New governmental guideline on bogus contracts

The Minister of Employment and Labour and the Minister of Finance jointly issued a new guideline on the qualification of contracts for work performance

The issue of identifying 'bogus contracts' or 'sham civil law contracts' has a long tradition in Hungary (HU0310102F). Currently both the Hungarian Labour Inspectorate (Országos Munkabiztonsági és Munkaügyi Felügyelet, OMMF) and the Hungarian Tax and Financial Control Administration (Adó- és Pénzügyi Ellenőrzési Hivatal, APEH) have the right to review employment related contracts in the course of their investigations, i.e. to decide whether an apparently civil law contract is in fact an employment contract. Nevertheless, except for a few provisions of the Civil Code and the Labour Code, up to presently this issue has been mostly left to labour law academics and to labour court practice, to a certain extent.

The present guideline has been issued by the Minister of Employment and Labour and the Minister of Finance jointly in accordance with the 1987 Act on Law Making. It is a legally non-binding document aiming to give the main principles of qualifying the contract for work performance. While the guideline admits that it is sometimes possible to perform a certain work on the basis of both a civil law and a labour law contract, it states that in the majority of cases such duality is not possible, i.e. the only proper form is the labour law contract.

The guideline specifies a handful of criteria that can help review contracts such as the regularity of the tasks performed by the worker, the possibility to require the worker to perform other work temporarily than the one included in the contract, the obligation to perform tasks in person, the worker’s obligation of availability to perform work, the existence of a hierarchical relationship between employer and worker, the employer’s right to command and control the worker, his/her power to decide on work schedules and place of work, the regularity of remuneration and the use of employer’s tools.

Given that the form of the new instrument is 'guideline', from the legal point of view the new instrument does not contain any novelty in connection with the issue of qualification; this would not even be legally possible by this way. None the less, it can still be of great assistance for the users of law as it lists definite criteria in one single document that can be used to make authority supervisions more efficient, which actually may have been the intention of the government putting the fight against undeclared work on its agenda. (HU0506101N)

This information is made available through the European Industrial Relations Observatory (EIRO), as a service to users of the EIROnline database. EIRO is a project of the European Foundation for the Improvement of Living and Working Conditions. However, this information has been neither edited nor approved by the Foundation, which means that it is not responsible for its content and accuracy. This is the responsibility of the EIRO national centre that originated/provided the information. For details see the "About this record" information in this record.

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