COVID-19 HR/Employment Law | Amendment to the Wage Evasion and Social Dumping Act, extension of COVID-19 short-time work, and alignment of notice periods for workers postponed
With summer upon us, we would like to update you on the latest changes in employment law. In addition to several laws relating to COVID-19, an amendment to the Wage and Social Dumping Act (LSD-BG) has also been brought before parliament; this is currently before the Federal Ministry of Labor. Furthermore, the social partners and the federal government agreed this week that as of 01 July 2021, short-time work will be prolonged. Finally, the alignment of the notice periods for blue-collar workers with those for white-collar employees, which has been planned for some time, is to be postponed to 01 October 2021. Please find below an overview of these important employment law developments:
1. Amendment of the Act to Fight Wage Evasion and Social Dumping (LSD-BG)
The amendment to the LSD-BG (Lohn- und Sozialdumping-Bekämpfungsgesetz) is currently at the Federal Ministry of Labor. Main parts will become effective on 01 September 2021 and applies to postings and assignments that begin after 31 August 2021. Here are some important changes:
The definition of “posting” will be adjusted, and by these adjustments the scope of the law will be restricted.
§ 2 (3) of the LSD-BG will be amended to adjust the definition of a “posting” to conform with the EU Directive on the Posting of Workers. It will now be mandatory to have a cross-border service contract for a posting. This must be executed between a foreign employer (not based in Austria) and a domestic party receiving services in Austria.
The current exemptions to the law (listed in § 1 (5) LSD-BG) are being expanded, based on experience gained from practice. In addition, the LSD-BG will not apply to intra-group postings/assignments of highly skilled workers for work on: delivery, installation/start up (and related training), maintenance, service work and repair of machinery as well as equipment and IT systems.
Postings/assignments to Austria for training purposes for a longer period of time will also be exempt. Under certain conditions, there may be further exemptions for posted/assigned workers whose average monthly gross remuneration is € 6,937.50 or more in 2021 (125% of thirty times the daily ASVG maximum contribution basis), and for mobile workers transporting goods or passengers across borders.
Changes in content
As soon as a posting/assignment exceeds 12 months, the Austrian labor law standards (including laws, ordinances, and collective agreements) apply in their entirety, insofar as they are more favorable than those of the posting country. When deciding which collective agreement applies, it is the one applicable at the place of work for comparable employees of comparable employers. The 12-month period can be extended to 18 months if the employer files a notification listing credible grounds (assignment of the contract or employee, etc.).
Posted/assigned employees are legally entitled to be reimbursed for travel, accommodation, and subsistence costs incurred during the posting in Austria, which would be paid to comparable employees of comparable employers at the place of work.
The powers of the anti-fraud office (“financial police”) are extended so that it may also demand the transmission of the wage documents referred to in § 22 LSD-BG from the employer up to one month after the termination of the posting or assignment. Violations are subject to administrative penalties pursuant to § 28 (4) LSD-BG.
There is still a formal distinction between a posting and a cross-border assignment, although § 26 (1a) LSD-BG provides for a simplification. § 26 (1a) now clarifies that a report is considered complete even if a ZKO-4 form was mistakenly used instead of a ZKO-3 form (and vice versa).
It should also become easier to maintain documents on employee registration and file a general notification (for a maximum of 5 clients/employers and an extension to 6 months).
Changes to the administrative penalties
Since the previous Austrian penalty provisions are disproportionately high with regard to formal obligations and thus contrary to EU law, the accumulation and minimum penalty in the LSD-BG are to be dropped.
Regardless of the number of employees affected by the administrative violation, there is now only one administrative violation. A fine of € 20,000 or € 30,000 may be imposed for violations of formal obligations.
