Legal questions in connection with COVID-19 – Status April 10, 2020
Relevant issues and our legal assess
English / German
The number of new infections with SARS-CoV-2 (coronavirus) increases daily. However, it is not only the health consequences of the infectious disease that weigh heavily; the economic consequences are already clearly visible. In a special session, the Austrian National Council passed a legislative package that provides a legal basis for the measures planned by the government to contain the coronavirus and its consequences. The legal measures include the establishment of the COVID-19 Crisis Management Fund (COVID-19-FondsG) and a federal law on provisional measures to prevent the spread of COVID-19 (COVID-19-Maßnahmengesetz).
I. Employment and social security law
1. Compensable entitlement to garden leave for employees who are within the COVID-19 risk group
In a multi-stage procedure, special protection is created for employees who belong to the „COVID-19 risk group“. The employer is reimbursed for the salary and social security contributions. Due to the legal anchoring in Section 735 General Social Security Act (ASVG), it can be assumed that the special protection covers „regular“ employees, apprentices and freelancers who are covered by the ASVG health insurance regime.
Step 1: Interministerial group of experts
The definition of this general risk group, which is based on medical knowledge and, if possible, on the intake of pharmaceuticals, is carried out by an expert group set up by the Federal Ministry for Social Affairs, Health, Care and Consumer Protection (BMSGPK) together with the Federal Ministry for Work, Family and Youth (BMAFJ).
Step 2: Information of the person concerned by the Austrian health insurance institution (ÖGK)
The health insurance informs the person concerned about his allocation to the COVID-19 risk group.
Step 3: COVID-19 risk assessment by the physician treating the person concerned
On the basis of the information received, the person concerned obtains an individual risk assessment from his physician, who, if necessary, issues a certificate of allocation of the person concerned to the COVID-19 risk group (COVID-19-Risk-Certificate).
Step 4: Affected persons, who are not employed in any area of the critical infrastructure, present the COVID-19-Risk-Attest to their employer
The person concerned is entitled to garden leave with continued remuneration, unless
- the person concerned can perform his or her work at home (home office) or
- the conditions for the performance of work in the workplace can be adjusted by appropriate measures in such a way that infection with COVID-19 is excluded with the greatest possible safety, including measures for the journey to work.
The garden leave may last until 30.04.2020 at the latest, unless an ordinance issued by the BMAFJ in agreement with the BMSGPK extends the period (but no longer than until 31.12.2020).
Labour law also provides for a special protection against motivational dismissal, so that a dismissal based on the use of this garden leave can be challenged in court.
Step 4a: Garden leave with continued remuneration and protection against motivational dismissal do not apply to persons affected who are employed in the critical infrastructure sector
The law does not define what is meant by „critical infrastructure“, nor how protection for this group of people should function. However, the explanatory memorandum for the parliamentary amendment application contains helpful passages for both topics:
- This cannot apply to areas of supply-critical infrastructure, since here the guarantee of critical infrastructure (see guarantee of critical infrastructure) is a priority. In any case, critical infrastructure includes the supply of food, transport, telecommunications, postal, energy and financial services, as well as a guaranteed supply of social, health and care services, and state sovereign administration.
- The risk of infection for the employees working in these areas must be reduced as far as possible by means of suitable protective measures to be arranged by the employer, so that any residual risk is so low that it is objectively justified that these employees, compared with other areas, are not entitled to garden leave.
Step 5: Employer’s compensation claims against the health insurance institution
The employer (with the exception of the Federal Government as an employer) is entitled to reimbursement of the remuneration paid to the employee or apprentice as well as the employer’s share of social security contributions, unemployment insurance contributions and other contributions by the health insurance institution. The application for reimbursement must be submitted to the health insurance institution no later than six weeks after the end of the garden leave. The Federal Government must reimburse the health insurance institution for the resulting expenses.
2. What do employers need to consider in connections with home-office?
- Employee protection also applies to the home office. It should therefore be ensured that records of working hours are kept.
- It should be noted that the employer must also ensure data protection and data security measures in the home office. These include, among other things, the provision of technical equipment such as laptops with appropriate firewalls, virus and password protection or, ideally, VPN. In addition, it is recommended to point out to employees that the same care must be taken with data protection and data security in the home office as for activities carried out in the employer’s office. The following measures should therefore be observed by employees: printouts may not be left open, third parties may not be allowed to view the screen and company-related documents, the screen saver must always be activated when leaving the workplace at home, the laptop provided by the employer may not be used privately by other family members and private USB sticks or hard disks should not be used for data backup. If there are corresponding regulations in a home office policy, these should be recalled.
- Since the 3rd COVID-19 Act, accidents that occur in the home office are also considered to be occupational accidents. With retroactive effect for accidents from 11 March 2020 and limited until 31 December 2020, also accidents that occur at the insured person’s place of residence (home office) are in a temporal and causal connection with the employment that forms the basis of the insurance and therefore occupational accidents. Accordingly, the home office is deemed to be the place of work for the scope of application of the ASVG (in the specified period). The explanations make it clear that „also the activity as such (i.e. the taking of a meal), if it takes place outside of the home“ is insured against accidents and accident insurance cover „also exists in principle on the way from work or from the home to the doctor (or other treatment facility) and back, whereby the way should be made known to the employer in advance“.
3. Incapacity to perform work activities due to the temporary closure of the operation of schools and childcare facilities
3.1. Temporary new regulation on voluntary leave of absence for care (Section 18b Employment Contract Adjustment Act [AVRAG]) – special care period
This newly created regulation provides for the possibility of a voluntary but paid leave of absence of up to three weeks („special care period“) for the care of certain groups of people:
- children up to the age of 14,
- Persons with disabilities who are looked after or taught in an institution,
- relatives with disabilities receiving personal assistance and
- relatives in need of care.
The requirements for the applicability of the regulation are:
- Children under the age of 14: Partial or complete closure of childcare facilities due to official measures, even if childcare is still offered there.
- People with disabilities:
- Either partial or complete closure of institutions/teaching centres where the person with disabilities is cared for, due to official measures, even if care is still offered there, or voluntary care of persons with disabilities at home, or
- The personal assistant for a family member with a disability cannot perform the personal assistance as a result of COVID-19.
- Relatives in need of care: Loss of caregiver due to which the care and support of the person in need of care is no longer ensured (example: foreign caregiver is no longer allowed to cross the Austrian border).
- People with disabilities:
- The employee concerned is not employed in an area which is critical for supplying the population/society with necessary goods and services.
- There is no other entitlement of the employee to time off work to care for the child/relative (eg paid leave for care of a sick relative, see 2.2).
No official notification is required for the (partial) closure of a care facility or the loss of the personal assistant or caregiver.
There is still no legal definition which companies are critical with supplying necessary goods and services. However, this includes in any case the areas of medical care, food trade and production, public transport and public safety.
According to the new regulation, the special care period can be granted for up to three weeks „from the time of the official closure of educational institutions and childcare facilities“. This means that the special care period can be taken from 16 March 2020 onwards.
According to information from the Federal Accounting Agency (the central service provider for the federal accounting system), the maximum time does not have to be used up, it is (for example) also possible to use the special care period for only two weeks. According to the Federal Accounting Agency, the special care period can be consumed on a weekly, daily or half-day basis. The following examples of how the special care period may be divided are given:
- One week of special care period, one week break and then another week of special care period or
- Six weeks of special care period always in the afternoons.
This means that the total eligible time must not exceed 21 calendar days.
Please also note the following important points regarding the use of the special care period:
- Consumption by the hour is not possible.
- Days off work (e.g. weekends) are eligible (= the employer receives partial reimbursement of costs, see below) if the special care period is consumed on at least seven consecutive calendar days.
- The special care period can also be consumed during school holidays.
