Defined in Austrian law (Labour Constitution Act, Article 29) as a written agreement concluded between the employer and the works council (or works council combined committee, company works council or group works council) on matters whose regulation is reserved by law or collective agreement to such agreements. This means that the parties to works agreements do not have unlimited regulatory competence but may regulate only those matters whose regulation has been delegated to the parties concerned by law or collective agreement. This competence almost invariably involves what are referred to as social matters (soziale Angelegenheiten), i.e. matters in which the employer possesses dispositive rights which are important to employees, such as the introduction of computerized personnel information systems, fixing the starting and finishing times for daily working hours (see working hours/working time: flexitime), the length and scheduling of breaks and distribution of working time over the days of the week, the introduction of staff questionnaires and surveillance measures or technical equipment for monitoring employee performance, the adaptation of work to human needs, etc. Competence to fix (basic) pay is not, however, delegated by law to the parties to works agreements. The only pay-related matters that may fall within the regulatory scope of such agreements are pay entitlements for time spent attending works meetings (see working hours/working time: flexitime), payments specific to the establishment concerned, profit-sharing schemes and occupational pension schemes. This restriction is intended to avoid conflicts between collective agreements and works agreements and to reserve the fixing of rates of pay essentially to the parties to collective agreements and ensure their precedence in the system of employee representation as a whole. Above all, the purpose is to prevent union pay policy from being undermined by company-specific policies based on different priorities. A works agreement, like the relevant collective agreement, is directly binding on the employment relationship; conflicting provisions agreed between the parties to the individual contract of employment are valid only if they are more favourable for the employee (favourability principle). The Act also lays down, in its Articles 30-32, special rules regarding the entry into force, legal effects and period of validity of works agreements.
As explained in more detail in the entry below on the works constitution, there are certain measures which the employer is permitted to introduce only after a works agreement to that effect has been concluded with the works council (classed as notwendige Betriebsvereinbarung, i.e. a mandatory works agreement). Secondly, there are other measures and matters on which a works agreement can be imposed by one of the parties: in the event of failure to reach agreement, the interested party is entitled to refer the matter to a public mediation and arbitration board (Schlichtungsstelle) which is responsible for attempting to mediate and empowered, if this fails, to decide the matter itself. An agreement which deals with these matters, whether reached by the parties or via the board, is therefore classed as erzwingbare Betriebsvereinbarung, i.e. an imposable works agreement. Thirdly, there are various other matters on which, although a works agreement may be concluded, this is neither mandatory nor imposable by one of the parties unilaterally (classed as fakultative Betriebsvereinbarung, i.e. an optional works agreement). The distinction between these three types of works agreement is important not only because they reflect the works council's different participation rights but also because the law specifies certain special rules for each type. For example, a mandatory works agreement cannot be terminated unilaterally, whereas an optional works agreement can.
It should be noted that, although works agreements on matters whose regulation is not delegated by law to the works council and the individual employer have no legal effect, they are frequently classed by the courts as contractual terms which are perceived by employees as offers by the employer to alter or supplement the contract of employment and to which employees may be deemed to have consented by accepting the corresponding pay or benefits. In other words, the content of a non-enforceable works agreement generally supplements the contract of employment and hence becomes “contractually based”. Such agreements, which are in themselves legally non-enforceable but ultimately have legal effect, are called freie Betriebsvereinbarungen (informal works agreements).
Since the mid-1980s, the works agreement has been acquiring growing importance in Austria as an instrument for the regulation of terms and conditions of employment, as part of the generalized tendency towards greater flexibility. In particular, many sectoral collective agreements contain delegation clauses (Öffnungsklauseln) designed to allow more flexibility as regards working hours. Such clauses empower management and works councils to conclude works agreements regulating specific working hours within the general framework laid down by collective agreement. Recently, such delegation clauses have also been agreed for certain sectors with a view to increased pay flexibility.