CMS Expert Guide to employment termination law and legislation

Global comparison

1. Dismissal of employees

1.1 Reasons for dismissal

In order to unilaterally terminate an employment agreement for an indefinite period of time, other than termination during the probationary period or an urgent reason for immediate dismissal, the employer requires a statutory dismissal ground to realise a termination. The employer can appeal to the following (limitative) statutory dismissal grounds under Dutch law:

  1. Economic grounds
  2. Long-term illness or disability
  3. Regularly not being able to perform work due to illness or disability
  4. Underperformance
  5. Culpable acts or omissions
  6. Conscientious objection
  7. Disturbed working relationship
  8. Other grounds than those mentioned above
  9. Cumulated dismissal grounds based on more than two dismissal grounds as mentioned under C – H combined

Depending on the statutory dismissal ground, the Employee Insurance Agency (UWV) or the Court is competent to assess whether the termination is allowed or granted. The employer should request the UWV for permission to terminate the employment agreement in case it appeals to dismissal reasons A or B. The employer should request the Court to terminate the employment agreement in case it appeals to dismissal reasons C to I.

The reasons for regular termination as set out in the Labour Act are as follows:

  • if the need for work ceases to exist for economic, technical or organisational reasons (‘notice due to business reasons’); or
  • the employee is incapable of fulfilling his employment-related duties due to certain personal characteristics or qualifications (‘notice due to personal reasons’); or
  • the employee intentionally breaches a contractual obligation (‘notice due to misconduct’); or
  • if the employee did not satisfy the employer’s requirements during the probationary period.

Generally, employers in Austria are not required to justify ordinary dismissals (Kündigungen). Nevertheless, they must observe prescribed notice periods and termination dates.

If an establishment employs five or more employees, however, these employees enjoy “General Protection against Dismissals”: an employee may challenge a dismissal if it has adverse effects on the individual’s personal life. In these cases, the employer must justify the dismissal for reasons related to employee capabilities, conduct or operational requirements if challenged by the employee.

Certain “vulnerable” employees enjoy additional “Special Protection against Dismissal” and may only be dismissed for one of several specific reasons, often only with the prior consent of competent authorities. These include women who are pregnant or who have recently given birth, parents on parental leave, works council members and employees formally classified as disabled persons.

Discriminatory dismissals or dismissals due to “illegal reasons” can also be challenged by employees.

1.2 Form

Depending on the kind of termination, different form requirements apply.

Unilateral termination:

  • Employee Insurance Agency: the employer needs to give notice in writing after approval has been given by the Employee Insurance Agency (UWV) to terminate the employment agreement.
  • Court: if the employer has pursued termination based on legal proceedings, the court will terminate the employment agreement. Meaning that no further notice needs to be given by the employer.
  • Probationary period: there is no formal requirement to give notice during the probationary period in writing. In case the employee asks for the reasons of termination, the employer is however obliged to confirm the reasons in writing. Moreover, it is highly recommend that notice be given in writing in order to create evidence that notice during the probationary period was given in a timely fashion.
  • Summary dismissal: there is no formal requirement to give immediate dismissal in writing. However, when the immediate dismissal is given, the employer needs to directly inform the employee of the urgent cause(s) of immediate dismissal. Therefore, it is common practice – and highly recommended – to give the immediate dismissal in writing in which the urgent cause(s) for immediate dismissal are set out thoroughly. 

Mutual agreement:

  • Settlement agreement: Parties can also agree to terminate the settlement agreement based on mutual consent, which needs to be concluded in writing.

Written form, including reasons for termination. Decision is to be delivered to the employee.

Unless otherwise stipulated in a collective agreement or employment contract, dismissals do not require any particular form. However, giving notice in writing is recommended. If “Special Protection against Dismissal” applies, rules may differ.

1.3 Notice period

The statutory-notice period for the employee is one month, regardless of the number of years of employment. The statutory-notice period for the employer depends on the length of service as per the termination date. An applicable collective bargaining agreement may stipulate otherwise, but the statutory-notice period to be observed by the employer is equal to:

  • One month if the employment has lasted five years or less;
  • Two months if the employment has lasted between five and ten years;
  • Three months if the employment has lasted between ten and 15 years;
  • Four months if the employment has lasted for 15 years or longer.

