THE ROAD TO FLEXIBILITY? LESSONS FROM THE NEW PROEF 1e HUNGARIAN LABOUR CODE T"-/3 G678":/#'* and N'%;8&<< H=3** Abstract As a result of a general revision, a new Labour Code entered into force on 1 July 2012 in Hungary. One of the determining objectives of the recent labour law reform was ‘ exibilisation’, and ensuring that regulation by labour law should be kept to a minimum. e new rules increased the contractual freedom of parties, and particularly the role of collective agreements in the regulation of employment relationships. While maintaining the basic structure of Hungarian labour law, the new Labour Code introduced conceptual changes in several key areas, such as the termination of employment relationships, liability for damages and collective rights. ese changes were justi ed by the government on the grounds that the current labour law regulation was too rigid and that did not re ect the private law foundations of this eld of law su ciently. e article puts this statement under critical review and gives an overview of the most important elements of the labour law reform. In particular, a er a short introduction we will examine what changes the new Labour Code introduced in the hierarchy of legal sources, and what attempts were made to extend the scope of the Labour Code to other forms of employment. Further, we will analyse to what extent the changes introduced by the new Labour Code modi ed the balance between the interests of employees and employers. Finally, we will also give an overview of the relationship between the new Labour Code and EU labour law. Keywords: collective rights; D exicurity; implementation of EU Directives; legal sources of labour law; New Hungarian Labour Code; scope of the Labour Code * Tamás Gyulavári, Lecturer, Pázmány Péter Catholic University, Labour Law Department; [email protected]. Z is article was published in the framework of TÁMOP No. 4.2.1.B- 11/2/KMR-2011–0002. project (furthering scientih c research at the PPKE) of the Pázmány Péter Catholic University. ** Nikolett Hős, Lecturer, Pázmány Péter Catholic University, Labour Law Department; hos.nikolett@ jak.ppke.hu, Z is article was published in the framework of TÁMOP No. 4.2.1.B-11/2/KMR-2011– 0002. project (furthering scientih c research at the PPKE) of the Pázmány Péter Catholic University. European Labour Law Journal, Volume 4 (2012), No. 4 253 Tamás Gyulavári and Nikolett Hős 1. BACKGROUND AND OBJECTIVES OF THE LABOUR LAW REFORM: THE MOST FLEXIBLE LABOUR MARKET IN THE WORLD? - ere was only sixth months between the publishing of the 7 rst dra8 and the adoption of the 7 nal proposal of the new Labour Code by Parliament in December 2011. - e government published the 7 rst consultation document, the ’Hungarian Work Plan’ (Magyar Munkaterv ), in June 2011. - is was an important document because it set the context of the revision of Act No. XXII of 1992 (1992 Labour Code or 1992 LC). - e 1e PROEF 1e 1992 Labour Code, passed shortly a8 er political change, was the third labour code, following the ‘socialist’ Acts of 1951 and 1967. However, the original text of the 1992 LC has been amended over 50 times in the past 20 years. Several amendments were adopted concerned labour law harmonisation, which encouraged the legislature to rethink the regulatory concepts of some labour law rules, however for a long time, a general revision of the Labour Code could not been realised. - e Hungarian Work Plan envisaged several measures to increase labour market W exibility and the employment rate in Hungary; among these measures it proposed the adoption of a new Labour Code. - e document pointed to the extraordinarily low Hungarian employment rate as one of the most critical problems aZ ecting the Hungarian economy. - e employment rate was 55.4% in 2010, the second lowest in the EU a8 er Malta (EU average 64.6%), and far oZ the targets of the Europe 2020 Strategy (70 and 75%). 1 According to the Hungarian Work Plan, one of the causes of this low employment rate was that stringent labour law rules prevented employers to employ workers in employment relationships under the scope of the Labour Code. - erefore, rigid labour provisions were supposed to be the main cause of the low employment rate, and also of illegal forms of employment. 2 Among the most problematic areas, the document pointed to the stringent labour provisions on the termination of employment, working time, wages and the place of work. 3 - e government document referred to the development of a ‘Hungarian W exicurity model’, in which W exibilisation of labour law would be only one pillar. 