was wrongful, the employer will only be obliged to recover a payment for maximum 18 months’ absence. The general principle does not allow the request for restoring the employment; the reemployment of the employee is only mandatory if the termination of the employment breached the requirement of equal treatment or if the employee is a trade union functionary, a member of the works council or the supervisory board.

3. Protection against dismissal is abolished.

Under the current LC the employer must not terminate the employment by ordinary dismissal e.g. during the following periods:

-       incapacity to work due to illness,

-       for the period of sick leave for the purpose of caring for a sick child 

-       during pregnancy, for three months after giving birth, or during maternity leave,

-       leave of absence without pay for the purpose of nursing or caring for children.

Pursuant to the Proposal, the employer has the right to notify the employees on their dismissal during these periods too, the notice period starts the day after the maturation of the above mentioned periods.

The planned measures do not fulfil the requirements of the revised directive 2010/18/EU on parental leave. The directive among others underlines, that men should be encouraged to assume a greater share of family responsibilities, parental leave should be granted in a non-transferable form among parents, the return of the employee to the former workplace should be guaranteed, the father/mother when returning to work should have the right to ask for changes in the working time and working patterns, workers should be protected against less favourable treatment or dismissal on the grounds of an application for, or taking of, parental leave etc. The Proposal does not fulfil these requirements.

4. Legal protection of workers in/close to retirement age is abolished.

Under the current LC an employer is allowed to terminate an employee's employment within the five-year period preceding the date of old age pension by ordinary dismissal only in particularly justified cases. The severance payment for such an employee increases by 3 months’ average wages.

Pursuant to the Proposal, the employment of workers in retirement age can be terminated without particularly justified reasons, as well, and the amount of severance payment is 1-3 months average wages in function of the active years.

5. Employees shall be provided with a detailed salary report sheet of the wages. Written reports of wages shall be provided annually, on request of the employee or on termination of the employment.

Under the current LC employees shall be provided with a detailed salary report sheet of the wages. The report shall be devised as to allow the employee to verify the authenticity of calculations, as well as the grounds and sums of deductions; no deviation from this provision shall be considered valid. The written accounting must include the details of payments for extraordinary work, on-call and stand-by.

The aim of the salary report is to enable employees to check the entitlements and the amounts of deductions. The report must include payments for extraordinary work, stand-by, holiday etc. broken down by entitlements. This facilitates the enforcement of employee’s right for pay on the one hand, and is in the interest of the employer, too, as he can prove the appropriateness of the accounting and the payment of wages. A monitoring and verification of the correct accounting of working time and payment is however impossible if the report is made on annual basis only.

Pursuant to the Proposal, there is no obligation for the employer to inform employees on the possibility of such written information. This regulation does not fulfil Art.14. of the ILO Convention No. 95 by which the employer shall at least draw the attention of the employees - in an appropriate and provable manner - to their possibility of requesting a monthly payment report on the particulars of their wages.

The annual ex post report effects especially negatively employees with a working time frame, as they will not have any information on the overtime they completed for a period of a whole year, only once a year if the employer complies with these regulations on overtime and working time patters. With the annual reporting cycle, the employer will have the possibility to define the employee’s working time arrangement unilaterally and annually which is contradictory to the requirements of the EU working time directive (2003/88/EC).

6. The upper limit of extraordinary imposed work is increased to 300 hours / year

Under the current LC an employee may be ordered to work in extraordinary work duty not more than two hundred hours in any given calendar year; or three hundred hours under collective agreement. 

Pursuant to the Proposal, with an annual leave of 4 weeks, 6.25 hours / week will be allowed for overtime; the Proposal weakens the CAs.

7. The working time schedule of a given day can be changed by the employer at least three days ahead in case of unforeseen events in production or operation

Under the current LC the employee must be informed about the working time schedule for a week’s period at least 7 days before - without other regulations in the CA. Without such notice the last working schedule is relevant.

Pursuant to the Proposal, neither overtime allowance nor downtime shall be paid. This will result in a loss of income and will make the balance of working life - family more difficult.

8. Less days for paid leave.

Under the current LC  the basic paid leave is 20 working days which increases with the age of the employee as follows:

a) above the age of 25. to 21 days

b) above the age of 28. to 22 days

d) above the age of 33. to 24 days

e) above the age of 35. to 25 days

f) above the age of 37. to 26 days

g) above the age of 39. to 27 days

h) above the age of 41. to 28 days

i) above the age of 43. to 29 days

j) above the age of 45. to 30 days.

