Employment Law

If an employee works in different countries or is deployed there, the question inevitably arises as to which employment law is applicable to the employment.

The answer to this can be found in the European Contract Law Convention (ECC) and in Regulation 593/2008 (Rome I Regulation). The EU Posted Workers Directive must also be observed for postings to and from Austria. 

The provisions of the Rome Convention and the Regulation 593/2008, which are basically identical in their key areas, are applicable, among other things, to all employment contracts that have a connection with the law of another state.

It’s irrelevant whether this concerns the law of a Member State or a third country. The law can also be chosen just for parts of the contract in question.

Overview and principles

Employers and employees may freely choose the employment law applicable to the respective employment relationship when working abroad.

However, this is not possible if all factual elements of employment are located in the same state. If this is the case, there can be absolutely no deviations from the provisions in force in that state, which are not subject to contractual disposition under the respective national law.

The free choice of law must be made expressly or must result with sufficient certainty from the provisions of the contract or from the circumstances of the situation.

If the parties do not make a choice of law, the employment contract shall be governed by either

  • the law of the state in or from which the employee normally carries out their work in fulfilment of their contract (even if they are temporarily posted to another country), or
  • the law of the state in which the company which hired the worker is located, unless the worker normally works in the same state.

If it is clear from the circumstances as a whole that the employment contract or employment relationship has closer links with another state, the law of that other state shall apply.

According to ECJ case law, national regulations for continued payment of wages in the event of illness/accident or occupational accident/occupational disease fall under the material scope of Regulation 1408/71 or Regulation 883/2004.

Limits to the free choice of law

The free choice of law must not result in the employee being deprived of the protection under employment law that they would have had without a choice of law.

This means that even in the case of a free choice of law, the standard of employment law standardised by mandatory provisions must not fall below that which the employee has at their usual place of work or at the company hiring them. A favourability comparison must therefore always be made.

Overriding mandatory provisions

The free choice of law is further limited by so-called overriding mandatory provisions. These are national and international regulations that exist in the public interest of a state or a community of states and affect private employment relationships. 

There is no definition or list of these mandatory provisions in the Rome Convention or in Regulation 593/2008. 

National Austrian intervention standards to be observed are, for example, the Hours of Work Act, the Holiday Benefits Act, the Rest Periods Act and the Insolvency Wage Guarantee Act. However, it is also conceivable to comply with mandatory national provisions on the minimum wage due.

Posted Workers Directive

In addition to the above conflict-of-law rules, the Posted Workers Directive must be observed for postings. This is an international overriding mandatory provision of EC law. In Austria, this directive was incorporated into the Anti-Wage and Social Dumping Prevention Act (LSD-BG). Specifically, the LSD-BG contains the following regulations:

Remuneration protection according to § 3 LSD-BG

In the case of the ordinary employment of an employee in Austria by an employer without a registered office in Austria, the employee shall be entitled to remuneration under the collective agreement which is due to comparable employees of comparable employers at the place of work. This is a general protection of remuneration. It is irrelevant if there is a posting or not.

Posting to Austria 

In this case, remuneration is also protected according to § 3 LSD-BG. The annual leave entitlement for the duration of the posting shall be calculated in accordance with the Austrian Holiday Benefits Act, provided that the amount of annual leave is lower under the law of the sending state. 

In the case of a posting, the working time provisions of the collective agreement must also be observed, without prejudice to the law applicable to the employment relationship.

Posting from Austria

In the case of a posting from Austria, the usual place of work remains in Austria. Austrian employment law shall in principle continue to apply (unless another choice of law is made).

This also applies to the respective collective agreements and company agreements. A different choice of law is only effective if it is more favourable to the employee. In addition, the employment law of the country of employment and any existing foreign intervention standards as well as the Posted Workers Directive must be taken into account.

Further information on this topic can be obtained from the relevant interest groups (Chamber of Commerce, Informationen zu https://www.arbeiterkammer.at/service/ratgeber/Die_Arbeiterkammer/The_Chamber_of_Labour.htmlChamber of Labour, etc.).