Trade unions oppose new rules to impose litigation costs on employees

New rules introduced earlier in 2008 relating to the payment of litigation costs in labour lawsuits will mean that the defeated party will have to repay duties and other related costs which were paid in advance by the state. This is in addition to paying the costs incurred by the adverse party. Trade unions are outraged by the new rule and have immediately initiated talks at the National Interest Reconciliation Council and with the prime minister, so far without success.

Details of new rules

On 31 January 2008, the Budapest Labour Court (Fővárosi Munkaügyi Bíróság, FMB) announced at a press conference to the general public that new rules regarding the payment of litigation costs in labour lawsuits would come into force on 6 February 2008. Previously, employees were entitled to initiate labour lawsuits without having to pay any duties or costs in advance. Moreover, employees were exempt from paying such duties and costs even if they lost the lawsuit. The only costs which they were obliged to pay in the event of defeat were those of the adverse party, such as the legal representative’s fee, amounting usually to no more than 5% of the compensation amount.

In line with recently adopted legislation, the above costs will henceforth be paid in advance by the state; however, if the employee loses the lawsuit, the court will oblige them to repay the duties and costs paid by the state. This follows Decree 56/2007 of the Ministry of Justice and Law Enforcement (Igazságügyi és Rendészeti Minisztérium, IRM) on the modification of IRM Decree 6/1986 on fee exemption in court proceedings.

In Hungary, this duty amounts to 6% of the sued amount in each case but to no more than HUF 900,000 (about €3,902 as at 8 July 2008). In addition, the defeated party will be obliged to pay the costs not paid by the state – such as the fees of the witnesses and experts – along with the costs incurred by the adverse party. While employees in poor financial circumstances may claim exemption from the court, this is unlikely to be an option for the majority of workers who may be planning to take a case against their employers.

Government justifies move

The government has attributed these amendments to economic considerations, arguing that it is seeking to reduce the number of labour lawsuits initiated as many of them are deemed unjustified. However, statistics cited by the head of FMB indicate that Hungarian employees initiate lawsuits five times less frequently than their German counterparts. IRM, meanwhile, denied that the newly adopted rules would deter employees from initiating lawsuits, as no duties or fees would have to be paid in advance and only employees filing an unjustified claim would be forced to pay the costs.

Legal experts are divided on the issue. Although some argue that the amendment will prevent ‘irresponsible’ employee litigation cases, others have expressed their reservations. In particular, concerns have arisen that employees may relinquish a well-founded claim in cases involving high amounts of compensation, for instance compensation for work accidents, and that the employer may be less willing to settle out of court. Thus, it is argued that the amendment may endanger law enforcement.

Trade union opposition

The trade unions are strongly opposed to the amendments, claiming that they are extremely disadvantageous to employees and that the provisions were adopted without the consent of the National Interest Reconciliation Council (Országos Érdekegyeztető Tanács, OÉT).

On 31 January, the Democratic League of Independent Trade Unions (Független Szakszervezetek Demokratikus Ligája, LIGA) called on the government to suspend its implementation of the law and submit the case to OÉT; the latter placed the issue on its agenda on 14 March. The employee side insisted that it was ‘unacceptable’ that the regulation had been passed without social dialogue at OÉT. Referring to the above statistics, they called for tripartite negotiations seeking a ‘meaningful change’ of the situation. At the OÉT meeting, the government proposed tripartite expert talks on the issue. Furthermore, the President of the National Association of Hungarian Trade Unions (Magyar Szakszervezetek Országos Szövetsége, MSZOSZ), Péter Pataky, allegedly raised the case in his personal meetings with the Prime Minister, Ferenc Gyurcsány, and the Minister of Justice, Tibor Draskovics. Despite the various trade union efforts, the new legal regulation has not been changed thus far.

Commentary

The trade unions’ claim highlights one of the weaknesses of the Hungarian tripartite national interest reconciliation system: if a law is prepared by an authority other than the Ministry of Social Affairs and Labour (Szociális és Munkaügyi Minisztérium, SZMM) – in this case by IRM – the provisions affecting basic employee rights may not necessarily be subject to consultations at OÉT. The case also highlights the weak lobbying efforts of those trade union confederations which allegedly claimed an alliance with the sole governing party, the Hungarian Socialist Party (Magyar Szocialista Párt, MSZP).

It is likely that the new legislation may reduce the total number of employee claims, and not only the ‘unjustified’ ones, since – according to lawyers and other practitioners – the rulings of a court cannot easily be predicted in the majority of cases in Hungary.

Gábor T. Fodor and László Neumann, Institute for Political Science, Hungarian Academy of Sciences