The period of notice may, for the employee, be extended contractually up to a maximum of six months. If the employee’s period of notice is extended, however, the period of notice for the employer may not be less than twice that of the employee.

Regular termination: notice period ranges from two weeks to three months, dependent on the employee’s length of service with the same employer.

The three-month period is extended by an additional two weeks / one month for 50 / 55-year-old employees who have 20 or more years’ continuous service with the same employer.

Extraordinary termination (summary dismissal): no notice period. Termination during probationary period: notice period of at least seven days.

Termination by employee: notice period cannot be longer than one month if the employee has a good reason.

If the employment is terminated because the employee  breaches his contractual obligations, notice periods are halved.

Although Austrian law does provide statutory minimum notice periods and dates, employers are free to designate their own notice regimes based on collective agreements and employment contracts. In case of conflicting regulations, however, employees will always benefit from the most favourable rule, pursuant to the “favourability principle” (Günstigkeitsprinzip).

Austrian employment law distinguishes between white-collar (Angestellte) and blue-collar workers (Arbeiter), providing separate notice models for each.

White-collar workers are entitled to receive at least six weeks notice and up to five months notice, always depending on the length of their employment relationship. These terms may be modified, although no notice period may exceed six months. In addition, white-collar workers benefit from statutory notice dates, ensuring that employment relationships may only end at the end of any given annual quarter. It is possible to agree contractually that a termination is possible on the 15th or last day of any given month.

If not otherwise stipulated by collective agreement, blue-collar workers are subject to a notice period of at least 14 days. In practice, however, collective agreements often guarantee more generous notice periods. 

From 1 January 2021, the notice periods and termination dates for white-collar workers will apply to blue-collar workers. In industries where seasonal businesses predominate, collective agreements may contain different provisions and set shorter notice periods. When concluding employment agreements with blue-collar workers, it is also possible to contractually agree on a termination on the 15th or last day of any given month.

1.4 Involvement of works council

The works council (if any) must be offered the opportunity to advise on any considered decision to terminate a number of employment agreements, which terminations have a significant impact on the organisation.

The works council must be informed of the employer’s intention to dismiss. The works council‘s consent is required for dismissal of the following employees:

  • members of the works council; and
  • candidates running for works council positions and members of the election committee for a period of three months following the announcement of the results of the election to the works council; and
  • employee representatives in a body of the employer; and
  • employees with diminished ability to work and employees in immediate danger of physical disability; and
  • employees over 60 years of age.

If a works council exists at an establishment, it must be informed of any proposed dismissals at least one week in advance. Within this timeframe, the works council may object, explicitly approve or refrain from commenting on the dismissal. The termination is void if the employer fails to comply with this requirement, either by failing to notify the works council or by failing to wait for its response within that week.

1.5 Involvement of a union

Under Dutch law, an employer is obligated to notify unions and the Employee Insurance Agency (UWV) and discuss the consequences of any reorganisation with the trade unions, when more than 20 employees are being dismissed within a three-month period.

The employer can also be obligated to involve or inform the unions under other circumstances based on the collective bargaining agreement (if applicable).

If there is no works council, consent is given by the union commissioner (the union representative employed with the respective employer). The union‘s consent is required for the dismissal of a union commissioner during their period of office and for six months thereafter.

No involvement.

1.6 Approval of state authorities necessary

Not applicable.

If the works council or union commissioner do not consent, consent can be substituted by a judicial or an arbitral decision.

Obligatory only for certain groups of employees (e.g. severely disabled persons, works council representatives, pregnant women, and employees on parental leave).

1.7 Collective redundancies

If more than 20 employees are being dismissed within a three-month period, the employer must notify the Employee Insurance Agency (UWV), the unions and the works council (if any) and discuss the consequences of any reorganisation with the trade unions.

For the purpose of determining whether this threshold of 20 employees in three months has been reached, employment agreement terminated by mutual consent also counts towards the total. 

Generally, if more than 20 employees are involved, the employer offers a social plan, which may be negotiated with trade unions (if applicable) or the works council. Unless a collective bargaining agreement stipulates differently, there is no statutory obligation to offer a social plan although it is very common to do so.

