Blog » WHEN THE EMPLOYEE IS CONSIDERED EXECUTIVE? – RULING OF HUNGARIAN SUPREME COURT
WHEN THE EMPLOYEE IS CONSIDERED EXECUTIVE? – RULING OF HUNGARIAN SUPREME COURT
20 May 2020
Is the employee considered as an executive employee if though the parties qualify the employee as executive, but refer to the wrong provision of the Labour Code? Does the will of the parties or their contractual declaration matter in this case? We analyse the latest decision of the Curia in our short article.
The employee (“Plaintiff”) has worked as a quality management director in the employer (“Defendant”) since 2015. Section 2.1 of his employment contract laid down, referring to the Section 208 (1) of Act I of 2012 on the Labour Code (“Labour Code”), that he is considered as an executive employee as he is an “employee under the director’s direct supervision and authorized – in part or in whole – to act as the director’s deputy.”
The Defendant changed the job title of the Plaintiff to quality management advisor for definite period and also set out that the executive duties and liabilities did not extend to Plaintiff during his job as a quality management advisor. Despite the end of the definite period the Plaintiff was worked as a quality management advisor until the termination of its employment relationship.
The Defendant terminated the employment of the Plaintiff by dismissal at the end of 2016, which was not reasoned as the Plaintiff was considered as an executive employee. The Plaintiff started a labour lawsuit referring to unlawful termination of his employment because it was not reasoned.
2. Judgments of first- and second instance courts
According to the standpoint of the Plaintiff, despite the facts in Section 2.1. of the employment contract, he was not an executive employee because he did not have any significant duties and competences as the director’s deputy, moreover he did not exercise a dominant influence on the operation and management of the Defendant. He referred to the invalidity of Section 2.1. of the employment contract.
According to the Plaintiff, pursuant to Section (208) (2) of the Labour Code the parties may agree that the employer is considered as an executive employee, but this was not the case as though the employment contract sets out that the Plaintiff is executive pursuant to the Section (208) (1) of the Labour Code, in fact, it was not true.
The first instance court found that the employment contract of the Plaintiff was terminated wrongfully by the Defendant.
The Defendant could not prove that the parties wanted to apply Section (208) (2) of the Labour Code in the contract, pursuant to which the Plaintiff would have been considered as executive employer on the basis of their agreement. Due to the lack of agreement the court did not assess whether the necessary conditions for the agreement (i.e. the position considered to be of considerable importance from the point of view of the employer’s operations or fills a post of trust, or his salary to reach seven times the mandatory minimum wage) were met.
The court concluded that based on the content of the employment contract, it is obvious that the parties considered the Plaintiff as executive employee on the basis of Section (208) (1) of the Labour Code. According to this section, the executive character of the Plaintiff can be adjudged based on whether the facts stipulated in the legislation are met, and not on the basis of the agreement between the parties.
Consequently, the first instance court assessed whether the Plaintiff was considered as executive employee on the basis of the statutory requirements. Pursuant to the available job descriptions, organisation charts, the Plaintiff was not entitled to act as the director’s deputy, therefore he was not considered as executive employee.
The second instance court upheld the judgment of the first instance court, noting that if the wrong section of the Labour Code is cited in the employment contract [(Section (208) (1) of the Labour Code)], it may not be interpreted broadly as a reference to another (the correct) section, [Section (208) (2) of the Labour Code)].
3. Decision of the Curia
The Curia upheld the second instance decision. It concluded, in accordance with the lower courts, that the Plaintiff was not an executive employee as he was not entitled to act as the director’s deputy and he was not under the direct supervision of the director at the time of the notice of the dismissal.
In light of the above, he was not considered as executive employee pursuant to the Section (208) (1) of the Labour Code. The “executive employee clause” in the contract was based solely on the cited provision, therefore, the employee was not designated as an executive by agreement under Section (208) (2) of the Labour Code, so the court did not examine the further conditions in that regard.
4. Assessment of the decision
Pursuant to the Labour Code an employee can be considered as executive in two cases.
On one hand, by law, in which case it is important whether the employee has duties and liabilities enabling him to exercise a dominant influence on the operation, management of the employer by his decisions and to have a major role in the management of the employer. [(Section (208) (1) of the Labour Code)]
On the other hand, based on the agreement of the parties. In this latter case the employment contract may invoke the provisions on executive employees if the employee is in a position considered to be of considerable importance from the point of view of the employer’s operations, or fills a post of trust, and his salary reaches seven times the mandatory minimum wage. [(Section (208) (2) of the Labour Code)]
The decision of the Curia highlights that the employer should pay special attention at the time of the conclusion of the contract, as in the latter case, executive status is not constituted by agreement if the parties refer to the wrong provision of the Labour Code.
Although the intention of the employer was to consider the Plaintiff as executive employer on the basis of agreement, the Plaintiff was not considered as executive irrespective of the fact whether he was in a position considered to be of considerable importance or fills a post of trust, and his salary may reached the required amount laid down by the act.
Based on the above, the Curia gave priority to the contractual declaration over the intention of the parties.
In consideration of the above, we recommend that you consult a lawyer with experience of labour law before the conclusion of the employment contract in order to avoid similar little mistakes which may have serious consequences.
 Decision No. EBH2011.23.46.
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