New Labour Code Submitted to Parliament

Estimated reading time 8 minutes

A comprehensive revision of the Labour Code was submitted to Parliament on October 26, 2011. (“Draft Bill”).  If adopted in its current form, the Draft Bill will overhaul material provisions of the existing statutory regime.  Effective date of the new Labour Code is expected to be July 1, 2012, which leaves little time for employees to familiarize themselves with the changes.  Please find below some of the anticipated changes we deem important.  These highlights should not be regarded as a definitive or exhaustive analysis and, if requested, we would be delighted to provide in a live presentation a comprehensive overview of the material changes.

Protected employees

The Draft Bill provides that employment relationship may not be terminated by employer during 

(i) pregnancy,

(ii) maternity leave,

(iii) unpaid leave of the parent requested for the purpose of child care (if child is under the age of three years),

(iv) first six months of treatment related to a human reproduction,

(v) regular or reserve army service. 

In contrast to existing regulation, sick leave is no longer classified as a protected category under the Draft Bill, a change that was implemented with a view to reduce sick leave abuses.  The Draft Bill provides that termination of the employment can be communicated during the time of incapacity due to illness; though notification period would commence only after the end of the incapacity due to illness.

If an employee interrupts his/her unpaid leave before the child is three years old, his/her employment can be terminated:

(i) with extraordinary termination,

(ii) due to incapacity,

(iii) due to reasons in connection with the operation of the employer. 

In the latter case, the employment can be terminated only if there is no vacancy suitable for the employee’s educational background required for his/her scope of work experience and capacity; or the employee rejected the offer of the employer to work in such position. This rule is applicable to the termination of employment within 5 years prior the retirement age.

Reduced Damage Amounts for Unlawful Employer Termination

While under the existing framework an employer may be fined up to 36 months’ of an employee’s average salary for unlawful termination, the Draft Bill reduces this amount to 12 month, which is a significant change in favour of the employer.

Working hours

The major changes compared to the present regulation are as follows, most of which favour employers:

• An employer may change the announced working hours - due to unforeseen circumstances - three days before the change, in which case the new working hours would not be deemed as an extraordinary work.
• The Draft Bill defines the requirements of working on Sunday and on public holidays more strictly compared to the normal working hours.  According to that in a normal working hour an employee can be employed only within the frameworks of activity that:

(i) serves public interest or objectively necessary for the proper function of the employer,

(ii) is seasonal,

(iii) is non-stop,

(iv) is multi-shift,

(v) stand-by type,

(vi) is exclusively part-time on Saturday and Sunday,

(vii) satisfies public needs,

(viii) is during work abroad.

The above provisions can be regarded detrimental for the commercial sector, since the employees who worked within a given work schedule and received their rest period combined together could work on Sundays in a normal work time.  Businesses related to the commercial sector – in order to be able to prescribe work on Sunday – should introduce a multi-shift work schedule or should employ employees exclusively on Saturday and Sunday in part-time.  However it is important to note that multi-shift working schedule results extra costs to the employer.

• The annual limit of the extraordinary working time is raised by the Draft Bill from the present 200 hours up to 250 hours, which could be increased by the collective agreement up to 300 hours.

Allowances

The Draft Bill provides as a general rule that the employee is entitled to wage supplement in addition to his/her salary.

The 50% Sunday wage supplement is prescribed by the Draft Bill only for those who work in multi-shift work schedule or in a stand-by type work.  An employee who would expect regularly Sunday work due to his/her type of work is not entitled to such supplement.

In contrast to existing regulation, the Draft Bill prescribes the obligation of shift allowance payment for a work performed between 6 p.m. and 6 a.m.  A further requirement is that the employee’s work schedule should regularly change.  The shift allowance for multi-shift and for work performed in an uninterrupted work order is equally defined at 30%.  According to the present regulation the shift allowance for those who work in a multi-shift work order from 2 p.m. until 10 p.m. is 15%, for those who work from 10 p.m. until 6 a.m. is 30%.  In case of work performed in an uninterrupted work order in the afternoon is 20%, at night 40%.  The nightshift allowance remained at 15%.  To sum it up, according to the Draft Bill the allowance is due from a later time, 6 p.m. instead of 2 p.m.; although those who work in a multi-shift work order will be entitled to 30% instead of 15% for their work from 6 p.m. until 10 p.m., therefore presumably their monthly wage shall not decrease.  Those who perform their work in an uninterrupted work order shall be entitled to 30% of allowance for a shorter time, instead of 20% and 40%.

The Draft simplifies the work related payroll administration by fully permitting the determination of the wage supplement in a lump sum instead of individual accounts.

Employee Damage Limitation for Malfeasance or Negligence

The Draft Bill provides, as the current regulation, that – an employee is generally obligated to compensate an employer for damages caused by the violation of his/her duties of employment, whether it be committed intentionally or by negligence.  The burden of proof lies with the employer with respect to:

(i) the damage amount,

(ii) proof of misconduct (malfeasance or negligence) and

(iii) causation. 

However, in contrast to the current 1,5 monthly average salary limitation, the Draft Bill provides for 4 months for negligence and unlimited liability for gross negligence or intentional tort.

Employees’ representation

• The existing labour law protection shall remain for certain trade union officers and for the president of the workers’ council.  An important rule is that the labour protection is granted only for the official of that trade union whose membership reaches the 10% of the total amount of employees.  The number of the protected officers depend on the average statistical number of the employees.  The maximum number of protected officers is 4, in case of more than 4,000 employees per premises.  The scope of protection is reduced compared to the present regulation, since only maximum 4 persons are entitled to protection and only in cases where the number of trade union members compared to total number of employees reaches 10%.
• According to the Draft Bill both trade unions officials and members of work council are entitled to time off.  The head of the work council is entitled to 15%, the member of the work council is entitled to 10%, and the officials of the trade union are entitled to 10% of time off as well.  A new rule in the regulation that the time off that was unused cannot be redeemed in cash.
• The Draft Bill does not include the right to object.  This right enables the trade union to object the unlawful measures.  In case the objection turns into a court procedure, the employer shall not execute the objectified measure until the end of the court procedure. This is the most powerful asset in the hand of the trade union against the employer.  The Draft Bill does not include the nullification right of the work council either as it is in the present regulation.  In accordance with the Draft Bill, in case of disagreement between the work council and the employer, there is a possibility for the parties to negotiate or to appoint an arbitrator.
• In accordance with the Draft Bill, a collective agreement can be concluded by a trade union whose number of members reaches the 10% of employees affected by the collective agreement.  A new rule is that a collective agreement can be concluded by a work council as well, in case there is no trade union entitled for that, i.e. there is no trade union whose membership covers 10% of the employees.  We believe that this provision is likely to increase the number of collective agreements, given that more bodies will be eligible for conclusion of such agreements.

For further information or to discuss any of the issues raised, please contact dr. Kinga Zempléni on +36 1 336 0443.