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Austria: Wage and Social Dumping Prevention Act — new developments

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In brief

An overview of current developments

Against the background of the EU Posting Workers Directive and the ECJ case law, the Wage and Social Dumping Prevention Act (“Lohn- und Sozialdumping-Bekämpfungsgesetz”, “LSD-BG”) has been amended effective as of 1 September 2021. In summary, the scope of the Wage and Social Dumping Prevention Act was limited and the provisions regarding administrative penalties were mitigated. However, provisions for long-term postings are now stricter. In particular, you should now observe the following changes.

1. New condition for applying the Wage and Social Dumping Prevention Act

The Wage and Social Dumping Prevention Act provides huge obligations for employers regarding compliance with Austrian minimum wage provisions, as well as significant penalties in the event of non-compliance. In the past, often it was not clear which cases fell within the scope of the Wage and Social Dumping Prevention Act. This legal uncertainty has now been partly eliminated by harmonizing the definition of a posting of employees according to the EU Posting of Workers Directive. A posting now requires a service contract between the foreign employer and the national service recipient (in accordance with the EU Posting of Workers Directive). Thus, for example, mere visits to trade fairs or seminars without a service contract are not covered by the Wage and Social Dumping Prevention Act to begin with.

In addition, further explicit exceptions of the scope have been included. The Wage and Social Dumping Prevention Act now no longer applies to temporary intra-group postings or secondments of a special skilled worker for specific work (e.g., work on the delivery and setting up of machines), workers posted or seconded for longer periods for training purposes and activities of employees with high-income. In practice, this leads to much-appreciated administrative simplifications.

2. Implementation of the “principle of favorability” in case of long-term postings

Up until now, employers only had to comply with minimum mandatory provisions of Austrian labor law, such as working time provisions, when employing foreign employees to whom generally foreign labor law is applicable. In case of postings or secondments lasting longer than 12 months, employers must now generally apply the provisions of Austrian labor law in full if they are more favorable (“cherry picking”). Thus, provisions regarding prevention from work and entitlements to time off from work under collective bargaining agreements must be taken into account in particular. Additionally, a comparison of which provision is more favorable may have to be conducted.

3. Mitigation of administrative penalty provisions

The new administrative penalty provisions mitigate the exorbitant penalties provided so far. In particular, the minimum penalties and the accumulation of penalties within one administrative penalty provision are eliminated, which means that now the penalty no longer depends on the number of employees affected. The monetary penalty in the event of violation of notification or not keeping necessary documents available is up to EUR 20,000 respectively in the case of obstruction in connection with wage audits as well as in the case of not keeping and not submitting wage records, the penalty is up to EUR 40,000.

In case of underpayment, a penalty of up to EUR 250,000 is possible, depending on the amount of remuneration withheld. However, in extremely severe cases, a penalty of up to EUR 400,000 may be imposed. Under certain circumstances, a lower penalty range may be applied in terms of mitigation of the penalty.

Conclusion

The changes in the Wage and Social Dumping Prevention Act lead to a limitation in the scope of this act and to a reduction of possible administrative penalties. However, in the case of long-term postings, stricter working conditions must be observed.

Please feel free to contact us at any time should you have any questions regarding the application of the new provisions of the Wage and Social Dumping Prevention Act or require further information.

Click here to access German version.

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Author

Philipp Maier is partner and head of the Baker McKenzie Employment Law Practice Group in Vienna. He joined Baker McKenzie Austria in 2009 as associate of the employment law practice group. Prior to that Philipp worked for several years in the employment law department of Freshfields Bruckhaus Deringer and in the litigation department of Wolf Theiss Rechtsanwälte. He also completed an internship at Aichelin Heat Treatment Systems (Detroit, USA).

Author

Mag. Simone Liebmann-Slatin, MSc. joined Baker McKenzie as a partner in 2003. Since 2011, Ms. Liebmann-Slatin is a senior counsel in the Vienna office and is a member of the employment law practice group. She regularly delivers presentations on issues related to employment law in Austria, and is an active contributor to various publications, webinars and workshops.

Author

Silvia Samek is a junior associate of Baker McKenzie's Practice Group Employment Law in Vienna. Prior to joining the Firm in December 2020, she completed her legal clerkship at various courts in Vienna and gained experience as a trainee in several renowned Austrian law firms. Silvia studied business law at the Vienna University of Economics as her main study. Additionally, she studied Executive Management at the FHWien University of Applied Sciences of WKW and European Economy and Business Management at the University of Applied Sciences BFI Vienna.

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