- It cannot be used by both parents (or caregivers) at the same time. However, it is possible for the parents (caregivers) to take turns. They do not have to live in the same household as the person to be looked after/cared for.
- According to information from the Federal Accounting Agency, only one application for funding for the special care period per employee is permitted. Therefore, the special care time can only be claimed per parent/caregiver and not per child/person to be looked after or cared for.
The employee is entitled to continued remuneration within the meaning of the Continued Remuneration Act (EFZG). The EFZG provides for the so-called loss of earnings principle for the calculation of the continued remuneration to be paid – the employee must be placed in the same position as if he had worked. The employer is entitled to reimbursement by the state of Austria of one third of the remuneration paid during the special care period. The eligible remuneration is the basic salary plus bonuses, allowances, overtime pay and lump sums, monthly premiums and commissions and aliquot special payment shares. Expense reimbursements are not eligible. The employer’s claim to reimbursement is capped at the maximum social insurance contribution basis [currently: EUR 5,370.00 per month] (whereby it is most likely meant that the claim for reimbursement is entitled to a maximum of one third of the maximum monthly social insurance contribution basis). The employer’s claim to reimbursement apparently does not include wage costs and social security contributions.
According to the Federal Accounting Agency, the application for funding for the special care period can be made via the Companies Service Portal (USP). A comprehensive FAQ on the special care period can be found at Buchhaltungsagentur.
The provision of Section 18b AVRAG is initially limited to 31 May 2020 with regard to the consumption of the special care period, but to 30 June 2020 with regard to the employer’s entitlement to reimbursement. If the official measure is therefore not lifted until 31 May 2020, the applications for reimbursement must be submitted by 30 June 2020 at the latest, despite the six-weeks period explained above.
Attention: During short-time work, no state support can be claimed for the special care period (for details, see 9.2.4).
3.2. Further entitlements of the employee to release from work with continued remuneration in the event of the closure of schools and childcare facilities (which take precedence over the use of the new special care period pursuant to § 18b AVRAG)
As explained above, the new „special care period“ under Sec 18 b AVRAG can only be claimed if there are no other entitlements to time off work for childcare.
3.2.1. Discontinuation of teaching operations with childcare facilities
As long as there is the possibility that children can be cared for in school, there will normally be no justified hindrance to work which would trigger a duty on the part of the employer to continue to pay remuneration. Here, holiday leave and time compensation would have to be agreed upon.
In this case, we therefore believe that the special care period described above can be used directly.
3.2.2. School closures without the possibility of care: nursing leave – childcare leave – prevention of work for other reasons – what is applicable?
In general, it can be said that the regulations on care leave (see below) are only relevant if a child/close relative is ill. The childcare leave (see below) comes into question if the usual caregiver is absent due to illness or other specific reasons. The closure of care facilities is generally not a reason for nursing leave or childcare leave. The regulations described below apply to both white-collar employees and blue-collar workers.
In the following cases, employees are entitled to one week’s leave of absence with continued payment of remuneration or, to a very limited extent, to a further week and the possibility of taking paid holiday leave without an agreement with the employer:
- Nursing leave (Sec 16 para 1 no 1 Austrian Holiday Act [Urlaubsgesetz])
An employee has to care for a sick close relative (most frequent case: children) living in the same household and is therefore unable to perform his or her work.
- Childcare leave (Sec 16 para 1 no 2 Austrian Holiday Act)
An employee cannot perform his or her work because he/she has to take over the necessary care of a child (natural child, own adopted or foster child or natural child of the spouse/registered partner/cohabitant with whom the employee lives in the joint household) if the actual caregiver is prevented for the following reasons
- Stay in a hospital and nursing home
- Serving a prison sentence, other administrative detention
- Serious illness
- Elimination of the shared household between the child and the actual caregiver
This case becomes relevant in the current corona crisis when the previous caregiver falls ill or is quarantined.
- Hospital escort (Sec 16 para 1 no 3 Austrian Holiday Act)
An employee accompanies a sick child under 10 years of age (cases of application as for care leave) during a hospitalised stay at a hospital or nursing home.
- Extensions of nursing leave
- If the one-week entitlement is already exhausted (regardless of whether it is due to nursing leave, childcare leave or hospital escort), a further week of paid leave can be taken due to a renewed need for care for a sick child under 12 years of age.
- However, this only applies if the employee is not entitled to such leave based on other standards – e.g. provisions in the collective bargaining agreement or employment contract.
- Nor can this entitlement be combined with the first entitlement to nursing leave, i.e. the extension cannot simply be used up „after“ the first need for care – there is therefore no possibility of a two-week continuous nursing leave.
- The entitlement to the second week of nursing leave per year also does not apply to a further case of loss of care or hospitalisation.
- If the entitlement to the second week of nursing leave per year is not sufficient, the employee can take paid holiday leave without an agreement with the employer for the care of a sick child under the age of 12 years if it takes longer. Furthermore, it is assumed by jurisprudence that, if there is no longer a holiday entitlement, in particularly urgent cases unpaid leave for a relatively short time (usually also one week) cannot be refused by the employer.
- For school closures, it follows that all these arrangements cannot be used if the child is healthy but needs care due to the closure of the care facility.
- Prevention of work for good cause (Sec 8 para 3 Salaried Employees Act [Angestelltengesetz] / Sec 1154b para 5 Austrian Civil Code [ABGB])
However, in the event of school closures without any other form of care (whether privately organised or provided by the school or kindergarten), the right to paid absence from work on the grounds of „incapacity for work for important reasons“ may be considered. Employees are entitled to continued remuneration for a „relatively short time“, according to the legal regulation. There is no legally fixed duration; the guideline is usually one week. Due to the special situation, longer periods could also be considered. However, these regulations do not form the basis for claims for permanent continued remuneration.
In summary, therefore, in the event of school closure with other care options (as is currently the case), the new provision on special care time is the only legal instrument for release from work with continued remuneration based on care obligations.
Further claims to leave of absence from work with continued remuneration (which would apply prior to Sec 18b AVRAG) require the child to be ill or the illness or other prevention of the usual caregiver.
4. Are employees obliged to inform the employer of an infection? To what extent are companies obliged to inform their employees about infections?
- In the event of illness, employees are only obliged to report themselves as unfit for work, but in principle do not have to provide any information on the illness itself.
- However, it is to be assumed that employees, due to their duty of loyalty, must report an illness, which must be reported to authorities, to their employer so that the latter can fulfil its duty of care and protect the rest of the workforce.
- Apart from this, the treating physician must report the illness to the authorities. The authorities usually inform the employer.
- Conversely, the employer is obliged to inform the workforce about any infections that have occurred in the company, especially if this results in a risk of infection for other employees. In this respect, the employer must, in particular, observe the data protection regulations (with regard to the particular sensitivity of health data).
5. Which rules apply if workers are quarantined by order of authorities?
If an employee is put into quarantine due to an official order or an official ban on work is issued, the employer must continue to pay the remuneration (unless the employee has been slightly negligent in his or her behaviour and so triggered the quarantine measure – such as private travel to a country which imposes compulsory quarantine for people entering from Austria – see point 7).
However, the employer can claim compensation in the amount of the loss of earnings under the Epidemic Act. There is no time limit for this concerning the duration of the measure (quarantine). However, the short expiry periods must be considered: the employer must demand reimbursement of continued remuneration from the federal government within six weeks of the day on which the official measure (quarantine) is lifted. In this case, the employer’s contribution to social insurance must also be reimbursed by the Federal Government
6. Which rules apply if employees fall ill with the SARS-CoV-2?
If an employee falls ill with SARS-CoV-2, the employee is quarantined by the authorities. Although the employee is generally sick and the normal regulations on continued remuneration must be observed, the Epidemics Act also grants the employer a claim for compensation if the employee is quarantined due to illness.
