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01 February 2014

Hungary: Employees' Liability for Breaching Their Obligations

The new Hungarian Labour Code stipulates a higher maximum compensation if the employee causes damage through negligence.

Employee obligations

Some employee obligations are specified in the new Hungarian Labour Code. For example, during employment the employee may not engage in conduct that jeopardises the employer’s business interest.

Other, more specific employee obligations may be specified in their scope of work, in the collective agreement, or in the internal rules of the company.

If employees breach these obligations, they are liable for the damage caused and must compensate the employer.

Changes to non-executive employee liability

The old Hungarian Labour Code differentiated only between damage caused (i) by negligence or (ii) intentionally. If employees caused damage through negligence, they were liable only up to one-half of their average monthly earnings. Alternatively, a maximum of one and a half months’ average earnings were charged if the employer and the employee agreed such in the employment contract. Collective agreements provided a maximum of six months’ average earnings as a limit. Even if employees caused damage by gross negligence, their liability was limited in the same way as if they had acted with  slight negligence. Employees were liable for the entire amount if the damage was intentional.

The new Hungarian Labour Code differentiates between damage caused (i) by  slight negligence, (ii) by gross negligence, or (iii) intentionally. Slight negligence is when the employee does not see the consequences of his/her acts because he/she is negligent. Gross negligence is when the employee recognises the possible consequences of the activity but hopes that the detrimental result will not occur. Damage is intentional when the employee foresees and wishes or accepts the detrimental consequences to happen.

Something new in the new Hungarian Labour Code is that with damage caused by slight negligence, the extent of indemnification may not exceed four months of the employee’s absence pay. Furthermore, the employee must pay a maximum of eight months’ absence pay if the collective agreement so provides. Another change in the new Hungarian Labour Code is that the employee must pay all damage caused by gross negligence or intentionally. Overall, the new Hungarian Labour Code stipulates a higher maximum compensation for negligence.

According to the current court practise, when employees breach their essential professional rules, it is often considered gross negligence.

In general, employees who drive a company car cause damage by gross negligence (not intentionally) if they break traffic rules and the company car is damaged. In this case, the employee usually recognises the risk but hopes the accident will not happen.

Exemptions from liability

The employee is not liable if (i) the damage was unforeseeable at the time of the injury, (ii) the damage was caused by the employer, or (iii) the employer does not mitigate the damage.

Damage is unforeseeable if a careful person thinking reasonably cannot foresee the damage. In this case, the information obligation of the employer is very important because it influences what is foreseeable by the employee. For example it may happen that the employee who is driving the company car runs a red light and hits another car. In this case, the employer may enforce only the amount that is the consequence of the accident – the part to repair. But if the part is not in stock and must be ordered, the employer may not claim damages arising from the fact that the car cannot be used until repaired because this was unforeseeable for the employee.

If the employer causes damage, the employee is not liable to pay. This is applicable, for example, if the employer gives wrong instruction to the employee.

Should the employer not comply with the obligation to mitigate damages, the employee is likewise not liable.

The employer’s claim for compensation

The employer is entitled to enforce its claim with a payment notice if the claim is not more than three times the minimum salary. The minimum salary changes yearly; in 2013 it is ca. EUR 330. Thus, the employer may enforce its claim with a payment notice if it is not more than ca. EUR 980.

If the claim exceeds three times the minimum salary, the employer is entitled to file an action with the court. The court then decides the claim in a court procedure.

The employer may enforce its claim with a payment notice if the claim is not more than three times the minimum salary.

authors: Kinga Hetényi, Krisztina Gergely