Austria

    1.1 In what circumstances does the employee transfer law apply?

    Employee transfer law applies upon a change of ownership of a business or part of one. The usual indicators are:

    • the transfer covers an economic entity (an organised grouping of persons and assets facilitating the exercise of an economic activity with a specific objective);
    • the undertaking retains its identity following transfer;
    • tangible and/or intangible assets transfer;
    • the activities carried on before and after are similar;
    • customers are transferred;
    • a significant number of employees transfer, based on their number or the fact they are key employees.
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    Author: Kunz Schima Wallentin

    Date: January 2017

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    The employee transfer rules apply to sales, leases, or to business reorganisations such as mergers, joint ventures or divestments. It also applies to transactions without a direct contractual relationship between the transferor and the transferee (e.g. rentals). The takeover of assets, such as premises, equipment, customers, staff and goodwill are also criteria for a transfer of business.

    The employee transfer rules do not cover share deals and no automatic transfer takes place in the event of the transferor´s insolvency or in the case of closure of a company.

    (b) Outsourcing

    Outsourcing will be considered a transfer of business if the outsourcing partner or new entity also takes over, for example, all or part of the staff, assets or goodwill.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    1.3 In outline, what are the implications of the employee transfer law?

    If the employee transfer law applies:

    • employees assigned to the undertaking transfer from the transferor to the transferee on their pre-transfer terms of employment;
    • collective agreements and union recognition arrangements transfer;
    • the transferor must provide information on the transfer to employee representatives (or if no representatives exist, the employees), in general, to consult them;
    • if employees have claims relating to employment with the transferor (e.g. for pay, for personal injury or for discrimination) the transferee becomes liable in place of the transferor (although, for certain claims there is a joint liability of transferor and transferee for a certain period of time);
    • if an employee is dismissed for a reason connected to the transfer, the dismissal is automatically unfair unless the dismissal is for business reasons (dismissal is, however, easier for the transferee than the transferor, as dismissals before the transfer will generally be considered to be connected to the transfer).
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    Author: Kunz Schima Wallentin

    Date: January 2017

    2.1 Who transfers?

    The protection covers all ‘employees’, defined as follows:

    • where both parties have obligations under a contractual relationship;
    • the employee works under guidance and control;
    • work equipment is provided by the employer;
    • the employee owes individual and personal commitment;
    • the employee is liable for care and attention but not for the outcome of his or her work.

    Apprentices and executive staff members are normally deemed to be employees as well.

    If only part of an undertaking is transferred, only those employees who are functionally and organisationally assigned to that part of the business would transfer. Other employees would not be affected. If the employee is assigned to more than one business unit, an assessment would be made about whether the transferring part is his or her predominant assignment.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    2.2 Can employees object to transferring?

    There is no general right for employees to object a transfer and therefore the employment contract with the transferee remains valid. However, employees have a right to object that is restricted to two situations:

    • the new owner refuses to acknowledge special protections against dismissal contained in a collective agreement applicable at the time of the transfer; or
    • the new owner refuses to maintain the occupational pension fund.

    The employee must raise any objection within one month of the transferee’s refusal to accept special protections against dismissal or maintain the pension fund. If this is done, the employment contract is deemed to remain with the transferor.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    2.3 What happens to terms of employment contracts?

    The transferee, as the new employer, must take over all rights and obligations contained in each individual employment contract. This happens automatically by operation of law. Therefore, employees may not be employed by the transferee under worse working conditions than with the transferor. Moreover, agreements concluded shortly after a transfer with conditions that deteriorate over time are regarded critically and may be declared void if the employee can prove that he or she was pressurised into agreeing.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    2.4 What about other employee benefits?

    Past employment with the transferor will count as continuous employment with the transferee.

    If benefits were granted under an individual agreement and the transferee cannot fulfil the obligations (e.g. if stock options were granted under an individual agreement but the transferee is not a private limited company) the transferee may claim the basis of the agreement to grant the stock options has ceased to exist. However, in such a case the transferee must offer an equivalent benefit.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    2.5 What happens to pension rights?