7. Which rules apply, if a plant/business unit closes?
If a company closes voluntarily, i.e. without an official order, the employer would have to agree with its employees on holiday leave and time off or grant them garden leave.
In the case of officially ordered plant closures, the rules on compensation under the Epidemic Act apply.
It should be noted, however, that the COVID-19 Measures Act stipulates that the provisions of the Austrian Epidemic Act regarding the closure of business premises do not apply if entry to business premises has been prohibited by decree (which is the case throughout Austria for a wide range of businesses since 16 March 2020). As a result, the provisions on compensation for financial losses incurred are also not applicable.
By its very nature, the restriction or prohibition of entry of the employer’s business premises leads to the fact that employees are generally unable to continue their work. Under labour law, it applied (or at least was discussed) that affected employers did not have to continue to pay the remuneration, since the prevention of work was not caused by circumstances for which the employer is responsible (so-called „neutral sphere“).
On 21 March 2020 a new legal regulation was passed: If employees are prevented from starting work because entering the employer’s business premises was restricted or prohibited, this is considered to be a circumstance for which the employer is responsible. This means that the remuneration must be paid. However, if an employee is engaged in another paid activity during the closure of the business, this income is credited to his income from the employer affected by the closure of business.
Employees who are unable to perform their work for reasons of prohibited/restricted access must, at the employer’s request, use up time credits and holiday leave. This is an important innovation in terms of labour law, as the consumption of holiday and time credits must always be agreed and cannot be ordered unilaterally.
However, these new regulations only apply in the case of impediments to employment due to prohibitions to enter or at least restrictions on entering the employer’s business premises.
This means: Due to economic difficulties as a result of the Corona crisis, which do not directly result from a prohibition or restriction on entering the company, the employer cannot order unilateral leave! The question of whether remuneration must continue to be paid in cases of self-imposed restrictions on entering the employer’s business premises (see COVID 19 short-time work as a substitute solution) has not been finally clarified yet.
However, there are certain limits to the one-sided arrangement of time off and holiday consumption:
- Only a maximum of 2 weeks of the current “holiday year” must be used. The right to unilaterally order holiday leave therefore particularly affects “old” holiday leave (= holiday leave entitlements from previous holiday years).
- Time credits that are based on a provision in the collective bargaining agreement that converts monetary entitlements into time (frequent example: sabbatical, time off option under the collective bargaining agreement) also do not have to be used up.
- In total, no more than 8 weeks of time credits and holiday leave (together) need to be used up.
This regulation applies retroactively since 15 March 2020 and expires on 31. December 2020.
8. Which rules apply to travel?
Business trips to risk areas (if flights are still available) are contrary to the duty of care and cannot be ordered by the employer.
If an employee, despite travel warnings and other relevant information, currently travels privately (especially abroad) and is subsequently prevented from returning (e.g. due to obligatory quarantine measures or border closures) or falls ill with the coronavirus, the employee is deemed to have been prevented from performing his or her duties (at least due to slight negligence).
This can lead to consequences under labour law: In the case of gross negligence, there is no entitlement to continued remuneration in the event of illness; in the case of other absences (e.g. due to quarantine measures), even slight negligence does not entitle the employee to continued remuneration. Failure to appear at work could be considered unlawful absence.
This principle will most likely not apply to persons who have their place of work in Austria but do not reside in Austria (commuters).
9. Which rules apply to the announced extension of the current basic military or civilian service, to the partial mobilization of the militia and to the temporary recruitment of former civil servants?
Based on Sec 23a of the Austrian Military Act (Wehrgesetz) the end of basic military service will be deferred or, subsequently, parts of the militia are to be mobilized. Similarly, based on Sec 21 of the Civilian Service Act (Zivildienstgesetz), former civilian service personnel are to be recruited.
The employees concerned must notify their employer immediately of the notice regarding their enlistment or extension of service. The employment relationship remains unaffected and continues to be maintained; however, the employer is not obliged to continue to pay remuneration. Certain periods running at the time of the notice of enlistment (expiry periods, notice periods in the event of employer’s termination, periods for the continued use of trained apprentices); leave and special payments are due pro rata temporis in the year of enlistment (corresponding to the calendar year shortened by the time of military/civilian service). In addition, there are regulations on the crediting of periods of civil service and military service against entitlements dependent on length of service.
From the time of the notification of the issuance of the enlistment order, the general notification of enlistment or receipt of the allocation notice up to one month after termination of service, there is special protection against termination and dismissal. Depending on the duration of the service, the special protection against termination and dismissal of employment may also be shorter.
10. The first consequences of the spread of the coronavirus on the economy are already becoming apparent. What measures may be considered in addition to staff reductions in order to deal with declining orders?
10.1. Holidays and time credits
The consumption of holidays and time credits must be agreed with the employees. Even in times of crisis, there is no possibility to unilaterally order the consumption of holidays and time credits (except the case described under Section 7), but in general, in view of the current situation, a higher willingness to cooperate can be expected, especially if this can secure jobs.
In this context, we understand it would also be permissible to combine leave of absence from work with the consumption of holidays and time credits in a mixed form in order to jointly overcome the crisis in a spirit of partnership.
10.2. Newly created short-time work (“Kurzarbeit”)
Short-time work is a measure to secure jobs in times of crisis.
Essentially, the principle of the reduced-working-time model is as follows:
- The working hours of the employees are reduced and their salaries are adjusted accordingly.
- The employer pays the employees a financial support for their loss of earnings (short-time work support).
- The employer receives a financial support from the Public Employment Service (Arbeitsmarktservice – AMS) on the basis of flat-rates determined by the AMS (short-time work allowance).
- Short-time work is implemented by an agreement between the employer and the employees/works council as well as an agreement of the social partners (Chamber of Commerce as well as Unions).
Due to economic difficulties, a new short-time working model based on the newly created Section 37 para 7 of the Public Employment Service Act (Arbeitsmarktservicegesetz) came into force retroactively from 1 March 2020 and is subject to ongoing specification. On 19 March 2020, a new short-time working guideline of the Public Employment Service and the social partner agreements were published. The guideline and the social partner agreements were subsequently adapted several times, most recently on 27 March (social partner agreements) and 30 March (directive).
The following information refers to the status as of 6 April 2020. Numerous uncertainties continue to prevail in connection with „COVID 19 short-time work“. At several points, clarifications from the decision-makers are necessary. Therefore, we cannot exclude the possibility that legal views other than those represented here will ultimately prevail.
The following key points are essential:
10.2.1. Core of the regulation
- The working hours are reduced by 10% – 90%.
- In addition to remuneration for the work performed, the employee receives financial support from the employer (short-time work support). In total, the employer must reimburse the employee approx. 80%-90% of his previous net remuneration (net remuneration guarantee).
- The employer receives an allowance for this from the AMS on the basis of flat rates (short-time work allowance).
The introduction of short-time working is linked to the following conditions:
- The employer must be affected by temporary economic difficulties which are not seasonal in nature. Economic difficulties caused by the corona virus can be claimed here.
- Working hours must be reduced on average by between 10% and 90%. Although the normal working hours must be at least 10% throughout the entire short-time working period, they may also be reduced to zero at times. This means that the normal working time can also fluctuate in the individual weeks if it does not fall below 10% on average (calculation).
- In addition to remuneration for the work performed, employees receive short-time work support from their employer.
- A social partner agreement as well as a basic agreement under labour law is concluded: (shop agreement; in companies without a works council individual agreements).
- Approval of the Public Employment Service.
- The new model can be concluded for a maximum of 3 months. If necessary, an extension for a further 3 months is possible after discussions with the social partners. However, the Corona short-time working model is limited until 30.9.2020.
