Recent case law on the distinction between ‚hiring out‘ and (sub-)contracting according to Directive 96/71/EC on the posting of workers by foreign companies

For foreign companies performing contracts in Austria, the distinction between „hiring out“ of workers and a works contract is essential: the legal relationship between contracting party and (sub-)contractor involves fewer administrative obligations and liabilities for the contracting party than the „hiring out“.

In important precedents the European Court of Justice (18 June 2017, C- 585/13, Martin Meat) and the Austrian Supreme Administrative Court (22 August 2016, Ra 2017/11/0068) ruled on the fundamental and legally relevant subject matters for the distinction between works contract and „hiring out“.

For this distinction, essential matter is

  • whether the remuneration varies in accordance with the quantity/quality of the services,
  • who is liable for services/works inconsistent with the terms oft he contract,
  • who determines the number of workers considered useful for the performance of a contract,
  • who gives the precise and individual instructions fort he performance of the services concerned.

As the Austrian Supreme Administrative Court demanded a comprehensive legal assessment on a case-by-case basis, there have been numerous decisions by the Austrian Administrative Courts on the details of the distinction.

In many cases, the Administrative Courts have suspended penalty decisions against contractors, based on the assessment that the finance police or the administrative authority have been wrong in presuming a „hiring out“ of workers rather than contracting (e.g. Administrative Court Niederösterreich, 10.12.2018, LVwG-S-523/001-2018; Administrative Court Tirol 5.2.2019, LVwG-2018/14/0803-1; Administrative Court Wien 13.6.2019, VGW-041/078/7475/201).

Due to the considerable fines and the related legal consequences – for instance in the context of participation in public tenders – any case should be accurately legally assessed in accordance with the recent case law. This may lead to a suspension of administrative penalty proceedings or at least a reduction of the fines.

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