Protesters walked through the city centre with flags of Hungary and the European Union. One of the banners read: "All I want for Xmas is democracy", while the protesters chanted "Orban, get lost!"
The protesters threw smoke grenades, prompting the police to react with tear gas.
On Saturday, the governing Fidesz party said that "criminals" were behind the "street riots" and accused Hungarian-born billionaire George Soros of fuelling the protests.
According to the proposed law, employers are guaranteed additional overtime of 250 hours per year for each employee. Regarding the rest of the hours they will have to get the consent of the workers.
According to a Hungarian journalist who spoke to Sputnik on conditions of anonymity, the law is within the EU framework.
"400 hours overtime is less than the EU directive, and is customary in other EU countries. Any hours of overtime, beyond the normal framework of working hours, will have to be paid for monthly also in the future, and the rights of trade unions likewise have not been curtailed, they have been extended by virtue of the fact that any departure from the twelve-month overtime framework is only permitted in the case of a collective agreement. There's always some dissatisfaction when governments withdraw some limitations imposed on the capital."