4 With a mere general statement, it asserted that W exible labour law must be supplemented with a new type of security: rather than promoting job security, employment security should be promoted, thus increasing the adaptability of employees to the changing needs of the labour market and supporting labour market transitions. 5 However, taking only 1 Hungarian Work Plan, p. 9. 2 As note 5, above, p. 44. 3 As note 5, above, pp. 44–45. 4 As note 5, above, pp. 23–26. 5 As note 5, above, p. 38. - is is similar to what the Green Paper on modernising labour law highlighted – that ‘adopting a lifecycle approach to work may require shi8 ing from the concern to protect particular jobs to a framework of support for employment security including social support and 254 Intersentia e Road to Flexibility? the reforms made to the Labour Code, 6 the new policy of the Hungarian government is based on the 8 exibilisation of labour law, but the security measures increasing adaptability of employees have been neglected. us, the Hungarian model is a 8 exibility model rather than a 8 exicurity one. On the basis of the National Work Plan, the government prepared two Dra; s between July and October 2011, and a few months later Parliament adopted Act No. PROEF 1e I of 2012 on the new Labour Code (the new Labour Code or new LC). 7 erefore, only one year passed between the publishing of the < rst proposal and the coming into e= ect of the new Labour Code, which is a very short period, bearing in mind the importance and general impact of this Act. 8 Beyond employment 8 exibility, the legislature also had other objectives, such as the simpli< cation of the existing regulation, developing new rules on the basis of the case law of the labour courts, and < ghting illegal forms of employment. Nevertheless, the main stream of the reform was the 8 exibilisation of employment protection, in order to increase the employment rate by promoting competitiveness of employers. is strategy contrasts with studies, which show that in fact the Hungarian Labour Code is quite 8 exible when compared internationally. 9 In spite of this, the government declared that the Hungarian labour market shall be ‘one of the most 8 exible in the world,’ 10 a policy that will result in one million new jobs by 2020. 11 is government target is similar to the Lisbon target (70%), however it seems to be even more radical. It is impossible to predict whether the new 8 exible rules on working time, liability for damages and the termination of employment etc. will generate hundreds of thousands of new jobs, although it may be a successful element in regional competition for foreign investment (e.g. with Slovakia and Poland). 2. RESHUFFLING THE LEGAL SOURCES OF THE EMPLOYMENT RELATIONSHIP e most important pillar of the reform is the complete reorganisation of the hierarchy of labour law sources, and at the same time the approximation of the Labour Code to the Civil Code. It is a fundamental change, which leads us back to the period before active measures to assist workers during periods of transition’ (European Commission: Green Paper – Modernising labour law to meet the challenges of the 21 century. COM (2006) 0708 < nal, p. 10). 6 is paper does not deal with the proposals concerning active labour market measures. 7 e new Labour Code was passed on 13 December 2011 and it came into e= ect on 1 July 2012. 8 In fact, Parliament adopted the new Act with some delay, since according to the original plans the new Labour Code should have come into e= ect on the 1 of January 2012. 9 Cazes, S. – Nesporova, A., Flexicurity: a relevant approach in central and Eastern Europe, Ilo, Geneva, 2007, p. 147; Wallace, C., Work Flexibility in Eight European Countries: A Cross-national Comparison, Czech Sociological Review , 2003, Vol. 39, No. 6. 10 As note 5, above, p. 4; the Prime Minister’s lecture (http://index.hu/belfold/2012/04/23/). 11 Government Programme 2010 ( Nemzeti Megújulás Programja ), p. 18 (www.kormany.hu). European Labour Law Journal, Volume 4 (2012), No. 4 255 Tamás Gyulavári and Nikolett Hős the Second World War, when the regulation of employment was an integral part of civil (private) law, 12 as in other European legal systems. 6 e socialist labour legislation (1948–1990) broke away from this tradition and treated the Labour Code as a natural element of public law. Evidently, the political change brought about a gradual shi< back towards the legal traditions of private law, a process started with the cautious 1992 LC and completed with the new Labour Code. 6 e main consequence of this conceptual change is the enhanced role of contractual sources of labour law, above all collective agreements (collective autonomy), but also the agreement of the parties. 6 e rigidity of labour law has been linked to the weak regulatory function of 1e PROEF 1e collective agreements in the last two decades in Hungary.