The works council (if any) must be offered the opportunity to advise on any mass redundancy being contemplated. 

Employer who expects to terminate at least 20 employees, five of which due to business related reasons, all within a 90-days’ period, is obliged  to duly consult the works council / union commissioner in order to possibly reach an agreement to save the employees and / or limit the number of terminations. The employer is obliged to provide the works council / union commissioner with written information concerning the reasons for termination, total number of employees, number, professions and positions of employees who are supposed to be terminated, election criteria for such employees, amounts and way of calculating their severance payments and measures undertaken to prevent such terminations. Employer is obligated to consider and explain all possibilities and suggestions that may lead to avoidance of terminations. Also, the Croatian Employment Agency needs to be informed about the previously mentioned points and consultations with the works council / union commissioner.

When collective dismissals (Massenkündigungen) are imminent, employers are required to notify the Austrian Employment Service 30 days in advance. For the sake of this notification procedure, collective dismissals are defined as employment terminations affecting:

  1. at least five workers in an establishment of 21 to 99 employees; or
  2. 5% or more of the workforce at an establishment of 100 to 600 employees; or
  3. at least 30 workers at an establishment of more than 600 employees; or
  4. at least five workers aged 50 or over, regardless of company size.

The requirements of the notification procedure are met if the employer informs the competent agency in writing and waits one month before carrying out the intended dismissals. Any failure to observe these rules will render all pertinent dismissals void.

1.8 Summary dismissals

An employer can terminate an employment agreement (definite and indefinite) with immediate effect for an ‘urgent’ cause, such as theft, fraud, or other very serious misconduct. One of the formalities to strictly take into account is that notice must be given very shortly after the employer has become aware of relevant findings and (ideally) after the employee has been confronted with these findings. In case of an urgent cause, there is no requirement for a mutual agreement, or court action or procedure at the Employee Insurance Agency (UWV). 

Case law shows that in the event of an urgent cause, the employer can also decide to confront the employee with the findings and then give the employee a conditional immediate dismissal. When the employer opts for this possibility, the employee is offered a settlement agreement that can be accepted within a couple of days. If the employee fails to do so in a timely fashion, then the employment agreement ends based on urgent cause. The benefit of this procedure is that it allows the employer to know usually within a week whether the matter can be closed by means of a final settlement instead of being confronted with lengthy and costly procedures initiated by the employee.

Summary termination (summary dismissal) is defined as termination without notice, and is only lawful where there has been: 

  1. a serious breach of employment obligations, or
  2. the employment relationship between the parties is no longer possible for another important reason (there are, therefore, two possible reasons: (i) breach of employment obligations; or (ii) another important fact; in either case, the employment relationship must not be possible any longer).

The employee is to be dismissed within 15 days of the day of becoming aware of the fact / reason for dismissal.

A summary dismissal (Entlassung) does not require observance of any particular notice periods but must be issued without undue delay. Summary dismissals are possible for good reasons only, as regulated by law. Disloyalty, untrustworthiness, or persistent refusal to carry out one’s contractually agreed duties are typical reasons for a summary dismissal.

Summary dismissals are effective even if they do not meet the above requirements. However, summary dismissal may then be treated as a regular dismissal, meaning the respective protection against dismissal is applicable.

1.9 Consequences if requirements are not met

A wrongful dismissal – meaning that the statutory reason cannot be sufficiently substantiated or other requirements have not been met such as the redeployment obligation – can lead to the restoration of the employment contract or to additional compensation (i.e. "fair compensation").

In case of collective redundancies, if trade unions are not consulted and the employer proceeds with the termination of the employment agreements based on a consensual agreement that determines the legal relationship between both parties, these agreements are subject to annulment. This may have far-reaching consequences, since redundancy pay will have to be paid back in the event of annulment and the employment agreement will have remained valid throughout.

If it is decided the dismissal is illegal, the employee is to be reinstated. Reinstatement is possible even before the end of the court procedure to determine the legality of the dismissal if the employee so requests. If the parties do not wish to continue with their employment relationship, the court shall at the employee‘s request determine:

  1. the date of termination of the employment contract; and
  2. compensation for damages, which ranges from three to eight times the employee’s average monthly salary over the previous three months (depending on the employee’s age, length of contract and obligations in relation to supporting family members or other dependants as defined by family law).

