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Termination of Employment Contracts in Austria

1. Grounds for Termination

The majority of Austrian employment agreements are for an indefinite period. This type of employment agreement is created when an employer agrees to employ an employee and does not affix a specific length to the term of the contract. This agreement only ends upon the employee’s retirement or death. However, there are many options available to end an employment agreement:

  • either party to the contract provides notice of termination without cause,
  • termination of a probationary employment,
  • a consensual termination of employment,
  • or a summary dismissal for substantial reasons.

Termination by Notice:

The Salaried Employees Act § 20 dictates that employers must provide at least a six-week notice period before they terminate an employee’s contract. The notice period increases to two months after the employee’s second year of employment, three months after the fifth year, four months after the fifteenth year, and five months after the twenty-fifth year. Giving notice of termination does not require a specific cause. Conversely, an employee may file notice and, regardless of the number of years of service, must do so one month before her intended termination date.

The employer must inform the works council at least seven days before providing an employee with notice of termination. After the employer notifies the works council, the council has seven days to deliberate on the termination and provide a response. During this period of deliberation, the works council must decide whether it will explicitly approve the termination, object to the termination, or refrain from any comment. The decision that the works council chooses to make has no bearing on the process of the termination proceeding itself. The decision is only relevant to post-termination matters, like a legal contest of termination. However, any termination by notice that takes place without the works council being informed is void.

In addition to the notice requirements, standard termination procedures must also abide by specifically enumerated termination dates. Termination dates are the statutorily or contractually pre-designated days at which an employment agreement must terminate. This is independent from the requirement of the notice period, and usually operates to extend employment from the last day of the notice period to the termination date. The Salaried Employers Act mandates that termination dates must fall on the last day of a calendar quarter, but allows for CBAs to modify this requirement to allow termination dates to fall on the fifteenth or last day of each month.

Termination of Probationary Employment

Both parties to an employment agreement may add a one-month probationary period to the outset of the agreement. This probationary clause allows either the employer or the employee to terminate the employment contract at any time during the probationary period without the requirement of notice. However, this probationary period must be explicitly included in the employment agreement.

2. Collective Dismissals

“Employers with more than 20 and fewer than 100 employees and intending to make at least 5 employees redundant or between 100 and 600 employees and intending to make at least 5 % of the employees redundant or more than 600 employees redundant or more than 600 employees and intending to make at least 5 employees older than 50 years redundant, within a 30-day term are to notify the local employment offices (Arbeitsmarktservice –AMS) at least 30 days prior to giving notice to the first employee. The 30-day notice period may be extended by a collective bargaining agreement. Redundancies and consensual termination agreements made without notifying the local employment office and prior to the expiration of the 30-day period are null and void. The notice to the employment office is to state the reasons for the redundancies, the period within which the employees are to be made redundant, the number and positions of the employees to be made redundant, their age, sex, qualifications, and length of employment, the criteria used in selecting the respective employees, and any intended social measures to minimize any adverse consequences of the collective redundancies for the respective employees. In addition, the employer must notify the works council, if any, of any planned collective redundancy immediately or at least so timely that the works council can thoroughly discuss the planned collective redundancy. In the consultation process, the works council may propose measures to prevent any negative consequences to the employees arising out of the redundancies or the contents of a social plan.”

3. Individual Dismissals

Immediate termination without notice, or a “summary dismissal”, is another available alternative to the notice procedures for termination. In the case of a summary dismissal the employer unilaterally and immediately terminates the employment agreement for substantial cause. This type of termination is available in situations where the work environment becomes such that it is impossible or inappropriate for employment to continue through the necessary notice period. Examples of substantial cause include, but are not limited to, breaches of a non-compete clause, blatant disobedience or disloyalty to the employer, or serious dereliction of reasonable duties. After the employer recognizes a substantial cause for summary dismissal, they must terminate employment without undue delay. This requirement prevents an employer from preserving the right to summarily dismiss an employee for an extended period of time, which would effectively create an at-will employment scheme.

While the employer must inform the works council of the summary dismissal, the employer is not required to do so before the actual dismissal. Unlike the procedures for standard termination by notice, informing the works council is not a precondition to the dismissal’s validity. The employer must inform the works council within three days following the dismissal, and the works council may then take a stance to either approve or object to the dismissal.

a. Is severance pay required?

In case the employer validly terminates the employment, the employee is not entitled to any statutory severance pay.

4. Separation Agreements

a. Is a Separation Agreement required or considered best practice?

As an alternative to the stringent requirements of the termination by notice procedure, an employer and employee may agree upon a termination date, and thereby bypass the notice requirements. In this case, the employee is still entitled to their statutory severance payments and may not legally waive those rights.

Any further payments are subject to the negotiations between the parties. If the employee, in the course of the negotiations for a consensual termination, requests to deliberate with the works council, if any, a consensual termination cannot be validly agreed upon within the following two working-days.

b. What are the standard provisions of a Separation Agreement?

Between employer and employee´s it is agreed either verbally or in writing that they are entitled to terminate the employment agreement without observing notice periods or termination dates. However, it is recommended that they be made in writing.

c. Does the age of the employee make a difference?

If employees are still underage, a consensual termination is only valid if a legal instruction from the Labour and Social Court or the Austrian Chamber of Labour about the protection against dismissal was given to the employee before.

d. Are there additional provisions to consider?

The consensual termination of the employer-employee relationship with expectant mothers as well as with mothers or fathers in parental leave must occur in writing. Also the resolution with people in military or civil service and education servant has to occur in writing and is only valid, if a legal instruction from the Labour and Social Court or the Austrian Chamber of Labour about the protection against dismissal was given to the employee before. The requirements of written form as well as the legal instruction apply to apprentices as well. In addition, for underage apprentices the approval of both parents (or a legal representative) is necessary.

5. Remedies for employees seeking to challenge wrongful termination

If the employer has appropriately adhered to the notice procedure requirements, then the employee’s options for challenging the notice of termination or for appealing termination are dependent upon the works council’s stance.

If the works council agrees to the notice of an employee’s termination, then they effectively bar the employee from contesting on the grounds that the termination was socially unacceptable. In this case, the employee may only contest the notice based on a subjective finding of unlawful motive and has the responsibility of filing the challenge.

If the works council objects to the employer’s intent to serve a notice of termination, the works council thereby maintains the right to file a challenge. The only prerequisite to filing the complaint is that the works council has the employee’s consent to do so.

A dismissal will be found socially unacceptable if the employee’s substantial interests are impaired, and the employer cannot show that the termination was based on the employee’s inability to effectively perform the tasks associated with their employment, or there are economic reasons that necessitate the termination.

For an employer to show that the notice of termination was valid, they may show that reasonable business interests make the employee’s continued employment with the company impossible. If the employer is making broad cutbacks on its workforce, the court will not analyse the underlying financial reasons for making those cutbacks, but will determine whether or not the employer exhausted all reasonable avenues to avoid having to layoff the appealing employee. Furthermore, an employer may rebut the employee’s claim of social unacceptability by showing that the employee was unable to perform their duties due to physical or psychological deficiencies, or if the employee committed a breach of duty.

For more information on these articles or any other issues involving labour and employment matters in Austria, please contact Gerlach Rechtsanwälte
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