Termination of employment contracts in Austria

Practical Guide

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Is “employment at will’’ a general principle of your country or do you usually need grounds for a termination of an employment contract?

In Austrian law a distinction is made between an ordinary dismissal ("Kündigung") and a dismissal without notice (Austrian term: "Entlassung").

No reason needs to be given for an ordinary dismissal.

A dismissal without notice can only take place for a special important reason, but - in general - no reason needs to be given at the moment of the dismissal (without notice). Any dismissal without notice - even an unjustified one - terminates the employment relationship immediately.

In principle a dismissal can be challenged in court.

In addition to general restrictions such in case of a transfer of undertakings (TUPE), age/sex discrimination or specific regulations as e.g. for mass dismissal there is a specific concept of dismissal protection as part of the statutory regulations for works councils. This embedding enables the works council in some cases to block a challenge of the dismissal by the employee.

If there is a general concept of “dismissal protection”, is it limited to certain requirements (e.g. size of company/workplace, length of service)?

A works council may only be established in those companies in which at least five employees are permanently employed. It is a right, but not an obligation to establish a works council.

Existence of a works council

In companies where a works council ("Betriebsrat") has been set up a special procedure is to be followed: The employer must inform the works council before any ordinary dismissal ("Kündigung"). The works council may comment on the intended termination within one week. If this procedure is not followed, the termination is legally invalid. In case of a dismissal without notice ("Entlassung") the works council must be informed immediately thereafter.

If no works council has been established in a company (despite its sufficient size as set out above) or if the works council did not explicitly agree to the termination, the employee may contest the termination in court within two weeks of receipt.

Challenge in court: Socially unjustified?

In addition to provisions for the protection of special groups [employees on military or civilian service, pregnant women, employees on leave under the Maternity Protection Act (MSchG) or the Paternity Leave Act (VKG), employees with disabilities and employee representatives] a termination is socially unjustified if it affects the essential interests of the employee and the dismissed employee has already been employed for six months. This concept refers to specific considerations for terminations caused by incapacity, misconduct, or business reasons.

The essential interests of the employee are in particular affected if the employee has reached or exceeded a certain age at the termination (50). Both the situation on the labour market and whether it can be expected that the dismissed employee will have a chance to a reasonable and an equivalent job within a reasonable period must be considered.

Thereby the family income (earned income together with the partner) is to be taken into account, too. In light of the partner’s high income no significant deterioration of the economic situation of the employee is to be feared. The Austrian Supreme Court (OGH 8 ObA 71/22g) ruled that there was no material impairment of interests if the employee and his wife had an income of EUR 10,333.42 gross per month despite a loss of income of around 30% due to the termination of the employment contract, considering monthly family expenses of EUR 3,637.67.

Even if the dismissal is socially unjustified, it may nevertheless be legally valid if the employer proves that there are personal reasons of the employee (e.g. breach of duty, considerable underperformance, very long sick leave, unwillingness to cooperate) or operational requirements that prevent the employee's continued employment (e.g. rationalisation, reorganisation, decline in orders). In case of operational requirements, the employer must do everything to find another workplace before terminating the work contract.

A dismissal may also be legally invalid if it is based on age-discriminatory reasons.

If a termination is deemed to be invalid, is “reinstatement (including backpay)’’or “payment of damages” the general remedy?

A distinction must be made between claims in the event of an ordinary dismissal ("Kündigung"), a dismissal without notice ("Entlassung") and premature termination by the employee ("vorzeitige Auflösung").

A notice of an ordinary dismissal ("Kündigung") is invalid if it is given in breach of a notice period ("Kündigungsfrist") and of the termination date ("Kündigungstermin"). A dismissal without notice is invalid if there were no special reasons that justified the termination.

In the event of an unjustified ordinary dismissal ("Kündigung") and unjustified dismissal without notice the employee is entitled to compensation in the form of “termination pay” ("Kündigungsentschädigung"). The basis for the calculation of the compensation is both the current remuneration to which the employee would have been entitled during the fictitious notice period and the pro rata special payments (e.g. holiday and Christmas bonuses = 13th and 14th monthly salary) as well as other remuneration components (compensation for leave not taken).

The employment relationship shall be terminated retroactively at the correct termination date as if the ordinary notice period had been observed in the first place. Termination pay must be asserted in court within six months after the notice of termination has been brought to the employee’s attention.

