Companies often use non-compete agreements to prevent highly skilled employees from using their know-how in favour of competitors following their termination. The Supreme Court recently addressed various questions relating to the compensation paid to employees for post-termination non-compete agreements. This article examines this topic in light of the Supreme Court's recent guidelines and a recent decision which led to debate among practitioners.
Parliament recently adopted a new law amending several sectorial laws concerning the processing of personal data. The new law aims to provide clarity in these areas and has amended the general rules of the Labour Code. It has also introduced a new chapter which sets out general rules on the handling of employee data. Although the amendments of the existing rules on the processing of employee data have been eagerly awaited, many practitioners have expressed their disappointment.
In Hungary, as is the case in other EU countries, recent economic growth has been accompanied by a labour shortage. Under pressure to find a solution, the government introduced a new law to amend the working time rules. Since its adoption, the new law has come under close scrutiny from opposition parties and trade unions, and in December 2018 thousands of people took to the streets to protest what has become known as the 'slave act'.
The European Commission has proposed to implement a directive on work-life balance for parents and carers which aims to increase the number of dual-earning families and help women return to work, while also requiring more flexibility from employers. Should the proposed directive enter into force, it will set minimum standards regarding parental and carer leave and will thus bring about considerable change for the Hungarian employment and social systems.
Hungarian law generally requires employers to justify the termination of an employment relationship, and economic grounds generally serve as valid grounds for dismissal. A recent Supreme Court case clearly shows that even when an employer has a rightful interest in dismissing certain employees for economic grounds, the justification of the dismissal must be formulated correctly in accordance with the law. Otherwise, employers may have difficulties protecting themselves in court.
With the constant development and advancement of digital technologies, the use of paper-based documents is gradually decreasing in all areas of life. This trend has inevitably affected the employment sector, as both employers and employees have an increasing need to reduce the volume of paper-based documents used in employment relationships. At the same time, the use of electronic documents has raised several practical questions.
The Supreme Court recently issued a reasoned opinion on certain legal and procedural aspects of employment-related suits involving equal treatment claims. The reasoned opinion addresses, among other things, the interpretation of the burden of proof in such suits, the equal pay principle, the concept of discrimination based on other grounds and the way of hearing and deciding anti-discrimination claims in suits initiated on the grounds of unlawful dismissal.
Employers are often frustrated by employees' incapacity to work for health reasons, but they must act with care when addressing such situations. In an attempt to protect employee interests, legal regulations provide certain restrictions on what employers can do if an employee is unable to work for health reasons. A recent Supreme Court decision has further clarified some of these restrictions.
Organisations with legal entities and employees in several EU member states often try to centralise their human resources (HR) functions to some extent, which occasionally requires them to share employee and HR data within their group. Although existing Hungarian law provides a stable legal environment with clear rules for employers as data processors, there is a general feeling of uncertainty around this topic, which is partly due to the upcoming entry into force of the EU General Data Protection Regulation.
Although the Labour Code fails to define a 'conflict of interest', its general principles prohibit employees from engaging in conduct which could jeopardise their employer's rightful economic interests. Depending on the circumstances, a conflict may constitute a severe violation of the employee's employment terms and can be punished appropriately. In other cases, a conflict may arise that is not the employee's fault, which can therefore be appropriately rectified without penalties.
The existing Labour Code amended employers' consultation duties in the event of a collective redundancy. When the code entered into force, this change seemed technical and went somewhat unnoticed among other more significant changes. However, the change is important, as it simplifies employers' consultation duties in the absence of employee representative bodies. Simultaneously, the new rule's compliance with EU law has raised questions around how employers should act.
In Hungary, employers have significant freedom to change their organisational structure and reorganise their workforce, which includes dismissing employees. However, there are some limitations – both generally and in the context of anti-discrimination rules. Even if the courts respect employers' freedom in organising their workforce, employers must be careful not to exceed the limits of this freedom in order to prevent disputes.
A recent amendment to the Act on Labour Safety reduced the number of employees who can be employed at a workplace before an employer must elect a work safety representative from 50 to 20. Employers that are affected by the new regulation are advised to ensure that they comply with the requirements governing health and safety at work and elect a work safety representative.
Research shows that – in accordance with global trends – Hungarian employers tend to attach great importance to fostering diversity in the workplace. Although some employers have yet to implement particular measures in this regard, few refuse to address the issue. The employment of workers from all age groups is a key focus area, along with the employment of workers with a reduced capacity to work and low-skilled and disabled workers.
Although performance-based compensation has long been an integral part of Hungarian employment law, neither the Labour Code nor the relevant commentaries provide a clear-cut definition of a 'bonus'. As a result, the definition and key legal principles governing bonuses have been developed by court practice, which shifted after the economic crisis and the adoption of the new Labour Code in 2012.
While the conclusion of non-compete agreements or inclusion of non-compete clauses and other restrictive covenants in employment contracts is common practice in Hungary, a number of issues frequently arise – particularly in regards to statutory compensation, enforceability and unilateral termination. To avoid legal disputes, employers should carefully consider these issues before concluding non-compete agreements.
Under the Hungarian fringe benefit framework (the so-called 'cafeteria system'), employers offer employees a choice of different benefits of a set value, which are subsidised by the state and therefore beneficial to both parties. Several amendments to the system are planned, mainly due to a potential amendment to the personal income tax laws and a recent European Court of Justice judgment, which held that the system violated EU law.
Considering the importance of unilateral declarations and commitments in the employment relationship, Hungarian labour law sets out detailed rules regarding the representation of the employer when making such declarations. While the previous legislation raised certain practical issues in this regard, the new Labour Code provides greater freedom for employers in establishing the system for exercising their rights through representatives.
Hungarian labour law provides employers with the right to monitor employees' behaviour and actions, provided that such monitoring pertains exclusively to employees' work. The law affords employers a significant degree of flexibility in this regard, but careful consideration of the company's needs and thoughtful legal analysis are required before implementing surveillance systems.
Employing overqualified employees has long been a source of debate among human resources (HR) professionals. However, overqualification has recently become a more prominent issue due to the growing number of graduate workers and the pace of technological development. Several practical HR aspects must be addressed when employing overqualified workers, which often give rise to legal issues.
The use of temporary agency workers is particularly popular among employers whose workforce needs fluctuate or which require employees for short-term or seasonal jobs. As a general rule, employers may employ an unlimited number of agency workers for any job position, for a period of up to five years. However, the law imposes certain restrictions and prohibitions on the use of temporary agency workers.
The 2012 Labour Code introduced significant changes concerning the compensation to be paid by employers in the event of unlawful dismissal. As the previous regime put an unreasonably high burden on employers, the new Labour Code introduced a new penalty regime for unlawful dismissal. The Supreme Court has now issued an opinion addressing the most important questions relating to this new regime.
A new act recently entered into force which introduced new rules governing the opening times of retail shops. The new act brings significant changes, including a prohibition against retail shops opening on Sundays. The new rules are intended to preserve employees' rights and allow them more time to rest, but have nonetheless provoked heated debate.