Transferring business – is it necessary to divide the employment relationship?

Published on 11/02/2021

When transferring a (partial) business, Section 3 of the Employment Contract Law Harmonization Act (AVRAG) provides for the automatic transfer of existing employment relationships to the transferee. Only those employees who are assigned to the transferred (partial) business are affected by the transfer. In practice, tricky demarcation issues may arise when allocating the employees, especially regarding supervisory roles  or employees in mixed employment.

In Austria, the allocation of employees has so far been based on the part of the enterprise in which the employees were predominantly, i.e. mainly, employed. If the issue remains unclear after examining these criteria, parts of the legal literature assume that the employee has the right to choose whether they want to be assigned to the remaining or the transferred part of the business.

The ECJ has ruled in the ISS Facility Services NV case (C-344/18) that the proportional transfer of an employment relationship to several acquirers is also possible. How the division of an employment relationship is to be legally implemented in practice is open. However, the Austrian courts cannot disregard the ECJ’s legal opinion.

The allocation of employees in a business transfer is legally decisive. Prevent legal uncertainties by carefully planning and structuring the business transfer, for example through tripartite agreements between the transferor, transferee, and employees.