10.2.3. Process of implementation
The following procedure must be followed for the introduction of short-time work:
Step 1: The employer must reach an agreement on the introduction of short-time work:
- In companies without a works council: with each employee concerned;
- In companies with a works council: with the works council.
Step 2: The social partners (Chamber of Commerce and Union) sign the short-time working agreement (social partner agreement).
Step 3: The employer must submit the following documents to the AMS:
- the concluded agreement,
- the application for short-time working allowance, and
- the reason why and extent to which the company is affected by temporary, non-seasonal economic difficulties.
Step 4: The AMS decides whether to grant or refuse short-time work allowance.
Note: The social partners in some federal states provide for a different order of steps. You can obtain information on this from the respective federal organisation of the Chamber of Commerce.
10.2.4. Special Topics
- All employees, including members of managing bodies, are eligible, provided they are insured under the General Social Security Act (Allgemeines Sozialversicherungsgesetz – ASVG). This means that senior executives and managing directors who are not shareholders or hold shares under 25% are also eligible.
- Decisive for the eligibility for short-time work is the inclusion in unemployment insurance.
- Apprentices are also eligible since the new directive.
- Part-time employees („normal“ part-time employees as well as employees in parental, old-age, educational, nursing and reintegration part-time work) can also be included in short-time work.
- According to information from the Ministry of Labour, freelancers whose work can be represented within a weekly normal working time can also be included in the short-time work agreement. However, this only applies if the freelancers are insured against unemployment. In any case, the so-called employee-like freelancers are subject to compulsory unemployment insurance (Section 4 para 4 ASVG).
- For marginal part-time employees, civil servants and freelancers who do not meet the above criteria (weekly normal working time and unemployment insurance), no short-time work can be agreed on.
- Both the nationality and any foreign employment law permits of the employees are irrelevant.
- Please note: During short-time work, no state support for special care period (see point 3.1.) can be claimed. For employees consuming special care period, therefore, the short-time work should only begin after or before the special care period.
Special topic: newly hired employees
- At present (6 April 2020), it is to be assumed that new employees joining the employer cannot be included in short-time working immediately upon their entry.
- The reason given is that the short-time work support and allowance must be calculated on the basis of at least one fully remunerated month or four fully remunerated weeks before short-time work.
- In the case of irregular remuneration, there must be an observation period of three months/13 weeks.
- It is unclear whether these “new joiners” cannot be included in short-time work at all or only after a fully paid month/four weeks (or three months/13 weeks in the case of irregular remuneration). Recent statements by the AMS indicate that a subsequent inclusion is not possible. Whether an inclusion is possible after three months if the short-time work is extended, is also unclear.
Special topic Employees returning from parental leave
- Employees returning from parental leave can be included in the short-time work immediately.
- Prerequisite is inclusion in the scope of the social partner agreement.
- The net remuneration is to be calculated on the basis of the notional remuneration.
All employers are eligible, except:
- Political parties,
- the federal government, the federal states, municipalities and associations of municipalities, and
- other legal entities under public law with the exception of those that participate in economic life and obtain large parts of their costs through service charges collected for this purpose.
This was intended in particular to enable cultural institutions such as museums to introduce short-time working.
As a result, private associations can also apply short-time work (including non-profit associations).
Consumption of holiday leave and time credits
- In principle, the AMS demands the consumption of vacation and time credits before or during short-time work. In the first three months, this only concerns the use of holiday entitlements from previous holiday years (“old holiday entitlements”).
- In companies in which a works council is established, the introduction of short-time work must be implemented by means of a works agreement. Therefore, a legal regulation has been created which gives works councils the authority to conclude agreements on the use of old holiday entitlements as well as time credits of employees in the course of COVID 19 short-time work.
- However, according to the AMS-guidelines and the social partner agreement, if no agreement is reached with one or more employees or the works council, this does not harm the employer in granting the short-time work allowance.
- Nevertheless, the employer must prove (according to the guidelines and the social partners‘ agreement) that he has made serious efforts to conclude an agreement concerning the consumption of holiday leave as well as time credits. It is advisable to document this accordingly.
Compensation for holiday leave and time off
- In the case of vacation and time off during short-time work, the employee is still entitled to full remuneration as before short-time work. No short-time work allowance is paid by the AMS for these periods.
- This applies in any case to holiday entitlement that arose before the introduction of short-time work. It is not yet clear what the legal situation is regarding the holiday entitlement that arises during short-time work, whether this is due (i) to the extent of the holiday entitlement before short-time work or (ii) only to the extent of the agreed reduced normal working hours. Under variant (ii), if the employee is subsequently employed full-time after the end of short-time work, the holiday entitlement would have to be projected back to full-time employment. In the case of part-time employees, the holiday entitlement would have as well to be projected accordingly to the extent of the part-time employment before short-time work. The social partner agreements can be interpreted in both ways.
Holiday leave for employees within the meaning of the Construction Workers Holiday Leave and Severance Pay Act (Bauarbeiter Urlaubs- und Abfertigungsgesetz – BUAG)
- Generally, for employees who are subject to the BUAG, the employer is obligated to pay a “surcharge for holiday pay” to the Construction Workers Holiday Leave and Severance Pay Institution. With the payment of this surcharge, the holiday entitlement arises.
- For employment relationships that are subject to the BUAG, no surcharges for holiday pay are to be paid in short-time work periods in which the weekly working hours were reduced to zero between 1 April 2020 and 30 June 2020.
- This means that employees do not acquire any holiday entitlement in weeks of short-time work during which no work is done („0% phases“)!
Remuneration for actually worked hours
- The employee receives the agreed remuneration from the employer for the hours he actually worked.
- If an employee works more than originally agreed in the context of short-time work, according to the prevailing doctrine and the (naturally non-binding) interpretation of the Ministry of Labour, no overtime and extra hour surcharges are payable for this up to the limit of the daily and weekly normal working hours applicable before the start of short-time work. However, there is no clear legal regulation or regulation in the social partner agreements on the remunerated treatment of these additional working hours.
- In order to ensure smooth operations in the company even during short-time work, we recommend adjusting the working time agreements. In particular, there is a need for adjustment in the case of flexitime models, and it should not be overlooked that the exact working hours (start, end and duration) must also be determined during short-time working.
Short-time work support
- In addition to the remuneration for the work performed, the employer pays short-time work support so that in total, the employee is left with at least – depending on the income before short-time work – approx. between 80% and 90% of his previous net remuneration („net remuneration guarantee“):
- Employees with gross wages/salaries above 2,685 euros: approx. 80%.
- Employees with gross wages/salaries between 1,700 and 2,685 euros: approx. 85%.
- Employees with gross wages below 1,700 Euro: approx. 90%.
- Apprentices receive 100% of their previous apprenticeship remuneration.
- The social partner agreement provides that the net remuneration guarantee is calculated on the basis of the average net remuneration for the normal working hours of the last month/the last four weeks. In accordance with the guidelines of the AMS, this means
- Revocable overtime lump sums are not to be taken into account neither in the net remuneration guarantee nor in the short-time working allowance.
- Irrevocable overtime agreements as well as all-in agreements are to be taken into account in the net remuneration guarantee and are subsidized within the framework of the short-time work allowance.
- Allowances and bonuses excluding overtime pay are to be included.
- If remuneration fluctuates monthly (e.g. in the case of surcharges, commissions or incentive wages of varying amounts), the average of the last three months / 13 weeks must be used for the net remuneration guarantee in accordance with the social partner agreement.
- According to the current version of the social partner agreement, „personal circumstances“ such as family bonus, non-cash benefits and commuter allowance are not to be taken into account. However, it is understood that the social partners are still negotiating on the consideration of benefits in kind.
