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As we referred to in our previous article, if a certain number of employment relationships are terminated for reasons related to the employer’s operations, the special procedural rules governing collective redundancies must be applied. These provisions serve a dual purpose: on the one hand, to mitigate the adverse consequences for employees and make the process more predictable; on the other hand, to ensure that employment authorities are prepared to handle the increased number of job seekers.
In the second part of our series of articles on terminations based on reasons related to the employer’s operations, we examine the circumstances under which the rules governing collective redundancies apply, as well as the factors that must be considered when determining the number of employees affected.
Regulations governing collective redundancies and conditions for their implementation
The rules governing collective redundancies are set forth in Act I of 2012 on the Labor Code (“Labour Code”). The employer must apply these special procedural rules if the set of conditions specified in the Labor Code are met.
Accordingly, collective redundancy refers to a situation where an employer intends to terminate the employment of a number of employees specified by law, on a specific legal basis, within a thirty-day period. We will present these conditions below.
Legal basis to be taken into account:
Only those terminations of employment may be taken into account for the purposes of determining the applicability of the rules governing collective redundancies that are attributable to reasons related to the employer’s operations. Accordingly, terminations based on the employee’s conduct or ability, as well as terminations initiated by the employee, are not relevant in this context. It is important to note, however, that not only traditional employer-initiated terminations should be taken into account, but also any grounds for termination that are actually related to the employer’s operations. The following should therefore be considered as such:
termination by the employer based on its own operations;
termination by mutual agreement initiated by the employer;
termination of a fixed-term employment relationship by the employer without notice and justification;
as well as – until proven otherwise – a termination without notice communicated to the employee who qualifies as a pensioner or holds an executive position.
Duration:
With regard to collective redundancies, termination notices issued within the 30-day period or termination agreements concluded by mutual consent are relevant. It is important to emphasize that if an employer carries out successive terminations of employment in such a way that no more than 30 days elapse between them, the individual terminations may be linked, and measures taken over a longer period—in some cases spanning several months—must be counted together. As a result, the total number of terminations may reach the headcount threshold specified by law, thereby qualifying as a collective redundancy procedure.
It also follows from the above that the timing and scheduling of these measures are of paramount importance. Even if the notices of termination are formally communicated outside the same 30-day period, where they are substantively linked and connected from an economic and operational perspective, there is a risk that the competent authority or court, upon evaluating the proceedings – taking into account all the circumstances of the case – will deem this to be a circumvention of the relevant rules. In such circumstances, the question may arise whether the rules governing collective redundancies should nevertheless be applied (or should be reclassified).
Determining headcount:
Finally, the application of the rules governing collective redundancies depends on the number of employees the employer intends to terminate in respect of its total workforce.
First and foremost, it should be noted that, according to the Labour Code, the number of employees must be determined based on the average statistical headcount over the six months preceding the decision on collective redundancies. For a precise calculation of this figure, the relevant methodological guidelines issued by the Hungarian Central Statistical Office (KSH) provide guidance.
The rules on collective redundancies must be applied mandatorily where the employer intends to terminate the employment of at least the following number of employees within a 30-day period:
in the case of an employment headcount between 21 and 99 employees, at least 10 employees;
in the case of an employment headcount between 100 and 299 employees, at least 10% of the employees;
in the case of an employment headcount of 300 or more employees, at least 30 employees.
An additional key consideration regarding the determination of headcount is that the Labour Code requires the combined headcount of branches operating within the same county or in the capital to be taken into account. This requirement to aggregate headcounts is intended to prevent employers from circumventing statutory thresholds by considering their branches within the same county as separate entities.
Fulfilment of conditions
Therefore, if all three of these conditions are met, the employer is required to comply with the specific notification, consultation, and other procedural obligations governing collective redundancies. We will address these obligations in the next section of our series of articles; however, we would like to note already at this point that, in the event of a violation of these rules, the courts may also rule that the terminations are unlawful.
Summary
We refer to collective redundancies when an employer intends to terminate the employment of a number of employees specified by law within a thirty-day period for reasons related to its operations. In such cases, the Labor Code prescribes specific notification and consultation obligations, and the terminations actually become effective as a result of a predetermined process lasting at least thirty days.
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