Non-compliance by the terminating party with the prescribed or agreed periods or dates of notice constitutes untimely notice. Although such untimely notice remains effective, it entitles the employee to dismissal compensation (Kündigungsentschädigung). Such compensation consists of the remuneration that the employee would have received had the dismissal been properly expressed (i.e. all due remuneration between the actual termination of employment and the date of termination prescribed by law, collective agreement, works agreement or employment contract).

An employee is entitled to General Protection against Dismissal may claim reinstatement in court. Reinstatement is granted if it is proven that the termination of the employment contract has adverse personal effects on the employee's life (e.g. little chance of finding employment of similar standing and income in a reasonable time) and the employer cannot adequately justify the termination.

1.10 Severance pay

When the employment agreement is terminated via the Employee Insurance Agency (UWV) or the court, a mandatory severance payment (i.e. transition payment) is due. The amount of the transition payment depends on the seniority of the employee and is equal to:

  • One-third of the monthly salary for each calendar year.

In 2020, the maximum transition payment is EUR 83,000 gross and for employees who earn more than EUR 83,000 gross a year, the transition payment is maximised at one annual gross salary.

In the situation where an employment agreement is terminated on the basis of the cumulated dismissal ground, the sub-district court can grant, in addition to the transition payment, a severance of up to half of the transition payment.

The employee is entitled to additional (reasonable) compensation if the employer has acted in a seriously culpable way. In that case, the remuneration is not subject to a maximum amount and is determined by the court. Case law shows an increase in the amounts awarded to employees.

If the agreed or statutory notice period is not observed, the termination of the employment agreement is deemed ‘irregular’. An irregular termination does not affect the validity of the termination itself, but it entitles the other party to claim statutory damages or compensation for the damages actually incurred.

An employee with an open-ended contract who has two years’ continuous service with the same employer (and is not being dismissed due to an intentional breach of contractual obligation) is entitled to a severance payment. The statutory minimum severance payment is calculated by multiplying one-third of the average monthly salary in the preceding three months by the number of years’ continuous service with that employer. The severance payment is capped at six times the average monthly salary, unless otherwise provided for by law, by-law, collective agreement or work contract

Austrian law distinguishes between two severance pay models: one is applicable to all employment relationships established prior to 1 January 2003 (“old model”), and the other to employment agreements signed after that date (“new model”).

The old severance pay model requires the employer to pay a sum based on the length of service at the end of the employment relationship unless it is the employee who terminates the contract or if the employee is dismissed without notice for good cause (i.e. summary dismissal). If the employment relationship is terminated after three years employment, the employee is entitled to severance pay of two months salary. After 25 years, the employee is entitled to twelve months salary.

The new severance pay scheme requires the employer to pay a sum of 1.53% of every monthly salary into an employee severance fund (Betriebliche Vorsorgekasse). At the end of any given employment, the employee may then either request disbursement of the collected amount or leave it in the fund for further investment.

1.11 Non-competition clauses

A non-competition clause may be inserted into the employment contract, but it will only be valid if it was set out in writing with an adult employee. If a non-competition clause is inserted into a definite term employment agreement, the compelling reasons that such a clause is necessary must be specified in writing in the employment agreement.

Post-contractual non-competition clauses must last no longer than two years from the date of termination of the contract. The employer is obliged to pay compensation (at least one-half of the average monthly salary paid in the last three months of employment). The covenant will not be valid if the employee is a minor or if the employee‘s salary amounts to less than the average national salary.

The non-competition clause does not apply if: (i) the employee terminates the contract without notice period (extraordinary termination) and does not state that he does agree that the clause applies; or (ii) if the employee is dismissed without a justified reason, unless the employer undertakes to pay the prescribed remuneration for the duration of the clause.

