Aron Peter Balogh
University of Debrecen, Marton Géza Doctoral School of Legal Studies, PhD student, arbalogh@gmail.com
Abstract
The objective of the new Act I of 2012 on the Labor Code of Hungary (LC) was to increase the role of collective agreements to achieve flexibility in labor regulations. The new Code – as a principle – allows collective agreements and individual labor contracts to regulate the content of work differently from what is stipulated by the Labor Code, not exclusively to benefit the employee, but the employer as well.
The general justification of the LC claimed that the limited role of collective agreements in the domestic labor market was due to the so-called relative dispositive regulations, allowing to interfere with the law only to benefit the employee. The new regulations – in the spirit of the extension of the collective autonomy of the participants of the labor market – also made it easier to conclude collective agreements, which are between the employer or employers’
associations, and the recognized trade unions. Trade unions are special forms of associations, which are registered by regional (formerly county) courts, and need at least ten members in order to be established. The entitlement to conclude a collective bargaining agreement under the previous Labor Code used to be linked to the results of works council elections (union members required to get the majority of the votes). At present, unions having the membership of at least 10% of the total number of employees employed at the employer are entitled to conclude collective agreements. These regulations can lead to practical issues, which I would like to reflect on from a critical perspective. For example, although it has been made easier to form a bargaining unit under the new regulations, the unions lack the democratic legitimacy to conclude any agreement if there is no requirement which ensures that the majority of the workers would support them. Unions are not motivated to increase the number of the members just above the minimum to conclude a collective agreement. Considering that the monitoring of the membership of the associations is difficult in the practice, it can also occur that a collective agreement is concluded without the union actually having the required membership for the capacity for conclusion.
The aim of this paper is to demonstrate the anomalies of the new regulations, to present a few of their practical consequences and to offer solutions for the de lege ferenda legislation.
Keywords: labor law, employment law, collective bargaining agreement, collective bargaining capacity, trade union
1. Introduction
The Act I of 2012, as the “new” Labor Code of Hungary (LC) introduced a huge innovation regarding the collective agreements of Hungary. Generally, collective agreements can regulate the content of work differently from what is stipulated in the Labor Code. The previous regulations under the obsolete Act XXII of 1992 on the Labor Code provided the collective agreements to deviate towards the benefit of the employee, but the new LC made it possible to regulate the content of work less beneficial to the employees as well. The intention of the legislative body was – as it was expressed in the justification of the Act – to provide a more flexible and extended collective autonomy to the participants of the labor market. With the extended autonomy, the parties can regulate their relationship and the content of work to match their financial, social and other needs. [1] Despite the new regulations, the figures
showed that the collective agreements could not engage a more significant role that they used to occupy before the new regulations entered into force.
Collective bargaining agreements are extraordinary legal institution of the private labor law, where the elements of contract(ual) law and public (labor) law are present at the same time.
As an agreement, the collective bargaining agreement is the embodiment of the mutual will of the parties involved, the labor union and the employer, although the normative regulations of it are applicable to all the employees employed at the employer. The contractual part contains provisions that regulate the relation between the concluding parties, the normative part declares the content of work, in other words, the rights and obligations that arise from or are in connection with the employment relationship. [2] The normative regulations prevail just as legislative acts with respect to the relationship of the employer and the employee, and the employees shall perform their work in compliance with these regulations, regardless if they did or did not have the chance to express their consent or to take part in the bargaining process of the CBA as a member of the trade union. The contractual part, practically speaking, governs the means of communication and shall be applied only to the concluding parties – the employer and the union, so it behaves like the terms of a contract. [3]
2. The decline of bargaining coverage and union density
The downward trend of unionization in the private sector does not show any sign of changing, much less of turning around worldwide. [Figure 1.] In Europe, the Commission expressed several documents (e.g. Green Papers) that to increase flexibility and security at the workplace, the significance of unions and their collective agreements should be strengthened.
[4]
Figure 1. Collective Bargaining Coverage and Union Density Rates Source: http://www.ilo.org/ilostat
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It is obvious that the workers have interests in common that a union can help advance.
Bargaining as a group gives workers greater clout with an employer than bargaining individually. When workers are organized at a workplace, the union has some monopoly power with which they can bargain more efficiently for workers' interests against management. Negotiating with the employer as an organized union, which is potentially present at several employers, puts greater pressure on the management compared to when the individual workers bring up an issue themselves. The larger the group, the more leverage it has against the employer, also its decisions are more accepted by the community of workers, regardless if they are unionized or not. Labor unions also possess power to organize collective labor actions such as strikes, protests, etc.
Before 2012, the collective bargaining coverage rate was around 33% in Hungary. One third of the covered employers employed in public sector, where the collective agreements prevail with significant restrictions on the possible deviations by law, so around 20 % of the workers of the private/business sector fell under the regulation of a collective bargaining agreements.
The trade union density – which expresses union membership as a proportion of the eligible workforce – was around 12 %, which was very low compared to other European countries.
