The Employment Law Review - Edition 12

Stefan Kühteubl and Martin Brandauer¹

I INTRODUCTION

Employment law is extensively regulated by statutory mandatory law to ensure the protection of employees. Unlike in other countries, Austrian employment law is extremely fragmented and not codified in one single codex of law. Since Austria’s accession to the European Union in January 1995, EU law has played an increasingly significant role in Austrian employment law. Apart from EU and codified law, collective bargaining agreements (i.e., written agreements between employers and employee associations) set out special regulations for specific trades and industries.

All labour and employment-related disputes are subject to the jurisdiction of the labour and social courts. Several authorities in Austria are competent to enforce statutory employment law. The most important authority in this respect is the Labour Inspectorate, which monitors the compliance of employers with statutory safety regulations such as working time and workplace security.

II YEAR IN REVIEW

Covid-19 reached Austria on 25 February 2020 and remained the dominant topic for the rest of the year. The federal government ordered a strict lockdown starting from mid March, one of the first countries in Europe to do so, and in parallel responded with a series of government aid and support measures to cushion the economic effects of covid-19. The following are some of the most important employment law-related government actions.

i Short-time work

The federal government has issued a highly successful short-time work model. Employers facing economic difficulties arising from the pandemic can apply for short-time work subsidies at the Labour Market Authority.²

Although several details have changed since March 2020, the basics remain the same. Employees can reduce their average working time to 10 per cent during short-time work, while still being entitled to between 80 and 90 per cent of their former net remuneration from the employer. It was even possible to reduce working time to zero hours for a certain time as long as an average of 10 per cent (30 per cent from autumn 2020) was met.

In return, employers received short-time work subsidies of up to 80 to 90 per cent of the employee’s net remuneration; the subsidy for each employee was capped at a gross remuneration of €5,370. Short-time work subsidies also included the employer’s social security contributions. Alongside the short-time subsidies, employers had to accept a total ban on the termination of employment contracts during short-time work and for one month following the end of short-time work (although exemptions apply).

ii Release from work duty with continued payment for high-risk employees

Employees considered at high risk from covid-19 are entitled to be relieved from the obligation to perform work, while continuing to be paid. These employees were individually informed by the Austrian health insurance, and after an individual risk assessment, a physician could issue the respective certificate to the employee. Alternatively, physicians were allowed to issue the certificate to the employee without prior notification by the Austrian health insurance if the criteria for a high-risk employee were met.

However, there was no entitlement to release an employee from their work duties if either the employee could work from home or there were appropriate protective measures at the workplace such that there could be a high degree of certainty that there was no risk of becoming infected with covid-19 at the workplace. To protect employees further, the termination of employment through being released from work duties could be challenged in court. In return, employers received compensation from the Austrian government for the remuneration paid to employees, respective tax contributions, and social insurance contributions during the release from work duties.

iii Working from home

Austrian employment law currently has no codified regulation for remote working (working from home),³ leaving it to the sole discretion of employees and employers to agree on the terms for working from home. Thus, there is no legal entitlement for employees to work from home. Since most employers have not concluded clear rules with their employees (e.g., who bears which costs, working time, the obligation to return to the office), disputes about returning to the office and meeting the costs of working from home (such as rent, electricity, etc.) are certain to arise once the covid-19 crisis has passed. The only government action in relation to working from home was the clarification that, during the covid-19 crisis, accidents occurring while working from home are considered official work accidents.

iv Other measures

Allowances and bonuses additionally and exclusively paid because of the covid-19 crisis are tax free up to €3,000.

III SIGNIFICANT CASES

There were no significant developments in case law during 2020.

IV BASICS OF ENTERING INTO AN EMPLOYMENT RELATIONSHIP

i Employment relationship

It is generally not mandatory for employers in Austria to issue written employment contracts, as an employment agreement may also be agreed orally or even by implication. Only in a very few exceptional cases, such as for apprentices, must an employment contract be concluded in writing. A violation of this requirement may render an agreement invalid. However, if no written employment agreement is concluded, the employee is entitled to receive from the employer, immediately on starting the employment relationship, a written statement in which the main aspects of the employment relationship are summarised. As a minimum, the content of employment contracts and written statements must include:

a name and address of the employer;
b name and address of the employee;
c commencement date of the employment relationship;
d applicable notice period;
e termination or end date, if a fixed-term employment contract;
f envisaged location of work;
g classification of the employee’s salary scheme (according to the applicable collective bargaining agreement);
h job title;
i amount of base salary and further parts of remuneration (e.g.,  holiday and Christmas payments);
j due date of remuneration;
k the amount of annual leave;
l agreed daily or weekly normal working time;
m applicable collective bargaining agreement; and
n name and address of the staff pension fund.

