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This article is also available in French, in Revue internationale du Travail 165 (1), and Spanish, in Revista Internacional del Trabajo 145 (1).
1. Introduction
Collective bargaining has a marginal and steadily diminishing role in employment regulation in Hungary, with current coverage below 20 per cent. This trend gives employees increasingly less say in their working conditions (Hungarian Central Statistical Office 2015 and 2020). Flaws in the regulation of collective bargaining are certainly among the main reasons behind this low and decreasing coverage. Taking a European comparative approach, this article analyses the Hungarian statutory rules on trade union representativeness and outlines the potential reform measures to help reverse the downward trend in coverage. Our aim is to present the Hungarian experience on various aspects of trade union representativeness in the light of ILO standards. This may be of particular interest to labour markets with low union density (that is, the proportion of union members in the workforce) and collective bargaining coverage – particularly in Eastern Europe – where such outcomes may be linked to inadequate legal regulation.
The remainder of the article is organized as follows. In section 2, we outline the Hungarian system of industrial relations, setting the regulatory context and examining how legal regulation may hinder effective collective bargaining. In section 3, we explain the preconditions for concluding and amending workplace-level collective agreements, and we review the practical challenges associated with potential solutions. Section 4 discusses the experiment of substituting collective agreements with works agreements, in which works councils function as quasi-trade unions. Section 5 analyses approaches to ensuring representativeness at the sectoral level as a means of initiating dialogue. In section 6, we consider the various limitations on the right to engage in collective bargaining in the public sector, before drawing some conclusions in section 7. Our study in essence considers how the legal regulation of the right to collective bargaining – particularly with regard to union representativeness – can better respond to the changed realities of work, in the light of the global trend of declining union density. In the absence of any such initiative by the Government, we present our own proposals for the reform of the current Hungarian legal framework.
2. The Hungarian industrial relations system: How can labour law be used to promote collective bargaining?
The origins of trade unions and collective bargaining in Hungary can be traced back to the early industrialization of the nineteenth century. However, this initial development was later undermined by communism, which tasked trade unions with controlling workers rather than representing their interests. The 1990s brought a rapid transition to democracy and the establishment of a market economy, accompanied by the emergence of freedom of association and autonomous social dialogue. Yet, three and a half decades later, trade union density and collective bargaining coverage are still among the lowest in the EU, and both indicators are falling. Despite certain legal reforms, collective bargaining is almost exclusively confined to the firm level.
These basic features point to a collective bargaining system in which, even within a formally supportive legal framework, trade unions face significant challenges in achieving the representativeness required for collective bargaining and to conclude agreements with a meaningful impact on working conditions. An analysis of the Hungarian legal framework may therefore provide useful lessons for countries with similar characteristics.
During the communist era, collective bargaining was not a relevant mechanism for setting the terms and conditions of employment. Collective agreements could deviate from the Labour Code1 only in cases where such deviations were explicitly permitted – which was extremely rare. The state determined wages directly through wage scales, or indirectly through regulations. Trade unions were one of the instruments of social control through which the Communist Party implemented its workplace policies (Szabó 2022, 44). This situation was not specific to Hungary. Throughout the 1990s, trade unions across Eastern Europe struggled to transform themselves from integral components of the socialist system into institutions of genuine interest representation (Bohle 2011, 96).
The Hungarian industrial relations system was established in its current form by the Labour Code of 1992,2 based on two main institutions of employee representation: trade unions and works councils. Trade unions are the primary actors, vested with a set of statutory rights related to interest representation, including the right to engage in collective bargaining. Works councils, following the German model, are elected consultative bodies that participate in the employer’s decision-making process. They are granted a wide range of consultative rights but have very limited powers in terms of co-decision (Héthy 1999, 194).
The early 1990s brought an extreme decentralization and fragmentation of trade unions, which were absorbed into six national confederations – none of which ever attained a dominant position. Following the period of compulsory union membership prior to 1990, the subsequent decades witnessed a steady decline in membership rates, falling to 29 per cent in 2001 and 7 per cent in 2021. This fragmented union structure and the lack of employers’ organizations at the sectoral level has maintained collective bargaining predominantly at the firm level. Low union membership is thus spread over a large number of organizations, often leading to several active unions competing with each other within a single workplace.
There are several reasons for the steady decline in union membership in Central and Eastern European (CEE) countries: among others, trade unions do not have a tangible impact on wage increases owing to a lack of effective bargaining, and they are organizationally, financially and professionally weak. In Hungary, they have faced political headwinds and hostile legislative reforms under Orbán Governments since 2010, as we will discuss below. The low – or, in some cases, practically inexistent – collective bargaining coverage in CEE countries can also be explained by various factors, including decentralized (firm-based) bargaining structures and the low level of organization of employees and employers alike (Funk and Lesch 2004, 267). Higher coverage levels are found in multi-employer bargaining arrangements, compared with single-employer bargaining systems, although most CEE countries have followed the latter model (Marginson, Keune and Bohle 2014, 41–42).
In Hungary, the reform of collective bargaining was the main pillar of the 2012 Labour Code,3 introducing a fundamental shift in the hierarchy of labour law sources. The 1992 Labour Code had aimed to establish minimum standards that could be supplemented or replaced by collective agreements. Accordingly, collective agreements were originally intended to play a significant role in employment regulation. As a general rule, the “principle of favour” was adopted in 1992, permitting only derogations that were more favourable (in melius) than the statutory provisions. Less favourable (in peius) derogations were also permitted in principle, though only to a limited extent. Despite the legislature’s aspirations, by the time of Hungary’s accession to the European Union (EU) in 2004, collective agreement coverage remained among the lowest in the EU, at around 30 to 40 per cent. Moreover, many firm-level agreements were not the result of genuine negotiations, but merely repeated the law (Neumann 2002, 11–12).
