Legislation came into force in Hungary in March 2005 that seeks to implement the 2002 EU Directive establishing a general framework for informing and consulting employees.
Act VIII of 2005 modifying Act XXII of 1992 on the Labour Code aims to fulfil Hungary's obligation to transpose the 2002 EU Directive (2002/14/EC) establishing a general framework for informing and consulting employees (EU0204207F). It came into force in March 2005.
Existing workplace institutions
In Hungary, the system of employee information and consultation existed before the implementation of the Directive (HU0401106F), but certain changes were needed to assure full harmonisation. Since 1992, works councils can be elected by employees at employers or - in certain cases - at establishments employing at least 51 employees. Nevertheless, at employers/establishments employing at least 15, a single works representative can be elected, with the same rights and obligations a works council would have. Before the new harmonisation measures, the majority of the information and consultation rights were vested in the works councils; however, trade unions also had similar rights to a certain extent. The new Act has slightly modified the information and consultation rights of the works councils and at the same time extended the rights of trade unions. Where there is a reference below to 'employees’ representatives', this should be understood as the trade unions and/or the works councils. As a consequence, the information and consultation rights apply only if there is one or more works council or at least one trade union at the employer.
Unchanged list of consultation issues
According to the Labour Code, the most important information and consultation rights are in connection with various types of reorganisation plans, the employer’s economic and employment situation and wage systems. Both trade unions and works councils have these information and consultation rights. Furthermore, trade unions have additional information and consultation rights in connection with labour safety issues, while works councils have rights in connection with certain human resources policies, early retirement and disabled worker issues, as well as in connection with the annual leave schedule, wages according to performance and certain internal regulations having an important effect on employees’ interests. While the amendment basically has not changed this list of issues, the law now stipulates that trade unions must be consulted on each of these issues in cases where no works council is in place at the given workplace.
The list of the topics for information and consultation rights can be extended by agreement between the employer and the employees’ representatives, and therefore the topics listed by the Labour Code are obligatorily subject to the information and consultation procedure, and no exclusion can be made by way of an agreement. However, no consultation has to be held if the employees’ representatives waive their rights.
Procedural rules for meaningful consultation
With respect to the above rights, the most important novelty is that before March 2005, the date when the new Act came into force, consultation between the works council and the employer could be quite formal, involving merely an exchange of letters. The wording of the law inherited from the state-socialist period was 'presenting opinions' (véleményezés), which did not mean more than the employer was required literally to 'hear the opinion' of employee representatives without really taking into consideration the arguments. Under the new Act, consultation has to mean a genuine exchange of views by way of a dialogue. A little more strictly than the terms of the Directive, the new Act provides that all consultations have to be held with a view to reach an agreement.
According to the new Act’s provisions, the employer has to inform the employees’ representatives on all matters subject to the information and consultation procedure with a 15 day notice period. If consultation is then initiated, the employer is not allowed to implement the planned measure for a period of at least seven days (which can be extended by the agreement of the parties), so the parties have at least a week to try to conclude an agreement in case the information and consultation procedure relates to reorganisation plans or wages according to performance.
Revised secrecy provision
Unlike the Directive, the new Act does not allow employers to withhold certain 'qualified' business secrets from the employees’ representatives. Instead, in accordance with the former Hungarian law, employees’ representatives are required to handle business secrets forwarded to them as confidential information.
Social partners’ input
Not directly related to EU harmonisation, the new Act - upon the request of the trade unions - has modified the provisions of the Labour Code on the protection of trade union officials and works council members against certain employer actions (for example against 'ordinary' dismissal) by creating clearer rules on the extent of such protection.
During the social dialogue prior to the parliamentary legislative process on the new Act, both the employers’ representatives and the trade unions had proposed modifying the original draft. Most of these - mainly technical - proposals were accepted and integrated in the final text of the Act. At the beginning of the debate, one of the trade unions proposed to have a third way to inform and consult employees in case there are neither trade unions nor works councils operating at the employer. During the debate, the employers’ representatives opposed the introduction of the seven-day deadline introduced by the new Act (see above), the extension of former works council rights to trade unions, and the secrecy provisions of the new Act.
Commentary
Similarly to the German system, and unlike some other European systems, the election of works councils in Hungary is a right given to workers - the only obligation of the employer in connection with works council elections is neutrality. As a consequence, there are many workplaces with workforces over the statutory thresholds, where neither a trade union nor a works council is in place (HU0501103F). Despite some criticism, the new Act has left unchanged the rules for establishing the institution; thus, the new law fails to provide a remedy for this fundamental problem of workplace representation in Hungary.
Earlier debates on the institution of the works council mainly focused on the balance between the entitlements of trade unions and works councils (HU0401106F). In 2002, the last modification of the Labour Code produced a significant overlap between the information and consultation rights of the 'two channels' of workplace representation. The new law basically reinforces the policy adopted in 2002 by giving trade unions slightly more rights. Nonetheless, in the preparation phase some argued that harmonisation with the Directive would have required granting the new rights only to works councils rather than to trade unions.
Another minor criticism was that the secrecy provisions of the new Act can be interpreted in a way that employees not qualifying as representatives are not required to keep business secrets after the termination of their employment unless they are compensated for it. Other experts, however, do not agree with this interpretation. No doubt, however, the major achievement of the harmonisation efforts is that more sophisticated procedural rules have come into existence, which might indeed help make the consultation meaningful. (Gábor T Fodor and László Neumann, Institute of Political Science, Hungarian Academy of Sciences)