The government of Viktor Orban is using the Covid 19 pandemic to drastically weaken the position of the most vulnerable class of employees. It has temporarily suspended, as of March 19th in a paragraph hidden in an official decree, all employee protections provided by the Labor Code. The key passage declares: “The employer and the employee may derogate from the Labor Code by their agreement.” A key function of modern Labor Codes is to prevent employers from misusing unbalanced power relations and providing rights to the weaker party in labor contracts. Under the new decree, the rights of employees and the obligations of the employers may be freed from the regulations of the Labor Code with the use of highly asymmetrical bargaining positions among the parties. In an extreme situation in which both parties are exposed to unpredictable social and economic consequences, the government is giving the stronger party the legal rights to manage outcomes and impose solutions on the weaker one at will. It practically means that employers can put aside any rule of statutory law, such as on working time and rest periods, and termination of employment or pay.
This step is unprecedented in the post-second World War continental law that uses Labor Codes to provide guaranteed rights to employees. It also deviates from the more recent treatment of labor relations during the pandemic in the OECD countries. This move back to absolute ‘freedom of contract’ is reminiscent of the employment world of the 1850s.
The pandemic affects hundreds of millions of employers and employees all around the world, and, during the crisis, it requires renegotiating their relationships. Governments in many countries are trying to address this by measures aimed at promoting a balanced redistribution of opportunities and resources among these actors. Several governments, including the U.S., have provided new rights to employees, including stricter safety procedures or paid sick leaves. These measures were combined with tax reliefs, cheaper credits or direct transfers to employers aimed at maintaining employment while keeping struggling firms afloat. Hungary is moving in the opposite reactionary antique direction.
With reference to the aim of alleviating the “effects of the coronavirus pandemic on the national economy,” the government is returning to the idea of state-enforced freedom of contract, the pet idea of Spencerian libertarians. This idea is based on the claim that the undisturbed market distribution of wealth and opportunities is the only system that serves the public good. Besides drastically deviating from the post-second World War continental law, the decree diametrically opposes the related key principles of the post-New Deal American constitutional doctrine that defines the role of the state in regulating labor relations as the defender of the rights of weaker parties in labor contracts. It also raises concerns about the effective implementation of EU Labor Law Directives in this “period of emergency,” since the parties may put aside provisions of the Labor Code implementing EU secondary law.
The government decree increases room for the exploitation of unbalanced power relations exactly at a time when employees are most vulnerable. It also fits squarely within the philosophy guiding the social and economic policies of the Orban government. Its policies have consistently been informed by the idea that the abundant availability of cheap (semi) skilled labor is the key both to the capacity to lure foreign direct investment in the country and to promote the emergence of the national class of entrepreneurs. Labor rights, both collective and individual, have always been seen in this frame as a nuisance to be done away with. The 2019 amendment of the Labor Code, called by its opponents as the “slave law,” authorized individual agreements to increase the extra working time up to 400 hours a year. This modification may now be perceived as a predecessor, or practice field, of the present emergency regime.
Supporters of the government decree claim that extraordinary situations require extraordinary measures. But, unlike the decree of the Hungarian government that allows for treating labor as a disposable commodity, the example of countries like Austria, Italy, and Poland shows that there are alternatives: rapidly developing measures in dialogue with national social partners, like the use of 400 million euros for short-time work in Austria, the encouragement of the use of paid leave by collective agreements in Italy, and the governmental support of employers to provide for earnings up to the national average wage level, as envisaged in the plan of the Social Dialogue Council (RDS) in Poland.
In striking contrast, Orban is not actually responding to the present crisis, but instead using the pandemic as an excuse to achieve his longstanding agenda.
Laszlo Bruszt, Istvan Deak Visiting Professor, Columbia University Professor of Sociology, Central European University
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