The main aim of the conceptual shift introduced by the (current) 2012 Labour Code was to enhance the role of collective agreements by radically widening the scope for less favourable derogations from statutory provisions. Above all, the general rule was changed to allow collective agreements to derogate from most of the Labour Code’s provisions, including in cases where these are detrimental to employees.4 The Labour Code also significantly curtailed the legal rights of trade unions, raising concerns about the ability of weakened unions to use their room for manoeuvre in collective bargaining. This 2012 reform led to a steady decline in collective agreement coverage, which fell to just 18.5 per cent in 2020 (Gyulavári and Kártyás 2023, 9).
Disadvantageous legal changes have created further obstacles to collective agreement coverage over the last decade, especially in the public sector. The hostile political climate is reflected in the ban on collective bargaining in the public healthcare sector, which came into effect in 2021 (see also section 6.2); the elimination of the employers’ obligation to deduct membership fees from wages across the public sector from 2024 onwards;5 and the ban on forming trade unions in the armed forces introduced in 2024.6
There are several non-legal, structural reasons behind the low collective agreement coverage in CEE countries, including the predominance of micro, small and medium-sized enterprises; divisions between and within both employers’ organizations and the trade union movement; and employers’ reluctance to negotiate with unions (Gyulavári 2018, 31–32 and 37). However, there are also legal reasons for low coverage, since a number of legal obstacles impede collective bargaining. These obstacles include provisions on representativeness, compulsory coalitions of trade unions, and restrictions on trade union rights and the right to strike. In this article, we argue that labour law obstacles are of crucial importance in the case of Hungary, where collective agreement coverage declined markedly after the 2012 labour law reform – from one third to less than one fifth of employees. This decline cannot be attributed to any factor other than changes in labour law (Gyulavári and Kártyás 2024). Identifying problematic labour law provisions may therefore help other CEE countries, or legal systems facing similar challenges, to address such labour law barriers.
We also argue that collective labour law is closely linked to the national context, shaped by legal, economic and social traditions, particularly in relation to the actors involved, their behaviour and the tools they use (Ales 2021, 28). As noted above, the Hungarian system of social dialogue – like the systems in other CEE countries – did not emerge through an organic process over decades or centuries. On the contrary, the very basis of the present system – built on freedom of association and autonomous bargaining – was introduced by the 1992 labour law reform. At that time, following 40 years of socialism, no trade union, employer or employers’ association operating in the Hungarian labour market had had any experience of collective bargaining in a market economy. Regulation could not build on existing national traditions or practices. Instead, it had to establish the conditions for these phenomena to evolve or transform themselves from their socialist forms into models suited to a democratic market economy. Post-socialist countries had little experience with either democracy or capitalism; reforms therefore had to build capitalism out of the ruins of socialist legacies or replace the old order entirely (Bohle 2018, 242–243).
The role of ILO Member States is not only to refrain from limiting the independence of the parties, but also to actively promote social dialogue (Servais 2017, 108). The above suggests that, in order to create an effectively functioning collective bargaining system in Hungary, it would not have been enough for the legislation to merely establish the independence of the parties and the autonomy of the bargaining process. Additional measures were needed to promote collective bargaining.7
In Hungary, where social dialogue started to develop four decades ago without a national precedent, the role of the legislature in supporting collective bargaining is particularly important. ILO Convention No. 154 also provides that collective bargaining should not be hampered by the absence or inadequacy of procedural rules.8 Although legal regulation is, of course, not omnipotent, the first step in creating a supportive environment is to ensure that the law does not impose unnecessary barriers to collective bargaining. The aim of this article is to identify the provisions that may have such an effect, with a particular focus on trade union representativeness.
3. Trade union representativeness: Legal obstacles and potential improvements
Labour law provisions have a direct effect on collective bargaining coverage by defining its legal preconditions. In particular, the rules governing trade union representativeness define the scope of the right to collective bargaining. Accordingly, we will first provide a critical analysis of the current representativeness criteria and their potential reforms. Second, we will consider the obligation to form coalitions in order to conclude collective agreements – a requirement that may disadvantage organized workplaces. Lastly, we will examine limitations on the right to amend or terminate collective agreements.
3.1. Representativeness: Current problems and reform options
3.1.1. Representativeness in an international context
In European legal systems, collective agreements are primarily concluded by trade unions or work councils, and occasionally by worker representatives (Rodríguez et al. 2011, 62–63). However, even trade unions have no automatic or unconditional right to engage in collective bargaining. Given the regulatory role of collective agreements – that is, their impact on the conditions of individual employment relationships – only trade unions with a sufficient mandate from the employees covered by the agreement are entitled to conclude it. Davidov (2004, 83–85) describes the inequality in the parties’ bargaining power as a democratic deficit within the employment relationship, which collective bargaining can help address. However, this deficit cannot be overcome if trade unions lack democratic legitimacy.
Therefore, establishing representativeness grants a legal status that authorizes trade unions to voice the interests of their constituents. This may serve several functions, including enabling the right to bargain collectively (Mundlak 2020, 447). In general, representativeness criteria are accepted by the ILO, as they demonstrate a democratic link between an organization’s membership and the officers who participate in bargaining (ILO 2015, 1). Article 3 of the Collective Bargaining Recommendation, 1981 (No. 163), identifies recognition of representative social partners for collective agreements as a measure to promote collective bargaining (Pärnits 2014, 487). ILO jurisprudence includes guidelines on representativeness, relating to elements such as neutrality, impartiality, “objective and pre-established” criteria, and scope for minority unions to exert their influence (ILO 2018, paras 533, 540, 1369 and 1387). As Mundlak notes, “these guidelines can and should instruct human rights and constitutional debates, but they remain procedural and thin in their instructions” (2020, 460).
In principle, a union’s bargaining power is based on the size and density of its membership; its financial resources, policies and ideological perspectives; the degree of member support; and its willingness to invoke sanctions (Sheldon, Gan and Bamber 2014, 698). As Mundlak observes, “rules on representativeness are not merely technical methods of sorting some associations from others. They reflect fundamental ideas about the source of trade union authority” (2020, 450). ILO Conventions Nos 98 and 154 do not prescribe a specific system for measuring representativeness. Accordingly, the degree of actual union membership, general ballots of workers or officials, or a combination of both, are equally compatible with ILO standards (ILO 2018, para. 531).
