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Corona Short Term Work and Employment Law Implications of Closure of Businesses

1.
Possibilities of reducing personnel costs

Many employers are currently faced with the question of how they can reduce their personnel costs in times of official closures or restrictions of their operations, cancellation and postponement of existing orders and the absence of new ones.

Apart from the possibility of reducing personnel (for which relief has already been granted in practice, such as above all the shortening or complete elimination of the waiting period in case of mass dismissals pursuant to § 45a AMFG), in particular the following measures exist:

1.1
New Corona short-time work
 

Development and aim of Corona short-time work

Already on 14 March 2020, the Austrian government together with representatives of the social partners (WKO and ÖGB) presented a specially developed corona virus short-time work model, which is considerably more appealing for both employers and employees compared to the regular short-time work model in place until now. The concrete implementation in the Federal Directive on Short-Time Work Subsidies of the Austrian Labour Market Service (Arbeitsmarktservice - AMS) was published 19 March 2020. On this day, the adapted Federal Directive on Short-Time Work Subsidies (KUA-COVID-19), adapted social partner agreements, as well as adapted AMS application forms and comprehensive information on the calculation of flat rates for the costs of lost working hours have been put online (https://www.ams.at/unternehmen/personalsicherung-und-fruehwarnsystem/kurzarbeit/downloads-kurzarbeit). So far further amendments and adaptions to the model are still made almost on a daily basis and clarifications are published for relevant issues that come up in practise on an ongoing basis.

In the meantime, there have been and continue to be further substantial additions or amendments to the model or clarifications of points relevant to practice, whereby the last substantial changes having been implemented on 27 March 2020. The original goal of ensuring quick and unbureaucratic processing by the AMS in the current crisis situation with an efficient application process could not (yet) be implemented in practice. Due to the multiple changes and clarifications of the short-time work model and the corresponding (complex) forms and agreements, but also due to the lively interest of the employers, it simply resulted in an overload for both the applying employers and the AMS.

The express aim of short-time work is to avoid dismissals for operational reasons and to safeguard employment in Austria. A precondition for the granting of short-time work subsidies is that the company is in temporary, non-seasonal economic difficulties which are caused by a loss of orders, of necessary supplies and operating resources or the like. These losses of orders or the like must be due to external circumstances which the company has little or no control over. The company must plausibly explain the external circumstances that led to the economic difficulties.

Government representatives made clear in the media that all companies that want to make use of the Corona-short time model shall be granted an approval for their application. There is no race towards the state resources available for the Corona-short time model. It shall not be a decisive whether a company is one of the first ones to file for Corona-short time or whether a company is, due to the current situation, not able to handle the formalities with the authorities or in case it is not clear at this point in time whether the model is the best personnel measure in the crisis for the company from an economic perspective.

To date, the Coronavirus Crisis Management Fund has increased the budget for coronavirus-related short-time work measures for 2020 to 5 billion euros. A further increase is possible.

The Corona short-time work model

Within the scope of Corona short-time work, a reduction of working time by up to 100% and thus, a complete release of employees is possible for certain periods. However, the planned working time must be at least 10% and 90% at a maximum within an initial averaging period of 3 months.

The working time of part-time employees included in the short-time work model will be reduced by the same percentage as for comparable full-time employees.

The short-time work support for the employees as well as the short-time work subsidies for the employers were considerably increased compared to the amounts previously applicable for short-time work in the past, so that employees on short-time work must generally - depending on the amount of the employee's previous gross monthly salary - be paid at least 90% (up to EUR 1,700 gross), 85% (between EUR 1,700 and EUR 2,685 gross) or 80% (between EUR 2,685 and EUR 5,370 gross) of their former net salary (minimum net replacement rate). For income parts above EUR 5,370 (maximum assessment basis) no AMS subsidy is granted. A certain minimum net replacement rate for income parts above the maximum assessment basis is not provided for by the Federal Directive on Short-Time Work Subsidies (KUA-COVID-19). However, the model social partner agreement - shop agreement / individual agreement generally provides for a minimum net replacement rate of 80% for income parts above EUR 2,685 gross (uncapped). In our view, however, a further gradation of the net replacement rate above the maximum assessment base or above a higher threshold is not excluded by the provisions and would have to be negotiated with the social partners and the works council or the employees. 

