2. Overview of Regulatory Field
2.5 Labour Law Regulations
In particular, an acquirer has to consider the following rules:
- Protection against dismissal: the Austrian employment law framework grants special status to certain groups of employees such as pregnant women or disabled persons, apprentices and members of the works council. These groups typically enjoy increased protection concerning the termination of their contracts. In addition, older employees enjoy some protection against dismissal, particularly when the dismissal results in social hardship or otherwise substantially violates their justified interests (eg, difficulties in finding a new job due to older age or age discrimination). Besides that, some employees could be entitled to the old severance payment scheme (granting such employees a multiple of their monthly salary which depends on, and increases with, their term of service). Under all these considerations, intended (post-closing) restructuring measures may become more difficult and/or costly to implement.
- Co-determination: similar to German law (but different in many details), the Austrian Stock Corporation Act (Aktiengesetz) provides for a two-tier board structure composed of the management board and the supervisory board. In some instances this structure also applies to limited liability companies. The management board is responsible for the day-to-day business, while the supervisory board mainly monitors these activities and in particular resolves statutory as well as assigned matters. If a works council is established, the Austrian Labour Constitution Act (Arbeitsverfassungsgesetz) entitles employees to delegate representatives to the supervisory board pursuant to the principles of one-third parity (Drittelparität). The employees delegate one third of the supervisory board’s members and the shareholders elect the remaining two thirds. Thus, employee representatives may gain insights, are entitled to the same level of information as shareholder delegates and, most notably, actively take part in important business decisions.
- Acquired rights: since the implementation of the European Acquired Rights/Transfer of Undertakings Directive, the Employment Contract Law Adaptation Act (Arbeitsvertragsrechts-Anpassungsgesetz) states that the acquisition of a business unit (eg, by way of an asset deal) involves a mandatory automatic transfer of all employment contracts that are part of the affected business unit. Therefore, a 'pick-and-choose' of employees is not possible and consequently the acquirer assumes the employment contracts, as they exist at the time of the transfer. This includes for example all benefits, unsettled claims, unconsumed vacation and severance pay entitlements. Only under certain limited circumstances employees may object to the transfer, eg, if any provision on protection against termination as set forth in a collective bargaining agreement applicable before the transfer or any pension commitment of the selling side are not taken over. Furthermore, employees are granted an extraordinary right to terminate their contract if working conditions worsen significantly. By contrast, terminations by the employer due to the acquisition of the business unit or transfer of the labour relations are null and void.