Restructuring - a view from Austria

What does Austrian employment law require of employers when it comes to making redundancies? It is an important question if you're a business with a presence in Austria where, just like the rest of the world, mass redundancy exercises are commonplace as businesses restructure in an effort to survive the pandemic. We will come on to the procedure shortly, but first the background.

Austria is a nation of 9 million and it had its first coronavirus case in late February and a nationwide lockdown began on 16 March, shortly after Italy. Euronews reported on a very early and very harsh intervention by the Austrian government which effectively shut down the whole public system. Austria's Chancellor is 34 year old Sebastian Kurz who had recently won his second mandate from the Austrian electorate on a platform that stressed budgetary restraint and business reform. His government had been planning to fast-track a range of economic and business reforms, including an overhaul of the way companies can be set up and run, modelled on UK limited companies with tax breaks for green and digital start-ups - then came the pandemic. 

As Statista reports, like its German-speaking neighbours Germany and Switzerland, Austria introduced a national shutdown last spring to prevent further spread of the virus. Large venues, cultural, retail and entertainment establishments were closed, as were schools and universities and travel restrictions were implemented to prevent coronavirus cases being brought from abroad. Daily life changed for a large share of the Austrian population, with so-called social distancing becoming the norm. In May 2020, 74% of the country considered the measures undertaken by the Austrian government to be appropriate and almost half of the population had strong trust in Mr Kurz. 

Austria’s current lockdown is its third and started on Boxing Day and was due to end on 24 January but, as Associated Press reported, that was extended to 7 February in a drive to push down still-high infection figures as officials worry about the possible impact of new coronavirus variants. 
The lockdown has, of course, affected businesses across the country and so, to help, the government has introduced various state aid measures. So let’s hear more about those measures from inside Austria. Julia Marboe is an associate at our best friend firm Wolf Theiss based in Vienna. She is an employment law specialist at the firm.

Julia Marboe: “The Austrian government support measures for businesses including emergency aid package launched to secure short term work. The short term work model, which had previously been less attractive for employers was amended and aimed at securing jobs. Also, the application process for employers to introduce short term work was simplified and accelerated home office was encouraged. A clear legal basis for home office is expected soon. Furthermore, businesses can apply for different types of financial AIDS. They can, for example, apply for an allowance to partly cover the fixed costs and businesses which were directly affected by the shutdown in November and December 2020. such as for example, hotels or restaurants are entitled to a revenue replacement between 20 and 80% of the lost revenue. In addition, tax deferrals are in place and can be obtained rather quickly from both the tax authorities and the Social Security institutions and a large amount of money was put in guarantees and warranties to secure loans.”

Notwithstanding the Austrian government’s support for businesses many have unfortunately been forced to shut down completely, or they're restructuring in an attempt to survive resulting in mass redundancies. That is when Austria’s collective redundancy laws kick in which we can now come on to.  Earlier in the year we were due to hold a webinar on this subject, looking at a number of countries across Europe including Austria, but because of the pandemic we had to cancel that. Nonetheless everyone involved was keen to adapt and the result is a series of programmes we will be releasing as HR Guides, covering each of those countries, hearing from lawyers based in each one. The theme of the webinar for all countries was to set out 5 do’s and 5 don’ts when it comes to restructurings. So let’s hear from Julia on that. First the 5 do’s: 

Julia Marboe: "Dos: 1. Do analyse the current situation of your business and the intended restructuring measures in detail before going forward. For example, expected savings effect in comparison to restructuring costs, legal framework, time schedule etcetera. Define goals and budgets - form a task force and define the roles in the negotiation process. Try to accommodate the works council and its members early in the process to make the whole negotiation a smooth experience.

2. Do define and use objective and measurable as well as legally sound selection criteria when restructuring the workforce; 3. Do inform and consult with the works council upfront before the intended restructuring and the potential mass dismissal; 4. Do proactively start social plan negotiations with the works council in case the restructuring has a negative effect for a significant part of the workforce; 5. Do inform the Austrian labour market service at least 30 days in advance of any planned mass dismissal, and additionally inform the works council at least seven days in advance before the notices to the individual employees are issued. Don’ts: 1. Do not start the restructuring process too late as such a process usually take some time; 2. Do not forget about restructuring costs when planning a restructuring - for example, social plan costs, entitlements under the old severance scheme, potential costs for court proceedings etcetera, and think about the individual risk of challenging the termination in court for each concerned employee; 3. Do not ignore concerns by the works council but rather address them and react with a strategic communication plan. Always remember, right information to the right person at the right time; 4. Do not go into the social plan negotiations without a strategy, a concrete draft of your first social plan proposal, a clear picture of the link costs and expect the possibility of a conciliation committee proceeding; 5. Do not violate the mentioned time periods for informing the Austrian labour market service as well as the works council as this could lead to the invalidity of the terminations. “ 
 
That was Julia Marboe who is one of our contacts at the Vienna branch of our best friend firm Wolf Theiss. We'll close this programme by hearing more from Julia, briefly describing the firm and the services it provides. 
Julie Marboe: "Our law firm Wolf Theiss is one of the leading law firms in Central Eastern and South Eastern Europe. We have built a reputation on the combination of unrivalled local knowledge and strong international capability. We opened our first office in Ghana 60 years ago. Our team now brings together over 340 lawyers from a diverse range of backgrounds, working offices in 13 countries throughout the region. Through our international network of offices, we work closely with our clients to help them solve problems and create opportunities. Your employees are your company's greatest assets. Having the right structures in place to protect these key relationships can prevent problems before they arise and secure the long term future of your business.

Our regional employment team with an average of 10 years of experience in the fields can help you to manage your risk associated with human resources. employment law changes quickly, and countries respond in different ways. We can assess what is most valuable to you, and you can count on us for straightforward advice, rather than having to wade through pages of arguments pro and con. If you have an international business, or one with international ambitions, our 13 Full Service offices have the flexible approach to your needs. We can advise you in international employment projects with the collaboration when necessary over experts in corporate dispute resolution regulatory and tax law. We are equipped to help you navigate the whole gamut of employment law. Whatever the issues you're confronted with, from day to day employment management to litigation, from remuneration to restructuring, you can rely on our services which are customised to best help you meet your long term business goals. Not only can we do all this, we can do it wherever you need, cross border and on time. Thank you for listening.”