As a result, employees receive during the short-time work period the same net salary, essentially irrespective of the extent of the work actually performed. However, if employees actually perform work for which, on the basis of their previous (full) remuneration, they are entitled to a gross salary exceeding the net replacement rate, this higher salary must be paid out.

Ultimately, employers are only required to bear the costs of the work that is actually performed. For the "suspended" working hours, the employer receives a short-time work subsidy from the AMS (which, in addition to the cost of the employee's corresponding salary, also includes the share of social security contributions and pro-rated parts of the special payments. The short-time work subsidy is granted in the form of flat rates for each “suspended” working hour.

Duration

Currently, short-time work can be applied for for a maximum period of 3 months. If all requirements continue to be met thereafter, the aid can be immediately extended by a maximum of 3 further months.

Scope of application

Corona short-time work does not have to be agreed for the entire company. The social partner agreement - shop agreement/individual agreement can stipulate whether the entire company, individual businesses or only organizationally separated business units should be included into the model. The limitation of the scope of application is particularly important for determining the headcount that must be kept during the short-time work period and for an agreed retention period beyond the short-time work period (usually one month).

The group of eligible employers for the subsidy has been defined broadly and essentially comprises employers from all sectors, in particular also temporary employment agencies. Whether and under which conditions also foreign employers are also eligible for subsidies by the AMS has not yet been conclusively clarified.

The eligible group of employees includes all employees to whom applies the statutory insurance against unemployment, in particular also managing directors if they are insured under the Austrian General Social Security Act (ASVG). Even freelancers can be included in the scope of application under certain conditions. Apprentices (100% net replacement rate!) have also been included. On the other hand, marginally employed employees (“geringfügig Beschäftigte”) cannot be included in short-time work. Furthermore, from the current perspective, only employees who were already employed 1 month or 4 weeks before the start of short-time work period can be included. In particular, therefore, new hires during the short-time work period cannot be included in the short-time work model.

Holidays, consumption of time credits and sick days

One Precondition for the granting of short-time work subsidies is that employees at best consume their time credits and holidays from former holiday periods before and during the short-time work period.

However, the consumption of holidays or time credits is not subsidised by the AMS. Thus, the employer needs to pay continued salary in full for those times and cannot claim “suspended” working hours and the corresponding subsidy for those times.

The consumption of holiday and time credits already needs to be considered in the planning of the Corona-short time model. It is specifically not permitted to create longer periods of free time using only a low number of holidays for that period (e.g. only plan 2 holidays for a full week of free time).

Since the consumption of holidays (or the consumption of time credits) cannot be unilaterally ordered by the employer, proof of a serious effort without particular success is sufficient in this respect. If, for example, no agreement can be reached in negotiations with the works council on the reduction of old holiday accruals (or time credits), this does not harm the employer. For businesses where a works council is established the 2nd COVID-19- Law specifically amended the Labour Constitution Act, so that works councils are enabled to consent to holiday and time credit consumption for the employees (since this generally needs to be agreed with employees on an individual basis).

Sick days of employees will also only need to be beared by the employers based on the average reduction of the working time applied to the actually planned working time (and not as originally planned in full by the employer).

Early termination or "additional working time"

Early termination of short-time work is possible at any time. In addition, "additional” working hours compared to the reduced working hours by employees (e.g. due to an improved order situation) are generally unproblematic for the granting of subsidies by the AMS.

In the case of "additional" working time, fewer "suspended” working hours are to be reported to the AMS in the monthly statement.

From an employment law perspective, however, it should also be expressly agreed in the social partner agreement - shop agreement/individual agreement for clarification purposes that the agreed short-time work can be revoked at any time or implemented to a lesser extent than originally agreed.

According to the prevailing opinion in the legal literature, the "additional” working hours of employees do not qualify (part-time) “extra hours” (Teilzeitmehrarbeit) or even overtime which would be subject to premiums.

Accordingly, “extra hour” premiums in accordance with § 19d Austrian Working Time Act (AZG) or overtime premiums will not accrue during the short-time work period, provided that the employees remain within their previous "limits" of their normal working hours.

