Supreme Court on Business Closure: Protection of Works Council Members Even Without a Workforce?

When a business is closed, the question arises as to whether prior court approval is required for the dismissal of works council (WC) members. The legal framework appears contradictory: pursuant to Section 121(1) of the Austrian Labour Constitution Act (ArbVG), such approval is required if the business is permanently discontinued, making continued employment demonstrably impossible. By contrast, Section 120(3) ArbVG provides that in the event of a permanent closure, the WC mandate ceases to exist, meaning that court approval is no longer necessary. The Austrian Supreme Court (OGH) recently addressed this tension (9 ObA 74/25k).

According to the OGH, Section 121 ArbVG covers the phase in which the workforce and operational resources are being reduced with the aim of closing the business—that is, where the closure is still in the planning or implementation stage. During this period, court approval is required for the dismissal of WC members. If, however, the closure has already been fully completed, the WC mandate ends pursuant to Section 62 ArbVG. The key distinction between dismissals requiring court approval and those that do not therefore depends on whether the closure has already been effected.

In the case at hand, management decided to reduce operations to such an extent that the work would continue to be carried out solely by the shareholders. After all non-protected employees had been dismissed, WC members were also dismissed without prior court approval, on the grounds that business operations had already been permanently discontinued. The OGH held that these dismissals were invalid due to the lack of court approval: although operations had been scaled back, the core economic activity continued unchanged. At the time of the dismissal of the WC members, the business was therefore reduced but not closed. Accordingly, the closure had not yet been fully effected.

In practice, this means that, prior to dismissing WC members in the context of business closures, it is essential to clarify whether premises and operational resources continue to be used and whether business activities are being continued—either by remaining employees or by the business owner themselves. As other provisions also distinguish between dismissals requiring approval and those that do not based on whether the business has already been closed (see, for example, Section 10(3) of the Maternity Protection Act (MSchG)), this decision is also relevant for other dismissal protection regimes.

We would be pleased to advise and support you in all employment law matters relating to business closures and operational reductions.