Short-time work allowance
- The employer receives this short-time work support from the AMS per hour of absence in the form of a flat rate as so-called short-time work allowance. This flat rate also includes pro rata special payments as well as pro rata social insurance contributions (based on the remuneration before the introduction of short-time work, see below) and other wage-related employer’s contributions.
- The flat rates were published by the AMS in the form of a table (spread sheet).
- Only incomes up to the ASVG maximum contribution basis are subsidised (2020: EUR 5,370 per month). Note: The amount of short-time work support is not linked to the amount of short-time work allowance. Any income in excess of this must be paid by the employer to the employee in the form of the net remuneration guarantee but is not subsidised.
- Whether the employer can also agree with the employee on a cap on short-time work support based on the ASVG maximum contribution basis is not regulated by the AMS-guidelines. The provisions do not in themselves speak against this.
- Social security contributions must be paid on the basis of remuneration as before short-time work. The AMS reimburses the employer for the additional costs (with certain restrictions) from the 1st month of short-time work.
- For the calculation of short-time work allowance, the remuneration including allowances and supplements, but excluding overtime pay, must be used.
- According to the guidelines of the AMS, revocable overtime lump-sum payments are also considered overtime pay.
- According to the guidelines of the AMS, irrevocable overtime flat rates and remuneration components of all-in agreements used to compensate overtime are not considered overtime remuneration.
- Likewise, overtime allowances are not to be included in the calculation.
Restrictions for redundancies during and after short-time work
- No employees may be laid off during short-time work as well one month after the end of short-time work (obligation to maintain the workforce).
- During the period of short-time work, the obligation to maintain the number of employees before the start of short-time work applies not only to employees who are included in the short-time work, but to the entire number of employees of the enterprise or part of the enterprise for which short-time work has been applied for.
- The obligation to retain in the month following the end of short-time work only applies to those employees who were included in the short-time work.
- Employment relationships already terminated before the introduction of short-time work which notice periods extend into the period of short-time work, as well as fixed-term employment relationships which end during the short-time work period, may still be duly terminated.
For the individual types of termination this means:
- Notice of termination for operational reasons is generally not permitted.
- However, terminations due to personal reasons are still possible. However, the employer is subject to a so-called „replenishment obligation“. This means that the employer must hire another employee for each employee who has been dismissed or made redundant for personal reasons. The same applies to justified premature resignations of employees.
- There is no replenishment obligation in the case of a termination by an employee and justified dismissals by the employer.
- In the case of amicable terminations of employment relationships, the number of employees must always be replenished unless the employee has previously consulted the trade union or chamber of labour about the termination of the employment relationship.
- In the event of an employee’s illness, the employer pays the employee full remuneration for the (reduced) working hours that would have been incurred despite short-time work, as well as short-time work support with regard to the (in this case notional) “hours of absence”.
- The AMS pays the employer the short-time work allowance in respect of the notional hours of absence.
- Example: The working time is reduced from 40 hours to 10 hours. The employee falls ill for one week. The employer pays 10 hours‘ remuneration and short-time work allowance in relation to the 30 (notional) hours of absence, the AMS pays the employer the short-time work allowance in relation to the 30 (notional) hours of absence.
10.3. Terminations of employment relationships by the employer
Despite the facilitation of the reduced-working-time model, there will also be terminations of employment contracts. It should be noted in this context that, despite the crisis, it is imperative to comply with the termination provisions. This means that notice periods and dates of termination must be observed, and the works council must be notified at least one week before termination. In addition, the provisions of the early warning system for mass dismissals continue to apply without restriction. Especially during the Corona crisis, however, a motion to shorten the lock-up period (see below) could be promising.
Threshold values above which the duty of disclosure is triggered if a certain number of employment relationships are to be terminated within a 30-day period.
Employer terminations as well as amicable terminations of employment relationships initiated by the employer must be notified to authorities. This does not include employee terminations, terminations initiated by the employee by mutual consent, dismissals with cause, termination of fixed-term employment contracts by expiration of a period of notice, and termination of employment during the trial month.
Notice of intended termination must be given at least 30 days before the first declaration of termination. Collective bargaining agreements may provide for longer periods. This period is the so-called blocking period, because no terminations may be made during this period. A shorter period can be applied for at the national office of the AMS responsible for the application. The head of the AMS, Mr. Kopf, has indicated in the media that it might be easier to obtain the corresponding permit due to the crisis.
10.4. Amicable termination of the employment relationship with promise of re-employment
It can be agreed with the employee that the employment relationship will be terminated and at the same time a promise to take the employee back after a certain period can be made.
10.5. Agreed part-time work
The working time can be reduced by mutual agreement for an unlimited or limited period of time with aliquot reduction of remuneration. It would also be permissible to recognise the employee’s cooperation by means of an additional remuneration component or, for example, a bonus. This may result in a need for adjustment under labour law, for example, regarding flexitime regulations or the adjustment of leave entitlement to the new normal working time.
There are also state subsidies for certain forms of part-time work, whereby it is primarily part-time training that could be considered – but especially if the crisis were to last longer, since this measure requires a certain amount of lead time.
11. What special regulations exist for the term of office of acting works council members?
- The term of office of works councils as well as the trustee for disabled employees, which ends between 16 March 2020 and 31 October 2020, is extended following a clarification in Section 170 of the Labour Constitution Act (Arbeitsverfassungsgesetz – ArbVG) until a new works council / trustee for the disabled (elected after 31 October 2020) has been constituted.
- The background to this regulation is that the preparation of a corresponding election is not ensured at present, as this would require the convening of a corresponding meeting to appoint the election committees.
- In order to prevent a period without representation in companies, it was therefore decided that the period of activity of the employee representatives would continue beyond the end of their regular period of activity.
12. Are there easements regarding social security?
In accordance with the announcement on its website, the Austrian Health Insurance Fund (ÖGK) has put together a package of measures to provide effective support to employers in the event of short-term liquidity bottlenecks.
Specifically, the following aid measures have been announced:
- Deferral of contributions: In the event of liquidity shortages due to the current situation, the maximum deferral period is extended from one to three months!
- Payment of contributions in instalments: The payment of instalments may be extended up to 18 months.
- Indulgence for late payment surcharges (Sec 114 ASVG): Corona-related late payment surcharges can be waived at the request of the companies.
- Suspension of execution and insolvency applications: In individual cases, execution and insolvency applications may be postponed in the event of liquidity bottlenecks caused by corona. Special guarantees are not required for this purpose.
The social insurance institution of the self-employed (SVS) has also already announced on its website that it will grant its insured persons (tradespeople, new self-employed persons, farmers) the following assistance measures in connection with the current situation due to the corona virus:
- Deferral of contributions (Sec 35 para 3 Austrian Commercial Social Security Act [GSVG])
- Payment of contributions in instalments (Sec 35 para 3 GSVG)
- Reduction of the provisional contribution basis (Sec 25a GSVG)
- Total or partial leniency of the default interest (Sec 35 para 5 GSVG)
Applications for deferral and payment by instalments of contributions and for reduction of the provisional contribution bases can be made informally using the online form, available at the SVS infopage on the coronavirus.
Tax-exempt Corona bonus
It was also decided that a „Corona bonus“ paid to employees up to EUR 3,000 is completely free of tax and social security contributions.
Allowances and bonus payments which are additionally paid out due to the COVID-19 crisis are tax-free and social security-free up to EUR 3,000 in the calendar year 2020. These must be additional payments made exclusively for this purpose and have not usually been granted before. They do not increase the annual sixth according to Section 67 para. 2 Income Tax Act (Einkommensteuergesetz – EstG) and are not credited against the annual sixth. Amounts in excess of this are to be taxed according to the tariff.
13. New wage tax regulations in connection with COVID-19
Please refer to the Tax Personnel News published by KPMG’s tax experts.