Non-competition clauses are only valid insofar as they last for no more than one year after the termination of employment, are restricted to the employer’s line of business and if the employee’s monthly income is above a certain threshold at the end of the employment relationship (e.g. for 2020, EUR 3,580 for contracts concluded after 29 December 2015). Also, contractual penalties are limited by law to six net monthly remunerations (without taking into account the 13th and 14th annual salary). If the parties agree to such a contractual penalty, the right to observe the non-competition clause or the compensation of any further damage is excluded.

A non-competition clause may not cause undue hardship to the employee’s career when weighed against the employer’s justified business interests.

Judges may limit the scope of a clause, or the contractual penalty to be paid when violating the law. Non-competition clauses are generally rendered void when the employer carries out the dismissals.

1.12 Miscellaneous

Dutch employment law prohibits giving notice to certain categories of employees, such as pregnant women, members and former members of a works council and employees who are absent due to illness (at least during the first two years).

In cases where the illness commences after the employer files his application for dismissal to the UWV, the employer will still be allowed to give a notice of dismissal to the employee.

The rules for special protection do not apply to cases of termination of employment by the court. However, the court will assess whether the request for termination involves a prohibition to terminate and will refuse the termination if the reason for termination directly results from a prohibition to terminate.

If a collective bargaining agreement (CBA) applies, the employment conditions will be governed by the CBA. The CBA may also provide for an alternative dismissal route in case of redundancy, but that is uncommon.

Not applicable.

Not applicable.

2. Dismissal of managing directors

It should be noted that the title ‘managing director’ is not recognised under the Croatian Companies Act or other relevant applicable legislation. The Croatian Companies Act recognises only a ‘director’, who is authorised to represent the company and obliged to be registered as a member of the management board with the respective commercial court.

A managing director need not to have an employment agreement with the company, or any other type of agreement, in order to be able to represent the company.

Where a managing director has a  managing / service agreement  which falls under the regulation of Croatian obligatory law, only the provisions of the managing / service agreement apply. If aspects of the relationship are not dealt with in the managing / service agreement, the relevant provisions of the Croatian Obligations Act will apply.

Where a managing director does not have any employment or managing / service agreement with the company, he shall be treated as a member of the management board only.

The table below sets out the position under Croatian law with respect to the managing directors of a limited liability company, with and without service agreements.

2.1 Reasons for dismissal

In the Netherlands, the statutory director who is appointed by the shareholder of a private or public limited company has a special legal status. The statutory director has a dual position: a corporate position and an employment agreement with the company. The statutory director does not enjoy the same dismissal protection as regular employees.

In all circumstances, the employer must ensure that there are one or more reasonable grounds based on which the employment agreement would end. Usually, lack of trust is presented as the main reasonable ground for termination. The possible (limitative) statutory reasonable grounds under Dutch law are as follows:

  1. Economic grounds
  2. Long-term illness or disability
  3. Regularly not being able to perform work due to illness or disability
  4. Underperformance
  5. Culpable acts or omissions
  6. Conscientious objection
  7. Disturbed working relationship
  8. Other grounds than those mentioned above
  9. Cumulated dismissal grounds based on more than two dismissal grounds as mentioned under C – H combined

No special reasons required (unless otherwise specified within the statute of the company or the contract itself).

Where the managing director has a service agreement, the provisions of that service agreement (and consequently the Croatian Obligations Act) will apply.

If the managing director is a member of the management board according to the statute of the company (and not only appointed by resolution of the shareholders), the company statute may set out that revocation is only possible for special reasons.

A company may revoke the appointment or terminate the service contract without cause, but must do so in compliance with applicable notice periods and termination dates.

2.2 Form

Before being able, exceptions excluded, to terminate the corporate position of the statutory director by means of a shareholders' resolution, certain procedural steps must be taken. These steps are set out in the articles of association of the company. The manner in which the statutory director is invited in writing, the wording of the invitation (which should not only include the reasonable grounds but also explicitly state that the statutory director has the right to render advice about the contemplated decision and be heard) and the timing of the shareholders' meeting are essential to ensure that the corporate termination cannot be legally challenged.

It is also important to ensure that the discussion held during the shareholders' meeting and the resolution are well documented in case the statutory director decides to initiate court proceedings afterwards to claim damages. Once the corporate position has been terminated validly, the employment agreement will end automatically after expiration of the notice period.

