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Labor and employment law challenges in business transformations

Austria

Workforce restructuring

The key practical issues in workforce restructuring include:

  • Legal justification
  • Works council and employee representatives’ process
  • Labor administration process
  • Costs and timing
  • Litigation risk

Applicable legislation

Workforce restructuring, also referred to as collective redundancies, is governed by Labour Market Promotion Act (Arbeitsmarktförderungsgesetz or AMFG).

Specifically, Art. 45a AMFG applies, in case of a collective redundancy, to the businesses that employ more than 20 employees and intends to give notice of termination within a period of 30 days to the following number of employees based on the specific thresholds:

  • At least 5 employees in companies with 21-99 employees
  • At least 5% of the employees in companies with 100-600 employees
  • At least 30 employees in companies with more than 600 employees
  • At least 5 employees who are more than 50 years of age (irrespective of the company size)

Required legal justification

In general, an employer is not obliged to provide legally justified reasons for collective redundancy.

Works council/unions or other employee consultation requirements

Consultation requirements with works council/unions

Without undue delay, but at least one week prior to an intended notice of termination, the works council must be notified with the following information:

  • A copy of the notification provided to the Public Employment Service (Arbeitsmarktservice)
  • Reasons for the contemplated collective redundancy
  • Number and position of all employees
  • Number and position of the impacted employees (including their qualification and duration of employment)
  • Selection criteria process
  • Social plan measures to limit the negative impact of the redundancy
  • Proposed time of implementation

Further, the employer must confirm timely consultation with the works council on the envisaged measures (such as selection criteria and social plan) pursuant to Sec. 109 Abs 1 of Austrian Labour Constitutional Act (Arbeitsverfassungsgesetz or ArbVG). There is no prescribed timeline, but the consultation must take place prior to the implementation of the intended measures. If no works council is established in the company, no consultation requirements apply.

A formal notification to the trade union is not required.

Consultation requirements with other employee representatives

There are no specific requirements to consult with other employee representatives on collective redundancy.

Consultation requirements with employees

There are no specific requirements to consult with employees on collective redundancy.

Approval/notification of the labor authorities or other government authorities

Approval of the labor authorities is not required for the execution of the collective redundancy process.

The Public Employment Service (Arbeitsmarktservice) must be informed at least 30 days prior to the issuance of first notice of termination in case of collective redundancy. Austrian law stipulates minimum information required to be included in the notification (e.g., number, qualification, age and duration of the employment of the impacted employees). A breach in the notification requirement renders the terminations void.

After the termination of the employment relationship, the employer must inform social security authority of such terminations.

Employee selection criteria

Generally, an employer can freely choose the employees to whom notice of termination be given. However, in companies with at least five permanent employees, the affected employees are entitled to contest the termination before the labor courts for being socially unfair (sozialwidrig). In such cases, the court examines whether substantial interests of the employees are infringed, what economic and social consequences the employee has to bear after termination, and whether the employer can put forward economic or personal reasons for justification of the termination (i.e., dissolution of the company).

Further, certain categories of employees, such as members of the works council, pregnant employees and employees with disabilities, enjoy special protection against termination. Termination of protected employees must be justified with specific reasons and/or requires the approval by the labor court or the competent administrative authority.

Actions required to limit the negative impact and social plan

Internal alternative employment/redeployment
It is not a mandatory obligation; however, it is a leading practice that the employer offers comparable job positions to older employees (50 years of age and above) to limit the litigation risk of socially unfair (sozialwidrig) termination.

Other measures
In companies with more than 20 employees, the works council, if existing, may usually demand a social plan to help the affected employees and prevent hardships. A social plan is enforceable if a considerable number of the employees are affected by the contemplated collective redundancy.

The measures of social plan may vary depending on the size of the company, the means of the company and its group, previous social plan and the employer’s potential to provide for measures to limit the negative impact of the redundancies including outplacement.

Estimated timeline

Preparation of specific documentation required for the information and consultation processes may take up to six weeks depending on the number of employment contracts to be terminated and on whether a works council exists.

The actual time required to fully implement a large-scale redundancy may vary from two to nine months depending on the number of redundancies contemplated and the existence of a works council.

Estimated costs

Mandatory costs

The key components of mandatory HR legal costs are as follows:

  • Severance payment (statutory, in case the employment contract was entered into before 1 January 2003)
  • Compensation for unconsumed holidays
  • Overtime compensation (if any)
  • Pro rata Christmas and vacation remuneration (13th and 14th salary)
  • Costs resulting out of the social plan (if applicable)

Customary additional costs

The measures of the social plan may vary depending on the size of the company, the means of the company and its group, the previous social plan and the employer’s potential to provide for measures to limit the negative impact of the redundancies, including outplacement, which is one the main customary additional HR costs.

Hiring restrictions post-redundancy

Generally, there are no legal barriers of hiring restrictions after a collective redundancy. However, if an impacted employee challenges the termination for being socially unfair (sozialwidrig), the employer may not be in a position to justify the (economic) reasons for termination if new employees were hired immediately post the collective redundancy.

Litigation risk

Interested parties

The termination can be challenged for being socially unfair (sozialwidrig) or for being based on unlawful grounds (verpöntes Motiv) if the impacted employee was employed for six months, was not an executive and if the company has at least five permanent employees.

The termination may be challenged either by the works council (if any) within one week of the termination and/or the impacted employee (depending on the reaction of the works council) within two weeks of the termination (if the works council did not comment on the termination) or three weeks as of the termination (if the works council did object the termination but did not challenge it). For example, if the works council approves the termination of an employee, the impacted employee may not challenge the termination for being socially unfair.

Generally, litigation cannot stop or slow down the collective redundancy process.

Damages and other remedies

Challenges could lead to the following remedies:

Damages for unfair dismissal
There are no damages for unfair dismissal or punitive damages in Austria. However, if the employee’s claim prevails in court, he or she has to be reinstated and paid the full salary for the period between termination and reinstatement.

Reinstatement
If the impacted employee’s claim is successful, he or she may be reinstated and paid full salary for the period between termination and reinstatement.

Criminal sanctions
There are no criminal sanctions applicable.

Country-specific issues

There are no other issues specific to Austria.

Contact

Primary Contact for Austria Labor and Employment Law

Helen Pelzmann
Pelzmann Gall Rechtsanwälte GmbH
+43 1 26095 2140

Global Labor and Employment Law Guide
Workforce restructuring
2016-07-01
Austria
AT

Contacts