Similarly, the European Committee of Social Rights accepts that States parties may require trade unions to meet certain conditions of representativeness:
However, such requirements must not excessively limit the possibility of trade unions to participate effectively in collective bargaining procedures […]. In order to conform with Article 6(2) [of the European Social Charter], the criteria of representativeness should meet the condition of proportionality and be prescribed by law, be objective and reasonable, and be subject to judicial review which offers appropriate protection against arbitrary refusals. (Lukas 2021, para. 6.18)
Eurofound identifies four European models of representativeness: social partner self-regulation; mixed social partner and state regulation; state regulation of membership strength; and state regulation of electoral strength (Eurofound 2016, 1–2). Among civil law countries, representativeness criteria vary significantly. Electoral success, union density and employer coverage in the relevant sector are the most important criteria. However, other factors may also be considered, such as independence, experience and financial rectitude (Eurofound 2016, 21).
In most systems, the question of representativeness is regularly reviewed – in particular, in the light of periodic workplace elections (for example, in France, Italy and Spain) (ILO 2015). In France, a trade union must obtain at least 10 per cent of the votes in workplace elections (8 per cent at the industry, national and cross-professional levels) to be considered representative and participate in company-level bargaining (Robin 2008). This new method replaced the “presumed-representative” status granted to five trade union associations before 2012 (Boulin 2008, 482). The same criterion was introduced in Luxembourg in 2004, but the threshold was set at a higher level of 20 per cent level (Clément 2009, 1).
At the same time, some legal systems – such as Germany’s – establish strict conditions for the recognition of trade unions, based on criteria such as power, independence and income. However, all recognized trade unions are entitled to conclude collective agreements (Kovács 2011a, 897). In some other countries, such as Estonia and Latvia, it is enough to register the trade union, but representativeness is neither regulated nor monitored in collective bargaining. The Estonian system resembles that of the Nordic countries, where organizations with sufficient membership or influence are generally able to conclude collective agreements and are, therefore, de facto representative (Pärnits 2014, 487).
Trade union density is a common criterion for assessing representativeness. However, representativeness may be regulated at different levels. Some countries have representativeness criteria for the conclusion of collective agreements at the firm level, others at the sectoral level, and some only for the right to be consulted at the national level. Minimum thresholds for representativeness vary across countries, ranging from 2 per cent in Bulgaria to 50 per cent in Malta and Romania, though a threshold of 5–10 per cent appears to be the most common (Eurofound 2016, 13–14). The basis for measurement may also vary: it may be linked to the number of union members, to those who actually pay membership fees, or even to those who show the union some form of informal support. According to ILO practice, “a required 10-per-cent representation for a trade union organization to be able to participate in the negotiating commission is not in violation of the principles of freedom of association and collective bargaining” (ILO 2018, para. 1378). By contrast, the European Committee of Social Rights considered that restricting collective bargaining to trade unions representing at least 33 per cent of employees was in violation of Article 6(2) of the European Social Charter (Lukas 2021, para. 6.18).
As an illustration of the above, the representativeness threshold in Poland is 15 per cent membership, or 8 per cent for workplace trade union organizations affiliated to organizations above the workplace level (Sierocka 2021, 39). However, proof of representativeness is only required when the workers are represented by more than one trade union (Hajn 2022, 380). The Slovenian approach is similar, but the threshold is 10 per cent, or 15 per cent for trade unions not affiliated to a national association (Pärnits 2014, 488).
Nevertheless, there are no clear (or mandatory) international guidelines for measuring trade union representativeness. Approaches are strongly influenced by national, historical and socio-economic contexts, as well as by the structure and traditions of social dialogue. The methods used always remain debatable, especially regarding whether the regulation of representativeness is necessary at all. Where it is deemed necessary to establish representativeness criteria within a legal system, the best approach – whether mutual recognition, election results or union density – is also a subject for debate (Milner and Nombela 1995, 9).
3.1.2. Hungarian rules on representativeness
Between 1992 and 2012, the Hungarian system of representativeness was regulated by the Labour Code and based on the result achieved by trade unions at works council elections – specifically, securing more than 50 per cent of the votes.9 However, such elections were possible only in workplaces with more than 15 employees, where a works council (representative) could be elected. This criterion met with criticism from academia (Kiss 2008, 79–80), as it only partially reflected worker support and incited trade unions to “occupy” works councils, resulting in a blurring of the distinction between these two forms of employee representation (Kovács 2011a, 896). At the same time, collective bargaining was practically impossible in small and medium-sized enterprises (Fazekas and Koltay 2005, 171). Although the legal threshold was relatively low (15 employees), in practice, trade unions were rarely represented in such small workplaces, and non-unionized workers seldom organized works council elections (Kovács 2011b, 82).
The Government shared the criticism regarding representativeness tied to works council elections and shifted (in the 2012 Labour Code) to a system based on trade union membership rates – similar to the Polish regulations outlined in section 3.1.1. Under Hungarian labour law, only trade unions are generally entitled to conclude collective agreements, with works councils being permitted to do so only in exceptional cases (see section 4). Since 2012, a trade union may conclude a collective agreement with an employer if at least 10 per cent of its employees are members of the union.10
Here we have to distinguish between the membership rate and the coverage rate. The membership rate is the share of employees who are members of a trade union, whereas the coverage rate is understood as the share of employees covered by a collective agreement (mostly at the firm level). Under Hungarian labour law, all employees of an employer fall under the scope of a collective agreement concluded by that employer.11 As a result, the coverage rate is higher than the union membership rate, although only approximately twice as high, owing to the lack of higher-level (sectoral) agreements. It should be noted that this rule of automatic coverage may also disincentivize many employees from joining a trade union (Miranda Boto 2020, 328).
