Betriebsübergang (transfer of undertaking, § 3 AVRAG)
What applies to a transfer of undertaking under § 3 AVRAG in Austria? Automatic transfer, right of objection and information duties, explained by Engelbrecht in Vienna.
Definition
A Betriebsübergang (transfer of undertaking) occurs where a business or part of a business passes in fact to a new owner while retaining its economic identity. A legal transaction between the previous and the new owner is not strictly required. Under § 3 AVRAG, existing employment relationships generally pass to the transferee automatically. Employees do not need to consent to the transfer, but may object to it under certain conditions. The transferee assumes the rights and obligations arising from the existing employment relationships.
Scope of application
§ 3 AVRAG is particularly relevant in the following situations:
- Acquisition of a business as an asset deal (not in a share deal)
- Outsourcing of parts of a business to external service providers
- Lease of a business, mergers and business succession
- Restructurings in which parts of a business pass to other entities
Legal basis
The legal framework for a transfer of undertaking consists of:
- § 3 AVRAG: the core provision on transfers of undertakings in Austria
- § 3a AVRAG: duty to inform employees where no works council exists
- § 4 AVRAG: change of applicable collective agreement and protection of collectively agreed terms
- § 5 AVRAG: occupational pension commitments on a transfer
- § 6 AVRAG: liability on a transfer of undertaking
- § 109 ArbVG: information and consultation rights of the works council in the case of operational changes that may accompany a transfer
- EU Directive 2001/23/EC: the European Transfer of Undertakings Directive
Deadlines
The following deadlines and duties apply to a transfer of undertaking:
- Employees' right of objection: If the transferee does not maintain the protection of collectively agreed terms or an occupational pension commitment, the employee may object to the transfer within one month of that refusal. If the transferee does not respond, the one-month period starts once a reasonable period set by the employee for a response has expired.
- Information of employees: Where there is no employee representation, the employees concerned must be informed in writing in advance of the transfer pursuant to § 3a AVRAG.
- Information of the works council: Where an operational change within the meaning of § 109 ArbVG is involved, the works council must be informed in good time and comprehensively enough to assess the possible effects and to comment on them. At the works council's request, consultation must take place.
Rights and obligations
Rights:
On a transfer of undertaking, employees have the following statutory rights:
- Continuation of their existing contractual rights, such as salary, holiday entitlement and credited prior service
- Subject to certain conditions, a right to object to the transfer of their employment relationship
- A right to be informed of the transfer in good time, provided no employee representation exists
- Protection against a dismissal whose operative reason is the transfer itself
Obligations:
Transferor and transferee have the following obligations:
- Information of employees: where there is no employee representation, the transferor or the transferee must inform the employees concerned in writing in advance of the transfer.
- Works council: insofar as the transfer involves an operational change within the meaning of § 109 ArbVG, the owner of the business must inform the works council in good time and comprehensively and, at its request, consult with it on the intended measure.
- Transferee: assumption of the rights and obligations arising from the employment relationships passing to it
Common mistakes
The following mistakes occur frequently in practice:
- Failing to distinguish between an asset deal and a share deal – a mere acquisition of shares in the employing company generally does not constitute a transfer of undertaking under § 3 AVRAG.
- The works council or the employees concerned are not informed in good time as required by law.
- Dismissals are issued whose operative reason is the transfer of undertaking, although such dismissals are not permissible.
- Outsourcing is carried out without assessing whether it triggers a transfer of undertaking, which can lead to unintended transfers of employment relationships.
Recommended steps
The following measures support a legally sound transfer of undertaking:
- Assess at an early stage whether a planned transaction or restructuring triggers a transfer of undertaking under § 3 AVRAG.
- Assess whether an operational change within the meaning of § 109 ArbVG is involved and, if so, inform and involve the works council in good time.
- Where no employee representation exists, inform the employees concerned in writing in good time pursuant to § 3a AVRAG.
- Issue dismissals only for reasons that do not lie in the transfer of undertaking itself.
Frequently asked questions
Do all employees transfer automatically in a transfer of undertaking?
As a rule, the employment relationships allocated to the transferring business or part of a business pass to the transferee by operation of law. The consent of the employees concerned is not required; subject to certain conditions, however, a right of objection exists. Employees who are not in an employment relationship with the transferor are generally not covered. This applies, for example, to agency workers where only the user undertaking and not the temporary work agency is transferred.
What does the employees' right of objection mean in a transfer of undertaking?
Employees may object to the transfer of their employment relationship if the transferee does not maintain the protection of collectively agreed terms or an occupational pension commitment. In that case the employment relationship with the transferor continues.
Can the transferee dismiss employees after a transfer of undertaking?
A dismissal whose operative reason is the transfer of undertaking is not permissible. Dismissals based on operational, personal or conduct-related grounds may still be permissible, provided they are not issued precisely because of the transfer.
Does § 3 AVRAG also apply to an acquisition structured as a share deal?
No. In a share deal only the shareholders of the company change. The employing company itself remains unchanged, so there is generally no change of owner within the meaning of § 3 AVRAG.
What role does the works council play in a transfer of undertaking?
Where the transfer of undertaking involves an operational change within the meaning of § 109 ArbVG, the works council has statutory information and consultation rights. The owner of the business must inform it of the intended operational change in good time and comprehensively enough for it to assess the possible effects and to comment. At the works council's request, the intended measure must be discussed with it.
Any questions?
Planning an acquisition or an outsourcing project? We assess whether § 3 AVRAG applies and guide you through the transfer.
