What steps are needed for an Austrian asset sale to protect employee rights under Betriebsübergang rules?

In Austria, an asset deal may qualify as a \"Betriebsübergang\" (transfer of an undertaking) under section 3 AVRAG if a going economic entity is transferred and continues its activity (share deals generally do not).

If applicable, all employment contracts transfer automatically by law to the buyer, including accrued and future employee entitlements, and dismissals solely due to the transfer are invalid.

The works council (or employees, if none exists) must be informed in advance and in writing about the transfer and its consequences.

A "Betriebsübergang" also triggers employer obligations beyond labor law, such as social security re-registration and tax notifications.

From a buyer’s perspective, careful assessment of whether a transfer applies, focused employment due diligence, and appropriate warranties and indemnities are key to managing post-closing risk.

We would be glad to assist you in structuring and implementing your planned transaction in full compliance with Austrian labor and employment law.

In Austria, a transfer of undertaking is primarily governed by the Employment Contract Law Amendment Act (AVRAG). It occurs when a business or part of a business is transferred to a new owner through a legal transaction, and the economic entity continues to operate while maintaining its identity.

Key Implications

Automatic transfer: The new owner automatically assumes all existing employment relationships at the time of the transfer, including all rights and obligations. New employment contracts do not need to be concluded.

Prohibition of dismissal: Any dismissal issued as a result of the transfer of undertaking is legally invalid. However, dismissals for other reasons (e.g., economic or organizational reasons) remain possible, provided the statutory notice periods are observed.

Right of objection: Employees can object to the transfer if the new owner does not assume the collective bargaining agreement's job security or a company pension commitment. In this case, the employment relationship with the former employer remains in effect (note: risk of redundancy with the former employer).

Duty to inform: Employers must inform the workforce in advance about the timing, the reason, and the legal, economic, and social consequences.

Our law firm operates throughout Austria. We would be pleased to assist you with all aspects of your asset deal, ensuring compliance with Austrian law and minimizing your risks.

Best regards,

Peter Harlander