In Austria, workforce restructuring is often necessary for companies facing economic challenges or needing to reorganize. However, the process is heavily regulated, and employers must ensure compliance with legal requirements to avoid complications and potential legal risks. This article outlines the key steps and legal obligations employers must follow when carrying out workforce reductions in Austria, with a particular focus on the importance of detailed planning, timing, and legal compliance.
Legal Framework for Restructuring
When a company plans to lay off a significant portion of its workforce, it is crucial to be aware of the legal thresholds that trigger specific obligations, such as the “Early Warning System.” These thresholds are determined by law and include the obligation to involve the Works Council early in the process and, in some cases, to create a social plan. Compliance with these legal requirements ensures a smooth process and mitigates potential risks.
Works Council Involvement and AMS Notification
A critical first step in workforce reduction is informing and consulting the Works Council. Under Austrian law, the employer must notify the Works Council before initiating any layoffs. The Works Council has the right to discuss alternatives to layoffs and propose measures to reduce the impact on employees. The timing and method of involving the Works Council are strictly regulated, and failure to consult them correctly may have an impact on the negotiations of a social plan.
Once the Works Council is informed, the employer must notify the Austrian Labor Market Service (AMS) about the planned layoffs. This notification is part of the Early Warning System, a legal requirement that applies when a company plans to lay off a certain number of employees. The AMS notification triggers a waiting period of 30 days before termination notices can be issued.
It is essential for employers to submit this notification in a timely manner. Failure to adhere to the legally required waiting period or to submit the AMS notification at all will result in the invalidity of the terminations.
Social Plan Requirements
In Austria, a social plan is required when a company plans to lay off a certain number of employees. The social plan is a works agreement between the employer and the Works Council that outlines measures to minimize the impact of layoffs, such as severance pay, job placement assistance, retraining programs, and other support mechanisms.
The requirement for a social plan is triggered when the workforce reduction exceeds specific thresholds, which can vary based on the size of the company.
Planning and Timing for International Restructurings
For multinational companies undergoing restructuring, timing and planning become even more critical. Different jurisdictions have different labor laws, and failure to comply with local regulations can delay the entire process and create unnecessary legal risks. A detailed and coordinated timeline is essential to ensure that all legal requirements are met in each country where layoffs are planned.
Employers should establish a clear schedule that accounts for the required consultation with Works Councils, the AMS notification, waiting periods, and negotiations for a social plan. By following a well-organized timeline, companies can ensure compliance with the relevant regulations and avoid unnecessary disruptions to the restructuring process.
Additional Notification to the Works Council on Individual Terminations
Beyond the initial consultation, employers must inform the Works Council about the individual terminations. This step also triggers an additional waiting period, which must be adhered to.
Failure to provide this information or to comply with the additional waiting period can lead to delays and the potential invalidation of the terminations.
Conclusion
In Austria, workforce restructuring is subject to strict labor laws that require employers to follow specific procedures to ensure compliance and avoid legal risks. Employers must consult with the Works Council, notify the AMS, and, when applicable, negotiate a social plan. For international restructurings, a coordinated plan and clear timeline are essential to comply with local regulations and avoid delays.
By following these steps and ensuring strict adherence to the legal requirements, employers can minimize the risk of legal disputes, maintain an efficient restructuring process, and successfully navigate the complexities of workforce reduction in Austria. Proper planning and attention to legal details will safeguard the company from unnecessary costs and complications.
By Stephan Nitzl, Partner, and Jennifer Held, Senior Associate, DLA Piper Austria
This article was originally published in Issue 12.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
