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A New Judgement May End a Decade of Debate - Liability of the Employed Managing Director

A New Judgement May End a Decade of Debate - Liability of the Employed Managing Director

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A new ruling of the Curia has finally settled the long-lasting debate on whether the general rules of civil law or the provisions of the Labour Code apply to the liability for damages of the employed managing director.

The interpretation difficulties have arisen from the single fact that the Labour Code – which refers to the applicable provisions of the Labour Code regarding the compensation for damages – does not contain any reference to the relevant section of the Civil Code, which establishes the general liability clause applicable to the managing directors in the event of contract breach.

  • The judgment published in 2023 stated that the liability of an employed managing director for damages is to be assessed according to the general rules of the Labour Code, meaning that the employer must prove
  • that the employee in such position did not act as expected in the given situation,
  •  the damage and its amount, as well as
  •  the existence of the causal link.

As per the reasoning of the new judgement, the Curia states that contrary to the provisions of the Labor Code, according to which the provisions of civil law apply to damages caused by an executive employee in the context of managerial activities, the Labour Code in force during the assessed damage does not refer to the rules of civil law, which leads to the partial turning of the burden of proof.

By Borbala Maglai, Attorney at Law, KCG Partners Law Firm

KCG Partners at a Glance

KCG Partners is a Hungarian business law firm providing a comprehensive range of legal services to international and local clients seeking local knowledge and global perspective. The firm comprises business-minded lawyers with sector-specific expertise, creating value for clients by applying a problem-solving approach and delivering innovative solutions.

The firm has a wealth of knowledge in corporate law, M&A, projects and construction, energy, real estate, tax, employment, litigation, privacy and forensics, securitization, estate planning and capital markets.

To address clients’ regional and international concerns, the firm maintains active working relationships with other outstanding independent law firms in Central and Eastern Europe, whilst senior counsel Mr. Blaise Pásztory brings over 40 years’ of US capital market and fund management experience.

KCG Partners Law Firm is the result of the teamwork of passionate and talented lawyers guided by the same principles and sharing the same values: 

  • Our most valuable asset is our people. They are the engine of our business and the key to our success.
  • We push boundaries by looking for innovative solutions that can empower our clients to achieve greater results.
  • We place our experience, commitment and professionalism to your service.
  • We are driven by our vision to shape and lead the Hungarian legal market and become a first choice law firm in our practice areas.

Firm's website: http://www.kcgpartners.com