No general protection against dismissal under § 105 ArbVG without a domestic business

The facts of the case

Specifically, the case concerned a manager who worked permanently for an employer based in Germany from Austria. The German company did not have any operations in Austria. The employee worked as “Country Manager Austria” and carried out his work from his secondary residence in Vienna. However, in terms of organization and hierarchy, he was fully integrated into the employer's operations in Germany. After being dismissed by the employer, the employee filed an action for annulment of the dismissal with the Vienna Labor and Social Court on the grounds of unfairness and social injustice pursuant to § 105 (3) ArbVG (Austrian Labor Constitution Act) and sought to have the dismissal declared legally invalid.

The court's decision and reasoning

The decision of the ASG Vienna and the Court of Appeal was ultimately upheld by the Supreme Court, which dismissed the action on the grounds that, although Austrian labor law was applicable in this specific case, the central requirement for general protection against dismissal under the Austrian ArbVG (Labor Constitution Act) was not met, as there was no domestic company with at least five employees.

Legally, the Supreme Court based its decision on Regulation (EC) No. 593/2008 (Rome I Regulation). Article 8 of this regulation stipulates that the law of the country in which the employee habitually works in accordance with the agreement applies to an employment contract, unless otherwise agreed by an explicit choice of law. However, Article 8 of the Rome I Regulation only covers issues relating to individual employment contracts and not collective labor law. Even though the contestation of termination under Austrian law pursuant to § 105 (3) to (7) and § 107 ArbVG has a strong collective law component, it ultimately pursues the goal of the continuation of the respective individual employment contract and thus the invalidity of the notice of termination.

For this reason, the Austrian Supreme Court now expressly takes the view that contesting termination under Austrian law ( § 105 (3) to (7) and § 107 ArbVG) follows the Employment Contracts Statute (Article 8 Rome I Regulation) in the sense of a uniform interpretation under EU law.

Accordingly, if Austrian labor law applies, the general protection against dismissal under § 105 (3) to (7) and § 107 ArbVG is also applicable in principle. However, this protection against dismissal requires, under substantive law, the existence of a business in Austria. If there is no such establishment, there is no general protection against dismissal (i.e., no possibility of contesting the dismissal on the grounds of improper motive or social injustice).

In a nutshell, this means that:

Employees who work in Austria for a foreign employer without a domestic operation cannot invoke the general protection against dismissal under § 105 ArbVG in the event of termination, despite the fundamental applicability of Austrian labor law.