Pursuant to the Proposal, employees will have above the age 26 + 1, above 31 +2, above 36 +4, above 41 +6, above 46 +8 and above 51 +10 additional workdays for paid holiday.

9. Current regulations on request for leave do not change.

Under the current LC the employer shall schedule one-fourth of the basic leave as requested by the employees, with the exception of the first three months of the work contract. In the event the employee is unable to fulfil his/her obligation to work due to conditions which would disproportionally or substantially harm his/her personal or family related conditions, he/she shall inform the employer about such conditions. In such cases the employer is obliged to schedule in total 3 work days of the basic paid leave - not more than three times - upon request of the employee disregarding the rule on the notice of 15 days. 

The leave shall be scheduled in more than 2 parts only on request of the employee. The employee must be informed about the date of annual leave one months in advance.

Pursuant to the Proposal, the employer is obliged to schedule 5 workdays / year as paid leave in the first 6 months of the work-contract as requested by the employee. At least 10 days must be schedules in one block, but divergence from this is allowed even to the disadvantage of the employee. The intention of impairing workers rights is clearly visible: while the LC in force allows multiple blocks of leave on request of the employee only, the Proposal leaves it to the parties to agree. Due to the hierarchy of their relation, the free will of the employee is at least questionable. The Proposal opens the possibility for a scattered scheduling of paid leave and breaches the employee’s right for recreation. The regulation breaches employees’ rights for recreation and self-determination and deprives the of the entitlement to determine own their annual leave in the first 6 months of their work-contract.

This solution does not fulfil the requirements of the EU directive on working time (2003/88/EC) either, which requires 4 weeks for paid leave. This regulation of the Proposal does not guarantee 28 calendar days as ordinary leave for employees.

Referring to practical difficulties connected to other than general working time patterns, the Proposal suggests that working time should serve as basis for the request for leave; leave has to be scheduled and registered equal to the amount of working hours not worked. This is contradictory to the right of employees for a leave measured in work days and can even lead to a situation when 1 week absence from the workplace is made equal with 2 weeks scheduled leave (e.g.: 6 days / week x 12 hours)

This regulation is anti-constitutional as it may result in a factual decrease of the number of calendar days of recreation. It is contradictory to the EU working time directive as it does not guarantee 4 calendar weeks for paid leave. The regulation is discriminatory with employees working in general work schedules

10. Employer’s liability for damages changes positively for employers.

Under the current LC an employer shall be relieved from liability if able to prove that the damage was caused by an unavoidable event outside his field of operations or solely by the unavoidable conduct of the aggrieved party. The employer's field of operations shall particularly include the causes arising from the conduct related to the activities pursued by the employer in the course of his duties and from the characteristics, properties, movement and operation of the materials, equipment and energy involved. 

Pursuant to the Proposal, the employer is relieved from liability if he can prove that the damage was caused by an event beyond his field of control, he did not have to predict and he was not expected to avoid the damaging condition or the damage. This will decrease the employer’s liability e.g. in case of work accidents.

This solution is not in line with the ILO conventions No. 17. & 42 also ratified by Hungary that rule on workers’ compensation.

11. The employee bears full liability for damages.

Under the current LC employees shall be subject to liability for any and all damages caused by violation of employment-related obligations. In the event of causing damage by negligence, the amount of liability shall not exceed fifty per cent of the employee's average wages for one month. The employment contract and the collective bargaining agreement may specify the amount of liability as no more than one and a half months and no more than six months' average wages, respectively; no deviation from this provision shall be considered valid. Employees shall be subject to full liability for damages caused wilfully. 

The employee bears full liability for the compensation of damages in case he/she does not proceed as generally expected, except in case the damage was not to be foreseen or if it was caused by wrongful behaviour of the employer, or if the employer did not fulfil his duty to mitigate loss.

12. Introduction of employee’s surety.

In case parties agree, the employee shall provide surety for the employer for the receipt of money or valuables, if he makes such payment or transfer or is directly controlling such an activity. The amount of the surety can be a monthly base wage of the employee. The surety cannot be used for the compensation of losses.

This is a new regulation with negative impacts on employees. On the one hand, it cannot be presumed that the financial situation of employees will enable the payment of such surety, and it is unjustified, on the other, as the employer’s claim for loss can be covered by the deductable part of  unpaid wages.

