The Employment Law Review: Austria
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.
Year in review
i Harmonisation of blue-collar and white-collar workers
Austrian employment law has historically distinguished between blue-collar workers (Arbeiter) and white-collar employees (Angestellte). In 2019, further steps were taken to harmonise the legal frameworks for blue-collar workers and white-collar employees. The main difference is the lack of mandatory minimum notice periods and termination dates for blue-collar workers. In some industries, this has led to blue-collar workers not being given any notice period at all, which makes their employment agreements, in essence, at-will contracts.
To further reduce the differences between the two categories, with effect from 2021, the mandatory notice periods and termination dates that apply to white-collar employees will also be applicable to blue-collar workers.
ii Regulations on flexibility of working time and rest time
In autumn 2018, the former federal government passed the largest flexibility package on working and rest time regulations in years (BGBl 2018/53). The flexibility package includes the following main amendments:
- increasing the maximum daily working time from 10 to 12 hours;
- increasing the maximum weekly working time from 50 to 60 hours. However, during a period of 17 weeks, the average weekly working time must not exceed 48 hours, although a collective bargaining agreement may extend this period up to 52 weeks;
- further exemptions from the scope of mandatory working and rest-time provisions for senior employees and family members; and
- the provision to agree with employees on additional working time for up to four weekends or on public holidays required during a period of extraordinary demand for the business.
Although the amendments have led to a certain degree of flexibility, working and rest-time legislation remains one of the most complex areas in Austrian employment law.
i ECJ C-64/18, C-140/18, C-146/18 & C-148/18 (Maksimovic)
To protect the Austrian labour market from wage dumping, Austrian law sets out strict documentation and notification requirements for the posting or secondment of employees to Austria from abroad. These wage dumping regulations and the documentation and notification requirements are strictly enforced by Austrian authorities and sanctioned with severe fines (up to €50,000 per violation). Until the Maksimovic case,2 Austrian authorities applied the principle of cumulation for administrative fines – that is, that each violation would sum up to a total fine, without any cap.
In Maksimovic, 217 third country employees where posted to an Austrian construction company without the necessary documents and work permits. Owing to the cumulation principle, the fines for the managers totalled approximately €20 million. If the defendants fail to pay the fine, as an alternative, a custodial sentence of up to four years would apply.
The European Court of Justice (ECJ) ruled that the cumulation of administrative fines without a cap and alternative custodial sentences contradicts the free movement of services and is thus contrary to EU law.
ii ECJ C-16/18 (Dobesberger)
In this case,3 the ECJ once again had to consider high administrative fines (€1.3 million) for violations of the current Austrian laws against wage and social dumping.
The Austrian rail company used a service provider for catering on certain international train routes. This service provider engaged a Hungarian subcontractor, which, in turn, used Hungarian leased employees for provision of the services. The leased employees of the subcontractor all had Hungarian employment contracts and were subject to Hungarian social insurance. Further, the start and end times of each working day for these employees was in Hungary, whereas the majority of the work was carried out on trains travelling through Austria.
The Austrian Labour Inspectorate qualified the rendering of services on trains as a secondment to Austria, with the consequence that the minimum wages and statutory provisions of Austrian law were applicable, and fined the managing director of the non-complying subcontractor. However, the ECJ ruled that the rendering of services on trains should not qualify as a secondment if (1) the start and end of each working day is in Hungary and (2) a substantial proportion of each working day is rendered in Hungary. Therefore, the Austrian courts will most likely remit the imposed fine.
iii Potential effects on Austrian codified law
Both the Maksimovic and the Dobesberger judgments are expected to lead to far-reaching adaptations of the currently rather strict laws against wage and social dumping in Austria.
