Group Layoffs Expected in Hungary – The State of the Automotive Industry and a Regulatory Overview

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  • Summary of Recent Events

The automotive industry is undergoing a challenging transformation worldwide. Due to declining demand, cost rationalization has come to the forefront, significantly impacting employment. Unfortunately, this trend is also evident in Hungary, where changes in the global automotive sector have a severe impact on domestic jobs, the affected employees, and, consequently, the national economy.

  • Legal Framework of Group Layoffs (short) 

    I. Definitions and Thresholds

In light of the above, we summarize how Hungarian law regulates group layoffs.

Group layoffs do not apply to smaller employers. The minimum thresholds and the definition are provided under Section 71 of the Hungarian Labour Code (Mt.). According to this provision, group layoffs occur when, within a 30-day period, the employer plans to terminate employment relationships due to reasons arising from the employer’s operations, based on the average statistical headcount of the previous six months, in the following proportions:

  • 10 employees, if the employer has a workforce of 20-99 employees,
  • 10% of the workforce, if the employer employs 100-299 employees,
  • At least 30 employees, if the employer has a workforce of 300 or more employees.

It follows from the above that companies operating with fewer than 20 employees are not subject to the statutory rules on group layoffs, even if the employment relationship of the entire workforce is terminated.

When calculating the thresholds for group layoffs, it is important to consider the rule that if the employer initiates another termination or mutual agreement to end employment within 30 days after the last termination due to reasons related to the employer’s operations, these numbers must be aggregated.

II. Procedure

a. Consultations with the Works Council

The employer is required to consult with the works council and provide written notification of the planned group layoff at least seven days prior to the start of the negotiations.

The purpose of these negotiations with the works council is to develop an agreement aimed at avoiding the group layoff or, if avoidance is not possible, mitigating its adverse consequences.

If the parties fail to reach an agreement, the layoff process can still proceed. The employer’s obligation to negotiate remains in effect for at least 15 days following the start of the consultations, even if no agreement is concluded.

b. Notification to the State Employment Body

The employer is obligated to notify not only the works council but also the state employment body of its intention to carry out a group layoff. A copy of this notification must also be provided to the works council.

The same notification obligation applies regarding any agreement reached with the works council and the employer’s decision to implement the layoff.

c. Decision, Employee Notification, and Communicating Terminations

The decision must specify the number of employees affected by the layoffs, broken down by employment categories, as well as the timeline of the layoffs, divided into 30-day periods. Any breach of the employer’s notification obligations renders the termination unlawful.

The affected employees must be informed of the decision in writing at least 30 days before the termination. It is crucial to assess any restrictions on termination at this point in time (i.e., when the notification is issued, not when the termination is actually communicated). For instance, if an employee is not pregnant at the time of notification but is pregnant by the time the termination is communicated, this fact will not prevent the termination.

  • Summary

Based on recent developments in the automotive industry, Hungary is also regrettably expected to face group layoffs. The rules of the Hungarian Labour Code, briefly outlined above, provide clear guidelines for conducting this process. Proper notification, adherence to the obligation to negotiate, and compliance with the timeline are key factors throughout the procedure.