II. Corporate law
1. SHAREHOLDERS‘ MEETINGS
The Austrian government has already recognized the issue of the (legal) necessity of holding general meetings, general assemblies and supervisory board meetings and has established a legal framework to facilitate meetings under corporate law. For the duration of the measures taken to prevent the spread of COVID-19 (e.g. prohibition of entry), meetings of shareholders and board members of corporations and private companies, cooperatives, private foundations and associations can also be held without the physical presence of the participants in the form of „virtual meetings“.
The holding of virtual meetings, which should lead to a similar quality of decision making as physical meetings, is regulated by the COVID-19 Regulation on Corporate Law (Gesellschaftsrechtliche COVID-19 Verordnung).
In particular, this regulation stipulates the following requirements for virtual meetings:
- Convocation: the existing provisions under statutory law and the articles of association (eg notice periods) generally remain unaffected, as far as the regulation does not stipulate otherwise. The requirements for participation in the virtual meeting (both from an organizational as well as from a technical viewpoint) must be laid out in the convocation (or be provided no later than 21 days before the general assembly).
- Two-Way Communication (image and sound): a virtual meeting is permitted if (i) there is a possibility to participate via two-way audio and visual communication (hearing and speaking, seeing and being seen) in real time and (ii) each participant is able to speak and vote. This virtual participation is permitted for shareholders as well as for members of the Management Board and Supervisory Board. In case some participants (however, no more than half of all participants) do not access to the technical means to facilitate a two-way audio and visual communications or are unable or unwilling to use such technology, such participants may participate by audio connection only.
- One-way connection at annual general meeting (AGM) is sufficient: in view of the (usually) higher number of participants at AGMs of stock corporations, an acoustic and optical one-way connection (hearing and seeing) is sufficient. Nevertheless, shareholders must be able to submit requests to speak and take part in votes during the meeting (e.g. by e-mail or using special voting software).
- The convening body decides: whether a virtual meeting is held and which technology is used is decided by the convening body or body member, considering the interests of the company and the interests of the participants.
- Identity verification: in case there is any doubt concerning the identity of a participant, the company must verify the identity of the participant in an appropriate manner (e.g. by showing the official ID with photo).
- Proxy voting rights for listed AGs: in case the AGM of a (i) stock exchange listed AGs, (ii) AGs, whose shares are traded on a multilateral trade facility (MTF), or (iii) AGs with more than 50 shareholders, is broadcast (Sec 102 para 4 AktG) it may be provided that (i) proposals for resolutions may be made, (ii) votes may be cast and (iii) objections may only be raised by proxy, whereby at least four independent persons must be proposed by the company, at least two of whom must be lawyers or notaries. The costs of these proxies shall be covered by the company.
- Special provisions are also provided for cooperatives and associations.
As a further facilitation, it has been legally specified that (i) the ordinary shareholders‘ meeting must take place within the first twelve months (instead of the first eight months previously) of the financial year of the company concerned and (ii) the omission of supervisory board meetings until 30 April 2020 due to COVID-19 does not constitute a breach of the corresponding legal obligations.
These legal provisions (and the regulation based on them) will expire on 31 December 2020.
2. DIVIDENDS FROM AUSTRIAN COMPANIES IN RESPECT OF THE CURRENT CRISIS SITUATION
In this respect, a distinction must be made between, on the one hand, the already existing framework conditions under corporate law and, on the other hand, the proposed (but not yet resolved) dividend payout restrictions.
If the annual financial statements for the previous financial year have not yet been adopted, the following applies:
- Private limited company (GmbH): If the managing director (or if established the supervisory board) notice a substantial and not just temporary loss, which has arisen within the period between the end of the previous financial year and the approval of the current annual financial statement, the balance sheet profit is excluded from distribution to the shareholders in the respective amount (Sec 82 para 5 Limited Liability Companies Act [GmbHG]). The managing directors must inform the shareholders of such circumstances. If the shareholders nevertheless resolve on a distribution of profits, the managing directors need to refuse to distribute the profit.
- Stock corporation (AG): there is no explicit provision for stock corporations – however, negative developments which have arisen since the end of the previous financial year need also to be taken into account when deciding on the distribution of profits (see below).
If the annual financial statements for the previous financial year have already been approved, the following applies:
- Private limited company (GmbH): The company must assess whether a distribution of profits endangers the existence of the GmbH. If this is the case, the shareholders‘ duty of loyalty (Treuepflicht) requires the (partial) retaining of profits. In case of intentional distributions of profits, the shareholders are liable for any damage (Existenzvernichtungshaftung) resulting from it.
- Stock corporation (AG): The managing directors‘ proposal for the distribution of profits (Gewinnverwendungsvorschlag) must take into account circumstances that have occurred between the approval of the annual financial statements and the resolution on the distribution of profits (although the managing directors‘ proposal is part of the Appendix of the financial statements, it can nevertheless be amended at any time – even without a supplementary audit – because it is not accessible to a determination). If losses cannot be covered by releasing free reserves, such amounts must be retained and carried forward (Vortrag auf neue Rechung). Losses that occur after the resolution on the distribution of profits do not affect the dividend payment claim. However, the shareholders‘ duty of loyalty may nevertheless result in restrictions in the enforcement of their claim.
With regard to the preparation and disclosure of the annual financial statements, it has now been legally standardized that (i) the deadline for the preparation of the annual financial statements (and their transmission to the Supervisory Board) may be exceeded by a maximum of four months and (ii) the disclosure of the respective documents to be disclosed must be made in the commercial register and in the Wiener Zeitung no later than twelve months after the balance sheet date (instead of within nine months).
Proposed Framework (statutory dividend payout block):
There have already been several calls in the media for companies to avoid profit distributions during the current crisis or even to ban such distributions altogether. This should apply in particular if companies claim state support services or short-time working models. These demands were concretized by the SPÖ’s initiative motion (Initiativantrag) submitted on 2 April 2020. On the same day, the Vice-Chancellor also announced a payout ban.
However, many questions remain to be answered regarding such a payout block:
- Is the payout block a ban on resolutions or a ban on payments? This is particularly relevant in the case of dividends that have already been resolved but not yet paid out.
- Does the payout block apply to profits (nevertheless) generated in the current financial year or also to profits generated in previous years which have not yet been distributed?
- Since the determination of profits is based on the level of the company, but various aid measures are applied at the level of the (sub-)company, it must be clarified to what extent profits from “healthy parts” of the company that do not claim aid are covered by the payout block.
- For how long does the payout block apply? It is conceivable, for example, (a) the duration of the claiming of benefits (which will take considerably longer than a few weeks, especially in the case of deferrals in the area of social security law), (b) a period of one year (which seems to be planned after the Vice-Chancellor’s announcement), or (c) the adoption of a resolution in the context of the approval of annual financial statements (for example for the 2019 or 2020 financial year).
Regardless of these questions, a general payout block seems to us to make little sense. As an example, there are two cases in which such a payout block would cause massive legal and economic problems for those affected:
- Shareholder-managing directors (especially in family businesses and start-ups) regularly bear entrepreneurial risk also by the fact that the remuneration from the employment relationship with the company is (very) low in comparison to normal market remuneration. In the event of economic success, there is then a claim to profit distribution. If a corresponding distribution is prohibited (despite profits generated), those who bear the economic risk in the interest of their company are disadvantaged.
- Wherever a holding company (especially one financed by outside capital) is dependent on the distribution of dividends in order to be able to meet its own obligations, the stop of distribution leads to the immediate insolvency of the holding company.
In order to avoid lasting damage to Austria as a business location, especially such constellations will have to be considered when formulating a possible payout stop. The submitted initiative proposal does not deal with these problems or at least not sufficiently.
