Thematic feature - individual labour/employment disputes and the courts

This article examines how individual labour/employment disputes are handled through the courts in Hungary, as at March 2004.

In March 2004, the EIRO national centres in 24 European countries were asked, in response to a questionnaire, to give a brief overview of their country's system for dealing with individual labour/employment disputes through the courts, along with data on: the volume of cases; the costs; the timeframe; alternatives to going to court; and any current debate on these issues. The Hungarian responses are set out below (along with the questions asked).

System

Please give a brief description of how disputes concerning individual employees' employment and labour rights are handled in your country by courts, tribunals or other official judicial bodies.

In Hungarian jurisprudence, the notion of a 'dispute of rights' covers all disputes in which the interpretation or application of a certain piece of law is disputed. The term also covers disputes arising from employment contracts, other agreements between the employer and the employee, work rules, collective agreements or any pieces of legislation related to their work relationship.

In the terminology of the 1992 Labour Code, 'employment-related individual legal disputes' (egyéni munkaügyi jogvita) are individual disputes of rights, that is all disputes which may arise over the existence or non-existence of a right of one of the parties, or in which violation, non-performance or non-proper-performance of an obligation is disputed. The parties to a legal dispute may be the employer and the employee(s). Legal disputes are adjudicated by labour courts.

The labour courts deal with labour disputes, having an exclusive authority and competence to adjudicate such disputes. Formal rules of court procedure govern the procedure in labour courts, and specific rules applied in the course of hearing labour law cases are included in Chapter XXIII of the Act on Civil Procedure. Most of the costs resulting from labour court cases are paid by the state. An employee losing a lawsuit should cover the litigation costs of the opposing party, but has to pay neither the relevant state dues nor the other costs of the legal procedure (for example, expert fees).

The system of labour courts, as special courts, was established in 1973. The labour courts adjudicate labour law cases in the first instance. They comprise a three-member panel - a legally qualified judge acting as chair and two lay members. Hearings are held before a full panel of three members. At the beginning of the first hearing, the chair is obliged to make an attempt to persuade the parties to reach a compromise agreement. In practice, this attempt is usually very formal, takes only a few minutes and does not lead to an agreement between the parties. The parties, however, frequently reach a compromise agreement during the court procedure but usually only after getting to know the other party’s standpoint and evidence, and also after finding out the probable opinion of the chair of the Labour Court on the matter.

Labour courts are organised at the county level (one for each county and one for the capital, Budapest) but occupy a position within the judicial hierarchy equal to that of local courts (see below). If a decision of the labour court is challenged by an appeal, the case is referred to the county court, whose judgment is final and binding. However, there is a possibility of an extraordinary appeal against the county court judgment, which is decided by the Supreme Court.

At the moment, there are four levels of courts in the Hungarian judicial system: local (or, in the capital, district) courts, county courts, regional courts and the Supreme Court. In most matters, the court of the first instance is the local court and, in the event of appeal, the county court acts as a court of the second instance. If the case begins at county level, the appeal is referred to the regional court. The Supreme Court adjudicates extraordinary appeals that challenge the final and binding judgments of county (or regional) courts. However, a major reform of the structure of judicial system has recently been decided. The reason is that the adjudication of ordinary and extraordinary appeals has overburdened the Supreme Court and resulted in a considerable backlog of cases. Furthermore, this situation has endangered the fulfilment of the Supreme Court’s main function, which is to ensure the consistent interpretation of law by the lower-level courts. In order to remedy the situation, a series of measures have been decided and partly put into effect. The most significant change is the introduction of a system of five regional courts, which hear all appeals against the judgments of the county courts within the region concerned.

Number of cases/disputes and costs

How many cases have been dealt with in your legal system by each category of court? Where possible, please provide statistics on the number of disputes in your country each year from 1990 to 2003 (or the latest year for which data are available). Where possible, please provide statistics on costs.

During the 1980s, approximately 20,000 cases were filed with the labour courts each year. In the early 1990s, the number of cases increased by 50%, reaching 31,000 in 1992 - see table 1 below. The steep increase was partly due to the large-scale economic reorganisation process that took place in the early 1990s, and partly to the effect of the introduction of the new Labour Code, which eliminated the 'in-house grievance boards' that had handled labour disputes at company level (TN0301101S). The second half of the 1990s saw a gradual decrease in individual legal disputes. In 1998, there were only 10,500 such cases. In 2000, however, there was again a steep rise in cases, with over 23,000 filed. The bulk of the increase is due to a recent extension of the responsibilities of labour courts to making awards in legal disputes related to social security payments. Nonetheless, a rise of around 10%-20% can be observed in cases related to labour issues. This rise is arguably the result of: the repeal of the pre-labour court workplace-level reconciliation process; and the increasingly tight labour market conditions, which encourage employees to seek justice through litigation.

The majority of cases tend to be won by employees, which commentators believe indicates that only those who are fairly sure about their prospects of winning the case use the labour courts. The amount of litigation is considered to be fairly low compared with more developed countries. This fact is thought by experts to be due partly to cultural factors, partly to weaknesses in workers’ representation and partly to the conditions in the labour market, which favour employers. This imbalance of power is reflected in the fact that in the mid-1990s employees typically sued their employers after having left the company. In the majority of cases, employees try to find remedy for their complaints individually in direct negotiation with their managers and they only sue the company as a last resort.

