Social plan benefits may be linked to the failure to challenge dismissal

NewsMonitor Employment Law - Episode 9

Published on 10.08.2021 

The Austrian Supreme Court has ruled in favour of employers on an important issue: they are allowed to make voluntary severance payments in social plans dependent on whether a dismissal is challenged.

In a (enforceable) social plan works agreement (Section 97 para 1(4) in conjunction with Section 109 Austrian Labour Relations Act (ArbVG)), measures are laid down that are intended to prevent, eliminate, or mitigate the consequences of a change in operations. A typical social plan, amongst other things, grants voluntary severance payments. Employers benefit from arrangements that minimise or exclude the risk of employees contesting dismissals. 

It was already a simple matter to make the granting of voluntary severance payments dependent on the conclusion of an amicable termination of the employment relationship (8 ObA 77/03m). Likewise, whether the initiative for the conclusion of an amicable termination came from the employee or from the employer may also be taken into account (9 ObA 129/12d). On the other hand, the works council may not issue a general advance waiver to contest terminations (8 ObA 79/03f). 

Now the Supreme Court (9ObA9/21w) has also confirmed a social plan regulation that only grants employees a claim to a voluntary severance payment after termination by the employer to be permissible if the works council or the affected employees themselves do not contest the termination (Section 105 ArbVG). This regulation, which has been quite common in practice so far, was controversial in labour law literature. 

With this decision, the Austrian Supreme Court expressly ruled that a social plan arrangement that makes it possible to reduce the risk of termination challenges and that occurs frequently in practice is permissible.