    An occupational pension scheme that is based on an individual agreement becomes part of the employment contract and the obligation passes to the transferee if it is a universal successor. However, if the deal is, for example, an asset deal, and not a case of universal succession, then the transferee may refuse to take over a company pension commitment. In this case, the employee is entitled to object to the transfer and his or her employment contract will not be transferred.

    If the employee does not object, no future pension benefits will accrue to him or her as of the date of the business transfer. The employee is entitled to claim compensation from the former employer for pension rights that accrued up to the date of the transfer.

    In general, the above applies to both defined contribution and defined benefits schemes.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    2.6 What liabilities transfer?

    As soon as the transferee steps into the existing employment contract as the new employer, replacing the transferor, any liabilities resulting from that contract are also transferred. For obligations arising from the period prior to the transfer, the transferor and the transferee are jointly liable.

    As concerns severance payment claims under the old system (for employment contracts made before 1 January 2003) and claims relating to an occupational pension which become payable after the transfer took place, the transferor remains liable for severance payment or for any occupational pension entitlements from the date of the transfer and for five years thereafter. However, note that liability of the transferor is limited to any severance payment or occupational pension rights existing at the time of the transfer.

    Note that the transferee does not take on criminal liability of the transferor.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    2.7 Do collective agreements transfer?

    Upon transfer, the employment contract will be governed by the collective agreement of the transferee. If both the transferee and the transferor are subject to the same collective agreement, there will be no change.

    If a different collective agreement applies and the conditions of the transferring business change, rights based solely on the former agreement may be lost if they are not covered by the terms of the new one. However, any more advantageous provisions of the former collective agreement regarding remuneration for regular non-overtime work or protection against dismissal are exempt and the former collective agreement must continue to be applied as regards those provisions. Hence, if there is no change to the economic and/or organisational conditions of the transferring business, the collective agreement of the transferor remains valid for transferring employees.

    If the transferee is not subject to any collective agreement, the former collective agreement will apply to the transferred workforce.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    2.8 How does the transferee obtain information on transferring employees?

    The transferor’s obligation to inform the transferee about transferring employees derives directly from the contractual relationship (if any) between the transferee and the transferor. There are no statutory requirements about this and no sanction if this information is not given in full in due time.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    3.1 Can employers make changes to employment contracts?

    Changes to individual contracts can be made only by mutual agreement or if one party has reserved the right to unilaterally change employment conditions. This right can only be exercised in good faith and is usually connected to bonus or premium payments. However, this general rule does not fully apply when it comes to reducing the employee’s compensation.

    By law, where an employee is switched to a new collective agreement, compensation for regular non-overtime work cannot be lower than that payable under the previously applicable collective agreement. Although an individual agreement that reduces pay is permissible (though it is debatable whether it is permissible in the first year), it requires special justification, such as personal or business-related interests. However, any reduced pay must not undercut the minimum salary set in the new collective agreement. Even if the employee consents, a reduction motivated only by the transfer is not permitted.

    Changes for the worse made very shortly after the transfer may be declared void if the employee can prove that he or she has agreed as a result of (direct or indirect) pressure. Employees must raise any such claims within a reasonable time period, but there is no statutory time limit. This could be an issue if structural changes are expected after the transfer and the employee agrees to some disadvantageous change only because he or she might otherwise be dismissed.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    3.2 When can employers safely dismiss employees before or after a transfer?

    Neither the transferor nor the transferee may dismiss employees by reason of the transfer. Such a termination might be effective at first, but the employee could bring an action for a declaratory judgment that the dismissal was based on the transfer alone and is therefore void. This would mean that the employment relationship remained ongoing. However, the employee can only claim back pay for the time period that the employee was ‘dismissed’ and cannot claim any compensation.

