What every employer needs to know: the most common mistakes in Hungarian employment agreements, do’s and don’ts.
Since Hungarian employment law is protective of employees, there is a widespread perception that as an employer it is unlikely that a court case can be won. However, the good news is that a great deal of employment disputes can be avoided with proper preparation, including a carefully worded employment agreement.
The PETERKA & PARTNERS Law Firm presents below a collection of certain common mistakes made by employers:
- Do not stipulate work schedule in the employment agreement.
With certain limitations, the right to schedule working time is the unilateral right of the employer. However, if the working time schedule is included in the employment agreement (say Monday-Friday, from 8:00 – 16:00), it can only be amended with the consent of the employee. So, should the employer like to move the starting hour to a bit later, or introduce a reference period, it will need to seek consent from the employees.
- Do not make the job description part of the employment agreement.
The job description is a collection of the typical tasks associated with the given position. It is the employer’s obligation to provide this to the employee, and since it is part of the starting documentation package, many employers think they are making life easier when they include the job description as part of the employment agreement.
However, this is not recommended. With certain limitations, the employer is entitled to amend the job description unilaterally. However, if the job description is made part of the employment agreement, it is no longer possible to change it unilaterally and usually the employee needs to be offered something in return for allowing the change.
- Regulate sanctions for wrongful breach of duty in the employment agreement.
If the employee wrongfully breaches his/her duty but this does not amount to a termination reason, the employer cannot use significant sanctions unless these are regulated in a collective agreement, or in the absence thereof, in the employment agreement. Such proportionate sanctions may include loss of right (to home office, premium, etc.) and/or penalty (but not exceeding the limit of one monthly salary). It is noted that if a wrongful breach of duty is sanctioned in this way, the same cannot be cited as a termination reason – hence, this course of action is recommended for minor issues where the employee is to be warned but kept on.
- Pay attention to non-compete clauses to avoid unnecessary major payment obligations.
While during employment the employee is required to refrain from damaging or jeopardizing the employer’s rightful economic interests by law and without specific compensation, the regime is different if a non-compete obligation is set for a period after employment. Post-employment non-compete obligations have detailed rules, including a maximum period of 2 years and the requirement to pay at least 1/3 of the base salary per month.
A general practice is that employers include such post-employment compensation in the employment agreement. However, if no cancellation declaration is communicated to the employee by the end date of the employment, the employer will be bound by the non-compete (and, as a worst-case scenario, will need to pay 1/3 of the base salary for 2 years). Thus, it is imperative to keep in mind this additional task of cancellation in such cases, or choose instead of this opt-out mechanism an opt-in setup.
- Include in the employment agreement the exchange of overtime surcharges to free time.
As a main rule, overtime is to be compensated with overtime surcharges. Often companies only realize the incurred overtime when it grows to a considerable number of hours, and the employee has his/her eye already on the monetary compensation.
If the employer would like to exchange surcharges to free time instead (subject to certain limitations), an agreement with the employee is needed. In such cases, the easiest is to include this in advance in the employment agreement to avoid situations where the employee can choose not to be compensated in this way.
It is noted that, as a rule of thumb, the proportionate free time needs to be granted in the following month, and that base salary for the overtime work would still be due (i.e., free time only makes up for surcharges, and in certain cases, only for part of them).
- Include IT monitoring software use in the employment agreement & pay attention to data privacy compliance.
IT monitoring either onsite or at home office is a hot topic as employers tread on thin ice when balancing the protection of their interests and infringing upon the human dignity of employees. What makes this especially risky is that besides non-monetary compensation claims this might also give rise to GDPR-compliance reviews by the authorities.
Thus, if the employer uses IT monitoring, it is recommended to double-check if this is covered from an employment perspective (including the requirement to inform employees in advance) and a data privacy point of view (balancing test, privacy notice, as the case may be a data protection impact assessment) as well.