The current representativeness criterion of 10 per cent membership presents a challenge, as overall trade union membership is below this threshold and continues to decline steadily. In 2020, only 7.4 per cent of workers were trade union members – a significant drop from the 9 per cent membership recorded in 2015 (Gyulavári and Kártyás 2023, 7). Moreover, it is already impossible to conclude a collective agreement in approximately two thirds of workplaces where there is no union at all (Hungarian Central Statistical Office 2015 and 2020). Consequently, if membership continues to fall, the number of representative trade unions will automatically decrease, along with the number of collective agreements. If the 10 per cent threshold remains unchanged, collective bargaining coverage will decline steadily and automatically, with union membership likely to follow the same trend. This worrying scenario is compounded by the specificity of the Hungarian system, in which collective agreements typically exist only at the workplace level (see section 5).
It should be emphasized that the lack of sectoral bargaining in Eastern EU Member States makes the issue of representativeness seem much more important than in Western Europe. Representativity serves as the entry point for single-employer-level bargaining in Eastern Europe, functioning as the sole condition for participation in the collective bargaining process. At the same time, if no trade union at the workplace meets the required criteria, there is no bargaining at all – except in Hungary, where normative works agreements (in principle) may apply (see section 4.2).
3.1.3. Reform options
One obvious solution would be to lower the 10 per cent limit. However, as trade union membership continues to decline, this could trigger a downward spiral in which the threshold would gradually lose its original function of providing democratic legitimacy. This would not solve the underlying problem, but only postpone it, undermining the legitimacy of the unions that conclude collective agreements. Furthermore, owing to existing obstacles, it is questionable whether even an extremely low threshold could guarantee a higher level of coverage among single employers.
Another possible solution is to allow alternative forms of evidence for representativeness. Collective agreements could be signed by either the non-representative union or the elected employee representatives, and subsequently ratified through majority votes by employees. If a sufficient proportion of employees approve negotiated agreements, neither the principle of representativeness nor the right to collective bargaining is violated by a disproportionate (overly strict) threshold. It is worth noting that the 1992 Labour Code already tried this approach (up to 2012),12 and it is also applied in several EU Member States (Rodríguez et al. 2011, 63).
However, the drawback of this solution is that majority support from non-organized workers cannot provide the same guarantee as the consent of a representative trade union. In the absence of a well-organized trade union, it is much less likely that the imbalance in bargaining power between employers and employees will be levelled out. Moreover, lack of interest and poor organization among employees may impede the practical implementation of this approach, which risks remaining confined to the lawbooks.
Lastly, the previous criterion on works council elections could be brought back. However, if there is no trade union organization with at least 10 per cent membership, works councils are generally not elected. Empirical evidence shows that workplaces with functioning works councils are even less common than those with trade unions: in 2020, the figures were 16.4 per cent and 23.4 per cent, respectively (Hungarian Central Statistical Office 2015 and 2020). Reintroducing this criterion would therefore represent a further barrier for trade unions.
Overall, measuring representativeness presents a significant challenge, particularly when attempting to expand collective bargaining coverage in a poorly organized work environment. Perfect solutions may need to be set aside in favour of the least harmful arrangement, keeping in mind that rules on representativeness should be considered as part of a larger framework of rules concerning representation and the labour process (Mundlak 2020, 453). In light of the above, we propose retaining the current requirement of 10 per cent union density, but supplementing it with an option whereby, in the absence of a representative trade union, elected employee representatives or the non-representative unions may negotiate with the employer. In such cases, the agreement would be subject to ratification by a majority vote of the workers. Employee representatives could be elected by the employees of the same employer from among themselves through an ad hoc vote – separate from works council elections – with the sole purpose of negotiating and concluding a collective agreement with the employer.
3.2. Compulsory coalitions of trade unions
3.2.1. Trade union unity or plurality?
Freedom of association implies that workers may form multiple trade unions within the same workplace or branch of industry. The ILO does not promote unity over trade union pluralism, as it is the workers’ right to come together and form organizations of their own choosing (ILO 2018, paras 479 and 483). Nonetheless, several serious shortcomings may arise when workers form multiple small unions that compete rather than cooperate, and whose independence may be endangered by their weakness. The amplification of “too many workers’ voices” can also undermine the unions’ authenticity and efficacy of governance (Mundlak 2020, 450). The ILO affirms that, even in such situations, states must not impose compulsory unification by legislation. Instead, they should limit their role to encouraging trade unions to join together voluntarily to form strong and united organizations (ILO 2018, para. 485).
A common solution for the challenges outlined above is for the state to guarantee certain rights only to the “most representative organizations”. This allows workers to form as many organizations as they wish; however, collective bargaining or consultation by governments, or the nomination of delegates to international bodies are reserved for the most significant union. Consequently, the notion of “representativeness” outlined in section 3.1 measures the significance of a trade union. In general, the law guarantees rights to all unions that meet the established criterion (for example, 10 per cent union density in Hungary).
The concept of the “most representative” trade union, however, refers to a single organization that enjoys the most support from workers (or otherwise appears to be the most significant) and is thereby entitled to bargaining rights. This again raises the question of which criteria can be used to identify the most representative organization. ILO Conventions do not cover this issue; it is therefore left to national law to distinguish between the most representative and minority unions. The Committee on Freedom of Association has set only some broad requirements in this regard: the criteria must be objective, pre-established and precise, and must avoid any possibility of bias or abuse (ILO 2018, para. 540).
Besides, minority trade unions that have been denied the right to negotiate collectively should be allowed to conduct their activities and at least to speak on behalf of their members and represent them in individual claims. In other words, the distinction should not have the effect of depriving trade union organizations that are not recognized as being among the most representative of the essential means of defending the occupational interests of their members, organizing their administration and activities, and formulating their programmes (ILO 2018, paras 525 and 545).