It is legally permissible to conclude a one-off fixed-term employment agreement in Austria; however, consecutive fixed-term agreements are only lawful to a very narrow extent and only when specific economic or social requirements are met. If this is not the case, even the first extension to a fixed-term agreement may be qualified as an ineffective chain employment agreement (Kettenarbeitsverträge). A chain employment agreement is considered an indefinite employment agreement with a commencement date of the first day of the original fixed-term agreement.

ii Probationary periods

Probationary periods are common in Austria and are often included in employment agreements. According to the Austrian Salaried Employees Act, a probationary period may be agreed for a maximum duration of one month for white-collar employees. For blue-collar workers, the applicable collective bargaining agreement may stipulate a shorter maximum probationary period.

During the probationary period, the employment relationship may be terminated by either party at any time without observing notice periods or end dates, and without being required to provide any reason for the termination. Apprenticeship contracts may include a probationary period of up to three months.

iii Establishing a presence

It is not necessary for foreign companies to establish a subsidiary in Austria to hire employees or to engage an independent contractor. However, if a foreign company conducts business in Austria frequently and with employees in Austria, it may be obliged to register with the Austrian commercial registry. In addition, the competent authority (trade authority, financial market authority, etc.) and the competent economic chamber must be informed about the start of business.

All employees in Austria are subject to the mandatory Austrian Social Insurance System, which includes, inter alia, contributions for health insurance, insurance against accidents at work, pension insurance and unemployment insurance. The employer is obliged to calculate the employee’s share of these contributions, deduct them from the employee’s salary and process the contributions to the Austrian health insurance. Further, the employer must deduct the employee’s income tax and forward it to the competent financial authority.

V RESTRICTIVE COVENANTS

During the term of an employment contract, employees are subject to a statutory non-compete obligation, which, in essence, covers competitive activities in the employer’s area of business. In addition, it is permissible to agree on a notification obligation for any secondary activity during the term of the employment agreement.

An employer and an employee may also agree on a post-contractual non-compete covenant, which is limited to a maximum duration of one year following the termination of the employment relationship. However, the enforceability of a post-contractual non-compete covenant depends on several conditions (e.g., amount of monthly remuneration, professional education, certain kind of termination, definition of restricted territory). Any post-contractual non-compete covenant concluded after 1 January 2016 is only effective if the employee’s monthly remuneration exceeds €3,700 (the basis for 2021) gross per month (special payments are not included). In addition, the law prohibits post-contractual non-compete covenants that are equivalent to a ban on the profession of the employee. Labour and social courts evaluate in each individual case whether a covenant is legally permissible.

Further, a post-contractual non-compete covenant only applies in certain types of terminations, such as ordinary termination by the employee, immediate termination for good cause by the employer or immediate termination without good cause by the employee. In the case of ordinary termination by the employer, the employer is entitled to enforce the post-contractual non-compete covenant by paying the employee the equivalent of his or her most recent monthly remuneration during the post-contractual non-compete covenant period.

If the employment is terminated by mutual agreement, it is at the parties’ discretion whether to agree on a post-contractual non-compete covenant.

VI WAGES

i General principles

There is no statutory minimum salary in Austria, but individual collective bargaining agreements set out mandatory minimum salaries. Salaries are usually paid in 14 instalments: the 13th and 14th instalments (referred to as ‘special’ payments) are taxed at a much lower rate. If an employer fails to pay an employee the applicable minimum salary, penalties apply, based on the Austrian Law against Wage and Social Dumping (LSD-BG).

ii Working time

The statutory normal working time is 40 hours per week or eight hours per day. Collective bargaining agreements may provide for a shorter time (very often 38.5 hours).

The maximum working time permissible is 60 hours per week and 12 hours per day. Over a period of 17 weeks, the average weekly working time must not exceed 48 hours but collective bargaining may further limit or extend this maximum period from 17 weeks up to 52 weeks.

