If you would like to fire an employee, but the conduct of the employee does not exceed a certain the limit that justifies extraordinary termination, the only way under Hungarian Labour law to dismiss him is the ordinary termination. Given that a wrongful termination can have serious financial effects, it is worth to summarise the 5 must-knows for an employer in relation with ordinary dismissals, including the case law of Hungarian Labour courts.
Under Hungarian Labour law a duly disclosed notice of termination terminates the labour relationship automatically. It means that the employer cannot revoke the notice of termination anymore, and if it is wrongful, the rules of wrongful termination shall apply with serious financial implications.
This is the reason why every employer shall carefully think over at least the following 5 (five) questions before disclosing an ordinary dismissal:
- Is there any protective measure defending the employee against dismissal?
- What is the exact reason of the dismissal?
- Is the justification of the dismissal defendable before court?
- How much I have to pay in case of dismissal?
- Can I terminate the labour contract without dismissal?
Protection against dismissal
In the following cases the employer is not allowed to dismiss an employee by ordinary termination: i) in case of pregnant women, during pregnancy; ii) in case of fertilization treatments during these treatments; iii) during maternity leave; iv) in case of non-paid leave for taking care of child; v) in case of employees performing volunteer reserve military service;
It is important that the above mentioned protective measures apply only if the employee informed about these respective circumstances the employer beforehand. In case of i-ii) the Labour Code exceptionally allows the employer to revoke its wrongful dismissal within 15 days as of disclosure.
Further protection applies to employees, who are within 5 years close to the age of retirement, to mothers, or fathers raising their child on their own until the child reaches the age of 3, and to disables persons. These persons can be dismissed by ordinary termination only in serious cases.
Finally, employees having a fixed-term contract cannot be dismissed by ordinary notice, except the employer is under liquidation or bankruptcy proceeding; or if the dismissal is justified based on the skills of employee; or in case the maintenance of labour relationship becomes impossible due to external, unavertable cause.
Grounds for dismissal
The Labour Code protects employees by providing the obligation of justification of the termination of the employment contract by the employer. The justification of the dismissal shall be clear, true and causal. The reason for termination can only be connected to the following circumstances
- the skills or the employment-related conduct of the employee; or
- a reason connected to the operation of the employer.
In case of legal dispute, the employer bears the burden of proof relating to the true and causal nature of its lawful termination.
Justification and related case-law
In the past, Hungarian Labour Courts were characterised as favouring employees, and even if it is changing with the new Labour Code, an employer usually faces a hard task when it comes to the proving of the validity of the justification before the labour court judge.
When it comes to the skills and employment-related conduct of the employee, a minor mistake in itself (e.g. 5-10 minutes sporadic delays in starting work, administrative faults) cannot be valid basis of a dismissal.
On these grounds the labour court found wrongful the dismissal of employee for a mistaken bank transfer, even if the damage caused was significant, but in a case when the employee committed persistently and recurrently the same fault, despite frequent notification of the employer, the judge found that the termination, justified with the ineptitude of the employee, was valid.
When it comes to non-compliance with expectations, or internal rules and procedures, the labour court examines especially the clarity of justification and if the employee knew or should have known these norms.
Based on this the Hungarian labour court established that the dismissal justified with "failing to meet expectations" was too vague, and consequently unlawful, while in a case when it was proved that the ethical code formed as integral part of the labour contract, the labour court held that the proven breach of the ethical duties by employee was valid ground of dismissal.
In case that the employer justifies the dismissal by a reason connected to the operation of employer (e.g. reorganisation, redundancy, termination of the position) it is well-settled case-law that the judge cannot examine the economic reasonableness behind this operations, but he can examine whether the employer actually executed the reorganisation.
For this reason the labour court found unlawful the termination justified with cutback, when the employer hired a new workforce for the similar position shortly after the dismissal. At the same time, the termination, where the employer distributed the tasks of the former employee among 2 employees, without hiring new colleague for the same position was held lawful.
In these cases, where the position of the employee is in the focus of the legal disputes, it is case law that only the mere job description, but the actual work duties of the employee shall be examined by the court.
Amounts payable employer
In case of ordinary termination there is a notice period, during which the labour contract still in effect. Employees dismissed by ordinary notice shall be exempted from work for at least the half of the notice period, so that they can find new job.
In case of ordinary dismissal, the employer shall pay severance pay if the employee spent at least 3 years in employment. In addition to the abovementioned, the employer shall pay compensation for the non-used holidays. The length of notice period and amount of severance pay is based on seniority shown in the table below:
|Length of employment (years)||Notice period||Severance pay|
|3-5||35 days||1 month|
|5-8||45 days||2 months|
|8-10||50 days||2 months|
|10-15||55 days||3 months|
|15-18||60 days||4 months|
|18-20||70 days||4 months|
|20-25||90 days||5 months|
|25-||90 days||6 months|
Alternative to dismissal?
The employer can fire the employee not only with ordinary dismissal but also by signing a mutual agreement. This is the most peaceful way of ending the employment relationship as the employee is a party of the agreement and not only the addressee of the employer's termination letter.
It also gives the parties the possibility to differ from the strict regulations of termination (eg. justification, notice period) and leaves a room for negotiation. By this way, employers paying a couple of monthly salaries in consideration for the cooperation of employee, can avoid costly and time consuming litigation in front of the labour courts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.