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Can Bad Practices Tolerated by the Employer Be a Valid Ground for Dismissal in Hungary?

Can Bad Practices Tolerated by the Employer Be a Valid Ground for Dismissal in Hungary?

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The Hungarian Supreme Court (the Kuria) has recently addressed an important principle related to dismissals that has long been known in labour law jurisprudence. In this article we summarize the decision and its effects.

Facts

In the examined case, the applicant worked as an account management consultant in a bank. His tasks included the preparation of offers for the conclusion of housing savings contracts, for the sale of which, the employee received a bonus from the employer.

His employer established during an internal investigation, that in the majority of the housing savings contracts opened by the employee, the clients did not start saving, however, the employee received the bonus for the unsuccessful contracts.

The results of the investigation were communicated to the applicant. Six months later, the employer terminated his employment with immediate effect.

Based on the justification of the dismissal, the internal investigations revealed that the applicant opened the housing savings contracts without actual customer demand and sales performance. In doing so, he collected bonuses illegally. After the errors and the bad practice were revealed during the internal audit, he did not change his practice.

The applicant filed a lawsuit for wrongful termination. According to him, the expectation from him in connection with the housing savings contracts was to arouse the interest of the customers, and in the event that they wish to conclude a contract, to sign the detailed offer with them. He also argued that other employees also committed similar behaviour, yet the employer did not terminate their employment.

First- and second-instance decisions

The first instance court found that the termination with immediate effect was unfounded. The court found that the applicant opened the savings contracts because the customers were interested in housing savings.

Following the defendant's appeal, the second-instance court changed the first-instance court's judgment and rejected the applicant’s claim.

The second instance court found that while it is reasonable that in some cases the customers cannot start the savings, the 73% rate in case of the contracts opened by the applicant is unacceptable and constitute a breach of his work duties, as he clearly started the contracts without assessing the actual customer demand and therefore violated the contracting process.

Judgment of the Supreme Court

The applicant filed a request for judicial review against the final judgment, which the Supreme Court found to be well-founded.

According to the Supreme Court, the second-instance court wrongly imputed to the applicant that he continued the bad practice despite the internal investigation. On the contrary, the related documents contained that the contracts were "OK". From this, the applicant could reasonably conclude that no serious irregularities were discovered in his work.

The court highlighted that in case the employer considered that the applicant had committed serious breaches of obligations during his activities related to the housing savings contracts, the applicant should have been clearly informed of this and asked to stop the bad practice.

In the absence of this, the applicant rightly claimed that the employer did not inform him until his dismissal that he did not perform his activities in accordance with the employer’ expectations.

The Supreme Court ultimately found that a bad practice developed and tolerated at the applicant’s place of work cannot be held against the applicant.

Comment:

Although the text of the Labor Code does not include it, the basic criteria related to dismissal have long been established in Hungarian judicial practice, according to which, the justification shall be true, clear, reasonable, and timely.

The requirement of reasonableness means that there must be a causal/logical link between the invoked breach and the consequence, i.e. that the employment relationship may no longer be maintained. Therefore, the dismissal might not be reasonable in case of minor, eventual breaches, or, as highlighted in the examined case, if the employer tolerated the problematic behaviour at the workplace or did not apply the same serious sanction for other employees.

The examined decision reinforced the well-established court practice in Hungary, according to which, a bad practice developed and tolerated at the employer cannot serve as a reason for termination.
Since the judgment can be invoked as a precedent, Hungarian legal practitioners can rely on this court practice with greater certainty in the future.

(In the article we summarized the court decision published under No. BH 2023.5.137)

By Peter Gritta, Attorney-at-law, SmartLegal Schmidt & Partners

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

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