In general, it is not permissible for employees to work on Saturdays after 1pm, on Sundays or on public holidays, unless legal provisions or applicable collective bargaining agreements grant an exemption.

Employers must also ensure that their employees’ working time includes daily and weekly rest periods.

Night-time work between 10pm and 6am is permissible in general. However, pregnant employees and employees under the age of 18 must not work during night hours. Furthermore, employees who regularly work during the night are entitled to regular medical examinations and treatment, and longer rest periods.

iii Overtime

The Austrian Working Time Act defines overtime hours and additional hours differently. Overtime occurs if the normal daily working time (eight hours) or the normal weekly working time (40 hours) is exceeded. For these extra hours, a supplementary payment of 50 per cent of the normal hourly rate applies. The employee has the option of being paid the overtime plus a supplement or to take 1.5 hours as time off in lieu. Collective bargaining agreements often provide for higher supplementary payments for overtime hours, night-time work or working time on Sundays and public holidays. Part-time employees may be entitled to a supplementary payment for additional hours (additional work rendered by the employee but not exceeding 40 hours a week) of 25 per cent of the normal hourly rate.

The Austrian Working Time Act and collective bargaining agreements stipulate several exemptions and potential flexibility measures (e.g., flexi-time, overtime calculation periods) to reduce costly overtime hours.

As an alternative, an employer and an employee may agree on an ‘all-in’ remuneration, whereby all additional hours and overtime entitlements are covered by the agreed salary. An all-in remuneration must set out the applicable base salary, which must be at least the minimum salary of the applicable collective bargaining agreement. The difference between the base salary and actual salary payments shall cover all additional hours and overtime entitlements of the employee. The employer needs to evaluate at the end of each year whether the difference between the base salary and the actual salary received covers all additional and overtime work performed by the employee.4 If it does not, the difference needs to be paid subsequently.⁴ This procedure is known as Deckungsprüfung.

VII FOREIGN WORKERS

i General

Since Austria’s accession to the European Union, EU citizens may live and work in Austria without restriction. To protect domestic employees in Austria, the employment of third country citizens (that is, not Austrian or from a Member State of the European Economic Area (EEA)) is subject to various restrictions, including the obligation to obtain residence and work permits. It is permissible that employment agreements are governed by non-Austrian law. However, if employees render services in Austria, specific mandatory provisions – which are more favourable for the employee – will apply.

ii Seconded and posted employees

Any employee seconded to Austria by an employer based in an EU or EEA Member State or third country is subject to the regulations of the LSD-BG. The LSD-BG grants certain employment standards to employees while they are employed in Austria and provides for registration procedures and other regulations to be observed during a secondment or posting.

Employers based outside Austria are required by law to pay their employees during their secondment or posting to Austria at least the minimum salary and any special payments set out in the applicable Austrian collective bargaining agreement or other statutory regulations.

It is of key importance to ensure compliance at all times with the regulations as set out in the LSD-BG as the Austrian authorities strictly enforce the LSD-BG and impose high administrative fines.

VIII GLOBAL POLICIES

It is common in Austria for employers to stipulate certain rules and regulations in their internal policies (e.g., travel or car use, code of conduct), although there is no legal obligation to do so. These types of policies do not have to be included in the employment agreement, as the employer has a unilateral right to instruct employees to comply with the policies. There are no requirements to complete or sign a form, or the like, so an email, letter or link to an intranet site is sufficient. For evidentiary purposes, it is advisable that the employee accepts a German version of the internal policy in writing (e.g., via a short letter of acknowledgment).

Exceptions to the aforementioned rules apply if an internal policy is subject to the co-determination rights of an Austrian works council. This could apply, for example, to the implementation of an internal disciplinary rule that is subject to the prior approval of a works council via a shop agreement.⁵ If a shop agreement is concluded, the internal disciplinary rules are binding for each employee. If there is no works council, it is legally impermissible to agree via individual contracts on internal disciplinary rules.

IX PARENTAL LEAVE

Expectant mothers are prohibited from working for eight weeks prior to giving birth and eight weeks afterwards. These consecutive 16 weeks are the maternity protection period, during which the mother receives a maternity allowance, in an amount corresponding to her most recent salary, from Austrian health insurance.

