I. The New Hungarian Labour Code: Desires and Reality
2. Contractual sources of labour law: revival?
2.7. Collective agreement concluded by a Works Council:
an absolute dogmatic failure
The really bad news is that the new Labour Code allows works council agreements, concluded by the works council and the employer, to take over the role of the collective agreement under certain conditions. Before the 2012 reform, works council agreements had a very diff erent legal nature, since the
26 See for example Poland (Piotr G : Legal position of trade unions in Polish Collective Labour Law: enterprise-based trade union. Hungarian Labour Law E-Journal, http://www.
hllj.hu, 2014/1., 73–86.
27 Article 41 of the 1992 Labour Code.
28 Article 277 of the 2012 Labour Code.
29 Kártyás, Gábor: Kollektív szerződés. In: G , Tamás (szerk.): Munkajog. Budapest, ELTE Eötvös Kiadó, 2013. 491.
law stipulated that only “issues pertaining to the privileges of a works council and its relations with the employer” shall be set forth in such an agreement.30
It must be mentioned that the possibility of works council agreements replacing collective agreements was already in place, but only for a very short period, as the socialist majority deleted this provision from the Labour Code immediately after winning the elections in 2002. There was a general consensus within labour law scholarship at the time, that the normative works council agreement is a normative failure for reason of the diverse legal nature of works council agreements and collective bargaining.
According to the new Labour Code, the primary role of works council agreements is still the arrangement of the relationship between the works council and the employer: “the employer and the works council may conclude a works council agreement for the implementation of the provisions of this Chapter and for promoting their cooperation”.31 However, works council agreements may also contain provisions governing rights and obligations arising in connection with employment relationships (normative part of the collective agreement).
Such works council (pseudo collective) agreements may be concluded on the condition that the employer is not covered by a collective agreement,32 and there is no trade union at the employer that would be authorized to conclude a collective agreement.33
There is only one restriction concerning the content of the normative works council agreements: namely that works council agreements must not derogate from the provisions of the entire Chapter of the Labour Code on wages.34 This exception is also a dogmatic as well as a practical mistake, since higher wages are usually the compensation for several fl exible provisions concerning in particular working time and resting periods in the collective agreement. Since such a pecuniary compensation is not allowed, the conclusion of a real and balanced deal may be hindered or even frustrated.
The number of collective agreements is still very low, therefore, the clear aim of this measure is to promote the conclusion of “near” collective agreements in medium sized companies. A works council shall be elected if the average number
30 Article 64/A of the 1992 Labour Code, introduced by an amendment of the original text in 1995.
31 Article 267 (1) of the 2012 Labour Code.
32 As a result, the employer may conclude a normative works council agreement, in case it falls under the scope of a subsector or sector level collective agreement.
33 Article 268 of the 2012 Labour Code.
34 Chapter XII., Article 136–165.
of employees at the employer or at the employer’s independent establishment or division is higher than fi fty.35 There is usually no trade union at employer level, as employee organizations are concentrated in large companies, particularly in state-owned (eg. Hungarian Railways and other public service companies) and multinational fi rms (eg. Tesco, Audi).
As a result, the large and medium sized fi rms without trade unions have not really had a tradition, a practice or even an interest in collective bargaining.
This situation may change to a certain degree, as these medium sized employers will be motivated to conclude a works council agreement in order to draw the advantages stemming from the fl exibility of working time as well as wages provisions by way of derogation. Nevertheless, the fi rst experiences show that no new collective agreements are emerging in this section of the labour market.
It remains an open question, how these companies may be incentivized to engage in the collective bargaining process. Perhaps statutory provisions are fl exible enough for these employers and the lowering of the level of protection has no tempting eff ect.
Although the above described legislative objective, the promotion of collective bargaining in a wider range of medium sized companies, may be acknowledged, the legal solution of the normative works council agreement raises serious dogmatic problems and doubts. The starting point must be an assessment in light of the legal nature of the works council, as a labour law institution: works councils are designed to foster “cooperation between employers and workers, and taking part in the employers’ decisions”.36 This idea of participation seriously contradicts the attributes of collective bargaining, where the employees’ representatives confront the employer to attain the best working conditions for the employees at the expenses of the employer.
Whatsmore, works councils must remain unbiased in to the event of a strike organized against the employer, they may not organize, support or obstruct strikes.37 The lack of eff ective collective actions weakens the bargaining position of works councils.38 The labour law protection of the members of works councils is also missing, since it is only the chair of the works council who enjoys protection against termination of employment.39 Therefore, the
35 Article 236 of the 2012 Labour Code.
36 Article 235 and 262 of the 2012 Labour Code.
37 The mandate of works council members participating in a strike shall be suspended for the duration of the strike (Article 266 of the new Labour Code).
38 G , Tamás (szerk.): Munkajog. Budapest, ELTE Eötvös Kiadó, 2012. 53.
39 Article 260 (3)-(5) of the new Labour Code.
works council is like a tennis player in Wimbledon at the central court, in dire need of a racket. Moreover, there is a danger, that certain employers may urge the election of friendly, yellow works councils in order to create a partner for concluding a works council agreement derogating from the Labour Code in the employer’s interest.
As a result of the above, the new Labour Code is expected to strengthen the role of collective agreements by allowing ‘works council agreements’ concluded by works councils and employers to derogate from the rules of the Labour Code.
At the same time, works council agreements will play a subsidiary role, since they may regulate terms and conditions of employment only in case there is no collective agreement or any trade union that could conclude a collective agreement. The works council agreement, substituting the collective agreement, is a dogmatic failure and entails serious risks. As of yet, it is diffi cult to assess the prospective harm caused of this legal solution. Unfortunately, there is no available data on the number of such agreements, yet their real number seems to be negligible (if any). In our opinion, this normative function of the works council agreement should be deleted from the Labour Code, since it does not play the role it was elaborated for, on the contrary, it raises serious doubts.