The amendment of the Labor Code introduced new obligations on companies which employ workers posted to them by a foreign company. The new rules apply not only to the Hungarian but also to the foreign company posting an employee, and therefore posting and host (receiving) companies must pay attention to these new rules. The new obligations may impose administrative burden on the posting and host companies and may entail high amount of fines in case of non-compliance.
The new provisions have been introduced to the Labor Code as a result of the implementation of the amendment of Directive 96/71/EC. The aim of the amendment was to introduce more effective means to prevent, monitor and sanction malicious practices related to the remuneration and work conditions of employees transferring within the EU.
According to the new rules, if an employee works in Hungary in the framework of providing services by the foreign company to the host company, the host company is obliged to inform the foreign employer in writing about the Hungarian Labor Code's minimal requirements applicable to foreign employees employed in Hungary. The notice must be sent to the foreign company prior to the conclusion of a service contract. These minimum requirements are, among others, the mandatory rules of the Labor Code concerning minimum rest periods and maximum working time, minimum paid yearly vacation, minimum wages, occupational safety and the provisions regarding equal treatment.
Moreover, the receiving Hungarian employer shall ensure that the employment contract or equivalent other document of posted workers, their time sheets, and the proof of payment of their wages is available in paper or electronic format during the whole term of posting at the place where the work is carried out, and for a period of three years after the end thereof at the employer’s registered seat or branch for review and verification.
Hungarian companies that fail to notify the foreign employer about the mandatory minimum rules of the Labor Code have joint and several liability with the foreign employer for potential employee’s claims in relation to the Hungarian entity's non-compliance with these mandatory rules. In addition, the authority may impose a fine on the host company. Furthermore, if the Hungarian company was aware or should have been aware when taking reasonable care that the foreign employer has not paid the salary of the employee, then it shall be jointly and severally liable with the foreign employer for the payment of wages and other payroll costs otherwise payable by the foreign employer.
The new rules impose obligations on the foreign employer as well. The posting company must notify the labor inspectorate latest at the beginning of the service-providing about the start of service-providing and supply of data on the foreign company, the activities to be carried out by the posted person and the main conditions of the work in Hungary. The foreign employer must appoint a person responsible to liaise with the labor authority. This person would be responsible for sending and receiving the documents of the posted employee. The foreign company shall notify the labor authority via the designated electronic interface about such officer.
The deadline to submit the above data was 31 August 2016 with respect to employees already employed in Hungary at the date of entry into force. With respect to workers posted to Hungary after the entry into force, the obligation already applied at the time of entry into force. The authority may impose a fine on the non-complying foreign company.
Besides the Labor Code, the Act on Labor Inspection has been significantly modified. The scope of the Act is widened to foreign companies who are sending employees to Hungary in order to provide cross-border services from 8 July 2016. As a consequence, Hungarian labor authorities may impose a fine on the foreign employer in case the obligations stipulated by Hungarian labor law provisions are not met. It is also new that the national authorities responsible for posting cooperate with each other regarding the fulfillment and supervision of the posting-related obligations and cooperate efficiently when reaching out to each other to enforce compliance with the regulations; so that the collection of the fines imposed on a foreign company will be more efficient.
It may be assumed that the new rules primarily relate to companies registered and located in the EEA, which are posting employees to Hungarian companies. However, the wording of the new rules leaves some uncertainty as to whether the new obligations also apply on those companies posting employees from outside of the EEA.
If Hungarian companies are posting employees to other EEA Member States, similar data supply and registration obligations may apply to the Hungarian companies, because pursuant to the 2014/67/EU directive, Member States were obliged to implement the same obligations into their own national law. It may not be excluded that the EEA county of the place of work implemented the Directive in a stricter way, so that stricter rules need to be observed in a given Member State. Thus, Hungarian companies posting employees to other EEA country may also suffer from a higher administrative burden and due to the closer cooperation of the national labor authorities the control of compliance with laws will be relatively easier. An infringement may result in a serious fine according to the national laws.
Act on Labor Inspection contains a clear reference that under the term of foreign employer an employer must be construed that is located in an EEA state and that provides service to a Hungarian company, and also, the language and the application form for data supply imply that the above obligations apply to employers located in EEA, this is not clear from the wording of the Labor Code.
The Labor Code uses the expressions "foreign employer" and "receiver entity" and thus it cannot be stated without doubts that they only relate to EEA companies. In addition, both experts and the prevailing case law confirm that the above mentioned minimum requirements which had been included earlier in the Labor Code as the implementation of the same Directive, also apply for non-EEA companies. Therefore it is questionable why the scope of the current implementation would be reserved only for EEA employers. This would mean that the legislator implemented the same directive earlier in such way that is it applicable to posted employees of EEA and non-EEA companies, while the current changes would only affect posting within the EEA. This would cause a disproportionate situation. It is obvious that the cooperation between the labor authorities is only applicable to the EEA, and thus the related obligations are only enforceable on this level, but pursuant to the Labor Code it is unclear whether the new information, document providing and data supplying obligation and the liability rules would also be applicable to companies from outside of the EEA.