Einvernehmliche Auflösung (termination by mutual agreement)

Scope of application

Termination by mutual agreement is the preferred option in the following situations:

• ending service relationships with executives or managing directors where a coordinated separation is desired
• separation in the course of restructuring or strategic change
• conflict situations in which both sides are seeking an agreed solution
• negotiating additional terms such as voluntary severance payments, release from work or confidentiality

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Legal basis

Termination by mutual agreement is based on the following legal sources:

• §§ 861 et seq and §§ 870 et seq ABGB: formation of the agreement and possible defects of consent
• § 104a ArbVG: consultation with the works council at the employee's request
• § 23 AngG and § 14 BMSVG: entitlements under the old and the new severance system respectively

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Deadlines

The following periods must be observed for a termination by mutual agreement:

• No statutory period – the termination date is freely agreed by both parties
• If the employee demonstrably asks the employer for a consultation with the works council, no valid termination by mutual agreement can be concluded within the following two working days.
• A challenge on the ground of mistake is generally possible for three years from conclusion of the contract; in cases of duress or fraud, the start and length of the period must be examined separately.

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Rights and obligations

Rights:

Both parties have the following rights in a termination by mutual agreement:

• a free decision on whether to agree, and agreement on the termination date and additional benefits
• the opportunity to obtain legal advice before agreeing; employees can request a consultation with the works council under the conditions of § 104a ArbVG
• entitlement to the final settlement claims and severance pay due by law; the balance under the new severance system can be drawn on where the conditions for payment are met

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Obligations:

The following obligations must be observed in a termination by mutual agreement:

• The agreement should be recorded in writing for evidentiary reasons; for certain protected persons and for apprentices, written form is required by law.
• Outstanding remuneration, special payments and compensation for untaken holiday must be settled in accordance with the statutory and contractual entitlements.
• The agreement must be entered into voluntarily; fraudulent misrepresentation or unlawful threat can impair its validity.

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Common mistakes

The following mistakes frequently occur in terminations by mutual agreement:

1. The agreement is not documented, or special requirements of form and information for protected persons are overlooked.
2. A blanket settlement of all claims is agreed without outstanding remuneration and severance claims being examined individually.

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Recommended steps

The following steps are recommended for a legally sound and complete termination agreement:

1. Record the termination date, outstanding claims and additional benefits in writing and unambiguously.
2. Observe any request for consultation with the works council and any special requirements of form and information.
3. Regulate release from work, non-compete clauses and the reference; for managing directors, also clarify separately the ending of the position as a corporate officer.