Table 1. Labour court cases filed, 1991-2003
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
28,253 31,319 17,349 28,243 14,458 12,842 13,318 10,589 11,490 23,732 26,099 24,798 29,801

Litigation timeframe

Where possible, please provide statistics on the timeframe within which court cases over individual labour/employment disputes are settled.

The labour court process is considered to be very slow and painstaking. According to estimates, 10% of cases take longer than a year to be processed. Table 2 below provides statistics for 2001, the latest year for which data are available (the figures do not fully reflect how long case take to be dealt with, as certain changes in the procedure result in the new registration of pending cases).

Table 2. Status of labour court cases filed in 2001.
. Total no. of cases After 6 months After 6-12 months After 1-2 years After 2 years
Closed cases 3,137 2,967 145 22 3
Pending cases 509 479 20 9 1

Other means of resolving individual disputes

Is there any kind of legal mechanism forcing or encouraging the two parties (management and employees) to resolve a dispute by prior negotiation? Where there is such a mediation process foreseen, please give details. Is there any evidence that mediation has had an effect on the volume of claims handled by courts? Are there any corporate policies built into the structure of organisations in your country specifically to deal with disputes? How are the employees’ representative bodies involved in the process?

In terms of workplace-level resolution of individual right disputes, there was a major reform of workplace-level conciliation procedures during Hungary's period of transition. During the state socialist era, company-level grievance boards, run by trade unions, were the first-instance juridical forum in individual rights disputes. However, due to the intertwined links among company management, unions and the ruling party during the state socialist period, it was widely questioned whose interests trade unions really represented. Thus, the post-socialist modification of rules pertaining to the world of work sought to re-establish the contractual freedom of employees and employers and to limit the intermediary role of unions.

The 1992 Labour Code therefore abolished the mandatory workplace-level grievance boards, and included only a brief passage concerning a pre-court conciliation procedure between the employer and the employee. It stipulated that, within 15 days of the employer taking a measure allegedly injuring the rights of an employee, the employee had the right to initiate steps and demand a conciliation process in writing. This conciliation process was a precondition for filing a lawsuit. If, however, the conciliation did not produce an agreement within eight days, the employee was free to file a suit. The requirement for this company-level pre-litigation conciliation procedure was repealed in 1999, following an amendment of the Civil Procedure Law. The modified procedure now makes it compulsory for the parties to hold a conciliation meeting at the labour court before the litigation is allowed to begin. Nevertheless, the Labour Code still contains a provision which authorises a collective agreement, or a joint decision of the parties, to provide for conciliation at company level in order to seek an agreement. If, however, the conciliation fails, the claimant has the right to file a suit in the labour court by the statutory deadline.

Although trade unions and works councils (HU0401106F) have no statutory role in the individual legal dispute procedure, unions may assist their members or employees with legal advice or by providing legal representation during the court procedure. Generally, legal advice is deemed to be the most important service that unions provide to their members.

Given an absence of legal regulations and well-established traditions in this area, there is no solid pattern of grievance procedures with trade union involvement at Hungarian workplaces. Case studies of workplace-level industrial relations have revealed that only a number of larger companies have established internal conciliation procedures in order to facilitate a quick solution of disputes related to employment issues. In these companies, however, management involves works councils rather than unions to facilitate in-house solutions.

Regarding legal disputes, 2002 saw the adoption of the Act on Mediation, with the aim of furthering the resolution of civil law disputes in out-of-court procedures. Several private agencies, legal advisors and lawyers now offer conciliation and mediation services for companies to help avoid court process. There are no statistics, however, on the use of these private third-party services.

The Labour Mediation and Arbitration Service (Munkaügyi Közvetítő és Döntőbirói Szolgálat, MKDSZ), whose mission is to facilitate reaching agreements in collective labour disputes, is barred from providing conciliation, mediation or arbitration services in pre-court reconciliation processes over individual legal disputes. In practice MKDSZ sometimes receives requests to mediate in disputes of rights, but cannot act officially given its mandate.

Debate

Please summarise any current debate on the issue of employment/labour disputes litigated by courts in your country.

Trade union confederations have recently argued for re-establishment of the workplace-level pre-court conciliation process, with the involvement of a third party providing conciliation and mediation services. Before the Act on Mediation was adopted, the MKDSZ had suggested that it should be authorised to provide mediation in individual legal disputes concerning labour rights. It was suggested that it would be especially important to have such mediation in individual labour disputes in cases where all or most of the employees of one employer are affected by the same alleged unlawful action of the employer - eg when the employer systematically violates the regulations on overtime or on annual paid leave.

At a tripartite seminar on conflict resolution in accession countries organised by the European Foundation for the Improvement of Living and Working Conditions in Prague on 17-18 November 2003, representatives of the Hungarian government and social partners agreed on the need to strengthen conflict-resolution mechanisms. The social partners have elaborated a national development plan for reinforcing such mechanisms, which includes an initiative to develop a third-party involvement scheme for individual dispute resolution. (András Tóth, Beáta Nacsa and László Neumann, Institute of Political Science, Hungarian Academy of Science)

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