11 November 2020

It is often the case that the employer does not clearly regulate the employment relationship of the employees, which later leads to an employment lawsuit. This happened in the case before the Hungarian Supreme Court, where a legal dispute arose in connection with the employee's work schedule, the stake is the payment of several million forints of overtime work compensation to the employee. In our short article, we analyze the Supreme Court’s decision and draw conclusions on how the employer can avoid similar situations.

1. The context

The employee who filed the labor lawsuit worked as a plant manager at the defendant company, overseeing the continuous production at the plant. He kept a record of his working time, according to which he was regularly present at the workplace in excess of his working hours, although the employer did not order overtime work.

The employer accounted for such excess work as overtime work under the Labour Code only at the beginning of the employment and only partially.

After his resignation, the employee filed a lawsuit against the employer and sought the recognition of the excess work recorded by him as overtime work and the payment for it.

2. First and Second instance court procedures and the decisions brought.

With regard to the employee’s right to payment for overtime, the court of first instance first examined whether the employee in the position of plant manager was classified as an executive employee under the LC. This is important because executive employees have flexible working arrangement by law, i.e. they allocate working hours themselves, so in their case the rules of the LC. on work schedule, including the rules on overtime, do not apply.

The court of first instance found that the employee was an executive employee, which was not affected by the fact that he kept records of his working hours, started work at the same time every day, and the employer initially accounted for the employee's overtime.

Based on the above, the employee was not entitled to payment for his overtime work, so the court dismissed the action.

The employee successfully appealed against the judgment, the court of second instance found, contrary to the court of first instance, that the employee was not an executive, as this could not be concluded based on his employment contract or employment conditions. The appellate court awarded the employee the requested payment for overtime. The court found that the employee is entitled to payment for overtime because he performed work necessary for the operation of the employer in excess of his working hours, which the employer has tacitly accepted.

3. The proceedings before the Supreme Court and the decision

The employer initiated a judicial review procedure against the final decision. The employer pointed out that the appellate court had not assessed the fact that the employee had previously identified himself as a manager when he substantiated the necessity of his overtime. The employer also argued that during the employment, he verbally agreed with the employee that the employee will be considered an executive in exchange for his increased salary, so he will not receive overtime pay.

The Supreme Court emphasized that the question of whether the employee was an executive could not be examined in the review procedure, so in this regard they followed the final judgment, according to which, the employee was not an executive.

The Supreme Court therefore examined whether an employee who did not qualify as an executive could have had a flexible work schedule based on an agreement, to which the employer referred. Based on the case files, the Parties set out in the employment contract a “fixed” work schedule between 6am and 14 pm, which was not amended in writing.

At this point, the Supreme Court pointed out that under the LC., the employer can only introduce flexible working time in writing, so the alleged oral agreement would be invalid in any case.

For this reason, the employee may in principle be entitled to overtime pay, however, the Supreme Court did not find it evidenced based on the case files that the employee’s overtime was indeed necessary. As the problem regarding proof arose from the erroneous organisation of procedure by the courts, the Supreme Court set aside the previous judgments and ordered the court of first instance to reopen the proceedings and render a new decision, so the lawsuit continues.

4. Assessment of the case

You can see from the case that labour law issues are often nuanced, sometimes seemingly insignificant circumstances play a key role in adjudicating the case. For an employer who is less familiar with labour law, it is hardly evident that, for example, an employee may become entitled to overtime pay even if he stays in the office in the evenings without his superior’s order. It is also often difficult to determine whether an employee qualifies as an executive under the LC, in which case, different labour law rules apply.

However, the main finding of the decision is that the employer may only order flexible working time in writing.

Statements materially affecting the employment relationship must be made in writing in most cases: the employment contract and the agreements concerning the employee's rights and obligations arising from the employment relationship (eg: salary, leave) must be in writing, working time schedule and the application of adverse legal consequences shall also be communicated in writing, to name just a few examples…

The requirement of written statements is a guarantee that increases the security of the employment relationship and thus protects the employee (and the employer too). Allowing verbal statements in important matters would make the content of the employment relationship unpredictable, and the difficulty of proving non-written statements would lead to undesirable burdens and risks, especially on the side of the employee.

In its decision, the Supreme Court held that with regard to essential issues of the employment relationship, such as the ordering of flexible working time, the parties may not derogate from the obligation to make a written declaration, i.e. an oral agreement is not sufficient.

3. Conclusion

It was again proved that no employer should take his employment law obligations lightly, an improperly regulated employment relationship is not in the interest of the employer either. The mistake of the employer in the article has caused him a lawsuit lasting for years, and in the event of losing, he will eventually have to pay much more than the employee’s original claim due to interest and legal costs. To avoid similar situations, we recommend involving an employment lawyer in your company's employment processes.