Valid shareholders’ resolution on revocation of appointment as member  of the management board. Registration of this revocation with the court registry. Termination of the service agreement in the same form in which the agreement has been signed (Obligations Act provisions shall apply).

A valid shareholder’s resolution is required on revocation of appointment as managing director and on termination of the service contract. A managing director has only to be notified in writing if so agreed in the service contract.

2.3 Notice period

The statutory-notice period for the statutory director is one month, regardless of the number of years of employment. The statutory notice period for the employer depends on the length of service as per the termination date. An applicable collective bargaining agreement may stipulate otherwise, but the statutory notice period to be observed by the employer is equal to:

  • One month if the employment has lasted five years or less;
  • Two months if the employment has lasted between five and ten years;
  • Three months if the employment has lasted between ten and 15 years;
  • Four months if the employment has lasted for 15 years or longer.

The period of notice may, for the statutory director, be extended contractually up  to a maximum of six months. If the statutory director's period of notice is extended, however, the period of notice for the employer may not be less than twice that of the statutory director.

According to the Croatian Companies Act, the appointment of a director of the company can be revoked at any time without notice (for no special reason). Some restrictions (not strictly defined) can be set out within the statute of the company.

If the director has a service agreement, the notice period will be as set out in the service agreement.

Revocation of appointment: possible without notice.

Termination of the service contract: Austrian law does provide statutory minimum notice periods and dates, and rarely does collective agreements and their notice periods and termination dates apply unless a more favourable contractual agreement exists. Managing directors generally have fixed-term contracts or long contractual notice periods.

2.4 Involvement of works council

If the company has a works council, then both the dismissal and the hiring of a statutory director (in light of the Works Councils Act, this person is defined as the individual who, alone or jointly with others, exercises the highest direct authority in managing work within an enterprise) are subject to the prior advice of the works council. The involvement of the works council must be initiated at such a stage when the decision is still being contemplated. In practice, the handing over of the invitation to the shareholders meeting, which handles the corporate dismissal, may hold an element of surprise, but the works council is usually involved shortly after the invitation has been handed over.

No involvement.

No involvement.

2.5 Involvement of a union

No involvement.

No involvement.

No involvement.

2.6 Approval of state authorities necessary

Not applicable.

Respective commercial court brings a resolution on registration of the resolution in the court registry. The court’s resolution and registration are declaratory.

Not required.

2.7 Collective redundancies

Not applicable.

Not applicable.

Not applicable.

2.8 Summary dismissals

An employer can terminate an employment agreement (definite and indefinite) with immediate effect for an ‘urgent’ cause, such as theft, fraud, or other serious misconduct. One of the formalities to take into account is that notice must be given shortly after the employer has become aware of relevant findings. Due to the fact that the statutory director also holds a corporate position, a shareholders meeting should be convened as soon as possible – in accordance with the articles of association – in which the immediate dismissal is put on the agenda. 

Until the shareholders meeting takes place, parties have the opportunity to negotiate a settlement agreement. The benefit of reaching a settlement agreement is that it allows the employer to know usually within a week whether the matter can be closed by means of a final settlement instead of being confronted with lengthy and costly procedures initiated by the statutory director.

If no settlement agreement is reached, the shareholders' meeting will take place. In this meeting, the statutory director will be given the opportunity to be heard and will be given an advisory vote as a statutory director. In the shareholders' meeting, the decision will be made to terminate the corporate and employment position with immediate effect. 

Not applicable.

A summary dismissal (‘Entlassung’) does not require observance of any particular notice periods, but must be issued without undue delay. Summary dismissals are possible for good reasons or serious breach of duty, as regulated by law. Disloyalty, untrustworthiness, or persistent refusal to carry out one’s contractually agreed duties are typical reasons for a summary dismissal.

2.9 Consequences if requirements are not met

If there is no reasonable ground and/or if redeployment (within the group) is reasonable, but the statutory director has been dismissed anyway, the requirements for dismissal are not met. If these requirements have been violated, the court may grant the statutory director fair compensation.

