Dynamics of employment termination – the question of the parties needs in the mirror of the rules of termination in the Hungarian Labor Code

When we talk about the enforcement of our labor claims, we immediately may think about the classic ways provided in our Labor Code, such as the mutual agreement of the parties, demand for payment, or the most important way: the labor lawsuit. This short article undertakes to examine and present the question of how the ways of termination collaborate with the interest of both parties of the employment relationship, and to find its possible critical points. Read more… (Ferenc Orosz)

When we talk about the enforcement of our labor claims, we immediately may think about the classic ways provided in our Labor Code (hereinafter: LC), such as the mutual agreement of the parties, demand for payment, or the most important way: the labor lawsuit. In my opinion, termination of employment relationship might be suitable for both parties to enforce their claims in a legal way, without using any other method of enforcement mentioned above. This fact is also reflected in the justification of the draft form of the current Labor Code, where the legislator stated that the termination system needed to be re-regulated to reduce the number of labor conflicts and lawsuits.[1] In my short article, I undertake to examine and present the question of how the ways of termination collaborate with the interest of both parties of the employment relationship, and to find its possible critical points.

I. The question of the purpose and duration of the employment relationship in relation to termination

With regard to the parties’ needs in relation to the employment relationship, I consider it essential to examine the purpose of the employment relationship, ie what the main needs of the parties are and what motivates them to establish or maintain the legal relationship. Basically, the purpose of the employment relationship is various, cannot be determined in one, complete and concrete definition. On the side of the employers, accomplishing the employers’ economic interests and aims is the main purpose of this legal relationship. So, the point of the employers’ view, establishing and maintaining legal relationships with employees aims the providing of manpower to ensure the accomplishment of the economic goals. These legal relationships need to be permanent since employers are not capable for realizing their economic goals on their own. The production of material goods and the creation of value require the employment, mental and physical strength of workers. Summarizing the above, the main needs of employers are no other than the employment of suitable employees, who are competent to perform the tasks to maintain their operation and to achieve their financial goals.[2] As I think, on the side of the employees, this question is much more complicated, because in an employment relationship the power inequality between the parties is a dominant sign of this type of legal relationship, the social purpose of Hungarian labor law is to protect the weaker party.[3] On the one hand, labor relationship and within that the wages and salaries paid after work provides the most important, but not only existential security of employees. It is in the best interests of employees to carry out their work in a job appropriate to their qualifications and status, in return for adequate remuneration, thereby obtaining the material and intangible conditions necessary for the development of their personality.[4] If we examine the provisions of Section 51 of the current Hungarian LC, it can be seen that the main obligations of the parties, such as the employer’s employment and wage obligations, as well as the employee’s work and availability obligations, are in line with the parties’ previously expressed needs.[5]

Due to the purpose of the employment relationship, the permanent nature of the legal relationship is important for both participants in the legal relationship due to the fulfillment of the purpose. However, the loss of the purpose of the employment relationship described above may occur on the part of either party, which circumstance entails the termination of the employment relationship. On the employer side, this is usually due to economic reasons, as well as the employee’s personality and behavior, while on the employee side, the reasons for the loss of interest can range from ambition to disappointment in the employer’s expectations to wages.[6] In the following, I will examine the three methods named by Mt. from the perspective of the interests of the parties, mainly the employees.

II. The issues of termination of employment by mutual agreement

According to the legal literature, the termination of a legal relationship by mutual agreement is the most cultured, risk-free form of termination that best serves the interests of the parties, in which case the loss of purpose is, in principle, on both sides.[7] From this we can conclude that ideally both parties have an interest in the termination: the employee may have found a more ideal job, in addition to which the employer found a more ideal candidate for the job in parallel, but these reasons are also very diverse and cannot be listed completely. However, in terms of enforcement, in my view, mutual agreement has two aspects that are worth taking under scrutiny.

One aspect is the content of the mutual agreement: being a contract, the parties can agree on any matter that they consider relevant and not prohibited by law. In this respect, there is a tendency on the part of employers to include a waiver clause of a general nature in the mutual agreement they offer, thus agreeing that there is no clearing relationship between the parties either at the time of termination or for the future.[8] The practice of the Curia handles the waiver clauses otherwise with caution, examining whether the employee’s contractual will actually extended to any benefit or claim that may be claimed later, and whether there has been any deception in this regard. This question also depends, of course, on whether the benefit has been determined item by item or only in summary form, because in the former case the chances of subsequent employee enforcement will be very low.[9]

As another issue, I would like to look at the case of coercion to sign the mutual agreement by the employer. In many cases, employers force their employees to sign a mutual agreement by coercion or threat, for the main purpose of relieving them of the obligation to pay severance pay in the event of termination of employment.[10] In this case, in fact, the loss of interest occurred solely on their side, so that a mutual agreement provides an appropriate basis for employer’s misuses. From this point of view, the employee’s existential interest in employment is eroded: on the one hand, he loses his livelihood job and, on the other hand, is quasi-deprived of his legitimate expectation of severance pay.[11] From the point of view of enforcement, the problem with this is that the Labor Code – in accordance with the Hungarian Civil Code – gives the parties a right of challenge due to coercion and threat, leaving it in a stricter way, leaving a narrower deadline. The employee has a subjective period of 30 days and an objective period of 6 months to assert his or her interests in the employment relationship characterized by subordination. In civil law, on the other hand, a time limit of one year is provided for this in the legal relations of equal parties. Employers may also maintain a coercive or threatening situation after signing the deed, which allows the objective 6-month period to expire without being challenged, thus causing a loss of rights to enforce the employee’s interests. De lege ferenda, it would be appropriate to set at least that time limit the civil law provides or more favorable among the rules of challenge in Labor Code to eliminate the vulnerability detailed above.[12]

