Term which, by analogy with the notion of a national Constitution as the body of fundamental principles according to which a particular State is organized, is used to refer to the set of legal provisions laid down in the Labour Constitution Act (Arbeitsverfassungsgesetz, or ArbVG for short) to regulate workforce representative bodies at establishment or company level and their consultation and co-determination rights (Mitwirkungs- und Mitbestimmungsrechte) in social, staff and economic matters. The works constitution is therefore the legally established (“constitutionalized”) basis according to which the workforce is organized within the firm. In Austria, however, there are also employee representative bodies outside the firm which safeguard the interests of employees in particular industries and geographical regions, i.e. essentially the trade unions and the statutory Chambers of Labour. The legal provisions governing these form part of the law on collective interest organizations (Berufsverbandsrecht) as a subdivision of labour law (also referred to in the case of the unions as the law on the right to organize). The existence of these separate structures have implemented a dual-channel system of representation.

Legal concept of the establishment

Austrian law on the works constitution (Betriebsverfassungsrecht) takes the establishment (Betrieb) as its central point of reference for the organization of the workforce. Consequently, the legal requirement is that workforce representative bodies should be formed for each establishment (not for sections and departments or other smaller organizational units) and that the workforce's consultation and co-determination rights should be exercised by representatives of that workforce as a whole (not by delegates representing the employees of individual departments or smaller units). An establishment is defined by Article 34 of the Act as “any premises constituting an organizational unit within which a natural or legal person or partnership, using technical or non-technical resources, regularly pursues certain work results irrespective of whether or not there is a profit-making objective”. This means that a given company can in practice comprise a number of establishments (gegliedertes Unternehmen, i.e. multi-establishment company). The essential criterion of classification as an establishment for the purposes of the Act is therefore that the management staff in the premises in question are largely free to take independent decisions on day-to-day matters and that the work result produced there has a degree if self-sufficiency (e.g. could be marketed separately). If these preconditions are not met (because, for example, the management does not possess such extensive powers), even geographically separate production units are regarded as forming a single establishment.

Organs of the works constitution

The holder of the rights and obligations on the employees' side as laid down under works constitution law is in principle the workforce, which is deemed by prevailing opinion to possess limited legal personality and therefore acts through its organs. These are the works meeting and the works council.

The works meeting (Betriebsversammlung) consists of all the establishment's employees, with the exception of executive staff, and takes decisions on fundamental issues. Its functions include: appointing the electoral board for works council elections (see below) and the company auditors; deciding whether a works council levy (Betriebsratsumlage) should be imposed on employees (amounting to up to 0.5% of their gross pay and used to form a works council fund to help meet the costs of running the council, company welfare facilities, etc.); advising on day-to-day problems; and monitoring the policy aspects of the works council's activities. It can even decide, by a qualified majority, to remove the council from office. The works council must convene regular works meetings at least twice a year, and extraordinary meetings when necessary or if requested by at least one third of all those entitled to vote in works council elections (see below).

The works council is the main employee representative body within the establishment. In particular, it exercises the workforce's consultation and co-determination rights, which to that extent can (loosely) be described as the works council's rights. The council is elected by the workforce (essentially all employees within the establishment aged 18 and over, with the exception of executive staff), by direct secret ballot following the principles of personal and equal suffrage. The election is conducted by an electoral board appointed by the works meeting, and this board is also responsible for overseeing all election procedures, announcing the results and making them known to the employer. Since in Austria works constitution law differentiates between white-collar workers and manual workers, it provides for the election of separate category-based works councils (Gruppenbetriebsräte) in establishments where there are five or more employees belonging to each of the two categories, i.e. a manual workers' works council (Arbeiterbetriebsrat) and a white-collar workers' works council (Angestelltenbetriebsrat), although the two employee categories can decide, each by a qualified majority, to form a combined works council (gemeinsamer Betriebsrat). Matters which jointly concern both categories are dealt with by a works council combined committee (Betriebsausschuss) composed of all the members of both category-based councils. If an establishment in which a works council has been elected forms part of a multi-establishment company and a council has been elected in at least one of the company's other establishments, a company works council (Zentralbetriebsrat) must be formed, elected by and from the members of the individual works councils, whose votes are weighted according to the size of the establishment workforce they each represent. This company works council is responsible for matters affecting the employees of more than one of the company's individual establishments, and in particular is empowered (and required) to exercise their consultation and co-determination rights at company level. In corporate groups (under Austrian law, a group is deemed to exist if two or more legally independent companies are grouped under joint management for business purposes) with (company) works councils in more than one member company, a groups works council (Konzernvertretung) may be established provided this is agreed by two thirds of the company works councils which together represent more than half of all the employees within the group. This group works council is responsible for dealing with matters which affect the interests of employees in at least two member companies; in particular, it can also conclude works agreements (see below) with the group management on matters whose regulation is referred to it by individual establishment- or company-level works councils within the group.