    Dismissals for reasons other than the transfer are allowed only if they would have been made regardless of the transfer, i.e. if they were not made merely to bypass the rules preventing dismissals by reason of the transfer. The closer the dismissal is to the transfer, the more convincing the evidence must be that the dismissal was for business-related reasons or for reasons of personal behaviour.

    While there is no clear-cut court ruling, waiting six to nine months before terminating employment contracts should increase the probability that terminations are deemed not to be as a result of the transfer. The above also applies to dismissals with the option of altered conditions of employment.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    4.1 Who must employers consult?

    The transferor must inform and consult in advance with the works council, if one exists, about planned transfers. A works council can be elected by the employees if the employer employs more than five employees. If no works council is established, either the transferee or the transferor must inform the employees in advance in writing. It is good practice also for the information to be made available on relevant company bulletin boards.

    There is no obligation on the employer to consult with a trade union, if one exists at the workplace.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    4.2	What information must they provide?

    The employer must provide:

    • the date or proposed date of the transfer;
    • the reason for the transfer;
    • the legal, economic and social implications of the transfer for the employees;
    • any measures envisaged in relation to the employees.

    In addition, the transferee must inform the employees about changes to applicable collective agreements, changes to works agreements and any refusal to take over occupational pensions or dismissal protection under the previous collective agreement.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    4.3	What does consultation involve?

    If a works council has been established and the changes are detrimental to employees, the works council may make recommendations to alleviate or avoid negative effects, and might wish to co-operate in establishing a social plan for affected employees. As the works council may enforce a social plan, it is common practice for employers to consider any suggestions made by the works council and discuss them in order to come to an agreement.

    In the event that no agreement to a social plan can be made with the works council, the Conciliation Board may mediate between the parties and, if necessary, make a ruling.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    4.4	How long does consultation last?

    The duration of the consultation depends on the particular circumstances in each individual case. The law does not provide a time frame.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    4.5	What happens if an employer fails properly to inform or consult?

    There are no direct sanctions if the obligations to inform and consult are disregarded, but the employer might be found liable if the employee claims damages resulting from such a breach. Damages may arise if the employees are prevented from reacting promptly, for example, if they miss out on an opportunity to negotiate amendments to their employment contracts or to look for different employment.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    5.1	Identify up to three issues in this country of which employers should be aware?

    The employee’s right to object to a transfer is very restricted and, if justified, has the result that the contract with the transferor remains in effect.

    In addition, in Austria the transferee is liable jointly with the transferor for all claims resulting from the employment relationship that arose in the period before the transfer.

    There are two main areas of case law that should be noted:

    • whether there is a transfer: the individual circumstances characterizing a transfer must be assessed in their totality in order to determine whether the employee transfer rules apply. Austrian courts interpret the meaning of a ‘transfer of an undertaking’ in accordance with ECJ case law.
    • agreements that are void because they bypass mandatory protections: it should be noted, that generally, the Austrian courts are very strict and do not accept any bypassing activities. Hence, in practice most transfers are conducted in accordance with the relevant protection provisions. 
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    Author: Kunz Schima Wallentin

    Date: January 2017

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    In general terms, the employee transfer law applies if undertakings are transferred outside of Austria, at least as long as the foreign transferee operates the transferred business within Austria. In addition, in such cases, the transferee will enter into an employment contract and difficulties might arise if the transferee can only offer employment abroad, since the employment contract will most probably not include an obligation for the employee to work abroad. If the employees do not agree to go abroad, the new employer would have no option but to dismiss them.

    Equally, the employee transfer rules apply in the case of transfers into Austria as soon as the undertaking is relocated to Austria.

    Other provisions may apply if there is an explicit choice of law in the individual employment contract.

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    Author: Kunz Schima Wallentin

    Date: January 2017

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    Austria has implemented Council Directive 2001/23/EC of 12 March 2001 by means of sections 3 to 6 of the Employment Law Harmonisation Act (‘Arbeitsvertragsrechts-Anpassungsgesetz’, the ‘AVRAG’).

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    Author: Kunz Schima Wallentin

    Date: January 2017

     

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