Overtime

Generally, the performance of overtime during short-time work is not permitted. However, the performance of overtime is possible if such provision is expressly stated in the social partner model agreement for certain areas of the business (with e.g. critical infrastructure). Costs for overtime needs to be beared by the employer in full.

Maintaining the headcount

The employer has to pledge to maintain headcount during the period of short-time work and in principle for a retention period of 1 month thereafter. However, only employees who were subject to the short-time work are relevant during the retention period after the end of the short-time work period.

If Corona-short time work is limited to certain business units, only the headcount of those business units needs to be maintained. Thus, in such case a parallel lay-off in other business units would generally not be harmful to the granting of the subsidises of the AMS.

Further, employment relationships terminated before the short-time work period, but whose notice period did not lapse before the start of the short-time work period are exempted from the duty to maintain the headcount of the business (unit).

Employers may in principle not give notice before the end of the retention period. However, ordinary terminations for personal reasons are possible. However, in such case and also in case of justified premature resignations by employees, the headcount needs to be ”re-filled” by the employer.

However, employment relationships which have already been terminated before the short-time work period but whose period of notice has not yet lapsed are exempt from the obligation to maintain the headcount. Also, employment relationships which end due to the lapse of time during this phase are exempted from the obligation to maintain the headcount.

Further, there is also no obligation to “re-fill” the headcount in case of unjustified premature resignations by employees or in the case of justified immediate dismissals (for cause) by the employers.

However, in case of terminations by mutual consent, the headcount generally needs to be “re-filled”. The obligation however does not apply if the employee in question obtains prior advice from the labour union or the Chamber of Labour (Arbeiterkammer).

The obligation to maintain the headcount may be waived in exceptional cases if there are important reasons, which deem to make the maintenance of headcount impossible.

Application and agreement

In order to apply for Corona short-time work, in essence three documents have to be submitted: an AMS application (COVID-19-Kurzarbeit Begehren), a social partner agreement - shop agreement/individual agreement and a (short) justification of the economic difficulties.

Corona short-time work must be applied for at the competent office of the AMS for the federal state. The actual procedure for the submission varies from one federal state to another. In particular, the procedure also differs in whether or not the AMS helps to obtain the signatures of the social partners. In Vienna, for example, the current procedure is that all documents can be submitted to the AMS and the AMS obtains the signatures of the social partners.

Short-time work cannot be ordered unilaterally by the employer. Special agreements have been drafted for Corona short-time work, which are both the necessary social partner agreement and a shop agreement according to § 97 para. 1 no. 13 Austrian Labour Constitution Act (ArbVG) or individual agreements with employees.

Currently, it is still possible to apply for the Corona short-time work model retroactively with the AMS from 1 March 2020. This possibility also allows periods of full work performance (before the imposed COVID-19 related restrictions from 16 March 2020) to be used for the calculation of the average reduced working time.

1.2
Suspension agreements
 

There are essentially 2 possibilities:

On the one hand, the dissolving suspension, in which the employment relationship is usually interrupted by amicable termination and the employer at the same time gives a promise of reinstatement at a certain point in time. On termination, the employee is entitled to the regular termination claims on the one hand, and on the other hand, he is generally entitled to unemployment benefit for the period of suspension. Regarding severance payments, different arrangements can be made.

On the other hand, a genuine suspension with full retention of the employment relationship can also be agreed. In this variant, employer and employee essentially agree that the employee is released from the work obligation for a certain (or determinable) period of time and the employer is released from the obligation to pay remuneration.

1.3
Reduction of holiday or time credits
 

A unilateral order to consume holidays or time credits is still not generally permissible and even an exceptional situation such as the current one does not change this in principle.

However, in businesses that are subject to a ban or restrictions on entering due to measures based on the COVID-19 Measures Act, the special provisions of the new § 1155 ABGB (in force since 23 March 2020) now apply, according to which employees are obliged to consume holiday and time credits during this period at the request of the employer. This authority to order generally concerns time credits and holiday entitlements from former holiday years. The authority concerning the current holiday year is limited to 2 weeks of holiday. In total not more than 8 weeks of holiday or time credits need to be consumed by the employee by the unilateral order of the employer.

Although not specifically clarified in the statutory provisions, the authority to order holiday or time credit consumption is likely not applicable when the the Corona-short time model is used.

