Is the client of the posting undertaking liable for pay claims held by posted or hired out workers?
The work performed by an employee gives rise to pay claims as well as to obligations to pay social security funds contributions and contribute wage supplements to the Construction Workers’ Holiday and Severance Pay Fund; the employer of that worker is required to pay these wages and make these contributions on the employee’s behalf.
In many cases, employees work within the framework of fulfilling a contract (service contract) which the employer has signed with the client ordering the service.
Several provisions of Austrian law specify for such cases that the client is additionally liable for payment of remuneration, the social insurance contributions and the wage supplements.
Client liability is an additional option for employees to obtain the pay to which they are entitled.
Client liability also ensures that the claims held by public institutions such as social insurance institutions and the Construction Workers’ Holiday and Severance Pay Fund will be satisfied in a segment where attempts are relatively often made to evade payment of such contributions and supplements.
Within the context of the posting of workers or cross-border temporary agency work and the claim to minimum remuneration, the specific rights and obligations described below, which are related to client liability, pertain to employees, clients, employers and user undertakings.
Rights of posted and hired-out workers
1. The employer (in many cases the contractor) is established in a third country (i.e. neither a Member State of the EU, the EEA nor Switzerland) and construction works are not concerned.
Posted workers can assert their claims to the applicable minimum remuneration in Austria against the client, if the client is an entrepreneur.
Hired-out workers can assert their claims to minimum remuneration both against their employers or the user undertaking. In the first place, the worker must claim minimum remuneration from the employer (temporary work agency). The type of legal action that the hired-out worker has to take here can vary (simple request or court action including enforcement and recovery proceedings). The steps that have to be taken depend on whether or not the user undertaking has already paid the temporary work agency the fee for the hired-out worker.
2. The employee has performed construction work
Posted workers can assert their claims to the applicable minimum wage in Austria against the client commissioning the construction works in the particular case, provided that the client is the immediate client of the worker’s employer. A claim can be asserted against the primary client (i.e. the client originally commissioning the construction works, usually a private individual), however, only if prior to commissioning the works the primary client was aware that this amount would not be paid or must, based on unambiguous hints, have seriously reckoned with and accepted the possibility that this amount would not be paid. The original client can nonetheless be held liable under certain conditions where, after the original client awards the contract to the client’s immediate contractor, one or more subcontracts are awarded to other parties as part of arrangements intended to bypass the liability of the original client (who in this case does not have a direct agreement with the worker’s employer).
Workers hired-out on a cross-border basis can assert their claims to the applicable minimum wage in Austria against the client commissioning the construction works in the particular case, provided that the client is the user undertaking of the worker’s employer. The client (the user undertaking) does not necessarily have to be the employer’s immediate client. A claim can be asserted against the primary client, however, usually only if prior to commissioning the works the primary client was aware that this amount would not be paid or must, based on unambiguous hints, have seriously reckoned with and accepted the possibility that this amount would not be paid. In the normal case, the primary client is not the user undertaking and is not liable.
In order for the posted or hired-out worker to assert the liability of the client,
- the worker has to inform the Construction Workers’ Holiday and Severance Pay Fund (BUAK) of the pay claim by no later than eight weeks from when the pay was due;
- in the information provided, the worker has to indicate a specific amount, the wage period, the employer, the place and period of the work provided, and the type of work performed;
- and the outstanding pay must not have expired or be subject to a limitation period.
Please note: Pay claims can lapse within a relatively short period of time. Such claims should therefore be reported to the BUAK as soon as possible.
Based on the information provided by the posted or hired-out worker, the BUAK investigates the details on which the pay claim is based. This institution also supports employees in calculating the amount of claimed wages and in identifying the client potentially liable for covering the claim.
The BUAK informs the client, the contractor and the employee of the results of the investigations and of the amount, which is not binding, of the pay claim as determined by the BUAK.
In this way the BUAK provides a basis for client liability, with the amount of liability being limited to the specified amount.
If the client does not, however, pay the amount specified by the BUAK, the employee must bring a civil action against the client. Only during such proceedings is a decision reached as to whether the client is indeed liable.
An action can only be filed within nine months from the date when the disputed pay was due.
3. The client is a subcontractor under a public-sector contract
Workers posted or hired-out from the EU, the EEA or Switzerland can assert their claims to the applicable minimum remuneration in Austria against the client in the particular case, if the client:
- is an entrepreneur and has accepted a contract from a public-sector client while not necessarily having an immediate contractual relationship with that public sector client;
- is an immediate client of the worker’s employer as subcontractor;
- and has subcontracted at least a part of the contract without authorisation.
The original client can nonetheless be held liable under certain conditions where, after the original client awards the contract to the client’s immediate contractor, one or more subcontracts are awarded to other parties as part of arrangements intended to bypass the liability of the original client (who in this case does not have a direct agreement with the worker’s employer).
In the construction industry, the BUAK supports employees in identifying the client potentially liable for covering the claim. The public-sector client is required to disclose information as to whether subcontracting was authorised.
Special client obligations arising from client liability – relationship with the contractor (employer)
- When the BUAK investigates disputed pay claims, every client is obliged to provide the BUAK on request with information concerning the undertakings commissioned and subcontracts awarded for construction works. Any client refusing to provide this information is assumed for the duration of refusal to be an immediate client of all subsequently commissioned undertakings and to consequently also be liable for the pay claims of the employees of those undertakings.
- Similar rules are specified in relation to the liability of a contractor under a public-sector contract who awards subcontracts.
The employer (i.e. the contractor awarded the contract):
- is required to provide the BUAK with information on request, specifically concerning the construction sites, the employees employed at those sites and the length of employment, and concerning the construction works further contracted to subcontractors and the wages paid – refusing to provide information or providing incorrect information is punishable by a maximum administrative penalty of EUR 10,000;
- forfeits the claim to compensation from the client to the extent of the client’s expense for covering the employee’s remuneration claim as well as the expense of any court action;
if compensation has already been received, is required to reimburse the client with the expense for covering remuneration claims as well as the expense of any court action.