OGH on Legality of ‘Chain Employment’ Contracts

Sept 27, 2024 Benn-Ibler Rechtsanwälte

Fixed-term employment relationships (so-called chain employment contracts) are only lawful if the succession of individual employment contracts concluded for a fixed period of time is justified for individual cases by special social or economic reasons.

The defendant had entered the employment market in 2019. Initially, an open-ended contract with one month’s probationary period was agreed with the plaintiff, then two fixed-term contracts ‘due to the uncertain and poor economic situation’ and because ‘further economic developments were not foreseeable due to COVID 19.’

The lower courts ruled that, because it shifted the economic risk to the employee, this was a legally impermissible chain employment contract. The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) agreed.

In justifying the extension of fixed-term contracts, economic reasons may be taken into account. However, if employers want to keep open their option of immediately reducing the number of employees in the event of an economic downturn, a series of fixed-term employment contracts is not objectively justified. The fact that reducing one’s workforce is made more difficult by concluding open-ended contracts is part of an employer’s general operational risk, and this risk must not be passed on to the employees. Uncertainty with regard to a company’s order-intake situation is a standard operational risk that has to be borne by business owners.

It follows that there was no objective justification for concluding fixed-term employment contracts with individual employees whose services were still required after their fixed-term employment contracts had expired, and for imposing the associated substantial disadvantages on those employees.

OGH 9 ObA 17/24a (23 July 2024)