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 upon the commencement of 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:
- name and address of the employer;
- name and address of the employee;
- commencement date of the employment relationship;
- applicable notice period;
- termination or end date, if a fixed-term employment contract;
- envisaged location of work;
- classification of the employee's salary scheme (according to the applicable collective bargaining agreement);
- job title;
- amount of base salary and further parts of remuneration (e.g., holiday and Christmas payments);
- due date of remuneration;
- the amount of annual leave;
- agreed daily or weekly normal working time;
- applicable collective bargaining agreement; and
- 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 solely provided that 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, the foreign company 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, as from 1 January 2020, to Austrian health insurance. Further, the employer must deduct the employee's income tax and forward it to the competent financial authority.
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 upon 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, etc.). Any post-contractual non-compete covenant concluded after 1 January 2016 is only effective if the employee's monthly remuneration exceeds €3,580 (the basis for 2020) 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 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 of 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 a mutual agreement, it is at the parties' discretion whether to agree on a post-contractual non-compete covenant.
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 a '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 the night. Furthermore, employees who regularly work during the night are entitled to regular medical examinations and treatment and longer rest periods.
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 of 25 per cent of the normal hourly rate for additional hours (additional work performed by the employee but not exceeding 40 hours a week).
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 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.
Since Austria's accession to the European Union, EU citizens may live and work in Austria without restriction. Some restrictions apply to Croatian citizens, but these are applicable only until 30 June 2020. To protect domestic employees in Austria, the employment of third country citizens (that is, not Austrian or from an EEA Member State) 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.
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.
Expectant mothers are prohibited to work 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.
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 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, albeit at a slightly lower level.
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).
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. A termination is only possible after obtaining the prior consent of the competent labour court and provided that specific reasons as stipulated by law are met. Members of the election board and candidates for the works council election also enjoy special protection against termination.
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.
Employee representation (protected concerted activity)
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 having to fear future consequences.
Austrian employment law differentiates between (1) a termination with immediate effect for cause (dismissal), (2) ordinary termination and (3) mutual termination.
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.
An ordinary notice of termination is not restricted to specific causes, although statutory notice periods and termination dates apply. The notice periods and termination dates to be observed are stipulated by statutory law, a collective bargaining agreement or a specific contractual agreement.
Employers may dismiss white-collar employees, subject to the appropriate statutory notice period, which depends on the duration of the employment relationship:
|Years of service||Termination notice period|
|Less than 2 years||6 weeks|
|More than 2 years and up to 5 years||2 months|
|More than 5 years and up to 15 years||3 months|
|More than 15 years and up to 25 years||4 months|
|More than 25 years||5 months|
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, termination dates on which the 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 the last or the 15th day of a calendar month, which is very often the case in Austria.
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 1 January 2021, the notice periods and termination dates for white-collar employees will also apply to blue-collar workers.
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.
Certain employees (such as works council members, pregnant employees, disabled employees, apprentices) are subject to special protection against termination. In these cases, the prior approval of a court or 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.
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 upon 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 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 upon termination of employment (also 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.
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:
- at least five employees in a business with more than 20 but fewer than 100 employees;
- at least 5 per cent of the employees in a business with between 100 and 600 employees;
- at least 30 employees in a business with more than 600 employees; or
- 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 the 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 court. Typically, social plans include voluntary severance payments.
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 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 the 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 timeframe 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.
Austria faced a certain amount of political turbulence during 2019 that led to the first technocratic government in Austrian history and the election of a new federal parliament in autumn 2019. As a result, little new employment law and few legislative proposals have been passed in 2019. As the new federal government (a coalition between a conservative party and the Green Party) has taken office at the beginning of 2020, it is unclear what changes to employment law Austria may face during the coming year.
1 Stefan Kühteubl is a partner and Martin Brandauer is an associate at Schönherr Rechtsanwälte GmbH.
2 Zoran Maksimovic and Others v. Bezirkshauptmannschaft Murtal and Finanzpolizei; judgment of the Court (Sixth Chamber) of 12 September 2019
3 Michael Dobersberger v. Magistrat der Stadt Wien; judgment of the Court (Grand Chamber) of 19 December 2019.
4 This procedure is known as Deckungsprüfung.
5 The German term is Betriebsvereinbarung.
6 The old system – Abfertigung Alt.
7 The new system – Abfertigung Neu.