29 July 2020

Can employers withhold the wage of employees because of an ongoing internal investigation? Is the suspicion that the employee caused damage sufficient to hold back mone, or the payment cannot be refused in this case? We analyse the recent decision of the Hungarian Supreme Court and answer this question in this article.

1. Facts

Employee (“Defendant”) has worked as a driver at the employer (“Plaintiff”) since 1st July 2009. Besides his base wage, Defendant also got certain allowances.

Plaintiff checked the fuel consumption of the truck used by the Defendant at the beginning of March 2013. It turned out during the internal investigation that the consumption of the truck tripled in the previous month in comparison with the preceding period. Plaintiff paid the wage of February of the Defendant in two instalments by reason of the investigation: the base wage was duly paid within the deadline, while the allowances – amounting to more than twice of the base wage -  were only transferred with a delay of 23 days.

Subsequently, Defendant notified the Plaintiff that he is terminating his employment without notice referring to the insufficient payment of wage of the Plaintiff.

2. First and second instance court decisions

In its statement of claim, Plaintiff requested the labour court to establish the unlawfulness of the termination without notice of the Defendant and to order to pay him the absentee pay for the notice period.

Defendant requested the court to reject the statement of claim and submitted a counterclaim for the compensation in lieu of notice and the severance pay.

According to the view of the first instance court, the Defendant had the burden of proof to prove that he had exercised his right to terminate the employment without notice in accordance with the Labour Code[1], in other words that the delay of 23 days had been a grave violation of substantive obligation of the Plaintiff.

The first instance court established that the termination without notice had been unlawful as the breach of obligation of the Plaintiff, which was admitted by itself, could not been considered as grave, since it affected only part of the wage and it had happened once, and it did not amount to a non-payment, just a delay of 23 days.

The second instance court agreed with the first instance court regarding the termination by the Defendant, explaining that in  his view, the one-time late payment of wage by the Plaintiff cannot be considered a grave violation specified in the Labour Code.

3. Decision of the Curia

However, the Hungarian Supreme Court (“Curia”) reversed the second instance court judgment and established that the termination without notice of the Defendant was lawful.

The Curia stressed that according to the well-settled case-law, even a short delay in wage payment and a not recurring, one-time omission of the Employer can be the lawful reason of the termination by dismissal without notice.[2]

Curia added that, according to the Labour Code the employer shall pay the wages even if it conducts an internal investigation against the employee which can lead to a claim against that employee.

4. Analysis of the decision

Why should employers pay the wage of an employee if there is a suspicion that he caused damage and there is an ongoing internal investigation against that employee?

Although, it is tempting for an employer to withhold the wage of the employee, the Hungarian Labour Code clearly regulates this issue: employers may only deduct claims directly from wages, up to the deduction-free part of the wages, based on the employee’s consent or if the claim arises from wage advance.

In other cases, deduction from wages shall only be made when the law expressly allows (eg. child support), or based on an enforcement order.

Consequently, employers cannot withhold wage based on their own decision, referring alone to an ongoing investigation. Therefore, in similar damage claim cases like the above, there shall be always an enforcement order to deduct from wages of the employee.

5. Solution - Deduction based on payment notice

Enforcement order can be a judgment of a court or if the claim less than 3 (three) times the mandatory minimum wage, a payment notice of the employer, which was communicated to the employee and which was not challenged by the employee in front of court within the deadline prescribed.

If the employee challenges the payment notice by a statement of claim, the claim of the employer will become enforceable only after the court reaches a final judgment.

Analysing the above, we can see that the Labour Code aims to create transparent situations, however withholding wage based on an ongoing investigation without issuing payment notice does not fall into this category.

To sum up the above, even if there is reasonable suspicion that the employee caused damage, withholding his wage is always unlawful.  In this case the employer shall conduct an internal investigation, and at the end of this he can issue a payment notice, up to the ceiling mentioned above.

A payment notice, not contested before the court, can be a valid legal basis of deducting from the wage. In the absence of this, or regarding the amount above the ceiling, the claim can only be enforced against the employee in front of court.


[1] Act I of 2012 - on the Labour Code („Labour Code”)

[2] Decision No. Mfv.10.105/2016/5.