Subsequent to the maternity protection period, mothers or fathers are entitled to parental leave until the child reaches the age of two years. During parental leave, the parent who is on parental leave receives the children’s nursing allowance from Austrian health insurance and is protected against termination of employment.

The employee is entitled to work part-time until the child reaches the age of seven, provided the employee (1) is living with the child in a joint household and (2) has been employed for at least three years with the employer and (3) the employer has more than 20 employees. If one of these conditions is not fulfilled, the employer and the employee may agree that the employee may work part-time on a voluntary basis.

Employees on parental part-time working enjoy special protection against termination of employment starting from the notification of the request to work part-time until the end of the agreed part-time period or – at the latest – until the child reaches the age of four. However, even after the child has reached the age of four and until the child’s seventh birthday, employees on parental part-time working still enjoy protection against termination of employment, albeit at a slightly lower level.

X TRANSLATION

There is no legal obligation to conclude an employment agreement in German or in the employee’s native language; the only prerequisite is that the employee is able to understand the content of the document.

However, it is recommended to issue at least a German or English translation of the employment agreement. If the employee is seconded or posted to Austria, the regulations of the LSD-BG must be complied with at any time (see Section VII.ii).

XI EMPLOYEE REPRESENTATION

According to Austrian employment law, a works council generally needs to be established if a business has five or more employees. However, there is practically no sanction if no works council is established (in practice, many small businesses do not have a works council). The employees must take the initiative to elect a works council, as there is no obligation for the employer to do so.

Works councils do not have to be members of a trade union (although many of them are). The works council is the only representative body by law and every employee older than 18 may stand for election as a works council member. The term of office is four years. Works councils are elected for a specific business unit and not for the legal entity. The number of members of the works council will depend on the number of employees.

Members of a works council enjoy special protection against termination of employment, which is only possible after obtaining the prior consent of the competent labour and social court and provided that specific reasons as stipulated by law are met. Members of the election board and candidates for election to the works council also enjoy special protection against termination of employment.

A works council is entitled to monitor the employer’s compliance with the applicable labour law regulations and may participate in social and personnel matters (relocation, hiring of new employees, etc.).

The most important participation right of a works council is that the employer is obliged to inform the works council seven days in advance of any proposed notice of termination. Within the seven days following receipt of such a notification, the works council may declare its position on the intended termination of the employment agreement. This statement may also affect how the employee is able to challenge the termination in court. However, if the employer (1) does not notify the works council at all or (2) gives notice to the employee during the first seven days or before the works council issues its statement, then the notice of termination is null and void.

Furthermore, the employer and the works council may conclude shop agreements. For certain sectors, the Austrian Employment Constitution Act provides a works council with the legal power to veto certain actions planned by an employer. Other employer actions cannot be vetoed but do require prior consent in the form of a shop agreement concluded with the works council.

XII DATA PROTECTION

i Requirements for registration

As of 25 May 2018, the EU General Data Protection Regulation (GDPR) and the amended Austrian Data Protection Act (DPA) apply in Austria. Accordingly, the processing of personal data is only legitimate if the controller has a lawful basis for the given data processing (Article 6, GDPR).

Employers are allowed to process data to the extent that it is required for the fulfilment and the purposes of the employment relationship and may process data such as name, address, social security number, age, gender, citizenship, education and work experience.

ii Cross-border data transfers

There are no specific rules for data transfers within the European Union as the rules of the GDPR apply EU-wide. If the processing is legitimate, data can be transferred to recipients in all EU Member States without limitation.

Data transfers to third countries, however, are subject to strict and detailed regulations. Therefore, data may only be transferred to third countries if an adequate level of data protection is guaranteed according to Chapter V of the GDPR. For US-related data transfers, an adequate level of data protection is guaranteed if the US recipient is certified under the EU–US Privacy Shield.

iii Sensitive data

The GDPR grants additional protection to special categories of personal data. Any data that reveals the person’s racial or ethnic origin, political opinion, religious or philosophical beliefs, union membership, health, sex life or sexual orientation qualifies as sensitive data. The processing of sensitive data by the employer is only permissible under very limited circumstances, as stipulated in Article 9 of the GDPR.

iv Background checks

Background checks are not very common in Austria, although there is no explicit restriction in this regard. Employers usually ask employees to provide a criminal record declaration on their first working day or with their CV during the application process. However, checks on criminal and credit records are only allowed if the employer’s interests outweigh the employee’s privacy interests and only to the extent necessary for the specific job position. Therefore, criminal and credit checks are permissible, for example, for employees working in a bank or an insurance company but not for an employee in the construction business. Medical checks and drug tests are only legally permissible for certain employees (e.g., aviators, doctors, train supervisors).

