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Labour Code Changes from 2023 – A Litigation Tsunami for Employers in Hungary?

Labour Code Changes from 2023 – A Litigation Tsunami for Employers in Hungary?

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In the last five years, the number of labour lawsuits in Hungary has dramatically decreased by because of the new Civil Procedure Code. However, due to the recent amendment of the Hungarian Labour Code from January2023, a new category of labour lawsuits may emerge. Do employers face a real risk because the new rules? We analyse this question below.

With the introduction of the new Code of Civil Procedure in 2018, starting a litigation in Hungary became more difficult than before, discouraging many employees with modest resources from suing their employers.

Although the purpose of the new code was to speed up litigations, the modification brought a much more formalistic approach than before, which led to a significant 60% drop in the number of new labour lawsuits in 2018, which has not changed much in the last 5 years.

However, in January 2023, the most significant amendment to the Hungarian Labour Code in recent years entered into force, introducing a new set of rules that may change the above trend.

Under the new Labour Code provisions employees raising a child under the age of eight years can request the modification of their labour contract by introducing "flexible working conditions" regarding the place of work, work schedule, and working hours.

In case the employee requests the amendment of the employment contract, the employer shall accept or reject the amendment proposal within 15 days. The rejection shall be justified, just like a termination notice in case of a dismissal. It means that the reasons shall be true, clear, and relevant.

The employee may challenge the rejection of the request before the labour court. In the litigation, the burden of proof is on the shoulders of the employer to prove that the justification is lawful, i.e., meets the above criteria. If the court finds the employer’s justification inappropriate, the judge can modify the labour contract of the employee in accordance with his or her initial request.

Due to the strict rules of justification, it is beyond doubt that the employer must pay particular attention in case it rejects an amendment proposal, especially, if we consider that it can be very difficult for the employer to prove before a court that the rejection was reasonable, if there are no solid reasons, why the employer needs the employee in the office in 8 hours per day.

For example, the rejection of an amendment request to work from home is probably reasonable in case of a blue-collar worker, who performs work in the factory. however, the situation in not that simple in case of a white-collar worker, who was able to perform his or her duties from home during the Covid pandemic.

The big question of the near future is whether employees will use their strengthened rights to request the amendment of their contract and whether they will take the case to court if, in their opinion, the initiative is unlawfully rejected. In case the right to amend the contract proves to be effectively enforceable in practice, a new category of labour lawsuits may emerge.

Due to the above, we recommend that employers prepare in advance to deal with possible modification requests, first and foremost by drafting clear and detailed job description, which is always a starting point when it comes to employment disputes. In addition, in case the employees request has to be rejected, before communicating the decision to the employee it is worth to have a second look on the rejection by a lawyer specialised in employment law disputes.

By Richard Schmidt, Managing Partner and Peter Gritta Attorney-at-law, SmartLegal Schmidt & Partners

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.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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