Supreme Court: Social plan benefits in exchange for waiver of termination challenge

In decision 9 ObA 9/21w of 29 April 2021, the Supreme Court had to decide whether the common practice of making social plan benefits conditional on the employee waiving a termination challenge under § 105 of the Labour Constitution Act (ArbVG) was legal.

In the specific case, there was a works agreement covering the social plan. This agreement applied to employees that were terminated by mutual agreement or by the employer. Section 105 ArbVG allows the works council or the employee to challenge a termination by the employer. In order to avoid a challenge, the agreement stipulated that in the event of a challenge, the works agreement would not apply, and the employee would therefore not receive any social plan benefits.

In the case at hand, the terminated employee brought two actions, a challenge under the ArbVG and a claim under the Equal Treatment Act.

The Supreme Court has now expressly clarified that an employer may make social plan benefits (that are part of a voluntary severance package as part of a social plan) contingent upon the employee not challenging the termination in court under § 105 ArbVG.

In its reasoning, the Supreme Court stated that such an agreement does not impermissibly restrict the employee’s right to challenge under the ArbVG. The social plan at issue allows the employee to choose a termination by mutual agreement, or to risk possible termination by the employer. An employee who chooses the former can receive social plan benefits, and cannot challenge the termination. An employee who chooses the latter and is subsequently dismissed has the right to challenge. If the challenge is successful, the employment resumes and the social benefit question is moot. If the challenge fails, the termination remains in effect, with no social plan benefits. Under case law, the employer is allowed to incentivize termination by mutual agreement in this manner.

According to the Supreme Court, such an agreement does not violate the co-determination rights of the works council, which are firmly established in the provisions of the ArbVG on works agreements. A general advance waiver by the works council to challenge terminations (which would not be specific to an individual employee), would be a different story.


Supreme Administrative Court: § 12b ARG – Temporary, special need for work

Section 12b has been added to the ARG (Arbeitsruhegesetz), as part of amendment BGBl I No. 53/2018. It creates an exception to the general rules for rest on weekends and public holidays. For “temporary” special work, the employer can now require work on “four weekends or public holidays per employee per year,” through a works agreement.

In the present case, the employer’s company provided external laundry and textile cleaning for hotels. The employer was penalized for having employees work on public holidays, in violation of the ARG. The employer contested the penalty, arguing that the hotels in this touristy region “could not operate without the external laundry service,” invoking the exceptional circumstances of § 1(2) ARG-VO, and referring to a works agreement providing for work on public holidays.

In its decision issued on 23 April 2021 on Ra 2019/11/0164, the Administrative Court confirmed that the wording of the law is clear. In order for the exception in § 1(2) of the ARG to apply, the work must not be able to be performed outside of the weekend or public holiday (i.e. before or after). They decided that the work in the case at hand did not qualify for the exception. In addition, the Administrative Court held that the works agreement in question did not comply with § 12b ARG in any case, because it contained no limit on the agreed holiday work.

Practical tip: In the absence of a works council, an exception to the weekend or holiday rest period under § 12b ARG can be agreed in writing with the employees concerned. Even with an individual agreement, weekend or public holiday work is only permitted to the maximum extent of four weekends or public holidays per employee per year, and the time limit must be specified in the agreement.


Supreme Court: Employees have no general right to object when an undertaking is transferred

Under § 3(4) AVRAG, when an undertaking is transferred, employees have a right to object if the acquirer does not take over the collective agreement protection or the company pension commitments. If the right to object is exercised, the employment relationship with the transferor remains unchanged, provided that the transferor’s business continues to exist.

For over a decade, legal scholars have debated whether employees should have a general right to object. However, in its decision of 24 March 2021 on 9 ObA 14/21f, the Supreme Court adhered strongly to its previous case law despite the persistent criticism. As defined in § 3(4) AVRAG, the right to object is limited to cases where employee interests are massively impaired, as listed in the statute. When the interests are only slightly impaired, the only special relief for the employee is available under § 3(5) AVRAG. For example, an employee cannot object under AVRAG simply because the acquirer (i.e. the new employer) has a completely different structure, strategy, ownership level, or creditworthiness.