III. Issues of dismissal and immediate dismissal

In the event of a dismissal the employer, the loss of purpose described above will appear on the employer’s side, so that it will meet his needs if he terminates the employment of the employee. The reasons can be various, such as reorganization, quality replacement, or even loss of trust. In this respect, it must be examined whether the dismissal, how compatible is with the interests of the employee.  I am thinking here mainly of the replacement and provision of his salary and subsistence. One way to do this is through severance pay: the main criticism of the new Labor Code is that the number of persons entitled to severance pay has been reduced compared to the previous law[13], the regulation is schematic, it does not consider circumstances other than the time spent with the employer, and the amount of severance payment is very low.[14] The following change can be observed in the amount: the previous Code adjusts the amount of the severance payment to the average earnings, and the current law adjusts the amount of the severance payment to the absence allowance, which Tamás Prugberger considers to be a social shortening and contrary to the Western European trend. I agree with his position that, in order to strengthen the position of workers, the legislator should return to the previous rules, because as mentioned, as one of the main functions of severance pay is to provide a living for the worker without income.[15]

In addition to severance pay, I believe that we need to look at other income-replacement legal institutions to ensure workers’ livelihoods. I will first examine the job-search allowance. Nowadays, the amount and duration of the job-search allowance is the subject of constant debate, which can be said to be remarkably low internationally. At present, benefits can be paid for a maximum of 90 days, which is based on the insurance principle. Its daily amount is the 60% of the gross daily wage, but maximum the amount of the minimum wage per day.[16] Second, if the employee still cannot find a job, he or she may receive a maximum of benefits for the active age under the Social Act,  employment replacement benefits, to be exact, if he or she meets the conditions prescribed by law, which are otherwise too strict in my opinion. This results in an extremely low amount of benefits, corresponding to 80% of the current minimum pension, which, according to today’s calculations, corresponds to HUF 22,800.[17] In my view, the regulation of both the job-search allowance and the benefits for the active age group is completely inadequate to ensure the livelihood of the former employee, and thus of the job-seeker. The former is unreasonably low in duration and amount, does not take sufficient account of the amount of contribution paid in my opinion, the latter is in my opinion humiliatingly low and is everything, just not suitable for ensuring a living wage.

Taking the case of a possible immediate dismissal by the employer into consideration – as Article XIX on Social Security of our current Basic Law provides the social protection only in the event of involuntary unemployment, the security of a worker ‘s livelihood may be jeopardized.[18]It may follow directly from the constitutional rule that an amendment to the law may occur at any time, which accordingly precludes the payment of a job-search allowance to a jobseeker who has become unemployed due to immediate dismissal. In any case, it can be considered as self-fault, since the Labor Code allows the employer to terminate the relationship immediately if the employee significantly violates an essential obligation arising from the employment relationship intentionally or through gross negligence, and if he or she behaves in a manner that makes it impossible to maintain the legal relationship.[19]

In my opinion, the termination of the employment relationship and the conflict between the needs and enforcement of the interests of the parties could be examined in many other aspects, but this is no longer possible in this short article, due to the limits. Overall, I would conclude that there is a need for a regulatory review of termination of employment in order to enforce the interests of the parties, in particular the employee, in the light of the facts and circumstances set out above.


Author:  Ferenc Orosz, law student, University of Debrecen, Faculty of Law

The research was carried out within the framework of the “Programs for Improving the Quality of Legal Training” supported by the Ministry of Justice.

[1] Magyar Köztársaság Kormánya: T/4786. számú törvényjavaslat a Munka Törvénykönyvéről. 128.

[2] Petrovics Zoltán: A biztonság árnyékában. A munkaviszony megszüntetésével szembeni védelem alapkérdései. (Doktori Értekezés) 36 – 37.

[3] Gyulavári Tamás (szerk.): Munkajog. ELTE Eötvös Kiadó, Budapest, 2017. 171 – 172.

[4] Petrovics: i.m. 36.

[5] A Munka Törvénykönyvéről szóló 2012. évi I törvény 51. §.

[6] Petrovics: i.m. 40 – 42.

[7] Lőrincz György: A munkaviszony megszűnése és megszüntetése. HVG-ORAC Lap- és Könyvkiadó Kft., Budapest, 2017. 64 – 65.

[8] Bihary Ákos – Mudri Sándor: Munkaviszony megszüntetése közös megegyezéssel? Veszélyes is lehet! https://www.jogado.hu/munkaviszony-megszuntetese-kozos-megegyezessel-veszelyes-is-lehet/ (download: 2022.03.18.)

[9] Lőrincz: i.m. 73 – 75.

[10] Prugberger Tamás – Nádas György: Európai és magyar összehasonlító munka- és közszolgálati jog. Wolters Kluwer Kft., Budapest, 2014. 379.  

[11] Gyulavári: i.m. 221.

[12] Prugberger Tamás: Munkáltatói visszaélések a munkaviszony megszüntetése során az új munkajogi szabályozás kihasználásával. Gazdaság és Jog, XXIV. évf. 2016/10. sz. 4.

[13] Ferencz Jácint: Védelemből elégtelen, indokolásból felmentve. 172. https://dfk-online.sze.hu/images/egyedi/bihari/ferencz.pdf (download: 2022. 03.20.)

[14] Bankó Zoltán: A munkaviszony megszüntetésére vonatkozó szabályok. Miskolci Jogi Szemle 12. évf. (2017) 2. különszám 33.

[15] Prugberger: i.m. 7.

[18] Magyarország Alaptörvénye XIX. cikk (1) bek.

[19] Mt. 78. § (1) bek.