Austria, Graf & Pitkowitz updates

Employment & Benefits

Contributed by Graf & Pitkowitz
Supreme Court rules on sexual harassment and vicarious liability
  • Austria
  • March 14 2012

In two recent decisions the Supreme Court clarified employer liability for harassment perpetrated by employees. The decision demonstrates that sexual harassment by the employer can also be perpetrated by the victim's superior. In such case the employer will be (vicariously) liable even where the harassment was the first such conduct of its kind.

Supreme Court rules on termination indemnity and old-age pensions
  • Austria
  • November 30 2011

The Supreme Court recently clarified that the termination indemnity for commercial agents can be forfeited if an agent has terminated the agency contract for retirement reasons other than reaching the regular retirement age. Agents would be well advised to consider the implications for their termination indemnity and principals have been granted yet another reason to avoid payment of the indemnity once an agent retires.

Restrictive covenants: court rules on enforceability of non-compete clauses
  • Austria
  • September 14 2011

Austrian law allows employers and employees to enter into non-compete agreements. The law distinguishes between restrictions of competing activities during employment and restrictive covenants pertaining to post-termination periods. Whether a restrictive covenant on post-termination periods is enforceable depends on how, and by whom, the employment relationship was terminated.

Primer on dismissals, redundancies and severance pay
  • Austria
  • June 15 2011

In order to carry out dismissals and mass terminations, the Austrian legal regime requires the employer to give prior notification to the appropriate agency and observe the relevant terms. Additionally, the regime provides for staggered severance pay, increasing with seniority, if the termination of employment is not initiated or primarily caused by the employee.

Supreme Court rules on 'mystery flyers'
  • Austria
  • February 23 2011

The Supreme Court recently clarified the scope of a works council's right to freedom of information under the Labour Relations Act. The employer, an airline, intended to evaluate its quality of service using so-called 'mystery flyers'. The information gathered was passed on to the airlines works council, which made several inquiries, requesting further information.


Insolvency & Restructuring

Contributed by Graf & Pitkowitz
Protecting tenants from eviction in rescue proceedings
  • Austria
  • March 01 2013

For a successful rescue to take place, the business premises must remain available for the continued operation of the company. Consequently, Section 12c of the Insolvency Code protects the debtor from eviction in rescue proceedings. However, the Supreme Court recently confirmed that a landlord may proceed with eviction proceedings if the tenant fails to meet certain obligations.

Court rules on future damage due to event before insolvency proceedings open
  • Austria
  • December 14 2012

A recent judgment of the Supreme Court made clear that future damage of an unknown amount arising from an event that occurred before the opening of insolvency proceedings may be asserted only as a bankruptcy claim in the insolvency proceedings. The estimated amount of damage must be disclosed when the claim is asserted against the bankrupt company.

New taxes on real estate sales: consequences for insolvencies
  • Austria
  • September 28 2012

A new real estate income tax was recently introduced in Austria. When land encumbered by liens is now sold in the course of insolvencies, the question arises as to whether this new tax qualifies as special estate costs. The Supreme Court is yet to clarify the matter; therefore, until this happens, creditors should note that reduced amounts will be attributed to them from the proceeds from the sale of collateral.

Court revokes abolition of free legal aid for insolvency estates without assets
  • Austria
  • April 13 2012

In 2009 the Austrian legislature abolished free legal aid for legal entities, and thus also for insolvency estates without assets, although free legal aid had previously been granted only under very restricted conditions. However, a recent ruling of the Constitutional Court held that the abolition of the entitlement to free legal aid for legal entities (ie, also for insolvency estates) was incompatible with constitutional law.

No determination of insolvency claims in criminal proceedings
  • Austria
  • November 18 2011

The Supreme Court recently clarified its position on whether injured persons could also join criminal proceedings as private parties if the offender has filed for insolvency. It ruled that creditors may join criminal proceedings as private parties in such cases only if the claims result from the prosecuted criminal action, arose after insolvency proceedings were opened and are not affected by the effects of the insolvency proceedings.


Real Estate

Contributed by Graf & Pitkowitz
Supreme Court questions basis for taxation of property transactions
  • Austria
  • November 25 2011

The Constitutional Court recently declared unconstitutional an article of the Court Fee Act, under which the fee for the registration of a new owner in the Land Register by reason of a deed of gift is taxed on the basis of the tax value. Although this judgment concerns court fees only, it calls into question all occasions where property transactions are taxed on the basis of the tax value rather than the market value.

Cross-border transactions: real estate agent's fee subject to foreign law
  • Austria
  • October 14 2011

The Supreme Court recently handed down a decision concerning a real estate agent's fee in connection with a cross-border sale agreement under which an Italian estate agent had facilitated the sale of an Austrian hotel to an Italian investor. The court ruled that the agent's contract had no close connection with Austria but was instead governed by Italian substantive law. The claim was therefore dismissed.

Corporate entities may claim compensation for discomfort
  • Austria
  • July 29 2011

The Supreme Court recently handed down a decision concerning the disruption of a tenant's business by severe construction work carried out by the landlord, and held for the first time that corporate entities can claim compensation for discomfort. The damages will be consolation for the tenant, but will not induce landlords to take tenants' interests into consideration when planning such work.

Supreme Court limits contractual exclusion of a seller's warranty
  • Austria
  • May 06 2011

In civil law jurisdictions, sale and purchase agreements frequently use key phrases which either trigger or exclude a set of legal rules laid down by statute, and which thus need not be explained in detail. Consequently, contracts require careful drafting. The Supreme Court recently handed down a decision concerning the contractual exclusion of a seller's warranty in a property transaction, with surprising results.

Excessive rent agreements: unlawful return of equity?
  • Austria
  • February 18 2011

The Supreme Court recently applied the rules of unlawful return of equity to a rental agreement. A company and its majority shareholder agreed on rent payments of approximately three times the market value. The company realised that it was overpaying and argued that the excessive rent payments constituted an unlawful return of equity. The court's decision will have a significant impact on M&A transactions involving property.


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