The current economic environment, with soaring inflation indicators and the energy crisis, presents serious challenges for everyone: in the interest of cost rationalisation and long-term sustainability, employers often have to make difficult decisions, such as collective redundancy, which means the dismissal of multiple employees for reasons related to the employer’s operations. Recently, one of the most valuable Hungarian startups, Bitrise, was no exception, so businesses should be aware of the legal requirements they must pay attention to if they are planning something similar. We set out the most important points below.
First, it is important to highlight that collective redundancy differs from other forms of terminating employment — including termination by the employer — and this difference is reflected in a different procedure. Therefore, first of all, it is worth establishing whether, if the employer intends to dismiss several people, the special provisions on collective redundancy apply to it. Under these provisions, the employer may primarily be subject to additional consultation and information obligations.
The conditions under which a group dismissal qualifies as collective redundancy are defined by Act I of 2012 on the Labour Code (hereinafter: the Labour Code). The main condition is the average statistical headcount calculated for the six-month period preceding the decision, based on the guidance provided by the Hungarian Central Statistical Office, which determines the minimum number of employees required for the applicability of the legal institution in proportion to the number of employees. It should be emphasised here that, under the Labour Code, if the employer has several sites, the headcount must be calculated separately by site, or by county if it has several sites within the same county.
It is also important that this headcount includes all other terminations of employment that take place for reasons related to the employer’s operations. This includes mutual termination initiated by the employer, or even — unless proven otherwise — employer termination that does not need to be justified, such as in the case of an executive employee.
If the employer intends to terminate the employment of a number of employees exceeding the above threshold, it must adopt a decision on this and on its implementation in accordance with the statutory requirements, specifying the number of affected employees by group and the timing of the redundancy process. The decision must be communicated to the employee in writing at least 30 days before the actual termination of employment. Failure to do so renders the termination unlawful. In addition, the decision must also be sent to the state employment authority, including the identification data, positions and qualifications of the affected employees, so that the authority can prepare for the increased number of jobseekers.
If a works council operates at the employer, the employer is subject to further obligations: it must inform the works council of its intention to carry out the redundancy, together with the reasons for it, the number of affected employees and the planned implementation. Thereafter, it is obliged to consult with the works council in the manner regulated by the Labour Code, after at least 7 days have passed, also addressing possible ways to avoid the redundancy. In this case, the agreement reached as a result of the consultation must be recorded in writing and sent to the state employment authority.
It can be concluded that collective redundancy is a difficult and complex process, which in the future may affect not only startups similar to Bitrise, but also small and medium-sized enterprises that have been present on the market for a long time.
The above article is for informational purposes only and shall not be considered legal advice, a legal position or a legal opinion provided by PV Partners Law Association or any of its attorneys or trainee lawyers in relation to any specific matter. PV Partners Law Association excludes its legal liability for the use of this article in any individual case. In relation to a specific matter, please feel free to contact us at the following email address: iroda@pvpartners.hu.