On the basis of the relevant Community Directive (94/45/EC), Austrian law has also recently included provisions on the formation of European Works Councils (EU-Betriebsräte). These require, in companies or corporate groups with their central management situated in Austria which have at least 1000 employees, at least 150 of whom are employed in each of at least two EU Member States, the initial creation of a special negotiating body (besonderes Verhandlungsgremium) where this is requested by employees or proposed by the central management. This special negotiating body, composed of representatives of the company workforces in each Member State concerned on a proportional representation basis, then has the task of deciding whether a European Works Council should be set up or whether, instead, efforts should be made to implement a procedure for the information and consultation of employees. If it opts for a European Works Council, arrangements for the latter's formation and the corresponding rights are regulated in an agreement concluded with the central management. In the event of failure to reach such an agreement, however, a Council must be established by force of law. Details of the Council's composition, functions and powers are regulated by law, but as a matter of principle it has information and consultation rights in all matters concerning the economic, social, health and cultural interests of the employees of at least two establishments or companies situated in two or more Member States.

Works council members

Although theoretically 25% of the works council members may be outside union officials, in practice they are normally all employees. The office is honorary and therefore attracts no payment. However, members of all works councils are guaranteed as much time off work, without loss of pay, as is needed to perform the duties of their office, and in large establishments one or more works council members (depending on the size of the workforce) must be given full-time release from work without loss of pay. Council members are also entitled to be released from work (with or without pay) for educational and training purposes. Overall, the law stipulates that an employee may not suffer any disadvantage as a result of holding office as a works council member, and this principle applies equally to pay-related aspects, promotion prospects and transfers. In addition, council members may not be dismissed, either with or without notice, unless the prior consent of the court has been obtained. Correspondingly, however, the law stipulates that works council members may not be granted special privileges as a result of holding office; the intention here is to prevent any possibility of their being “bought” by the management. And the legislators have also made them subject to a special duty of confidentiality.

Rights and responsibilities of the works council

The works council is responsible for exercising certain consultation and co-determination rights which are conferred on the workforce within an establishment: 1) information, consultation and participation rights (Beratungs-, Informations- und Interventionsrechte); 2) rights to co-determination in social matters; 3) special consultation rights in staff matters; and 4) special consultation rights in economic matters.

1) Information, consultation and participation rights: The employer is required to hold regular discussions with the works council and keep it informed on matters which are important for the workforce. Consultation meetings must take place at quarterly or (at the council's request) monthly intervals, and the council may invite Chamber of Labour or union representatives to attend. The council itself may demand information on all matters of interest to employees, and the employer is also obliged to inform it of any kind of computerized collection and processing of personal data on employees and, if the council so requests, furnish it with details of the software used. In addition, the council is entitled to present complaints to the employer on all matters of concern to employees and to request appropriate measures or demand the correction of shortcomings (general right of intervention). It is also entitled and required to monitor the employer's observance of rules laid down under labour law, social security law and employee protection law, on the basis of rights such as its right to participate in the implementation of the law on employee protection (for example, in the appointment of safety officers, safety experts and works doctors).