II. Measures resulting in income loss

1. The supplement called „wage supplement for shift work” will disappear.

Under the current LC employees shall be paid a fifteen per cent wage supplement for working in night shift. Employees working in alternating shift or in continuous shift shall be entitled to a 15% afternoon or 30% night shift supplement. Employees working in continuous shifts shall be entitled to an additional five per cent shift supplement for afternoon shifts, and an additional ten per cent shift supplement for night shifts. 

From the regulations currently in force only the supplement for night shift will be retained as a 15% supplement. This will result in major income losses for the employees concerned.

2. For extraordinary work, the employee is entitled for and can decide between a 50% wage supplement or time off, the time off shall not be less than the duration of the work performed.

Under the LC in force until 21. July 2011, employees shall be entitled to a fifty per cent wage supplement for work performed in excess of the daily working time cycle or over and above the working time frame. Employment-related provisions or an agreement between the parties may stipulate the provision of time off in lieu of a wage supplement; the time off shall not be less than the duration of the work performed. 

3. Guaranteed minimum wages will most probably disappear. Social partners will play no role in setting the lowest mandatory wage level.

The amount and the scope of the lowest mandatory wage level (minimum wage) will be set by the government. The Proposal makes no mention of defining guaranteed minimum wage and salary levels on the basis of qualifications and degrees required by any job.

Under the current LC (in force until 21. July 2011) the Government, with the agreement of the National Conciliation Council, shall establish the mandatory minimum wages and the provisions for the supervision of labour relations by a decree.

(After 01. Jan.2011 the mandatory minimum wage for employees with full time employment in case of full leverage is 78 000 HUF. The minimum wage for employees employed in jobs with a qualification requirement of at least secondary school or secondary vocational degree receive in case of full leverage a mandatory minimum wage of  94 000 HUF.)

The fact that the government has the exclusive competence to decide on the amount of minimum wages will substantially weaken social dialogue which is a main pillar of the European social model in the EU. Art. 3 (2) of the ILO Convention No. 26, also ratified by Hungary, stipulates that representatives of employers and employees concerned shall be involved in the process of setting minimum wages and they shall be consulted before fixing the amount. On the basis of the ILO convention and in line with its provisions the Proposal should include consultation with the social partners.

4. Break-time shall not be part of the working time,

even if the CA or the parties agree otherwise. This will result in an increase of the time to perform work and in an income loss through a decrease of the contracted working time and a potential proportional decrease of wages.

III. Measures impairing collective rights

1. Works council regulations

The Proposal does not guarantee works council members protection under the labour law; this is contradictory to the ILO Convention No.135 and to the EU directive on information and consultation.

It does not provide works council members any possibility for paid leave for training, although this is granted employee representatives at the workplace level by the ILO Convention No. 140.,aso ratified by Hungary.

Pursuant to the Proposal, works councils are responsible for monitoring the enforcement of employment regulations -  although this is a classical trade union responsibility. It breaches Art 5. of the ILO Convention No.135 which does not allow to use works councils to undermine the position of trade unions.

2. Consultation rights

Pursuant to the Proposal, the employer is not obliged to provide information or initiate consultation if the facts, information or data revealed jeopardised the rightful economic interest or the operations of the employer. This is contradictory to the EU Directive 2002/14/EC that establishes a general framework for informing and consulting employees, and defines possibilities for divergence in a more restricted form than the Proposal does. This provision of the Proposal also breaches the provision of the Directive that forbids a deterioration of the achieved level of protection.

The Proposal sets a very short minimum deadline for information and consultation (7 days), but on the basis of the wording this can be in practice interpreted and applied as maximum -this again, is contradictory to the Directive.

3. Decreasing trade union rights

The right to object is abolished - this right provided the possibility to veto the employer’s  irregular measures.

The Proposal does not guarantee trade unions the right for information and consultation through binding requirements for the employer. The Proposal reserves all information and consultation rights defined by relevant EU directives for works councils only. This solution breaches in our view European legislation as it leaves the competence to define ’workers representation’ to the member states, however, in line with their laws and practices. In Hungary, under law and according to practice we have had dual workers representation at the workplace level for more than 20 years therefore information and consultation rights must be guaranteed for both types of workers representation structures or at least distribute such rights among them along certain principles. The solution in the Proposal is contradictory to European legislation.

Work time allowance to guarantee the efficient representation of workers interests  is abolished. This regulation is contradictory to the ILO Convention No. 135. Art 2. which stipulates that allowances afforded to workers' representatives as may be appropriate in order to enable them to carry out their functions promptly and efficiently.