Further, the Austrian Supreme Court has stated several times that certain questions in job interviews regarding a potential pregnancy, sexual orientation, membership of a union or religion are invalid and applicants have the right to answer these questions falsely without fear of any future consequences.

XIII DISCONTINUING EMPLOYMENT

Austrian employment law differentiates between (1) a termination with immediate effect for cause (dismissal), (2) ordinary termination and (3) mutual termination.

i Dismissal

Every employment relationship may be terminated by the employee or the employer with immediate effect for cause. In this event, no notice period and no termination date have to be observed. In general, termination for cause is only admissible if circumstances make it unreasonable to continue the employment relationship (even for the duration of the applicable notice until the termination date). Reasons for termination with cause are stipulated by law, and include severe breach of contractual obligations rendering the employee untrustworthy, incapacity to perform the agreed services, violation of a non-compete agreement and rude behaviour by the employee or the employer.

Ordinary termination

An ordinary notice of termination is not restricted to specific causes, although statutory notice periods and termination dates apply, as stipulated by statutory law, a collective bargaining agreement or a specific contractual agreement.

In principle, and provided that neither the employment contract nor the collective bargaining agreement do not specify otherwise, no formal requirements apply to a notice of termination. It is necessary to inform the works council, if any, at least seven days in advance of any proposed notice of termination.

White-collar employees

Employers may dismiss white-collar employees, subject to the appropriate statutory notice period, which depends on the duration of the employment relationship:         

Individual agreements may deviate from the statutory notice periods if they are more favourable for the employee. Besides stipulating notice periods, the applicable law also stipulates termination dates. According to the Salaried Employees Act, the dates on which an employment relationship effectively ends are the end of each calendar quarter (i.e., 31 March, 30 June, 30 September and 31 December).

If employment is terminated by a white-collar employee, the applicable notice period is one month and the termination date is the end of the next calendar month. However, the employee’s notice period may be contractually extended if the agreed notice period is not longer than the notice period the employer has to observe, and provided that it does not exceed a maximum of six months.

If explicitly stipulated in an employment agreement, it is legally permissible to agree to termination dates for employees and employers on each last or each 15th day of a calendar month, which is very often the case in Austria.

Blue-collar workers

Section 77 of the Austrian Industrial Code stipulates a two-week notice period for blue-collar workers, whereby no termination date needs to be observed. This regulation is not mandatory and there may be no notice period at all. In practice, the applicable collective bargaining agreement stipulates the notice periods and termination dates for blue-collar workers. As of 30 June 2021, the notice periods and termination dates for white-collar employees will also apply to blue-collar workers.

Employees subject to special protection

Certain employees (such as works council members, pregnant employees, disabled employees and apprentices) are subject to special protection against termination of their employment. In these cases, the prior approval of the labour and social court or an other competent authority is required.

Mutual termination and fixed-term contracts

Besides termination by notice, employment relationships may be terminated by mutual agreement. An employer and employee may agree freely on a termination date of their choice, without taking into account the statutory or contractual notice periods or effective dates. Employment agreements for a fixed term will automatically end when the contract period has elapsed but may only be terminated by ordinary termination under certain circumstances and if that option has been explicitly agreed in advance.

Severance systems

Austria has two systems of statutory severance pay. One applies to employment contracts that commenced before 1 January 2003⁶ and the other to employment contracts that commenced on or after 1 January 2003.⁷ Employees who are subject to the pre-2003 system generally have a direct claim against the employer for a severance payment on termination of employment, unless an employee terminates the employment relationship or is dismissed for cause. The severance claim is calculated based on the employee’s length of service and his or her most recent remuneration (including bonuses, if any) and may amount to up to 12 monthly remunerations after 25 uninterrupted years of service. In general, severance pay under the pre-2003 system is due and payable immediately on termination of employment (and when the relevant employee retires).