3.2.2. The drawbacks of the Hungarian solution
In Hungary, the 1992 Labour Code linked the right to collective bargaining to the number of votes obtained in works council elections, establishing a relatively complex system. A trade union could conclude a collective agreement if its candidates obtained more than half of the votes cast in the works council elections. Where multiple unions were present in the workplace, this threshold had to be met jointly. If the unions failed to agree on the collective agreement, unions with at least 10 per cent of the votes could conclude the agreement, provided that they collectively secured more than half of the total votes. In this case, the support of unions under the 10 per cent threshold was no longer necessary. Lastly, if even the unions over the 10 per cent threshold could not reach an agreement among themselves, a union that obtained more than 65 per cent of the votes could conclude the collective agreement on its own.13
This “phased system” in place before 2012 sought to break deadlocks resulting from the presence of several unions. However – as noted above – it was conceptually flawed to link the right to conclude collective agreements to the results of works council elections. Since 2012, Hungarian law provides that when more than one trade union is entitled to conclude a collective agreement (that is, when several unions exceed the 10 per cent union density threshold at the workplace), an agreement may be concluded only if all eligible unions agree.14
This arrangement can lead to various stalemate situations. For example, in a workplace where two unions are active – representing 80 and 10 per cent of the employees, respectively, a situation may arise in which the majority union reaches an agreement with the employer, but the minority union disagrees with the proposed text, even if only on a single point. Under the current rules, the employer cannot conclude the collective agreement with the union representing the vast majority of its workers, as the consent of the smaller union is also required. In our view, this rule constitutes a disproportionate and unnecessary restriction on the right to collective bargaining.
Hungarian labour law allows the formation of multiple trade unions within a single workplace or at the sectoral level, and this is a relatively common practice. Consequently, the problem described here affects a dwindling number of workplaces with significant but fragmented union membership. From a practical point of view, it is a waste of resources to focus the collective bargaining process on reaching a compromise among the workers rather than on negotiating with the employer – particularly when the support behind the respective trade unions differs significantly. It should be noted that even when this rule forces trade unions into a “coalition”, their membership figures cannot be added together in order to meet the 10 per cent threshold.
The legislation would therefore need to be amended to allow representative trade unions to conclude collective agreements jointly. However, in the absence of consensus, unions falling below a certain membership threshold could still be excluded from agreements. The precise threshold should be determined in consultation with the social partners. Thus, even if representativeness continues to be measured by union density, the requirement of compulsory coalition should be replaced with the previous “phased system” to avoid stalemate situations.
3.3. The dynamic aspect of the 10 per cent threshold
As Otto Kahn-Freund famously observed, “as a power countervailing management the trade unions are much more effective than the law has ever been or will ever be” (Kahn-Freund 1972, 12). Collective bargaining establishes working conditions through the power relationship between the “collectivity of workers” and the employer(s) (Rocca 2015, 98). Within this “power relationship”, the representativeness of trade unions is not static, as the number of union members, the distribution of votes in works council elections, or other indicators of a union’s significance may change over time. Legal regulation should reflect these changes, as the capacity to conclude collective agreements is, in fact, a regulatory capacity.
As the ILO Committee on Freedom of Association has observed, if there is a change in the relative strength of unions competing for a preferential right or the power to represent workers exclusively for collective bargaining purposes, it should be possible to review the factual bases on which that right is granted. In the absence of that possibility, a majority of the workers concerned might be represented by a union which, for an unduly long period, could be prevented – either in fact or in law – from organizing its administration and activities with a view to fully furthering and defending the interests of its members (ILO 2018, para. 1380).
Consequently, unions may acquire the right to join an already existing collective agreement or lose their right to be a party to the agreement depending on the evolution of their representativeness. The “dynamic approach” to representativeness requires legislation to account for the fact that the factual basis on which trade unions are granted rights may change over time. Thus, the law should not only specify when a trade union gains the right to bargain collectively, but also that it may lose that right if it no longer meets the requisite conditions.
This dynamic understanding of trade union representativeness is not adequately reflected in Hungarian law. Judicial practice has established a doctrine whereby – given the contractual nature of collective bargaining agreements – only the original signatory parties may amend the agreement.15 This was explicitly codified in the 2012 Labour Code, which provides that trade unions reaching the 10 per cent threshold after a collective agreement has been concluded are granted the right to be consulted during negotiations, but do not become a party to the agreement.16
In September 2023, the Constitutional Court annulled the contested rule on the grounds that it unjustifiably discriminated between trade unions representing workers, even if they had the same legitimacy.17 While the Constitutional Court’s decision partly solved the problem, two concerns remain. First, judicial practice continues to reflect a static understanding of union representativeness. In one case, the Supreme Court (Kúria) ruled that a trade union that had concluded a collective agreement retained the right to amend or terminate it for as long as the agreement remained in force – even if its membership fell below the 10 per cent threshold.18 Several studies have shown how this interpretation can lead to unmanageable situations. For example, negotiations may be deadlocked by a dissenting union representing only a small fraction of the affected employees (Balogh 2019, 55–56; Nemeskéri-Kutlán 2019). Instead, we propose that when a trade union no longer meets the threshold required to conclude a collective agreement, it should lose the right to amend or terminate it.
Second, the Constitutional Court’s decision makes it clear that no distinction should be made between the collective bargaining rights of trade unions meeting the 10 per cent threshold – irrespective of whether they reached that level before or after the agreement was concluded. However, the Labour Code still provides that unions reaching the threshold after a collective agreement has been concluded are entitled only to amend it, with no explicit reference to termination. From the standpoint of legal certainty, both rights – amendment and termination – should be explicitly included in the Labour Code.
4. A misguided outside-the-box solution? Works councils as substitutes for trade unions
4.1. European examples: Supplementary bargaining by works councils
As previously noted, in most EU Member States only representative unions are entitled to conclude collective agreements. However, in a few countries – such as Austria and Germany – works councils may also engage in bargaining alongside trade unions in certain configurations (Rodríguez et al. 2011, 61), whereby normative works agreements may supplement higher-level collective agreements.
