One of the fundamental differences in the solution applied by the Hungarian law
is that while the member states of the European Union usually differentiate
between the cases from the point of view whether the termination by the
employer is unlawful because of breaching some rules of procedural law or
because of falsehood of the indicated reasons for termination, the Hungarian
law does not know such a differentiation. This is of importance since while the
member states of the European Union usually judge the former case significantly
softer; the Hungarian law adjudges the compensatory consequences of this case
under the same severity as those of a termination based on false reasons.
Accordingly, this fact itself already justifies the treatment of terminations
by special care in Hungary, and eventually the involvement of an outside legal
expert, since a termination which is otherwise lawful upon consideration of the
reasons for termination indicated therein, however, is not worded precisely
enough, may have serious financial impacts (see below).
A further significant difference in the Hungarian solution is that while within
the EU an employee may usually only claim the arrears of his/her salary, and in
some member states he/she may claim a severance pay in case the employment is
not restituted, in Hungary in such a case of omitting the restitution of the
employment the employee may claim not only a compensation for the arrears of
his/her salary and other damages incurred, furthermore the payment of the
severance pay due to him/her, but in addition he/she may also claim the payment
of an amount of penalty character, equivalent to his/her 2-12 months average
salary, depending on the court's decision.
In relation to the employee's obligation to reduce damages we would like to
draw attention to the fact that in practice Hungarian labour courts do not
oblige the employee to prove, whether he/she tried at all to find another
employment in order to reduce his/her damages incurred. However, this would be
of high importance – in cases where the employee does not claim the restitution
of the employment, since several employees ab ovo do not try to find
employment, knowing that they may claim anyhow the total arrears of their
salary, even upon failure to make efforts to reduce damages.
Finally, casting an account of the financial consequences of an unlawful
termination by the employer in the Hungarian court practice, for employees not
placed back into their employment and not finding new employment (other source
of income) after their dismissal, the payment of their 14-24 months average
salary is usually adjudged by courts (already including the above mentioned
amount of penalty character). Nevertheless, in some cases the amount adjudged
may run up to 50-60 months average salary of the employee.
Considering the above, at the beginning of a labour litigation it is extraordinarily hard to assess the actual financial risks of losing the lawsuit, which is often more problematic than the apparently high amounts adjudged as compensation.
This situation calls for change by all means, either by prescribing the above-mentioned obligation to reduce damages or by reforming the respective legal institution. The new Hungarian Labour Code being already under codification and serving the purposes of legal harmonization with the EU, too, will hopefully provide more exact and clearer provision as to the compensation to be paid for unlawful dismissal.
Dr. Tamás Gödölle
Attorney at Law
Dr. Arnold Hovánszki
Attorney at Law