The Supreme Court has affirmed that the list of cases in § 3(4) AVRAG is not completely exhaustive, because there may be similar cases not contemplated by the legislature that would qualify, but they are extremely reluctant to find similar cases. The only one so far has been where the transfer caused an employee to lose their position on the works council. The Court has hereby affirmed that employees have no general right to object when the undertaking is transferred.


Supreme Administrative Court: Demarcation between supplying temp workers internationally, and performing contracts for work and services

When applying the case law of the European Court of Justice, “every indication” is to be taken into account in classifying the employment relationship as an international supply of temp workers (grenzüberschreitende Arbeitskräfteüberlassung). Courts will look at whether the remuneration depends on the quality of the service rendered, who bears the consequences of non-performance under the contract, who determines the number of employees deployed for each job, and who instructs the employees.

In the case at hand (VwGH 10 December 2020, Ra 2020/11/0170), a German company took over the order for delivery, assembly, and commissioning at a specific location in Austria. The German company involved a Polish company to carry out the order. Although the German company sent its own employees to Austria as site managers, the Polish company provided the personnel for the assembly. The contract between the German and Polish companies contained warranty clauses.

The Administrative Court decided that this was an international supply of temp workers. They noted that 1) the German company controlled the work done by the Polish company, 2) the contract between the German and Polish companies stated in advance the specific number of employees from the Polish company for the job, 3) the site manager of the German company had to decide how many replacement workers were required in the event of absences, and 4) the German company conducted regular quality controls.

The Administrative Court examined several factors individually, and decided that in sum the contract between the German and Polish companies was an international supply of temp workers.

In practice, this case shows that warranty clauses in the contract are not alone sufficient to classify the employment relationship as one of a contract for work and services (Werkvertrag), as opposed to an international supply of temp workers. Rather, the court will take all indications into account and assess the facts in total. How the employment relationship is classified is very important because it determines which legal provisions apply to the conditions of employment (minimum remuneration, mandatory entitlements), and which posting permits or notifications may be required (Entsendebewilligung / Anzeigepflicht).


Supreme Court: Fixed-term employees cannot be forced to consume vacation when they are put on leave of absence.

According to Supreme Court case law, an employee is not required to consume vacation time when they are put on leave for a long period of time (such as when they have given notice of termination), unless the failure to execute a vacation agreement is an abuse of rights, or the employee would otherwise violate their fiduciary duties towards the employer.

An abuse of rights requires a blatant disproportion between the advantage pursued by one party (the employee) and the disadvantage which results to another (the employer). According to the Supreme Court, for there to be an abuse of rights in the context of an employee refusing to consume vacation time, there would have to be a completely clear, blatantly disproportionate disadvantage to the employer for which there would be no other redress under law because of special circumstances.

This overall assessment must always be made on a case-by-case basis. Factors include the duration of the period of notice or leave, the number of remaining vacation days, the employee’s behavior during the notice period or leave of absence, whether it is a typical holiday period (during which the employee may have regularly taken leave in the previous years), etc.

In the decision of 24 March 2021 on 9 ObA 21/21k, the Supreme Court clarified that this legal opinion also applies to leaves of absence in fixed-term employment relationships. Making different rules for fixed-term and open-ended employment relationships would contradict the provisions of the Holiday Act, which does not differentiate between fixed-term and open-ended employment relationships for the entitlement to holiday compensation.

If the employee does not consume their vacation during a period of leave or notice, the only consequence is that the leave entitlement becomes time-barred.

In the case at hand, the Supreme Court found that the employee, whose five-month leave of absence fell during the first lockdown of the COVID 19 pandemic, and who was caring for her school-age child at the time, had no obligation to use up her remaining 14 days of vacation during the leave of absence.


Supreme Court: Abuse of sick leave and the reimbursement of detective costs

In the case at hand, the employee was taking increasing amounts of sick leave, and the employer suspected that they were merely “playing sick.” The employer therefore hired a detective agency to observe the employee. On the very first day, the employee was sitting in the coffee house despite being on sick leave and was out until late at night. Based on this evidence, the employer decided to continue the observation. Similar events over the next two days supported the charge of sick leave abuse. As a result, the employer dismissed the employee. The employer then sued for reimbursement of the detective costs.