Provided the employee insists on continued employment and successfully proves that the dismissal without notice was unjustified, the employment contract was at no time interrupted. Remuneration must be paid in arrears for the entire period. The employee must immediately return to work or be prepared to do so (= reinstatement).

If “payment of damages’’ is the general concept, what is the basis of its calculation/the maximum amount of the employee may receive?

Compensation for termination includes all claims to which the employer would be entitled if the employee had been duly terminated by the employer.

When calculating the amount of a payment of damages, the so-called default principle is applied. The aim is to put the employee in the same financial position as he or she would have been in if the employment relationship had been terminated in accordance with the rules. Thus, in the case of employment for an indefinite period, the payment of damages is due until the next possible ordinary termination date. In the case of fixed-term employment it is paid until the expiry of the fixed term.

This means that the employer must pay everything that the employee would earn during the notional notice period (salary, average overtime, pro rata special payments) or would have acquired in vested rights.

Compensation for termination includes:

  • the remuneration for the fictitious notice period (e.g. wage/salary, bonuses, average overtime pay, average commissions, etc.);
  • the pro rata special payments (e.g. holiday and Christmas bonuses=13th and 14th monthly salary) and days of leave that would have accrued during the fictitious notice period.

May the right to terminate in some cases forfeit, (e.g. right to terminate forthwith) if not executed timely? If so, what is the respective timeframe?

Yes, in the event of a termination forthwith/dismissal without notice (“Entlassung”). If there is a special reason for a dismissal and the employer is aware of it, the employer must dismiss the employee immediately, otherwise the reason for dismissal is forfeited.

The dismissal must be announced immediately after a reason for dismissal has become known. If the facts of the case are unclear, the employer may wait with the dismissal until the facts have been clarified. This period also includes contacting one’s own lawyer for legal advice, but the employer must not take an unnecessarily long time for this.

However, according to the Austrian Supreme Court (OGH 8ObA57/13k) a notice of termination forthwith may - based on the respective circumstances of the case - still be timely if the employer issues a suspension from work immediately after becoming aware of the reason for dismissal and afterwards, within a timeframe of three weeks, issues the termination forthwith.

Has a termination to be delivered in writing or may the delivery of an oral/email/facsimile termination without an original signature be sufficient as well?

In principle, there are no formal requirements for notices of termination, unless the collective agreement or employment contract provides otherwise. They can therefore be made both in writing (also by e-mail and fax) and orally.

In practice, the written form is recommended, if only for reasons of proof, whereby care must be taken that the termination only becomes effective upon receipt by the employee.

If a notice of termination must be given in writing, "signature" is always meant (= the document must have a personal signature ("wet ink")).

May a termination be successfully rejected due to the lack of a formal proxy of the company’s statutory representative (e.g. its managing director) or may internal authorization generally be sufficient?

In principle, only the contracting parties can give notice of termination (employer and employee).

Representation by other persons is only possible with a power of attorney.

If a superior who appears to be authorized has issued a notice of termination to the employee, the employee may rely on this, and the notice of termination is legally effective.

Is there any general formal procedure with regard to the employee (e.g. obligatory meeting with the employee) before a valid termination may be issued?

In principle there is no procedure to be followed prior to an ordinary dismissal ("Kündigung") and a dismissal without notice ("Entlassung").

There are exceptions for companies with a works council as set out already above.

Before issuing the notice of termination the employer must inform the works council, which has one week to comment on the notice.

The works council can agree to the dismissal within this period or object to it.

Is there any statutory body that needs to be dealt with before a valid termination may be issued? If so, what is the usual timeframe?

In addition, a preliminary procedure must be followed in the case of disabled persons with special needs and persons with special protection (e.g. expectant mothers).

Mothers and pregnant women can only be dismissed with the prior consent of the Labor and Social Court (“Arbeits- und Sozialgericht”). However, this is only the case if the employer was aware of the pregnancy at the time of the termination.

Before terminating the employment of a beneficiary disabled person, the approval of the Disability Committee of the Social Ministry Service must be obtained.

Is there usually an employee representative body that needs to be dealt with before a termination may be issued? If so, what is the usual timeframe?

Principally, there is no need to consult the employee representative in case of termination, however, if a works council has been established.

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