Trade union functionaries are not entitled to effective protection by the labour law.

Under the LC in force, the consent of the immediately superior trade union body is required for the transfer or max.15 days posting of an elected trade union official negatively effecting him, as initiated by the employer. The trade union shall justify its refusal of the consent extensively. It should reveal that the planned measure of the employer is due to the employee’s trade union activity and would be discriminatory or would create obstacles to the operation of the trade union body where the employee is active as elected functionary, presupposing that the termination of the planned measure will not cause disproportional and substantial disadvantages.  

The Proposal does not include such protection except the employer unlawfully terminates the employment of workers’ representatives (e.g. trade union  functionary), he can be bound by the court for their reemployment.

The ILO Convention No. 135 concerning Protection and Facilities to be Afforded to Workers' Representatives in the Undertaking which under the terms of the right to organise and collective bargaining provides for protection of workers against acts of anti-union discrimination in respect of their employment stipulates, that Workers' representatives in the undertaking shall enjoy effective protection against any act prejudicial to them, including dismissal, based on their status or activities as a workers' representative or on union membership or participation in union activities. The Proposal does not consider this recommendation.

According to the ILO Recommendation 143 workers representatives should be entitled to protection against all discriminatory measures including dismissal that are based on their involvement in trade union activities. The Proposal does not consider this recommendation.

The elimination of the protection under the labour code is contradictory to the Directive 2002/14/EC establishing a general framework for informing and consulting employees in the European Community, too, which among other requires: „Member States shall ensure that employees' representatives, when carrying out their functions, enjoy adequate protection and guarantees to enable them to perform properly the duties which have been assigned to them”

The right to represent members in court is abolished - this right guarantees the adequate and mainly free of charge representation of employees in court and helps labour disputes end positively for workers.

These measures will make the establishment and the operations of trade unions impossible.

4. Collective bargaining

Pursuant to the Proposal the CA should be made by the trade union representing at least 10 % of the employees its scope covers. The employer is free to decide which of the eligible trade unions he wants to agree with. The employer may conclude several collective agreements.

Works council can conclude a company agreement with the force of the CA if the employer has no CA or no eligible trade union to negotiate. This impairs the right of employees for the representation of interest and organisation. The works council is not a body or inexpedient for the protection workers interests.

The LC in force guarantees all trade unions the right for collective bargaining. The works council has no rights for making a collective agreement.

According to the explanation of the Proposal, the employer can choose which trade union he wants to make an Agreement with. This will result in an arbitrary discrimination of the trade unions. Resulting from the impairment of trade union rights the employer can make some trade unions impossible and promote the activities and the operation of others he prefers,  initiated/established or that are dependant of him, in order to reach a collective agreement serving his own interest. In conclusion, the freedom of organisation will be encroached which is contradictory to international commitments, primarily to the ILO Conventions No. 87. & 98.

With right arises the question of breaching the ILO Convention No 154 on the promotion of collective bargaining. The Proposal does not fulfil the requirements of Art.3 stipulating that the existence of these representatives cannot be not used to undermine the position of the workers' organisations concerned. It is contradictory to Art. 5 stipulating that measures adapted to national conditions shall be taken to promote collective bargaining, among others with the objective of making collective bargaining possible for all employers and all groups of workers in the branches of activity covered by this Convention, the establishment of rules of procedure agreed between employers' and workers' organisations should be encouraged and collective bargaining should not be hampered by the absence of rules governing the procedure to be used or by the inadequacy or inappropriateness of such rules. Finally, it is contradictory to the requirements of Art. 8: The measures taken with a view to promoting collective bargaining shall not be so conceived or applied as to hamper the freedom of collective bargaining.

Against that background, in many workplaces it will be impossible to strengthen workers rights the new LC had derogated even if law allowed any divergence for the benefit of employees, because there will be no trade union to conclude the CA. The Proposal encourages employers to make trade unions impossible and conclude agreements with the works council in line with the employer’s interests, with negative regulations for employees’ rights or to conclude a „pseudo-agreement” with the so-called yellow unions with the same objectives. 

IV. Other measures contradictory to international obligations

1. Fixed-term employment

Under the LC in force the fixed-term employment shall be considered as employment for indefinite period of time if the fixed-term employment is repeated or prolonged between the same parties without the related employer’s rights and the agreement aims at the impairment of the employee’s rights. The Proposal grants this protection only if the fixed-term contract is  re-established or prolonged within a period of 6 months.