In many cases, such negotiations are supposed to deal only with non-pay issues or are conducted only on a de facto basis, since legislators have tried to separate the bargaining functions of unions from the participative responsibilities of works councils. Nevertheless, in practice, there are often strong links between the unions and works councils. (Sheldon, Gan and Greg 2014, 698)
The regulation of normative works agreements respects ILO norms, as the works council can take the place of the union only if no representative union is active at the workplace. The Workers’ Representatives Convention, 1971 (No. 135), and the Collective Bargaining Convention, 1981 (No. 154), contain explicit provisions guaranteeing that, where both trade union representatives and elected representatives exist in the same undertaking, appropriate measures are to be taken to ensure that the existence of elected representatives is not used to undermine the position of trade unions (ILO 2018, paras 1345 and 1346).
In Germany, collective agreements are mainly concluded between a trade union and a branch employer association. In addition, the works council and the employer may sign works agreements at the workplace level containing normative clauses, but works agreements always cover the entire workforce (unlike collective agreements). Works agreements do not replace collective agreements but supplement them on topics at the company level where the works council has a right to co-determination – or (recently) on issues where “open clauses” in higher-level agreements allow regulation of pay or certain working conditions. In recent decades, trade unions and employers’ associations have established a fair balance between centralized and decentralized bargaining, which has brought trade unions and works councils even closer together than before (Weiss 2020, 240–242).
4.2. Hungarian works councils in collective bargaining: Not fit for purpose?
In Hungary, the 2012 Labour Code introduced a provision permitting works councils to conclude quasi-collective agreements. Accordingly, if no collective agreement exists between the employer and a trade union meeting the 10 per cent threshold, the employer may conclude a works agreement with the works council.19 Although this arrangement may appear similar to the German model, the Hungarian works agreement is a fundamentally different legal institution. It serves as an unnatural substitute for workplace-level collective agreements in non-unionized workplaces.
The underlying objective of increasing coverage in workplaces lacking unionization is to be supported. However, this new legal institution does not fit conceptually into the system of collective labour law. In particular, works councils are not legal persons; their members enjoy less labour law protection than trade union officials against adverse actions by the employer; and they cannot organize a strike or engage in wage negotiations.20
This solution is fundamentally different from the German regulatory model, given that Hungarian works councils lack co-determination rights and there is an absence of higher-level collective agreements. The exclusion of wages from bargaining illustrates how the Hungarian legislator simply copied the German solution without adapting it to the Hungarian context. The lack of higher-level bargaining makes this provision totally pointless: there is no higher-level collective agreement to respect, and the exclusion of wage regulation makes works agreements practically meaningless.
Works agreements may pose risks for workers, as deviations from the provisions of the Labour Code could undermine their interests. It remains unclear how works councils can act as equal bargaining partners, given that they lack the right to organize strikes, enjoy only limited protection against adverse employer actions, and do not possess the material and human resources available to trade unions.
The proposed extension of collective bargaining capacity and the promotion of sectoral-level bargaining are more effective means of strengthening collective bargaining. Accordingly, we do not consider this misaligned legal instrument necessary. Moreover, normative works council agreements do not really exist in practice (Szabó 2022, 225). Therefore, abolishing this legal institution would not result in a practical change, but rather clarify the regulation of labour law. In our view, works agreements are not suitable instruments for establishing collective agreements at non-unionized workplaces.
5. Representativeness in sectoral-level bargaining
5.1. Centralized and decentralized collective bargaining systems
It is a long-standing theorem in labour law that countries with workplace-level collective agreements – such as Canada, Japan and the United States – tend to have low collective bargaining coverage, as it is roughly proportional to membership.21 A good counter-example is France, where collective bargaining coverage stands at 98 per cent despite union membership being only 8 per cent. This high coverage rate is due to the extended (erga omnes) scope of agreements.22 Collective agreements are negotiated for the economy as a whole, for entire sectors or for those sectors including smaller firms where workers are less likely to be unionized, which can result in coverage rates exceeding union density.
According to Mathys (2023), nearly all countries with collective bargaining coverage rates exceeding 75 per cent have sectoral and/or national-level collective agreements. While sectoral-level collective bargaining can take various forms, the criteria used to measure representativeness are similar to those presented in section 3.1.1 (Eurofound 2016, 10–17). Where the legal conditions are favourable, sectoral bargaining can result in high coverage even when combined with low union membership. The use or extension of sectoral collective agreements may therefore be key to increasing coverage levels despite low union density.
ILO Conventions do not prescribe a preferred level for collective bargaining, as this is essentially a matter to be left to the discretion of the parties. The Committee on Freedom of Association likewise does not adopt a stance in favour of bargaining at either the branch-of-activity or enterprise level. However, it has stated that legislation should not constitute an obstacle to collective bargaining at the industry level (ILO 2018, paras 1404–1409). In centralized collective bargaining systems, sector-level agreements typically play a dominant role, whereas largely or completely decentralized systems are based on single-employer agreements. The former group includes Nordic, Central and Southern European countries, as well as Brazil and South Africa, while the latter comprises Anglo-Saxon and Central-Eastern European countries (Gyulavári and Menegatti 2020, 8–9).
By increasing coverage, higher-level collective bargaining offers several advantages over bargaining at the workplace level. Uniformity of working conditions within individual sectors removes wages from competition between employers, limiting competitive pricing among entrepreneurs and reducing competition among workers in the labour market (Menegatti 2020, 119). Workplace-level agreements, on the other hand, may better reflect the specific needs of the local workforce and encourage participatory democracy among the workers directly concerned at sites of a manageable size, where workers can engage in meaningful deliberations about what they want (Mundlak 2020, 456). However, since 2008, the decentralization of collective bargaining has emerged as a major trend throughout Europe, coupled with mechanisms that allow derogation from higher-level agreements – such as opening clauses, opt-outs or other issue-specific deviation practices (Eurofound 2015, 33 and 38).