Under the new system, the employer pays 1.53 per cent of the employee’s gross monthly salary to a severance fund. Employees who are subject to the new system have a severance claim against the fund only.

ii Redundancies

According to Section 45a of the Labour Market Promotion Act, an employer must notify its local branch office of the Employment Service (AMS) if the employer intends, within a period of 30 days, to dismiss as redundant:
a at least five employees in a business with more than 20 but fewer than 100 employees;
b at least 5 per cent of the employees in a business with between 100 and 600 employees;
c at least 30 employees in a business with more than 600 employees; or
d irrespective of the size of the business, at least five employees aged 50 or older.

Starting with this notification, a 30-day retention period applies, during which no employment agreement may be terminated. If the employer fails to notify the AMS or terminates any employee’s employment before the end of this 30-day period, all terminations will be null and void and the affected employees could claim for reinstatement. Prior to the notification to the AMS, the works council, if any, must be informed.

The employer must also notify the AMS if the relevant number of employees is offered a mutual termination agreement or the relevant number of employment agreements are terminated by mutual consent within the 30-day term.

In companies with at least 20 employees, a social plan might be enforced by the works council to protect employees from substantial disadvantages resulting from the collective dismissal. According to business practice, when it is required that the AMS is notified of a collective dismissal, a social plan shall be offered to the works council. If the employer and the works council fail to agree on a social plan, the works council may address the conciliation body at the competent labour and social court. Typically, social plans include voluntary severance payments.

XIV TRANSFER OF BUSINESS

As an EU Member State, Austria has implemented the Acquired Rights Directive. In the event of a transfer of business, employees automatically transfer to the new employer, which has to maintain all rights under the existing employment agreements.

If any working conditions that are dependent on a collective bargaining agreement or works council agreement change because of the transfer of business to the substantial detriment of employees, the employees may terminate their employment relationship on the employer’s terms within one month. Any transfer-related termination of employment (prior to or following the transfer) is null and void. In other words, a termination needs to be justified by termination grounds independent of the transfer of business. Neither statutory law nor case law set out a timeline for this restriction. As a rule, the closer to the transfer date the termination notice is given, the more reason to suspect the termination happened because of the transfer.

There is no general right for employees to object to or opt out of a transfer. According to law, employees may only object to a transfer of their employment if the transferee does not take on (1) special termination rules set forth in an applicable collective bargaining agreement, or (2) company pension commitments.

A works council, if any, needs to be informed in advance of the transfer by providing information about (1)  the reason for the transfer, (2)  the legal, economic and social consequences for the employees and (3) the envisaged measures regarding the employees. Consultation with the works council is only obligatory if explicitly demanded by the works council during the information process. Austrian law does not set out a specific time frame regarding the notification process. However, it is generally recommended – as a matter of good employee relations – to notify the works council one to two months prior to the proposed transfer taking effect. Nevertheless, in practice, violations of the works council’s information and consultation rights in relation to a transfer of business are not sanctioned.

XV OUTLOOK

There has been little long-lasting employment law-related legislation during 2020 because of the covid-19 crisis. The next significant legislation project will be the new law for ‘working from home’, which is currently under negotiation between the federal government and the social partners (employee and employer stakeholders). According to the current status, this law will stipulate binding framework conditions for working hours, insurance coverage and cost coverage for employees working from home. Austria has been hit hard by the covid-19 crisis. As a result, a wave of insolvencies, employment-related restructurings and, ultimately, mass lay-offs are expected during 2021.

 

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¹ Stefan Kühteubl is a partner and Martin Brandauer is an associate at Schönherr Rechtsanwälte GmbH.
² The German name of the authority is Arbeitsmarktservice.
³ Remote working is officially called ‘teleworking’; more commonly, the term ‘home office’ is used.
⁴ This procedure is known as Deckungsprüfung.
⁵ The German term is Betriebsvereinbarung.
⁶ The old system was Abfertigung Alt.
⁷ The new system is Abfertigung Neu.

authors: Stefan Kühteubl and Martin Brandauer
publishing house: Law Business Research Ltd
Reproduced with permission from Law Business Research Ltd
This article was first published in February 2021
For further information please contact Nick.Barette@thelawreviews.co.uk
Editor: Erika C Collins