The Supreme Court has already ruled on several occasions that the employer is entitled to reimbursement of the investigation costs if there are sufficient indications to suspect that the employee is abusing their sick leave and the investigation can clarify the situation.
The employee must reimburse the employer for those detective costs which were necessary to establish reliable evidence; the employer must bear any additional costs of the observation.

At what point the investigation is sufficient to provide solid evidence always depends on the circumstances of the individual case. In the present decision of 25 March 2021 on 8 ObA 8/21s, the Supreme Court takes the view that the three-day observation of the employee was necessary to obtain solid evidence. This is justified because a party under surveillance often alleges in court that the evidence is inadequate, erroneous, or coincidental.

Here, the Supreme Court did not consider the detective costs of € 7,983.30 net to be either existentially threatening or exorbitant for the employee. This was because the employee had worked for the employer for 5 years and the employer had also suffered a considerable cost burden due to the abuse of sick leave. The use of two detectives in the specific case was therefore necessary and the entire costs were to be reimbursed by the employee.


Supreme Court: Dismissal for impermissibly recording a conversation

In the case of 28 July 2021 on 9 ObA 65/21f, an employee recorded a conversation with the branch manager with his mobile phone and then informed his immediate superior. The employee was then dismissed for lack of trustworthiness.

The Supreme Court found the dismissal to be justified. The former employee was not able to demonstrate that circumstances in the company had burdened him to such an extent that his conduct would have been lawful under the General Data Protection Regulation. The assertion that “circumstances in the company” had placed a great burden on him, in particular the manager’s unappreciative treatment of the employees and his lack of trust in the works council, was insufficient. According to the Supreme Court, the employee could not prove a valid fear that some unjustified theory for termination would be concocted during the recorded meeting. He also could not establish that he was acting in reaction to a unilateral intervention by the company in the remuneration agreement.


And of course:
A COVID 19 update

Yes, COVID-19 continues to keep us all on our toes. Here is a brief overview of the latest issues in employment law:

COVID-19 vaccination requirement?
There is currently no general obligation to vaccinate against Covid-19 in Austria. In certain areas, a partial obligation to vaccinate has already been introduced (especially in the health sector). However, the employer has the possibility to agree with new employees in the employment contract that they will be vaccinated against COVID-19 by the start of employment (or at another time). With current employees, the employer can execute a supplementary agreement adding these terms to the existing employment contract. It is considered permissible to ask for the vaccination status during the job interview.

COVID-19 mandatory testing?
Whether an employer can require employees to test regularly is debatable (unless they are vaccinated). Since regular employee testing is the safest way to protect other employees, in our opinion the employer can order low-impact testing (such as gargle tests). This is especially true if the tests are required as an alternative to vaccination. If compulsory testing is introduced, the employer should provide testing facilities and bear the costs, unless there are already sufficient, easily accessible, and free testing facilities in the area (e.g. in Vienna gargle test, drive-through testing, etc.).
It is controversial and unclear whether the employer has to bear the costs of testing if no free testing facilities are available.

3-G rule at work?
We believe it is permissible to institute a 3-G rule in companies across the board. The new general collective agreement on the Corona measures does not contradict this view (“General-KV”). It stipulates that if the employer requires a mask, the employee does not have to wear one if they are 3-G compliant. The employer is responsible for checking the employee’s 3-G status, and is authorized to do so. The employer may institute a 3-G rule in order to determine whether a mask requirement is necessary. If the nature of the work makes 2-G status necessary, we believe this can also be instituted (e.g. where employees must take frequent business trips abroad to countries requiring vaccination or 2-G status).

Starting in November, there will be no compensation for loss of earnings for unvaccinated people in Germany during a required quarantine. This applies to people who are eligible for vaccination but refuse to get vaccinated, who are officially ordered to quarantine after contact with Corona-infected persons or after returning from a risk area. During the ordered quarantine, there is no continuation of pay for these employees. It is questionable whether Austria will adopt a similar measure, but the new General-KV stands in the way until 30 April 2022. Until then, it is illegal to discriminate against people who have been infected with Corona. Specifically, it is illegal to dismiss, terminate, or otherwise disadvantage (e.g. with regard to pay) persons who have tested positive for Covid-19. However, a different position is taken for unvaccinated employees who do not test positive but still have to be quarantined. In this case, there are strong voices emphasizing the fact that there is no entitlement to continued payment of remuneration.