Finally, it should be noted that any payout block – regardless of the concrete form it takes – will inevitably lead to massive conflicts of interest between the restricted company and its shareholders. In this context, it will be necessary to make decisions in the area of conflict between applicable due diligence (on two levels), fiduciary duty and liability for the destruction of existence. This may also prevent the use of legal support measures and thus be at the expense of the employees of a company (worst case)
3. ESTABLISHMENT OF NOTARIAL ACTS AND NOTARIAL CERTIFICATIONS WITHOUT PHYSICAL PRESENCE
Following the example of the Electronic Notarial Form Formation Act (Elektronische Notariatsform-Gründungsgesetz) concerning the electronic formation of private limited companies (GmbH), the notarial regulations now provide that official notarial acts for the establishment of a notarial deed or a publicly certified deed can generally be performed without physical presence, using electronic means of communication. This requires, among other things, a connection in the form of an optical and acoustic two-way connection in real time.
4. EXCLUSION OF CERTAIN LOANS FROM THE SCOPE OF APPLICATION OF THE EQUITY CAPITAL REPLACEMENT ACT (EKEG)
The EKEG generally stipulates that a loan granted by a shareholder to a company in crisis is treated as equity capital for the protection of creditors and therefore cannot be claimed back by the shareholder during the crisis.
The EKEG has now been amended to the effect that loan do not fall within the scope of Sec 1 EKEG (and thus are not subject to the repayment ban) if (i) monetary loans are granted and/or added to between 1 April 2020 and 30 June 2020 for a duration of no more than 120 days and (ii) the company has not provided a pledge or comparable security from its assets for this purpose.
III. Do I have to pay rent or lease if my business is affected by the imposed prohibition on entering the premises?
Sec 1104 of the Austrian Civil Code (ABGB) stipulates that no rent or lease has to be paid, if a property (e.g. business premises) cannot be used accordingly due to extraordinary coincidences such as an epidemic (“Seuche”). According to the case law of the Austrian Supreme Court, this provision is supposed to cover elementary events which affect a larger group of persons and which cannot be controlled by humans, so that generally no one can expect to receive compensation. It can therefore be well assumed that the COVID-19 virus falls within its scope.
However, Sec 1104 ABGB is a dispositive provision, which can be amended by the contracting parties. Before reducing rental payments, it is advisable to assess whether and how cases of impossibility of use of the business property are covered by the specific rental or lease agreement.
IV. You are planning to cancel an event or are affected by the cancellation as a participant of an event?
1. Can organizers cancel events due to the coronavirus and what are the legal consequences?
Whether companies as organizers can cancel or postpone a planned event and what legal consequences this has, must be checked based on the specific contracts. Do the concluded contracts contain force majeure clauses? Does the clause cover epidemics, pandemics or similar current events? Does the contract contain other clauses that entitle the organizer to postpone the event?
Companies that are organizers must check in each individual case whether a case of force majeure exists at the time of cancellation or postponement of the event, i.e. whether the spread of coronavirus can be classified as an epidemic at that time. This may also constitute a case of impossibility or loss of the basis of the transaction. Whether the organizer is entitled to cancel or postpone the event therefore depends on the individual case and must be checked individually.
2. Is the outbreak of COVID-19 force majeure and what does that mean?
Force majeure is to be assumed under Austrian law if an extraordinary event is caused by external forces which does not occur or cannot be expected to occur in a certain regularity, and which cannot be averted or rendered harmless in its consequences even by extreme reasonable care. However, any non-exceptional event is also unavoidable if it cannot be averted despite all conceivable expertise and caution (according to the case law of the Austrian Supreme Court, the existence of force majeure was affirmed for SARS in 2005). Force majeure clauses in contracts and general terms and conditions are regularly based on this definition. In legal terms, force majeure generally means that the party obliged to perform is generally released from its obligation to perform or that performance deadlines are extended.
Examples of force majeure are war, natural events, sovereign orders or epidemics. Whether a case of force majeure exists is to be examined in each individual case. If the contract does not contain a force majeure clause or if an epidemic virus outbreak is not covered by it, the rights and obligations of the supplier shall be governed by the relevant statutory law.
For example, the UN Convention on Contracts for the International Sale of Goods (CISG) provides for a separate force majeure clause in the international movement of goods. This also determines the obligations of the supplier in individual cases, in particular regarding reasonable additional expenses and compensation.
The Austrian Civil Code (ABGB) does not contain a separate force majeure regime. However, the existence of force majeure is nevertheless relevant, as such an occurrence generally leads to the fact that a debtor in default is not liable for the consequences of the delay. The same shall also apply in the event of a complete impossibility of performance. If necessary, an adjustment or rescission of the contract due to the loss of the basis of the transaction may also be considered.
3. What options do I have as a participant of a cancelled event?
If an event is cancelled, the participants should check whether the organizer is entitled to cancel or reschedule the event according to the contract and whether participating companies or persons can assert claims if necessary. In addition, further contracts with third parties that were concluded in connection with the planned event (e.g. travel costs, hotel bookings, expenses for events) should be examined with regard to cancellation, termination or modification options; in particular with regard to whether participants are still obliged to pay under these contracts despite the cancellation of the event and the termination of contracts with other contractual partners or whether contractual options for cancellation still exist.
4. What are the recommendations for action in connection with the cancellation of events?
- Prompt review of contracts (including terms and conditions) and risk assessment
- Assertion of claims and required documentation
- Prompt notification of contractual partners and involved third parties
- Review of insurance policies
- Damage-reducing measures
- Solutions by negotiation and avoidance of disputes
V. Your supply chain is disrupted by the coronavirus outbreak? Are you confronted with supply chain failures or supply shortages?
1. What are the legal consequences of supply chain disruptions due to the COVID-19 outbreak (supply chain failures)?
Failures in the supply chain caused by the coronavirus also affect the purchasing department of a company. Deliveries required for production could be cancelled raising the question of what the purchasing department may demand from suppliers in this situation and who is financially responsible for the failure. The legal assessment should begin with the relevant contractual basis, i.e. framework agreements, individual contracts and general terms and conditions of business including regulations on force majeure. If force majeure does not apply, the question arises as to whether a reservation of self-supply has been agreed and whether it is effective (GTC). Further, possible provisions on the assumption of procurement risk, guarantees and regulations on alternative procurement must be analyzed.
Statutory law applies if the contracts with the supplier do not contain any corresponding provisions. In this case, it must first be determined whether UN sales law (CISG) or national law is applicable. Subsequently, it has to be clarified how the applicable law deals with the relevant aspects (i) withdrawal from the contract due to delay in performance (and, if applicable, additional claims for damages), (ii) termination of the contract and consequently release from the obligation to deliver due to impossibility of delivery, (iii) damages due to non-delivery and (iv) possible discontinuation of the basis of the transaction.
In addition to legal issues, economic consequences must also be weighed up: the contractual relationships must be assessed and structured accordingly to maintain the relationship with the suppliers even for periods after the outbreak of COVID-19. Therefore talks/negotiations should be held soon with the suppliers in order to find pragmatic solutions to avoid damages and cost-intensive compensation procedures and to maintain the economic relationship.
2. In case of disruptions in the supply chain due to the outbreak of COVID-19, what are the (legal) recommendations for action?
- Examination of supply contracts with a focus on force majeure clauses and provisions on delivery failures;
- Examination of the applicable law: UN sales law (CISG); national law (in case of international contracts: applicable national law);
- Examination of obligations to give notice of defects according to the contracts and applicable law to safeguard rights in case of legal proceedings;
- Proactive communication with suppliers and negotiation with affected contract partners (customers) about extension of delivery deadlines, financial compensation, etc.;
- Documentation of relevant events for the purpose of asserting claims for damages (to prove causality, amount of damage and mitigation of damage);
- Examination of liability risks and need for action within the operational departments of the company and between group companies.
