The European Council Directive 77/187/EEC is the broadest source of employee protections during transfers of business. This directive was meant to guide “the laws of the Member States relating to safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses”.
Austria adopted the terms of this directive with the Adjustment of Labour Law Act in 1993. This law states that, generally, in the case of a transfer of business all employment contracts that are part of the affected business are automatically transferred to the purchasing party. This transfer of employment contracts includes all unsettled claims of any employees against the previous employer, even if the underlying facts of those claims occurred before the transfer of business.
A transfer of business is defined as the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger. In order to determine whether a transfer of business actually took place, a court will consider a specific set of criteria, not all of which need be met in order for the transaction to legally qualify as a transfer of business. These criteria include:
- the transfer of tangibles,
- transfer of intangibles,
- takeover of principal staff,
- transfer of clientele,
- level of similarity between pre and post transfer business activities,
- and duration of interruption.
1. Employees’ Rights
Right to object the Transfer of Employment:
“As a matter of general principle, Austrian law does not provide for a general right of employees to object to the automatic transfer of their employment agreement in case of a transfer of business. However, an employee may object to a transfer of the employment agreement to the purchasing entity when the new owner does not take over any provisions on protection against termination as set forth in a collective bargaining agreement applicable before the transfer of business or, any pension commitment of the selling entity.
Right to Give Notice of Termination:
“Under subsection 3 (5) AVRAG, employees may give notice of termination in the event of a transfer of business provided the collective bargaining agreement or the shop agreements applicable after the transfer substantially worsens their working conditions. In this case, the termination employee has the same claims as if notice of termination had been given by the employer; that is, entitlement to, inter alia, severance pay as defined by statute.”
Termination by the employer:
Furthermore the Austrian courts, in accordance with the relevant European Council Directive, have held that neither the transferor nor the transferee may use the transfer of business, or the proximate effects of a transfer of business, as grounds for termination.
When disputing their termination in this context, an employee must show both a temporal and causal connection between their dismissal and the transfer of business. Therefore, the employee must show that they were dismissed “because of the transfer”.
2. Requirements for Predecessor and Successor Parties
Obligation to Inform and Consult with the Works Council:
Austrian law states that an employer must notify the works council of the planned transfer of business, and of the implications of the transfer on the collective agreements of the employees prior to the transfer. If no works council exists, the employees are to be informed individually before the transfer takes place.
“Although there is no strict time limit for this, the employer is to notify the works council timely so that the members my thoroughly discuss the proposed transfer. However, this is a lex imperfecta, because the law does not apply any legal penalties when the transferring entity fails to comply with the notification requirement. In response to the notification of a transfer of business, the works council may propose specific measures to prevent any negative consequences for the employees. If the transferring entity does not agree with these measures, the works council may submit the proposal to a conciliation board at the labour courts for a final determination.
According to the law, the employee is to be informed in writing on the following issues prior to the transfer:
- the point in time when the transfer is intended to take place,
- the reason for the transfer,
- the legal, economical, and social consequences of the transfer for the affected employees and
- all measures that have been taken with regard to the employee.