The provision of the LC in force was included on the basis of the EU Directive 1999/70/EC. In our view, leaving this provision out of the new regulation is contradictory to Art 5. of the agreement of the social partners in the Attachment of the Directive, by which the choice of the different protection mechanisms is only allowed after consultation with the social partners. The Hungarian legislator cannot choose from the protection mechanisms in the directive without a consultation with the social partners. The Proposal is contradictory to Clause 8.3) of the Attachment to the Directive: Implementation of this agreement shall not constitute valid grounds for reducing the general level of protection afforded to workers in the field of the agreement - in fact, the Proposal definitely reduces this protection.

2. Change of the employer by legal succession

The Proposal regulates the change of the employer by legal succession. Different provisions of the regulation are contradictory to the relevant directive (2001/23/EC): 

Art 3. of the Directive would mean that rights and obligations deriving from the employment at the time of the change shall be transferred from the preceding employer to the succeeding employer; i.e. these rights and obligations shall not be amended due to legal succession. The Proposal does not underline this.

In connection with the employer’s obligation to provide information, it is questionable on the basis of the draft if the works council has the right for information at all. The draft makes no reference to the right for consultation and its regulation on the basis of Art 7 of the EU directive. Similarly, there are no provisions in the Proposal on the role of the controlling undertaking in connection with legal successions. There are no regulations in the Proposal on how the representatives of the employees concerned shall be selected in case there is no works council in the undertaking.

Under the LC in force the right for information and consultation in case of legal succession of the employer is granted to the trade union represented at the undertaking.

The Proposal transfers this right to the works council. The provision of the Proposal is against the law because representatives of the employees concerned receive these rights if there is no works council in the undertaking irrespective of the fact if the company is organised or not. Under Art 3.c) of the directive "representatives of employees" shall mean the employees provided for by the laws or practices of the Member States. Under Hungarian law and in our practices employees’ representatives are primarily trade unions and in certain areas (in the area of participation rights) the works council. The right for information in case of legal succession is primarily a trade union right, in an unorganised enterprise of the works council and only in case none of the two institutions are present, the right can be transferred to representatives of  employees concerned. The provision which in an enterprise without a works council leaves trade unions out of consideration, is basically contradictory to the objective and the provisions of the directive.

The period of time defined for information is also contradictory to the regulations of the directive.

Under Art 4 (2) of the directive, if the employment contract is terminated because the transfer involves a substantial change in working conditions to the detriment of the employee, the employer shall be regarded as having been responsible for termination of the contract of employment or of the employment relationship. The Proposal does not fulfil this requirement, either.

3. Obligation of the employer to provide information

In contrast to the current regulations of the LC the Proposal does not fulfil the requirements of directive 91/533/EEC in connection with the information provided for employees upon concluding the work-contract, and does not respect fully Art 2.i)-j) (governing duration of the working week, information on the parties of the collective agreement) and Art 2.2.a) either (personal data of the parties to the work-agreement)

4. Posted workers

The Proposal does not provide necessary regulations for posted workers on the basis of directive 96/71/EC.

5. Collective redundancy

The regulation is mainly in line with the LC in force at present. Trade unions are not included in the list of parties entitled to consult within the frame of the consultation obligation, i.e. the Proposal does not consider trade unions as workers representatives and this is contradictory to directive 98/59/EC. (similarly to those described under legal succession of the employer). Clearly, an ad hoc committee comprising of unorganised workers has less capabilities to enforce workers interests than trade unions have, therefore the aim of this amendment is to weaken employees’ positions, as well.

The Proposal does not fill the gaps of the current LC: mainly due to the too general, brief and schematic provisions on the information and consultation of workers representatives and its time-frame.

The proposed time-frame is not in line with the requirements of the directive of collective redundancies and does not regulate the termination of employment during the probation period.

6. Working time regulations

The regulation of the weekly working time on the basis of the work pattern of the employee is not in line with the directive 2003/88/EC as the Proposal differentiates among the extraordinary working times. The terms ‘multi-shift’ and ‘continuous working pattern’ are also contradictory to the directive similarly to the provisions on the working time frame, the daily and the weekly rest periods.  

In the absence of a working time frame, the Proposal introduces an institution similar to the working time frame but the weekly working time shall be performed during a so-called accounting period defined by the employer. This regulation evades the rules of working time frame and is contradictory to the directive 2003/88/EC on the organisation of working time.