a. Laws and Guiding Principles
Employment laws in Austria dictate that the nature of the employment relationship will govern whether that relationship is legally defined as a standard employment relationship, and incur all of the entitlements and protections of Austrian labor law, or whether that relationship is a freelance, service agreement, or independent contract agreement. At the outset of any employment agreement, the employee should obtain a written contract of employment. However, although an employee should obtain a writ-ten contract in case there is any labor dispute during their period of employment, an employment contract is not necessary. A contract of employment may be constructed verbally or implicitly and still be legally enforceable.
Within the scope of re-characterization of independent contractors, an independent contractor may claim that their employment agreement exceeds that of an independent contractor. The decisive basis for this assessment is the manner in which the employee’s services are effectively carried out on a day-to-day basis, notwithstanding the terms of the employment contract or even the intention of the two parties at the time of the creation of the employment agreement. The decisive factors that define a standard em-ployee as opposed to an independent contractor are:
- personal dependency
- economic dependency
- continuous obligation
- obligation to work for a certain period of time
- use of the employer’s equipment
- incorporation into the employer’s organization
- success of the assigned tasks directly benefits the employer
- the employer incurs the risk of production
While all of these factors are not required to be present, if the majority of these characteristics outweigh the characteristics of an independent contractor, then the competent authority will find that the employment arrangement was, in fact, a standard employment contract as opposed to an independent contract.
A parallel example of the dangers of a re-characterization of an employment agree-ment can be found in the re-characterization of a fixed term contract to an indefinite employment contract. Employers in Austria are permitted to create fixed term contracts with their employees that come to a natural conclusion at the end of the fixed term. However, if an employer engages an employee in consecutive fixed-term contracts and the employee can claim the many characteristics of an indefinite employment contract listed above, then, as long as the employer does not have a special social or econom-ic reason for the consecutive fixed-term contracts, the employee may claim all of the benefits of an indefinite employment contract. In the same sense, if an employee who started out as an independent contractor starts to take on the characteristics of a stan-dard employee, they may have a claim for a re-characterization of their employment. The legal consequence of a re-characterization of an employment relationship would be that the former contractor would become entitled to all of the related protections and entitlements, which are extensive, and much more expansive than those granted to an independent contractor.
b. The Legal Consequences of a Re-Characterisation
In case of re-characterization, the employer would be liable for the income tax and the social insurance contributions that should have been deducted. Concerning the contri-butions for the social insurance, additional costs may arise as a result of the delayed payment. Moreover, the former independent contractor may be entitled to higher wages following the respective collective agreement. In this case, the employer is obliged to pay the remaining amount. Finally, the former independent contractor becomes entitled to all of the related protections and entitlements, which are generally extensive, and much more expansive than those granted to an independent contractor.
c. Judicial Remedies Available to Persons Seeking ‘Employee’ Status
All Austrian employees are automatically members of the Chamber of Labor. The Cham-ber of Labor as well as organization-specific works councils and industry-specific trade unions represent employees’ varied interests and are independent democratic institu-tions. Membership in the Chamber of Labor has the benefit of providing employees with legal representation, if necessary. Therefore, as an initial measure, an employee seeking a re-characterization of their employment agreement may petition the Chamber of Labor for legal representation. Subsequently, the employee may bring their case directly to their organizations’ employee works council and their employer. If the employee works council cannot resolve the re-characterization of employment claim with the employer, then the petitioning employee may bring their claim to the competent labor court of first instance. These labor courts have jurisdiction over disputes concerning employment related contracts, and may submit a conclusive judicial holding on whether or not the employee is entitled to the claimed re-characterization.
d. Legal or Administrative Penalties or Damages for the Employers in the Event of Re-Characterisation
In the event of re-characterization of an Agreement for Work and Services the employ-er has to pay fees and social security contributions with retroactive effect. Moreover, the authorities can impose several fines: The financial police will impose a fine between €730 and (max) €2.180 per employee working without any valid declaration. In case of recurrence the fine will increase between €2.180 and €5.000. The competent social insurance agency will charge a cost contribution of €800 for the procedure itself and €500 per employee without any valid declaration. In Austria these administrative penalties were steadily increased in recent years.