The vast majority of the agreements – 2012 there were 2,783 collective agreements, 2,701 of these were in force at a single employer. Almost two-thirds of the collective agreements were for employers in the public sector, although, in terms of the numbers of employees covered, the proportions are reversed. [5]
It can be stated in general that the flexibility of labor law regulations and the emerge of collective autonomy have not yet strengthened despite the efforts. The new code lowered the level of minimum standards of employment, but to exercise the rights that rise from the collective autonomy, the employees have a great need to have capable unions to represent them to promote their rights and to conclude agreements deviating from the standards to their favor. The existence of strong and efficiently operating trade unions is essential to match the intentions of the government, to regulate labor law with the power provided to the bargaining parties by the possible deviation in collective bargaining agreements. Although there are no accessible figures of the present collective bargaining coverages and union density, it is no exaggeration to say that the Hungarian labor market still lacks strong trade unions, the union density and collective coverage rates are low, therefore collective bargaining does not take a central position in most of the employee’s life in Hungary. [6]
3. Collective Contractual Capacity in Hungary
Collective bargaining agreements are concluded by the employer or employers’ associations, and a recognized and registered trade union. Trade unions are associations, special forms of associations, that shall be registered by regional (county) courts. Under the new regulations, only 10 percent of the employees employed is required to join the union to conclude a collective agreement, and if the employees are represented by two or more unions at the employer, the unions with a collective contractual capacity are entitled to conclude the contract jointly. Despite the new regulations, the collective agreements could not establish a more significant role at the labor market which can be realized following the steady decline of bargaining coverage and union density rates. Although it was made easier to form a bargaining body under the new regulations, unions lack the democratic legitimacy of the workers. Unions are not just not concerned to increase the number of the members just above the minimum required to conclude a collective agreement, they only need to reach the 10% of the employees to join them in order to achieve their goals. The employees are also not concerned to join a union, because the union which has a contractual capacity can bargain effectively and can reach a valid collective agreement without the majority of the employees,
also the non-members are not required to pay union fees. It also has to be emphasized that the scope of the agreement extends to all the employees employed at the employer, including non-union members.
4. The „Democratic legitimacy” of worker’s representation
As I have previously mentioned, the majority support of the employees is not required for the collective contractual capacity, but the agreement is applicable to all the employees employed at the employer. This means that only 10 percent of the employees can reach significant decisions without the actual approval of the majority. In a case of the Hungarian Constitutional Court, two (representative) unions wanted to conclude a CBA under the old regulations. Representative unions used to be entitled to engage the agreements jointly, if they got the 50% of the votes at the works council elections. If they could not reach an agreement jointly, the union who got 65 % of the votes individually, could conclude the agreement.
Neither of two unions had 65, but they jointly had 63,5%. They argued that the minority union undemocratically obstacles the majority. The Constitutional Court expressed, that the constitutional definition of coalitional rights and freedoms does not include that the will of the democratic majority shall prevail in the bargaining procedure. [7]
Before 2011, the Hungarian National Interest Reconciliation Council – which is a tripartite body of the representatives of the employers, labor unions and the Hungarian Government – used to adopt three-party agreements regarding the amount of the minimal wages in Hungary, which were mandatory prevailing regulations such as legislative acts in the whole country.
The Constitutional Court declared that the National Interest Reconciliation Council exercised executive (power of the state) when it enacted such a decision, even if it is reached through an agreement. The Court also expressed that from the democratic principles it can be inferred that the represented unions were required to have the majority support of the employees in order to reach a democratically legitimate act. [8]
It seems to be obvious that the unions do not exercise legislative power of the state when they conclude collective agreements, but they regulate the content of work with a legal institution which has the same, normative power in employment relations as a legislative act.
Coalitional rights of the employees include the individual right to refrain from any union activities, open shopping or closed shopping is prohibited in Hungary. Section 231 (1) of the Labor Code provides employees and employers the right to establish organizations/associations, without any form of discrimination whatsoever, for the promotion and protection of their economic and social interests. This right also includes their discretion, to join or not to join an organization of their choice. When an employee decides not to join a union, it includes his or her approval to the activities of the people who are actually exercising their coalitional rights as members of the unions. However, if the employees are represented by more than one unions at the workplace, and the employee joins the minority union, which does not possess the mandatory 10 percent support of the members, neither the union, nor – indirectly through representation – the employee will take part in the conclusion of the agreement, also the union or the employee as an individual will have no power to terminate, to modify, or to contest the agreement.
When the legislation does not provide guarantees for the democratic principles to prevail, in several cases, the national courts establish further requirements. For example, solely the existence of the unions is not enough to conclude collective agreements in Germany. Unions gain the so called Tariffähigkeit – bargaining capacity since their registration, but German labor courts established a test of Social Dialogue Capacity (Social Mächtigkeit), where the court examines if the union has sufficient leverage to represent the interest of the employees employed at the employer (which is determined from the membership rate, financial situation,
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independence, history of the particular union). [9] In the United States, the bargaining power of the union is the question of the recognition of the employer. If the employer refuses to bargain, it is up to the NLRB to decide whether the union is an appropriate bargaining unit.
