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Will the New Rules on Abuse of Rights Require Rethinking HR Practices?

Will the New Rules on Abuse of Rights Require Rethinking HR Practices?

Issue 10.3
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Recent changes to the Hungarian Labor Code on the abuse of rights rules are a hot topic among employers, HR professionals, and employment lawyers in Hungary. In this article, we will take a look at what the new rules mean for employers and how they may mitigate the legal risks and financial exposure arising from the amendments.

The Meaning of Abuse of Rights in Employment Law

Most abuse of rights cases concern conduct by the employer (e.g., termination, instructions) that, on the face of it, is an exercise of legal rights, but instead is carried out for reasons concealed by the employer. If the conduct itself is unlawful, or if it is not a concealed act, then this does not constitute an abuse of rights.

A typical example is when an employer dismisses an employee for a reason apparently connected with the employer’s operations (such as a reorganization, or the employee’s position being eliminated), while, in reality, the employer terminates the employee because they uncovered illegal company practices, had conflicts with their supervisor, or raised unpleasant complaints within the organization.

What Changed as of January 1, 2023?

Until the end of last year, if an employee claimed that their termination or another type of conduct by the employer violated the prohibition on the abuse of rights, then the burden of proof was on the employee. In a dispute, the burden of proof describes which party must prove something to win their case in court. Until January 1, it was the employee who needed to prove the fact that there was an underlying reason to the employer’s actions, and that this hidden reason was actually the grounds for the employer’s ostensibly lawful decision. The new rules have split the burden of proof between the parties:

The party referring to an abuse of rights (usually the employee) must prove the facts and circumstances supporting the violation and, also, the negative consequence suffered. The latter is pretty obvious in termination cases. The other party (typically the employer) must prove that there is no link between the facts and circumstances and the negative consequence.

As an example, the employee provides evidence (e.g., emails, witness testimonies) that they had a workplace conflict with the management; then the employer needs to prove that the conflict had nothing to do with the dismissal but was rather connected with the company’s reorganization. However, it is rather difficult to prove that something does not exist, so employers are in a much harder position following these amendments to the burden of proof. 

In addition to these new evidential burdens, employers now also face greater financial exposure in abuse of rights claims against them. Under the new rules, employees may claim to be reinstated in their position if they are successful in their claim. If the employee claims reinstatement, their claim will not be limited by the 12-month salary cap if they claim loss of earnings. 

We can assume that employees will more often bring a claim of abuse of employer’s rights due to the new rules being more beneficial to them.

How To Mitigate the Risks of and Exposure to Such Claims?

The new rules require employers to pay even more attention to termination matters than before. Due to the possibility of employee reinstatement, losing an abuse of rights case can be much more expensive than a directly unlawful termination claim. Therefore, it is essential – now more than ever – to ensure that employees are not dismissed for concealed reasons. 

Employers can implement the following steps to help prevent and defend against abuse of rights claims: 1) maintaining objective performance evaluation records; 2) documenting employee misconduct through emails and warning letters; and 3) drawing up transparent and objective redundancy criteria.

The difficult part of it is that dismissing people has so many personal aspects and, from the employer’s perspective, these new rules make HR processes even more bureaucratic. Despite the risks, however, employers should not unnecessarily see threats in every corner either. The new rules are not likely, for example, to change court practice where employers may lawfully choose underperforming or previously misbehaving employees for redundancy. 

By Zsofia Olah, Head of Employment and Labor, OPL Gunnercooke

This article was originally published in Issue 10.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here

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