1.4
Other models for reducing working hours
 

The possibility to agree with employees on educational leave, educational part time or partial retirement leads to a reduction or elimination of personnel costs and of course also currently exists. Full-time employment contracts can temporarily also be converted into part-time contracts by mutual consent.

2.
Continued remuneration and compensation for loss of earnings in the event of official closures of businesses

Large parts of the retail sector are affected by comprehensive official closure measures since Monday, 16 March 2020, since Tuesday, 17 March2020, the same applies to the gastronomy sector (with some exceptions such as delivery services).

The Covid-19-Fund Act lays down the framework conditions for the establishment of a coronavirus crisis management fund, meanwhile endowed with 38 billion euros, to cushion the economic impact of the current crisis, as well as the use of the funds. The Federal Minister of Finance, in agreement with the Vice-Chancellor, is responsible for the distribution and disbursement of the funds.

The Covid-19-Fund Act (unlike the Epidemics Act) did not contain any regulation on loss of earnings for employees/employers affected by official closures. It was therefore unclear whether and if so, who will have to pay for the ongoing remuneration of employees in the retail and gastronomy sector for the period of the comprehensive closure measures (the duration of which cannot be predicted at the present time). As the employer’s obligation to continue to pay the remuneration according to § 1155 ABGB would have most probably been omitted in case of a total closure of businesses, it was unclear whether the affected employees would now be released from work without continued remuneration.

Since, however, inventory work and generally activities without customer traffic are still possible also in these sectors despite the measures, entitlements to continued remuneration of the employee against the employer would have been to assumed in a large part of the cases anyway. In order to avoid case-by-case assessments and to eliminate the uncertainty of the employees, it has been clarified in the meantime that in any case of time off work due to official closure and restriction measures, the employees have a claim for continued remuneration against their employer. However, in § 1155 ABGB (in the version of 23 March 2020) an express obligation was included that employers have to continue to pay if services of employees do not take place due to such measures. In return, however, employees will be obliged to consume holiday and time credits during this period at the employer's request (see above in Section 1.3)In addition, the possibility for employers to apply for state compensation for the continued payment of remuneration shall be established. However, this has so far only been a political declaration of intent, which has not been implemented (so far).

3.
Continued remuneration in case of voluntary closures of businesses

It is still not possible to give a general answer as to whether employees are entitled to continued remuneration if the owner closes the business voluntarily (i.e. without an official order), for example in order to prevent the spread of the coronavirus.

In concrete terms, the question arises as to whether the employee retains his or her entitlement to continued remuneration if he or she is willing to provide services but is prevented from doing so by circumstances in the employer’s sphere. Not only events for which the employer is responsible, but in principle also coincidences can trigger the obligation to continue to pay remuneration under the relevant § 1155 ABGB. However, there may also be coincidences or cases of force majeure in which the obligation to continue to pay remuneration pursuant to § 1155 ABGB does not apply.

In connection with events of force majeure, the assessment of whether the obligation to continue to pay remuneration is triggered is based in particular on whether an elementary event affects not only the employer but also the general public in a comparable manner and whether the event was not foreseeable or avoidable for the employer. In other words, it is a question of whether, in view of the special situation of force majeure, the "typical business risk" of the affected  business was realised. Only in this case would the economic risk lie with the employer.

In our view, the exceptional economic situation associated with the abstract "danger" of a viral disease suddenly appearing for the first time in China cannot be regarded as a typical business risk of an Austrian company, which would probably mean that the obligation to continue to pay remuneration would no longer apply. However, it should be noted that in individual cases, the obligation to continue to pay remuneration, if at all, can only be waived if the closure of the business is considered unavoidable once all milder measures have been exhausted. In this case, the business owner will most probably have to present very good arguments as to why such a measure was necessary without the corresponding official orders. Purely economic considerations will certainly not be sufficient here.

 

 

Please note: This newsletter merely provides general information and does not constitute legal advice of any kind from Binder Grösswang Rechtsanwälte GmbH. The newsletter cannot replace individual legal consultation. Binder Grösswang Rechtsanwälte GmbH assumes no liability whatsoever for the content and correctness of the newsletter.



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