OGH: Cost-of-Living Allowance and Insolvency

Jun 14, 2024 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has clarified that the tax-free cost-of-living allowance (‘Teuerungsprämie’, Austrian Inflation Relief Package, see Federal Law Gazette I 2022/93) constitutes remuneration and is protected in the event of an employer’s insolvency under the Austrian Insolvency Remuneration Guarantee Act (Insolvenzentschädigungsgesetz, hereinafter IESG).

In December 2022, the plaintiff’s employer paid a cost-of-living bonus of EUR 500.00 to each of his employees. In 2023, the employer’s assets were put into receivership without self-administration. The Austrian Insolvency Compensation Fund (Insolvenzentgeltfonds, hereinafter IEF) rejected the plaintiff’s claim for insolvency compensation in the amount of EUR 500.00 net, which was the cost-of-living allowance. The IEF reasoned that this was not remuneration within the meaning of Section 1(2) IESG.

The court of first instance found in favour of the plaintiff, while the court of appeal was in favour of a review of the factual justification for the payment.

The OGH has now reinstated the original ruling, as follows:

The cost-of-living allowance is in principle a form of remuneration subject to the IESG and therefore a secured claim, according to the OGH. The objective justification for such a premium has already been established by lawmakers in general. It does not require further examination in individual cases.

The cost-of-living allowance is an additional payment that is expressly desired and encouraged by lawmakers and is intended to help maintain parity between work performance and pay.

Also, it was not proven that the plaintiff and the employer, knowing of the impending insolvency, jointly attempted to improperly shift the risk to the IEF.

OGH 8 ObS 1/24s (25 April 2024)