Austrian Supreme Court: No Business License, No Competition

Sept 2, 2022 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, OGH) has ruled that a violation of Section 7 of the Salaried Employees Act (Angestelltengesetz, AngG) can occur even if an employer does not have a license for the business line in question.

The plaintiff is a manufacturer and distributor of drying systems for shoes and clothing. The defendant worked for the plaintiff as a senior employee and was subject to a contractual non-competition clause. In 2014, the defendant started a company that produced shoe dryers and supplied them to one of the plaintiff's main customers. It was not until 2016 that the employment relationship between the plaintiff and the defendant was dissolved. The plaintiff did not hold a business license for a mechatronics business, including the construction of drying devices, until 2020.

The plaintiff demanded the rendering of accounts and payment of the proceeds from the deliveries on grounds of violation of the non-competition clause. The defendant objected that the plaintiff had no right to base her claim on this, as she herself was not entitled to carry on this line of business due to her lack of a business license.

All instances ruled in favour of the plaintiff:

Under Section 7 of the Austrian Salaried Employees Act (AngG), employees may not engage in commercial activities `in the employer's line of business’, either individually or on behalf of third parties, without the employer’s consent. `Line of business´ only refers to business activities actually carried out by the employer. However, the purpose of the non-competition clause also covers unauthorized activities of the employer if such activities give rise to the legal status of a businessperson pursuant to Section 1 of the Austrian Salaried Employees Act (AngG). However, according to case law, the definition of `business person´ does not depend on compliance with the provisions of commercial law. In competition law, too, a competitive relationship does not depend on compliance with commercial regulations. The fact that an employer does not yet hold all the required business licenses does not necessarily mean that they have no interest in the unhindered pursuit of their business operations.

OGH 8 ObA 25/22t (18.07.2022)