Employees’ Rights in Case of a Transfer of Undertaking

A transfer of an undertaking occurs when an undertaking, business or part of a business is transferred to another owner. In this context, the European Court of Justice focuses on the concept of the “economic unit” and not on individual concepts of the transfer of an undertaking. The successor enters into the existing employment relationship as employer with all rights and obligations.

Non-transfer of employment by mutual agreement may be agreed between all parties concerned.

The right of employees to object to the transfer of their employment relationships are limited under Austrian law: The employee has a right of objection only in two cases: if the new owner/successor does not take over an individual contractual pension commitment and if the transfer results in the loss of existing protection under a CBA and this protection is not taken over by the new owner/successor.

Employees have a so-called “special right of termination” if a new CBA or a new occupational pension fund is applied and if this results in a significant deterioration of the working conditions. If the employee terminates the employment contract within one month under this “special right of termination”, this termination is treated as a termination by the employer (which is more favourable for the employee).

Requirements for Predecessor and Successor Parties

The successor enters into the existing employment relationship as employer with all rights and obligations. This means that all claims and obligations on the basis of an individual employment contract are transferred to him. This so-called “automatic entry” does not depend on the will of the previous and the new owner, nor on the employee concerned. There are special rules for the event of a transfer of undertaking in bankruptcy proceedings or in reorganisation proceedings without self-administration of the predecessor.

In the case of a transfer of undertaking, the predecessor or the successor must inform the employees or, if a works council exists, the works council) about the transfer of the undertaking. This information to the employees must be provided in writing one month in advance and needs to include the date or planned date of the transition, the reason for the transition, and the legal, economic and social consequences of the transfer for the employees, and the planned measures for employees.