For underpaid wages, a five-level penalty scale is now introduced, whereby the amount of the withheld remuneration is taken into account (as well as the degree of fault on the highest level). The penalties range from € 20,000 to € 400,000. If the employer cooperates fully and without delay in establishing the truth (e.g. by disclosing the payroll accounting), the lower penalty according to the graduated model is to be applied up to the respective maximum limit insofar as it corresponds to the amount of damage (mitigation of penalty).
2. Short-time work new as of 01 July 2021
The previous, uniform model of COVID-19-related short-time work expires at the end of June 2021. It became clear this week that short-time work will be extended, but in a weakened form. Starting on 01 July 2021, companies that are particularly affected will be handled differently from those that are no longer suffering so severely from the pandemic.
The first group includes businesses that have suffered a sales shortfall of at least 50% between the 3rd quarter of 2019 and the 3rd quarter of 2020. These businesses can basically continue to use the previous model of short-time work until the end of 2021. This means: minimum working hours of at least 30% of the normal weekly working hours (in exceptional cases: down to 0%) and net wage compensation of 80 – 90%, depending on the wage level. Apprentices continue to receive 100% regardless of their working hours.
For all other companies, a transitional model with a reduced subsidy level will come into effect, which can be used until mid-2022: In this model, the minimum working time is 50% of the normal weekly working hours. Furthermore, the short-time work subsidy will be reduced by 15%. The net replacement rates remain unchanged.
According to the WKO (Austrian Chamber of Commerce), both models require that one week of vacation is consumed for every two months in which short-time work is used. Between two short-time work phases, a business will be able to reduce staff if the social partners consent. The Ministry of Labor expressly promises relief in this regard, in contrast to the previous model.
A business can utilize short-time work for a maximum of 24 months, although there will be exceptions in individual cases. The new individual application phase is 6 months. Companies that were not in phase 4 of short-time work now have a period of 3 weeks to apply, during which they will be advised by the social partners and the AMS (Austrian Labor Market Service).
3. Alignment of notice periods for workers postponed
The notice periods for workers (Arbeiter) were planned to be aligned with those for employees (Angestellte) as early as 01 January 2021. Because of the COVID-19 pandemic, this plan was initially postponed by six months to 01 July 2021. Now there is a further motion to postpone until 01 October 2021. The motion is currently before the Committee for Labor and Social Affairs and is expected to pass in the National Council. This would mean the following for companies:
Workers giving notice of termination on or before 30 September 2021 must abide by the notice periods of §77 GewO (Austrian Trade Regulation Act), i.e. 14 days (for both the worker and the employer) – if the collective agreement or employment contract does not provide for a longer period. For notices of termination issued as of 01 October 2021, the new §1159 ABGB (Austrian General Civil Code) applies. This corresponds in content to §20 AngG (Austrian White Collar Employee Act). In the absence of a more favorable agreement for the worker in the employment contract or collective agreement, the employer may terminate the employment relationship at the end of every quarter, with a notice period of six weeks to five months (depending on the duration of the employment). It is possible for the parties to agree that the employment can also be terminated on the 15th or last day of a calendar month. As of 01 October 2021, a notice period of at least 4 weeks applies for terminations by the worker, in each case from the last day of the calendar month.
We urgently recommend that existing service contracts with workers be adapted to make termination options as flexible as possible.
4. Last but not least
- Because the pandemic outlook has improved and vaccination is increasing, the COVID-19 risk group exemption will “expire” on 30 June 2021. Certificates to exempt members of the COVID-19 risk groups will be ineffective starting 01 July 2021. However, the Minister of Labor has been authorized to issue a new risk group ordinance quickly, in agreement with the Minister of Health, if necessary.
- In contrast to the risk group exemption, the special exemption for pregnant women beginning at the 14th week of pregnancy, which originally was also limited until 30 June 2021, has been extended until 30 September 2021. However, this extension only applies to pregnant women who are not fully immunized and only to professions where physical contact with other persons is inevitable. The exemption ends with the second vaccination. The costs arising in this regard will be compensated in their entirety to the affected companies as before.