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backEUROtalk May, 2012

Hungary's New Labour Code: Significant changes that provide more flexibility for employers

The New Hungarian Labour Code

The new Hungarian Labour Code, effective as of July 1, 2012, introduces significant changes to the current labour legislation; therefore necessitates the review of existing employment contracts, labour law policies, collective bargaining agreements and other employment related documentation. The new law is friendlier to businesses and provides greater flexibility to employers relating to the regulation of employment relationships. The new Labour Code preserves the fundamental principles of labour law, but provides certain new opportunities and solutions which could be useful for employers.

Significant changes under the New Labour Code

The new Labour Code introduces new provisions, among others, in relation to the following areas:

·       greater scope of employment contract and information obligations

·       more flexible working order and working time scheduling, beneficial overtime regulations

·       compensation requirements more favorable to employers

·       employer friendly termination rules of indefinite and definite term contracts, reduced scope of termination protections for employees

·       decreased liability of employers and increased liability of employees for damages

·       less burdensome regulations for transfer of business situations

·       changes on vacation entitlement and vacation allocation rules

·       modified rules applicable to executive employees

·       modified scope of rights for works councils, unions and their representatives, different rules on collective bargaining agreement and new instrument of "factory agreements"

·       new rules on non-compete agreements and confidentiality obligations

·       significantly lower financial consequences in case of unlawful termination

New opportunities and instruments

The New Labor Code introduces various new instruments and new provisions, which may provide good opportunities for employers to more effectively and strictly regulate employment relationships, or to create more flexible and employer friendly conditions; including inter alia:

·        new obligations on employees related to behavior out of the work place, right for employers to restrict employees' personal rights (media relations, social media, political activities etc)

·        right to check employees at the workplace

·        deviation from the statutory rules on a more flexible manner to the benefit of the employer

·        system of disciplinary measures now allowed in single employment contracts

·        flexible working time arrangements, solutions for overtime issues

·        new forms of employment, employment by multiple employers, employees sharing one function

·        solutions for carry over of vacation

·        possibility to terminate fix term contracts and employment of earlier protected employees

·         collective bargaining agreements may provide for conditions less burdensome for employers

What to do before July 1, 2012 in light of the New Labor Code?

Due to the upcoming changes, employers need to prepare themselves and should review employment contracts, labor law policies, collective bargaining agreements and other employment related documentation, in order to assess whether modifications are required or advisable

·         Review employment contracts, internal policies and other documentation related to the employment relations

·         Amend documents to comply with the new provisions

·         Consider new instruments and opportunities, and determine whether those could be beneficial and worth using

·         Modify the appropriate employment documentation to enable employers to take advantage of the new opportunities

Source: Baker & McKenzie - GAI

For more information or to contact Baker & McKenzie, please click here.

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