5.2. Sectoral-level bargaining and representativeness in Hungary
Although sectoral-level collective bargaining could potentially play a beneficial role, it remains largely absent from practice in Hungary (Kovács 2011a, 904), despite being regulated by law since 2009.23 Since then, agreements above the workplace level have been concluded in only a few sectors – such as electricity and construction – and primarily through agreement extensions. In 2024, only the agreement in the electricity sector had an extended scope (Gyulavári and Kártyás 2023, 16–17). While there are many possible reasons for the limited role of sectoral-level agreements, one evident constraint is the controversial regulation of trade unions’ right to conclude sectoral agreements. This highlights the urgent need to revive sectoral bargaining through legal reforms.
Under the current Labour Code, if a collective agreement is concluded by a trade union federation (that is, a civil organization whose members are trade unions),24 at least one of its member unions must meet the 10 per cent density threshold.25 However, whereas the memberships of member organizations cannot be cumulated in order to meet this condition, we argue that it would be more appropriate to allow for such aggregation.
In addition, a separate law established the so-called “sectoral dialogue committees” and set out the criteria for the sector-level social partners to conclude collective agreements within these forums. 26 However, the conditions differ from those laid down in the Labour Code. In sectoral dialogue committees, trade unions’ representativeness is measured using a more comprehensive system, based on five cumulative criteria: votes obtained in works council elections; number of members; coverage of collective agreements concluded by them in the relevant sector; and participation in national and international social dialogue forums.
There appears to be no justification for maintaining two separate sets of rules for sectoral-level collective bargaining. Instead, the conditions of representativeness under the Labour Code and in the Act on sectoral dialogue committees should be harmonized. The latter sets out a more complex system, which would appear to be more appropriate; however, the opinions of the social partners would be an important input in determining which system should prevail.
6. Limitations in the public sector
6.1. Specificities of public sector collective bargaining
Public employees also perform subordinate, dependent work, and collective bargaining may therefore be the most effective means of involving them in shaping working conditions. At the same time, in the public sector, the social context of collective bargaining, the identity of the parties and their scope for manoeuvre are distinct and, therefore, require specific rules. During negotiations, a public employer does not represent its own private interests, but rather those of the public (Summers 2003, 442–443), and cannot autonomously determine the employment framework (for example, staffing levels or budgetary resources). The fundamental aspects of public employment are determined by binding legislation, including the state budget, which imposes a natural limitation on collective bargaining. In the private sector, collective bargaining serves to restrict the (economic) power of employers. This function, however, cannot be without limits in the case of public bodies exercising authority derived from the sovereignty of the State (Chigudu 2015, 171; De Becker 2021, 300).
National practices on collective bargaining in the public sector vary significantly. While the vast majority of EU Member States use some form of negotiation to determine working conditions and/or wages, some governments take all decisions in this area unilaterally. The differences between the two regimes are often nuanced, as it can be difficult to distinguish not only between bargaining, consultations and outright unilateral decision-making, but also between the letter of the law and established practice.
In many cases, effective wage-setting combines elements of both regimes (European Commission 2014, 9–11). According to the ILO, centralized collective bargaining should, in principle, take place within the framework of public services, as it reflects a homogeneous approach to labour relations in the State. National-level agreements may be supplemented by lower-level negotiations. The ILO has observed a gradual move away from statutory unilateralism in relations between the State (as the employer) and public employees, towards bilateral labour relations supported by the exercise of collective bargaining (Canessa-Montejo 2019, 49–50 and 60–61).
According to ILO Conventions, the right to collective bargaining may be restricted in the case of the armed forces, the police27 and public servants engaged in the administration of the State.28 The Committee on Freedom of Association interprets this latter category narrowly, referring only to those whose activities are directly related to or who support public administration. It does not cover those providing public services such as education or public healthcare (ILO 2018, paras 1239, 1241, 1269 and 1270). Similarly, the European Committee of Social Rights has noted that, in the case of public officials, collective bargaining may be subject to regulations determined by law. However, merely hearing a party on a negotiated outcome is insufficient (Lukas 2021, 6.16–6.17).29
6.2. The severe restrictions on public sector bargaining in Hungary
Although Hungary has ratified all the relevant ILO Conventions, Hungarian labour law unduly restricts the right of public sector workers to engage in collective bargaining.
First, public administration staff are excluded from collective bargaining, except for “public administration employees” who do not participate, even indirectly, in administrative functions (for example, janitors, drivers or catering staff employed by government agencies).30 This rigidity is typically justified by the claim that the employment of civil servants is governed by binding statutory provisions and financed through public funds, leaving no room for collective bargaining. However, current regulations grant employers broad discretion to manage the employment of civil servants through unilateral decisions, largely undermining this argument. In our view, collective agreements would play an important role in making employment-related matters – such as precise salary levels, place of work or tasks to be handled – which are currently left to the employer’s unfettered discretion, more transparent and predictable. For this reason, we propose that collective bargaining should, as a general rule, be permitted in civil administration.
Second, collective bargaining is also severely limited in public institutions that are not administrative bodies but provide public services such as education, healthcare or cultural services. While the criteria for representativeness in this sector are the same as those established in the Labour Code, the permissible content of collective agreements is highly restricted. Consequently, trade unions must meet the same worker support thresholds as in the private sector, yet the scope of bargaining is overly narrow, as the vast majority of the applicable statutory provisions – such as those governing termination and remuneration – are binding.31 We argue that the scope of collective bargaining should be expanded, while the law could set stricter limits in areas where derogation could have significant fiscal implications.
Moreover, a 2020 reform stipulated that no collective agreements could be concluded in the public health sector from 2021 onwards, and a new law repealed all existing agreements.32 In accordance with established ILO practice, this categorical prohibition and direct state interference with existing collective agreements contravene the right to collective bargaining, as the Committee on Freedom of Association stated in its decision No. 3399 (2022) (Kártyás 2022). Legislative action is urgently needed: the conflict with fundamental rights must be resolved as soon as possible, and collective bargaining must be reintroduced in the public healthcare sector.
