Would You Sanction as an Employer? Read This First

Would You Sanction as an Employer? Read This First

The Conditions for Applying Adverse Legal Consequences
Contrary to popular belief, a culpable breach of obligations does not grant the employer unlimited discretion to impose sanctions. The conditions for applying adverse legal consequences are clearly defined by the Labour Code. Such measures may only be imposed if the possibility is expressly provided for in a collective agreement or, in the absence thereof, in the employment contract. This order is not merely technical but mandatory: if a collective agreement is in place, it must regulate the possibility of imposing adverse legal consequences. A general, formal statement that adverse consequences may be applied in the event of a breach is not sufficient. The regulation must be specific and clearly define the types of breaches and the nature and extent of the sanctions that may be imposed. The Labour Code also sets time limits for applying adverse legal consequences. The employer has fifteen days from the date it becomes aware of the breach to make a decision. This is the so-called subjective deadline. In addition, there is an objective deadline: no adverse legal consequence may be imposed more than one year after the breach was committed. Thus, if the employer becomes aware of a breach one and a half years later, it is no longer possible to apply a sanction. Although the law does not prescribe a specific procedural framework, any procedure set out in the collective agreement, employment contract or internal policy must be fully observed. It is also an important rule that the same breach cannot be sanctioned twice. If the employer has already imposed an adverse legal consequence, it may not rely on the same conduct as grounds for termination. Therefore, before making a decision, the employer must carefully consider whether the conduct in question warrants a milder sanction or termination of the employment relationship. At the same time, in cases of repeated misconduct, a prior written warning may serve as important evidence that the employee had already been notified of the objectionable behaviour. Any adverse legal consequence must be set out in writing, as verbal communication does not meet statutory requirements.
Types and Characteristics of Adverse Legal Consequences
The Labour Code does not restrict employers’ creativity in determining what types of sanctions may be applied, but it does provide guidance as to whether a given sanction is permissible. First and foremost, the sanction must be proportionate to the gravity of the breach. It would clearly be disproportionate, for example, to permanently and significantly reduce an employee’s base salary for a minor delay. In a specific case, a court held that the legal disadvantage applied must be capable of achieving both specific and general preventive effects, meaning that the sanction must have both an individual and a general deterrent function. The legal consequence must be related to the employment relationship and must constitute a disadvantage that temporarily modifies its terms. A sanction may not fall outside the framework of the employment relationship or oblige the employee to perform tasks unrelated to their position. For example, an employee working in a cleaning position may not be “punished” by being required to clean the employer’s private residence outside working hours. The disadvantage may be financial or non-financial in nature. Non-financial disadvantages include, for example, a written warning, temporary restriction of the possibility to work from home, or withdrawal of certain working time allowances. Financial disadvantages may include a reduction of base salary, withdrawal of certain benefits, or loss of eligibility for bonuses. However, the amount of any financial disadvantage may not exceed the employee’s one-month base salary applicable at the time the measure is imposed.
The law also stipulates that an adverse legal consequence must not infringe the employee’s personality rights or human dignity. Measures such as public shaming or posting the names of employees who committed breaches may violate human dignity. According to legal literature, requiring a previously managerial employee to perform significantly lower-prestige work may also raise concerns in this respect.What About Written Warnings?It may arise from the above that if neither the collective agreement nor the employment contract regulates adverse legal consequences, the employer is left without any disciplinary tools. Is it really impossible even to issue a written warning in the event of a culpable breach?
The situation is more favourable for employers. A written warning may be issued even if its possibility is not expressly provided for in the contract. According to the consistent case law of the Curia, the Supreme Court of Hungary, a written warning is an instrument ensuring work discipline, deriving from the employer’s right of supervision and instruction. Within this framework, the employer may draw the employee’s attention to the objectionable conduct, express disapproval, and clearly set expectations for future lawful behaviour. Consequently, the application of a written warning does not require specific authorization in a collective agreement or employment contract, as it can be derived independently from the employer’s managerial powers. ConclusionThe application of adverse legal consequences is subject to strict legal constraints. If formal or substantive requirements are violated, the employee may challenge the measure before a court, which may declare it unlawful and, where appropriate, order the employer to pay damages. For this reason, careful consideration and, if necessary, the involvement of a legal expert are advisable before making any disciplinary decision. A lawful and proportionate measure not only resolves the immediate issue but also strengthens organisational predictability and work discipline in the long term.