Workers can also call for a decertification election in order to the union to lose its bargaining power. Otherwise, if a union operates at the workplace previously certified as a bargaining unit, unless the employees call for a decertification election, the bargaining power of the union cannot be questioned. [10]
5. Contractual capacity regarding the amendment of the CBAs
The Curia of Hungary expressed in two of its decisions that only those unions are entitled to amend or modify the CBA who were concluding parties of the collective agreement.
Furthermore, the Curia expressed in its decision on a principal issue that the union who concluded the contract is entitled to amend it even if it loses its collective contractual capacity. This was a decision relied on the previous Labor Code – where the unions representing the workers at the workplace jointly had collective contractual capacity if they obtained altogether 50% of the votes at works council elections. In this case, the Curia declared several amendments of the CBA to be void because one of the unions (with a contractual capacity) was absent from the conclusion of the modifications. [11]
Under the new rules of the Labor Code, only 10 percent of the employees employed are required to join the union to conclude a collective agreement, and if the employees are represented by two or more unions at the employer, the unions with the collective contractual capacity are entitled to conclude the contract jointly. Although neither the old, nor the new regulations express it explicitly, it can be inferred from the text of the Labor Code that the rules and conditions of conclusion are applicable if the collective agreement is amended or modified. The problem is that the case law of the Curia shows that without the consent of all the unions, who were originally concluding parties, the collective agreement cannot be modified. If we take it into consideration, that according to the Labor Code the collective agreement will cease to apply only if all the concluding unions had lost their contractual capacity, as long as only one of the union remains capable to conclude the CBA, the consent of all the smaller unions, who actually lost their contractual capacity, is required to amend the contract. This also means that the smaller unions who had lost their contractual capacity – therefore their significance at the workplace – since the conclusion of the agreement, can obstacle the process of bargaining and the conclusion of modification.
6. Acknowledgements and conclusions
These cases demonstrate that the rules concerning the contractual capacity are, in many cases, obstructed by dogmatic and interpretational difficulties. My opinion is that – in the spirit of dogmatic clearance – it would be appropriate to have more detailed regulations in the Labor Code than the currently established regarding the collective agreements, also the case law of the Hungarian courts of law should be reviewed, revised, and summarized in disambiguation opinion issued by the Curia. As far as the significance of the normative regulations of the collective bargaining agreements are concerned, the possible deviation provided to the parties is a chance to regulate their relationship and the content of work to match their demands, financial, social needs, it is essential to have equal participants at the negotiations, in other words, it is important to strengthen the positions of the trade unions. It is also important to increase the workers’ confidence in the trade unions and in their collective bargaining agreements, for example with supporting legislation to encourage the union membership, or to
link the validity of a collective bargaining agreement to the approval of the majority of the employees at the employer.
In conclusion, to gain the confidence of the employees, the idea of reorganization of the whole union movement and structure has to be reconsidered. Most of the union officials are employed by the employers. Unions get most of their incomes from the employer or the state, they are neither independent financially, nor independent politically, and since the transition from socialism to market economy, they could not establish a fiduciary environment for the workers of the Hungarian labor market.
References
[1] Justification of the Hungarian draft law No. T/4786. on the Labor Code,
[2] KISS,GYÖRGY: Munkajog [Labor and Employment Law], 2005, Osiris Kiadó Budapest, [3] BERKE,GYULA: A kollektív szerződés a magyar munkajogban [The Collective Agreement
in the Hungarian Labor Law], 2014, Utilitates Bt., Pécs.
[4] Green Paper of the European Commission on modernising labour law to meet the challenges of the 21st century, Brussels (2006),
[5] National Industrial Relations - worker-participation.eu
Accessed at: http://www.worker-participation.eu/National-Industrial-Relations/Countries/Hungary/Collective-Bargaining#note2 on May 21, 2017
[6] GYULAVÁRI,Tamás – KÁRTYÁS,Gábor,The Hungarian Labour Law Reform. The Great Leap Towards Full Employment?, Dereito, 2012/2, Vol.21, pp. 167-188
[7] Constitutional Court Decision No. 911/B/2000 ABH [8] Constitutional Court Decision No. 124/2008. (X. 14.)
[9] KISS, GYÖRGY: The legal dogmatic status and law policy opportunities of trade unions based on Hungarian employment regulations from 1992 till today
Accessed at: http://real.mtak.hu/25657/1/KissGyangol_11_44.pdf on May 21, 2017 [10] Basic Guide to the National Labor Relations Act General Principles of Law Under the
Statute and Procedures of the National Labor Relations Board, accessed at https://www.nlrb.gov/sites/default/files/attachments/basic-page/node-3024/basicguide.pdf on May 21, 2017
[11] Curia Decision Mfv. II. 10.174/2001. (BH2003. 128) and Mfv. II. 10.174/2001/4.
(EBH2002. 684)
Reviewer: Dr. György Nádas, assistant professor, University of Debrecen Faculty of Law
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