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Changes in the Hungarian Labour Code from 1 January

Changes in the Hungarian Labour Code from 1 January

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As of 1 January 2023, the Labour Code was amended on several points, creating significant new obligations on the employers' side. We summarize the most impactful parts of the amendments, as well as the novel employers' obligations resulting from such amendments.

With regard to employment disputes, it is of note that the burden of proof now rests on the shoulders of the employer in cases concerning the breach of the prohibition of the abuse of rights. Unlike under the previous regime, should the employee wish to bring action for the abuse of rights (e.g. in relation to termination by the employer) it is sufficient to allege such abuse, and the burden of proof will shift to the employer to show that it has not abused its rights. The significance of this issue is further enhanced by the fact that if the court finds that the employer's termination constituted an abuse of rights, the employee may request the reinstatement of the employment relationship, a matter on which the court has no discretion, i.e. the court is bound by law to order the employer to reinstate the employment at the employee's request. This also entails that, as a legal consequence of wrongful termination, the employer is not only liable to pay an amount equivalent to 12 months' absence pay as compensation for lost wages, but must pay the full amount of lost wages due up until the date when the employment relationship was restored. In certain cases, this can be particularly disadvantageous for the employer. Therefore, before making any notices potentially giving rise to a dispute, it is advised to record the circumstances that demonstrate not only the legality of the measure taken, but also the employer's proper exercise of its rights.

A new feature in relation to the termination of employment is that, even if the law does not require the employer to provide reasons for termination (e.g. due to the fact that the termination with immediate effect occurs during the probationary period or the employee is an executive), the employer may still be obliged to provide reasons. This may be the case when the employee claims that the termination was due to certain specific reasons, e.g. for taking a paternal leave, parental leave or unpaid leave for childcare. It is therefore essential that, even where there is no obligation to provide reasons, the employer should only terminate the employment if valid and demonstrable reasons are available.

Another important change with regard to the termination of employment is that the employer is no longer obliged to unilaterally terminate the employment relationship if the employee is found to be unfit for work by the assessment of the occupational physician. In such cases, the employee may not be assigned work and is not entitled to downtime pay. The new rule is essentially the codification of the case law of recent years, eliminating uncertainty on the issue.

The scope of the prohibitions on termination has been expanded as well: the employment relationship can no longer be terminated by notice during paternity leave, parental leave and leave to care for a relative with serious health problems.

The scope of the notification under Section 46 of the Labour Code has been significantly expanded: employees need to be notified of several additional circumstances and employment conditions, with the notification deadline reduced to seven days. In light of this, it is our view that a new employee notification template should be drawn up, with expanded and clarified contents. 

A change affecting the employer’s obligation to amend the employment agreement is that employers must inform employees about the possibilities of full-time or part-time employment, teleworking and indefinite term employment. The employees may, in turn, expressly request the amendment of their employment agreement on the basis of such information. Furthermore, irrespective of the information provided by the employer, an employee raising a child may, for the period lasting until the child turns 8 years old, request a change in the place of work and working hours, or to be employed part-time or within a teleworking framework. The employer is required to respond in writing within 15 days. In the event of refusal, the employer must state the reasons for its decision, which must meet the requirements of truthfulness, clarity and reasonableness. Timely communication and correct wording of the reasoning are of paramount importance as, if such reasoning is unlawful or not given at all, the employer's consent may be replaced by the court, resulting in the employment agreement being amended in accordance with the employee’s request.

In the case of definite term employment agreements, the proportionality requirement for the probationary period is now also regulated by law, in that the length of the probationary period must be determined on a pro rata basis, taking as a basis a probationary period of up to 3 months for definite term agreements of up to 1 year.

A major change regarding employees raising a child is the introduction of paternity leave and parental leave in line with the relevant EU legislation. The duration of the leave fathers are entitled to in the event of the birth or adoption of a child is uniformly set at 10 working days. Paternity leave is to be granted in no more than two segments. Parental leave is to be granted to both parents for a total of 44 working days within the period spanning up until the child turns 3 years old. The parental leave needs to be granted at the time requested by the employee. 

By Zsolt Cseledi, Partner, Livia Mihovics, Counsel, Oppenheim

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

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