2) Co-determination rights in social matters: The works council must participate in the regulation of all social matters within the establishment (as described in more detail in the works agreement entry): for some it possesses a right of “parity” co-decision-making, and for others it can call on a mediation and arbitration board (Schlichtungsstelle) if agreement cannot be reached with the employer. This board, composed of equal numbers of representatives from both sides with a judge as neutral president and set up by the competent labour and social security court, has the task of attempting to establish agreement between the parties on the matter in question and, if this is unsuccessful, deciding the case itself. For other social matters, the works council has the right to regulate them in conjunction with the employer, with normative effect. The works agreement is an important instrument of all these forms of co-determination in social matters. Where the council has a full right of co-decision-making, the employer cannot take any action until a works agreement has been concluded with it to that effect. In other words, the council can prevent any planned measures from being implemented by its simple refusal to conclude the agreement (right of veto). This type of agreement is called a mandatory works agreement. In contrast to this, the council's right in regard to certain other matters to call on a mediation and arbitration board as described above (where no works agreement is concluded and the board's decision takes its place) simply enables the council to push through the regulation of the matter concerned. This second type of agreement has therefore become known as an imposable works agreement. For all other social matters, where the legislators have delegated to the parties at establishment level the option of regulation, a third type is called an optional works agreement. Matters which are dependent on the conclusion of a mandatory works agreement include the introduction of a disciplinary procedure and the installation of systems for monitoring employees which intrude on human dignity; those falling within the scope of an imposable works agreement include the distribution of working hours over the individual days of the week, and the introduction of computerized systems for the collection, processing and transmission of personal data on employees (an area which is subject to especially extensive co-determination rights); and those on which optional works agreements may be concluded include the adjustment of working conditions to human needs, the introduction of company welfare facilities (Wohlfahrtseinrichtungen), the temporary reduction of working hours and the introduction of an occupational pension scheme. It should be stressed that the permitted scope of formal works agreements is restricted to the matters specified by law. Other matters connected with the employment relationship are assumed to be regulated by collective agreement. However, pay-related issues, in particular, are excluded and any works agreements on the subject are invalid. The reason for this restriction is the precedence of the regulatory powers of the parties to collective agreements: in principle, rates of pay are established at associational level by the unions and employers' organizations. In practice, works agreements are also concluded on pay-related issues; their content, if the individual employer and individual employee comply with it, can become part of the contract of employment and therefore binding. Such an agreement is referred to (albeit incorrectly from the legal point of view) as an informal works agreement.

3) Special consultation rights in staff matters: When an employer is intending to recruit new employees, the works council must be provided with specific information on the planned recruitment, can demand to be consulted on the matter and must be notified of each resultant engagement of an employee. The employer must also inform the council of any intended promotion of an employee and, if it so requests, consult the council on the matter. The council must likewise be informed of any intended “long-term” transfer and, if it entails less favourable terms and conditions of employment for the employee concerned, has a right to object. In order to implement such a transfer despite the council's objection, the employer must refer the matter to the court, which is required to grant its consent if the transfer is justified on objective grounds. The employer is also obliged to inform the works council of every intended dismissal (see protection against dismissal), on pain of its being deemed null and void; the council has the right to challenge in the courts any dismissals to which it has lodged an objection.

4) Special consultation rights in economic matters: Every employer must provide the works council with regular information on the firm's economic and financial situation, including its business trend, inflow of orders and turnover, and, if the council so requests, consult it on that situation. Where the company concerned forms part of a corporate group, the employer must also provide information on any measures planned by the controlling company (such as reorganization programmes and structural changes) which affect employees. In large companies the employer must give the council a copy of the annual report (and the group annual report where appropriate) and, if the council so requests, explain and clarify the content. In addition, the employer must inform the works council of any projected change to the establishment that implies far-reaching consequences. If the change entails serious disadvantages for a significant proportion of the workforce, the council can demand the conclusion of a social plan (redundancy programme) in the form of an imposable works agreement, providing for measures to prevent, eliminate or mitigate these disadvantages.

Employee representation on the supervisory board

The Austrian legislators have also made provision for a form of co-determination which is related to the company rather than the establishment: seats on the supervisory board (Aufsichtsrat) of every joint-stock company (i.e. private or public limited company) must include, in addition to the shareholders' representatives, employee representatives (all of whom must be employees) with voting rights. The co-determination model concerned is not one of “parity” but only “one-third parity”: one employee representative for every two shareholders' representatives (with an extra employee representative if the number is uneven). The right to appoint these board-level employee representatives (Entsendungsrecht) lies with the company works council; special rules are laid down on the composition of the supervisory board of a group's controlling company. The office of employee representative on the supervisory board is honorary. Although these representatives in principle have the same rights and obligations as other board members, differences exist on individual aspects: for example, a report on the company's affairs can be demanded at any time from the management board by two employee representatives (but not two shareholders' representatives). It should also be noted that the appointment of members of the management board, which is one of the supervisory board's most important functions, requires the majority vote not only of all supervisory board members but also of all shareholders (“double majority”). This is intended to ensure that the management board members enjoy the trust of the capital-owning side. Ultimately, therefore, the model is one of below-parity co-determination, merely intended to include employee interests in company decision-making processes. Hence, the right to take strategic business decisions remains in the hands of the owners of capital.

Please note: the European industrial relations glossaries were compiled between 1991 and 2003 and are not updated. For current material see the European industrial relations dictionary.