3. What are the legal consequences of COVID-19 for suppliers?
If the supplier cannot (partly) meet its delivery obligations due to the consequences of COVID-19, the question arises of how the supplier should behave towards his contractual partners (customers) in order to avoid endangering business relations and to avoid claims for damages.
First, it is crucial for the supplier whether it is temporarily or completely released from its obligation to perform due to the consequences of COVID-19. This may be the case in the event of force majeure. Force majeure clauses are regularly agreed in supply contracts. If the supply contract does not contain a force majeure clause or if an epidemic virus outbreak is not covered, the rights and obligations of the supplier are determined according to the relevant statutory law.
In certain cases, a release from the obligation to perform due to impossibility or, in special constellations, an adjustment of contracts to the changed circumstances may be considered.
In all these scenarios, (statutory and contractual) notification obligations must be complied with and damage-reducing actions shall be initiated.
4. In case of disruptions in the supply chain due to the outbreak of COVID-19, what are the (legal) recommended actions for suppliers?
- Examination of supply contracts (including force majeure clauses, self-supply reservations, etc.);
- Documentation of the COVID-19 impact;
- Early contact with customers and compliance with notification requirements;
- Examination which employees of the contractual partner are authorized to make changes to the contract;
- Negotiate amicable solutions with contractual partners and record agreements;
- Internal coordination between purchasing and sales;
- Examination of cover purchases and other contractual measures in individual cases;
- Examination of claims against upstream suppliers;
- Examination and implementation of damage mitigation measures.
VI. Am I allowed to process data from my employees and/or from visitors to my business premises in connection with the COVID-19 outbreak?
1. May a company process personal data of its employees about travelling to countries at risk or on their personal state of health?
As explained above, companies as employers have a duty of care (responsibility to protect their employees), which also requires them to take appropriate protective measures to protect their employees from infection.
As far as the questions of the employer are related to travels or stays in countries at risk, the collection and processing of personal data of the employee can be based on Art 6 para 1 lit b sentence 1 GDPR. This is because, (i) in view of the duty of care, these data are necessary for the performance of the employment relationship (in particular, for the fulfilment of the duty of care towards other employees) and (ii) these data are not concerning health. The employer needs the information about employee`s travel to decide whether the employees concerned should better work at home or if other measures should be taken into account to provide the other employees with the best protection possible.
On the other hand, information on personal well-being are data concerning health which may only be processed if there is a justification according to Art 9 GDPR. Art 9 para 2 lit b GDPR provides for the legal basis. According to this provision, special categories of data like data concerning health may be processed if and to the extent that this is necessary for the purposes of carrying out the obligations and exercising specific rights under employment law. „Employment law“ covers both individual and collective employment law. Collective agreements and bargaining agreements can legitimize the processing of health data. In such cases, the employer’s duty of care is decisive. This particularly applies since the measures serve the protection of the remaining employees.
It can also be argued that the processing of the data concerning health can be processed for the purpose of health care or for the assessment of work ability within the framework of the legally standardized duty of care according to Art 9 para 2 lit h GDPR. This requires that the examination and assessment of the ability to work be carried out exclusively by medical personnel or by other persons who are subject to corresponding confidentiality obligations.
It must always be ensured that employees are informed in due time about the processing of their personal data in accordance with Art 13 or 14 GDPR. In the case of direct questioning of employees, the information must therefore be provided at the latest at the time of questioning.
2. May a company process personal data from third parties, such as visitors to business premises, about travelling to countries at risk or on their personal state of health for the purpose of implementing protective measures?
A company may also process data related to travels or stays in countries at risk of a third party to protect the company and, above all, its employees. It may also process such data, e.g. to decide on access to company premises.
Processing data related to travel or stays in countries at risk by third parties can be based on Art 6 para 1 lit f GDPR. In principle, it is not apparent that there is an overriding legitimate interests of data subject concerned. Please not, that it will not normally be necessary to collect further personal data (such as e.g. names). It is important to ensure that as little data as possible is processed.
Questions regarding the personal well-being and thus data of visitors concerning health may only be asked if processing is justified under the GDPR. In any event, visitors‘ health data may be processed if the visitor has expressly consented to the data processing in accordance with Art 9 para 2 lit a GDPR. The consent must comply with the requirements of Art 7 GDPR; in particular, reference must be made to the fact that consent may be revoked at any time.
Finally, ensure that third parties are also informed in good time about the processing of their personal data in accordance with Art 13 or 14 GDPR. In the case of a direct survey, the information must also be provided at the latest with this survey. Since the legal basis for questioning third parties about their stay in risk countries is Art 6 para 1 lit f sentence 1 GDPR, information must also be provided about their right to object pursuant to Art 21 para 1 GDPR. In this context, attention must be paid to the formal requirements of this information pursuant to Art 21 para 4 GDPR, according to which this information must be separated from the other information, for example by means of a different, highlighted graphic representation.
VII. You are confronted with a large number of claims arising from COVID-19 based events such as breakdowns in your supply chain or cancellations of events or trips you have organized. What do you need to do? We recommend that you analyze in detail which claims have already been raised and to what extent these claims are scaled?)
- Establish a team structure, which specifically processes claims in a focused and coordinated manner and which examines whether defending such claims can be successfully (cost-efficiently) carried out with the help of the current personnel and technical infrastructure.
- Analyse whether the filed claims do have similar content and scope.
- Ensure the completeness of data which is necessary to efficiently and quickly react to potential claims.
- Analyse the contractual basis (contractual documentation, terms and conditions etc.) with specific regard to provisions on limitations of liability, liquidated damages, claims for compensation etc.
- Define and implement a strategy on how to react to filed claims from a procedural perspective (in particular, whether and to what extent you may provide your services on a goodwill basis; or according to which parameters you may provide services under legally uncertain conditions).
VIII. You would like to know if and to what extent damages and losses of your company caused by or in connection with the outbreak of COVID-19 are covered by your company insurance?
Generally, insurance coverage depends on the relevant damage, its causes, the type of insurance policies and the extent of coverage. The nature of the damage and its cause require a case by case analysis:
- Business interruption insurances generally cover interruptions of operations resulting from property damage. Since COVID-19 does not represent such property damage, therefore an interruption of business is typically not covered. Business interruption insurances – especially for self-employed individuals – may, however, also cover loss of earnings for personal reasons. Such personal reasons typically include illness. Coverage would therefore be possible.
- Business closure insurance policies, however, provide coverage for business closures caused by infectious diseases. Under such policies, insurance coverage may also be provided for COVID-19. The available terms and conditions of such insurance policies commonly vary. Whether a business closure insurance is applicable in the case of COVID-19 depends on the individual agreement. Since insurance cover is often limited to diseases that are subject to notification to authorities at the time of the conclusion of the insurance contract, there would typically be no cover for damages caused by COVID-19: In Austria, COVID-19 has only been subject to compulsory notification since January 26, 2020.
- Event cancellation insurance typically does not cover epidemic or pandemic risks. The risks covered by event cancellation insurance have to be specifically determined in each individual case. Whether coverage is provided in the event of cancellation due to official orders (e.g. pursuant to Sec 15 Austrian Epidemic Act) therefore depends on the individual contract.
- Travel cancellation insurance typically covers the risk of an unexpectedly serious illness. The COVID-19 infection of a traveller causing the disease, however, has to occur before the departure. No insurance cover is often available in the event of cancellations due to an epidemic or pandemic in the country of destination. On a case by case basis, a travel warning by the Austrian Foreign Ministry may constitute an insured event. Further, all-inclusive tours are subject to a statutory right of withdrawal in case of extraordinary circumstances, e.g. when travelling to high risk areas.
- Finally, claims may also arise under other insurance policies. Policyholders should analyse their policies and seek professional advice to assess possible bases for claims.
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