If there is no valid shareholder resolution, the revocation will be invalid and the court will refuse to register it in the court registry. Where the managing director has a service agreement, he could claim:

  1. compensation for damages; or
  2. fulfilment of contractual obligations in accordance with the provisions of the Croatian Obligations Act.

If there is no valid shareholder resolution, the revocation of appointment as managing director will be invalid.

It is possible for the revocation to be valid and for the termination of the service contract to be invalid. If this is the case, the managing director is entitled to continued payment of salary and adequate employment.

2.10 Severance pay

When the statutory director’s employment agreement is terminated, the mandatory transition payment is due. The amount of the transition payment depends on the seniority of the employee and is equal to:

  • One-third of the monthly salary for each calendar year.

In 2020, the maximum transition payment is EUR 83,000 gross and for employees who earn more than EUR 83,000 gross a year, the transition payment is maximised at one annual gross salary.

In case parties have agreed to a contractual severance, one should verify whether the statutory director is entitled to both the contractual severance (i.e. a golden parachute) as the statutory severance.

The statutory director may be entitled to an additional (reasonable) compensation, if the employer has acted in a seriously culpable manner. This could apply if the dismissal is not based on any of the statutory reasonable grounds. In that case, the additional compensation, damages, remuneration is not subjected to a specific maximum amount and will be determined by the court. If the statutory director wishes to challenge the decision of the shareholder, he should initiate court proceedings within three months after termination of his employment.

Severance pay may be specified in the managing director’s service agreement (this is usually a large sum).

Austrian law distinguishes between two severance pay schemes: one is applicable to all employment relationships established prior to 1 January 2003 (‘old model’), and the other to employment agreements signed after that date (‘new model’).

 The old severance pay model requires the employer to pay a sum based on the employee’s length of service at the end of the employment relationship unless it is the employee who terminates the contract or if the employee is dismissed without notice for good cause (i.e. summary dismissal). If the employment relationship is terminated after three years employment, the employee is entitled to severance pay of two months salary. After 25 years, the employee is entitled to twelve months salary.

The new severance pay scheme requires the employer to pay a sum of 1.53 % of every monthly salary into an employee severance fund (‘Betriebliche Vorsorgekasse’). At the end of any given employment, the employee may then either request disbursement of the collected amount or to leave it in the fund for further investment.

2.11 Non-competition clauses

A non-competition clause may be inserted into the employment contract, but it will only be valid if it was set out in writing with an adult employee. If a non-competition clause is inserted into a definite-term employment agreement, the compelling reasons that such a clause is necessary must be specified in writing in the employment agreement.

The managing director, as a member of the management board, is prohibited from doing the following without the approval of the supervisory board (or the shareholders, if the company does not have a supervisory board):

  1. being a member of the supervisory board or management board of another company with the same business activities; or
  2. performing business activities equal to those of the company for his or somebody else’s account; or
  3. using the company’s premises for performing business for his own or somebody else’s profit. The company is entitled to compensation for any damage caused.

Non-competition clauses are only valid insofar as they are concluded for the duration of no more than one year after the termination of employment, are restricted to the employer’s line of business and if the employee’s monthly income is above a certain threshold at the end of the employment relationship (e.g. for 2020, EUR 3,580 for contracts concluded after the 29th December 2015) Also, contractual penalties are limited by law to an amount of six net monthly remunerations (without taking into account the 13th and 14th annual salary). If the parties agree on such a contractual penalty, the right to observe the non-competition clause or the compensation of any further damage is excluded.

A non-competition clause may not represent an undue hardship on the employee’s career when weighed against the employer’s justified business interests. Judges may limit the scope of a clause, or the contractual penalty to be paid when violating the law. Non-competition clauses are generally rendered void when employers are responsible for dismissals.

2.12 Miscellaneous

The termination prohibitions that apply to employees also apply in the relationship with the managing director. Dutch employment law prohibits giving notice to certain categories of employees, such as pregnant women, members and former members of a works council (which will probably not be statutory directors), and employees who are absent due to illness (at least during the first two years).

If the statutory director falls ill before actually receiving the invitation to the shareholders' meeting, the employment agreement will not end automatically, but will remain in place. The statutory director will in that case be protected against termination of his employment agreement whereas his corporate position can end.

Not applicable.

Not applicable.