Author: Anna Mertinz
Cross-border staff deployments from EU countries to Austria entail a large number of administrative obligations for the companies involved. The Austrian Wage and Social Dumping Act (LSD-BG – Lohn- und Sozialdumping-Bekämpfungsgesetz) stipulates many administrative duties and regulations if companies with their seat in EU countries deploy their employees to Austria (even if this deployment is only for a short time).
The LSD-BG was recently amended (In German: Neues zum Lohn- und Sozialdumping | KWR). Non-compliance with the numerous obligations may result in considerable penalties. According to the provisions of the Posting of Workers Directive (Directive (EU) 2018/957), these penalties must be “effective, proportionate and dissuasive”. The penalties imposed under the LSD-BG in Austria to date show that non-compliance with the requirements for cross-border staff posting is not a trivial offence.
In this context, we would like to discuss a recent decision of the ECJ(C-205/20) regarding the penalties imposed under the LSD-BG. This case concerned CONVOI, a company based in Slovakia, which posted its workers to a company based in Austria (Fürstenfeld). The company did not comply with the notification and document availability obligations incumbent on it under the LSD-BG. An inspection was carried out. As a result, the district authority imposed a fine of EUR 54,000.00 on the company. The company challenged the decision before the Regional Administrative Court of Styria. A preliminary ruling procedure was initiated at the ECJ. The Regional Administrative Court essentially sought information about whether very high fines, in particular high minimum fines, can be imposed cumulatively per worker concerned without setting a maximum fine. This is part of the so-called “cumulative penalty principle” which underlies Austrian administrative law – one penalty per infringement and per worker. These penalties are then added up and result in very high total penalties (=cumulative penalty).
In the case C-64/18 (“Maksimovic Decision”), the ECJ had already ruled on the cumulative penalty principle, stating that high, cumulative penalties would not be lawful. Despite this decision, the Austrian legislator has so far failed to amend the penalty provisions in the LSD-BG in accordance with the Posting of Workers Directive. The Regional Administrative Court therefore had its doubts about the continued application of the Austrian penalty provisions and turned to the ECJ.
Unsurprisingly, the ECJ found in the decision C-205/20 that Austria had failed to transpose the Posting of Workers Directive or had not properly implemented the penalty provisions in the LSD-BG. The Directive says that sanctions for breaches of reporting obligations must be “effective, proportionate and dissuasive”. National courts must ensure that sanctions for non-compliance with administrative obligations are proportionate, the ECJ said. Thus, the ECJ ruled that national courts and authorities would be obliged to apply a national sanctions regime even if it infringes the Posting of Workers Directive as long as it is ensured that the sanctions comply with the principle of proportionality. Whether proportionality is ensured would have to be assessed on a case-by-case basis and under consideration of all the features applying to the relevant situation.
In the national proceedings, no decision has yet been published, so it remains to be seen whether the fine of EUR 54,000.00 will be upheld or whether it will be considered disproportionate.
The “sigh of relief” after the Maksimovic Decision appears to be short-lived. Penalties are to be imposed by Austrian authorities in such a way that they are “effective, proportionate and dissuasive”, despite the weakened cumulative penalty principle.
Key Action Points for Human Resources and In-house Counsel
For this reason, we recommend that domestic and foreign companies comply with the extensive provisions of the LSD-BG when posting staff to Austria..