In our view, the current restrictions on collective bargaining in the public sector should be lifted not only because of fundamental rights concerns, but also to promote adaptable and flexible workplace regulation that supports the improvement of working conditions.
7. Conclusion
The main challenges facing collective bargaining in Hungary come from low and declining collective bargaining coverage and union density. While legal regulation alone cannot generate more union members or collective agreements, it is of the utmost importance that the rules on trade union representativeness do not create unnecessary barriers to collective bargaining. At the same time, no party should have bargaining rights without a democratic mandate.
Our overview of the Hungarian situation, assessed in the light of ILO standards and comparative national practices, has identified several instances where these principles are not fully met. In the absence of higher-level (sectoral, branch or regional) collective bargaining, workplace-level representativeness criteria are the sole entry point for trade unions. This issue is of particular importance in Hungary and in similar decentralized systems, but less so in countries with centralized bargaining and established trade union associations bargaining predominantly at higher levels. The lessons that can be drawn from the regulatory framework governing collective bargaining in Hungary will therefore be of particular interest to readers in the countries of the former Soviet Union and Eastern Europe.
Declining union density has recently placed pressure on Hungary’s regulation of representativeness, as trade unions are increasingly unable to meet even the relatively low thresholds. Maintaining at least the current level of collective bargaining coverage thus requires a reform of the representativeness framework. As potential solutions, we propose that: (i) employee representatives should be entitled to conclude collective agreements with the majority support of the workers; (ii) appropriate criteria should be introduced for sector-level bargaining; and (iii) the representativeness system under the Labour Code should be extended to the public sector, thus enabling the social partners to engage in collective bargaining.
While we do not think that these legal reforms alone will immediately generate genuine and mutually beneficial dialogue, they could help remove significant legal obstacles. In the current Hungarian context, it is unlikely that our proposals will be taken up, as the Government does not promote autonomous initiatives, such as collective organization and bargaining. Nevertheless, it is important to put these reform proposals forward to lay the groundwork for a potential solution, and to show other countries the evident consequences of such restrictive policies.
Competing interests
The authors declare that they have no competing interests.
Notes
- Act No. 2 of 1967 on the Labour Code. ⮭
- Act No. 22 of 1992 on the Labour Code. ⮭
- Act No. 1 of 2012 on the Labour Code. ⮭
- Act No. 1 of 2012 on the Labour Code, art. 277(2). ⮭
- Act No. 70 of 2023 on provisions related to further simplification of the functioning of the state. ⮭
- Fundamental Law of Hungary, art. 45(8). ⮭
- The obligation to promote collective bargaining is enshrined in the ILO Declaration on Fundamental Principles and Rights at Work (2022), point 2(a); the Right to Organise and Collective Bargaining Convention, 1949 (No. 98), Art. 4; and the Collective Bargaining Convention, 1981 (No. 154), Art. 5. ⮭
- Convention No. 154, Art. 5 (2) d. ⮭
- Act No. 22 of 1992 on the Labour Code, art. 33(2)–(5). ⮭
- Act No. 1 of 2012 on the Labour Code, arts 276(2) and (6). ⮭
- Act No. 1 of 2012 on the Labour Code, art. 279(3). ⮭
- Act No. 22 of 1992 on the Labour Code, art. 33(6). ⮭
- Act No. 22 of 1992 on the Labour Code, art. 33(2)–(5). ⮭
- Act No. 1 of 2012 on the Labour Code, art. 276(4). ⮭
- See Supreme Court decisions EBH 2002.684; BH 2003.128. ⮭
- Act No. 1 of 2012 on the Labour Code, art. 276(8). ⮭
- Constitutional Court Decision 22/2023 (X. 4) AB. ⮭
- Supreme Court Decision EBH 2018.M.6. ⮭
- Act No. 1 of 2012 on the Labour Code, art. 268. ⮭
- Act No. 1 of 2012 on the Labour Code, art. 260(3)–(5), 266 and 268. ⮭
- OECD, “Collective Bargaining Coverage”, OECD Data Explorer, last updated 30 September 2025. https://stats.oecd.org/Index.aspx?DataSetCode=CBC#. ⮭
- Worker-participation.eu, “National Industrial Relations, France”, https://www.worker-participation.eu/National-Industrial-Relations/Countries/France. ⮭
- Act No. 74 of 2009 on sectoral dialogue committees and on certain aspects of intermediate-level social dialogue. ⮭
- Act No. 1 of 2012 on the Labour Code, art. 231(2); Act No. 175 of 2011 on freedom of association, the status of public benefit organizations, and the functioning and subsidy of non-governmental organizations, art. 4(3). ⮭
- Act No. 1 of 2012 on the Labour Code, art. 276(3). ⮭
- Act No. 74 of 2009, on sectoral dialogue committees and on certain aspects of intermediate-level social dialogue, Annex 1. ⮭
- The Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87), Art. 9(1); Convention No. 98, Art. 5(1); the Labour Relations (Public Service) Convention, 1978 (No. 151), Art. 1(3); and Convention No. 154, Art. 1 (2). ⮭
- Convention No. 98, Art. 6; and Convention No. 154, Art. 1(3). Countries that have ratified Convention No. 151 shall also promote negotiations in the public service, except among high-level employees whose functions are normally considered to be managerial or involve policymaking, or employees whose duties are of a highly confidential nature (Convention No. 151, Art. 1). ⮭
- European Confederation of Police (EuroCOP) v. Ireland, Complaint No. 83/2012, Decision on the Admissibility and the Merits, para. 176. ⮭
- They are employed by a government agency under an employment contract rather than under a civil service relationship. See Act No. 125 of 2018 on government administration; Act No. 107 of 2019 on administrative bodies with special status and the status of their employees; Act No. 199 of 2011 on civil servants. ⮭
- Act No. 33 of 1992 on the status of public servants, art. 13. ⮭
- Act No. 100 of 2020 on the healthcare service relationship art. 15(10); and Government Decree No. 530/2020 (XI 28) on certain issues related to the legal status of healthcare workers, art. 6. ⮭
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