CAN THE PROBATIONARY PERIOD BE STIPULATED VERBALLY IN HUNGARY? – THE CURIA RULED

28 October 2020

In its recent decision, the Curia dealt with the issue concerning what are the consequences if you fail to put in writing the employment contract which contains a probationary period clause. Is the probationary period clause valid or invalid in that case? We analyse the decision in our short article and answer the question above.

1. Facts

The plaintiff (“Employee”) applied for a position of a commercial leader at the defendant (“Employer”) in March 2017.

After that, the Employee consulted the managing director of the Employer three times about his employment contract. According to a witness, the parties agreed that they would stipulate a 6 months’ probationary period in the first meeting.

The last consultation concerning the employment contract, during which the parties agreed to put the employment contract in writing, happened on 30^th March 2017.

After that, the Employee commenced work for the Employer without a written employment contract on 3^rd April 2017. At the end of April 2017, the Employee received the draft of the employment contract, which contained a six-month probationary period, but the parties only signed the employment contract on 16^th May 2017 in which they stipulated that the Employee had been working since 3^rd April as well as the six months’ probationary period

A few days later, on 23th May 2017, the Employer terminated the employment relationship of the Employee without notice and justification referring to the probationary period.

2. The arguments of the Parties

The Employee claimed compensation for the unlawful termination of his employment relationship. According to the Employee, they agreed on the probationary period only one month after the establishment of the employment contract at the signature of the employment contract on 16^th May 2017. Besides, the Employee argued that a six months’ probationary period could not be stipulated in the absence of a collective agreement.

In his statement of defence, the Employer argued that he agreed with the Employee on the stipulation of probationary period on 3^rd April 2017, on the commencement day of the work of the Employee. The Employee did not allege the invalidity of the employment contract on the grounds of failure to put the contract in writing within a period of thirty days from the commencement date. Consequently, the stipulation of the probationary period is valid and the termination without notice by the Employer is lawful.

3. The first and second instance court decision

The first instance court (“First Instance Court”) rejected the claim of the Employee on the basis that the employment relationship was concluded between the parties on 30^th March 2017 and it was proven that the parties already agreed on the stipulation of probationary period at that time.

The First Instance Court has highlighted that it could not be concluded from the Labour Code[1], that the employment contract shall be made in writing in each case if the parties agree on a probationary period.

However, it is true that the part of the stipulated probationary period exceeding three months is void because of the relevant provision of a collective agreement, but the stipulation is just partially invalid, therefore the parties stipulated a three months’ probationary period. As the communication of the termination without notice occurred during the three months’ probationary period, the termination is lawful.

The tribunal, which acted concerning the appeal of the Employee, upheld the judgment of the First Instance Court, explaining that the First Instance Court correctly concluded the date of the establishment of the employment relationship and that the parties verbally agreed on the probationary period.

4. The decision of the Curia

The Curia dismissed the request for judicial review of the Employee and upheld the final verdict.

The Curia referred to the circumstance that the parties may stipulate a probationary period in the employment contract. It is a fact that the Labour Code lays down a written form for the employment contract, but the invalidity on the grounds of failure to put the contract in writing may only be alleged by the employee within a period of thirty days from the first day on which he commences work. In the failure of referring to the invalidity in deadline, the employment contract, which is concluded with the infringement of the formal requirements, is valid and the employment relationship is established according to the content of the employment contract, which is concluded verbally.

Consequently, the Curia agreed with the lower courts that according to the Labour Code, the probationary period, concluded verbally, is valid if the employee does not allege the invalidity of an oral employment contract within 30 days from the first day on which he commences work.

Based on the above, the Curia established that the Employee served his probationary period, therefore the termination without notice and justification by the Employer was lawful.

5. Assessment of the decision

According to the Labour Code, the employment contract shall be made in writing[2] and a probationary period[3] may be stipulated from the date of commencement of the employment relationship. According to the case-law[4], a probationary period may be stipulated only at the establishment of the employment relationship, therefore it cannot be remedied even with a few days’ delay after the commencement of the employment relationship.

It follows from the above that the probationary period should be basically stipulated only in writing. However, the employee may only allege the invalidity of the contract or its part, the probationary period on the grounds of failure to put them , in writing within a period of thirty days from the first day on which he commences work.[5]

Taking into account that the Employee did not allege the invalidity of the employment contract in the present case, the acting courts had to decide whether it  was proven that the parties agreed on a probationary period verbally before the Employee commenced his work.

Based on the declarations of the witnesses and the drafts of the employment contracts containing the probationary period clause, all acting courts found that the parties had agreed on a probationary period before the Employee commenced his work.

Although, the above case was a success for the Employer, you as an employer act prudently if you conclude all employment contracts with the probationary clause with your future employees in writing before the commencement of work.