LAWFUL TERMINATION OF EMPLOYMENT IN HUNGARY – PART ONE: HOW TO JUSTIFY A DISMISSAL?

30 October 2019

From salary to vacation leave, an employment relationship can have many sensitive parts. However, labour disputes mostly arise around the termination of the employment by the employer and specifically in connection with the justification of dismissal. Since the fault of the justification will result in unlawful termination, leading to important pecuniary consequences, in our forthcoming article series, we summarise the rules governing employment terminations and the related case-law of the Hungarian courts. In the first part we present the general rules for justifying employee termination.

1. Adequate justification of the termination – General requirements

Whatever the reason for the termination, the justification must meet the below four requirements of the Labor Code[1] and judicial practice. The reasoning and the grounds therein must be

• real
• reasonable (relevant)
• timely
• clear

Let’s see what exactly the above terms mean.

2. The veracity of the grounds for termination

It is a basic requirement for the justification to refer to existing reasons that are evidenced by facts. It is important that the reason must exist (be real) at the time of the notice of termination. Thus, termination is unlawful if the reason stated in the justification, such as the elimination of a position, occurs only after the notice of termination.[2]

What if the employment is terminated as part of a long-term, complex restructuring process? In such a case, the court will examine the reality of the specific sub-process that is the basis of the termination (eg.: whether organizational changes have been decided before the termination and the implementation has been started), however, the completion of the whole restructure is not necessary to establish the legality of the termination.[3]

Termination often involves multiple reasons, in which case the consequence of the untruth of each reason may be different.

In case the termination is based on several grounds considered together as a whole, each ground shall be valid and the inaccuracy of a single ground will lead to the unlawfulness of the termination.

Conversely, if it can be assumed from the justification that a single ground therein might serve as the basis for the termination, the termination will already be lawful if the court establishes the lawfulness of one ground.[4]

3. The rationality of the grounds for termination

The requirement of reasonableness means whether the reason stated can serve as a basis for termination. The justification must be serious and convincing, so when assessing this aspect, the court will examine the weight and importance of the reasons given.

The trend shows that courts are increasingly permissive towards employees, so a termination is not justified properly due to lack of reasonableness, for example, in case of a one-time delay of the employee or, being late with the data recording in some cases.[5]

According to the case-law, it is also contrary to the requirement of reasonableness if the dismissal is due to an employee's previous illness, since it cannot be concluded that the work of the already healed employee would not be required by the employer.

4. The timeliness of the grounds for termination

Although the Labor Code does not provide strict deadlines in relation to "normal" termination, this does not mean that the employer could invoke the reason for termination at any time for an unlimited period, after the occurrence of the termination event.

According to the court practice, the employer must exercise his right of termination within a reasonable period of time after the event giving rise to the termination has occurred. Failure to do so, on the one hand, discredits the termination, which undermines reasonableness, and, on the other hand, gives the employer the opportunity to maintain the employee in uncertainty regarding the future of their position over long term or even to blackmail them.

There is no specific timeframe for timeliness, as it is greatly influenced by the circumstances of the specific case. According to the practice, it is certain that a reference to an event which happened years ago is inappropriate[6] and, moreover, the court found the termination belated and therefore unlawful in a case when the notice of termination happened half a year after the event giving rise to it.

5. The clarity of the grounds for termination

In the justification, the employer must state the reasons of the termination and also the facts and evidences on which it is based in a clear and comprehensible way. The purpose of this is to give the employee the opportunity to get to know the grounds immediately, to check them and, if necessary, to present their defence and disagreement as soon as possible.

The practice is unanimous in that the generic or trite wording such as "the employee did not live up to the expectations" or "the result is below the expectations of the company" does not meet the requirement of clarity.

Practice only mitigates the obligation to the extent that the reasons should be clear to the employee themselves. Therefore, a lack of clear justification cannot be established if the reasons of dismissal are not understandable for an outsider at the first sight, but they were clearly known and understood by the employee.[7]

6. Conclusion:

In the first part of our article, we have explained that an essential element of a termination by the employer is a statement of reasons, in which the employer summarizes the reasons for the dismissal and the facts underlying it. Whatever the reason for the termination, the justification must meet the criteria of veracity, reasonableness, timeliness and clarity. Violation of any of the four requirements will result in unlawful termination.