04 July 2025
newsletter
austria
Austria: VwGH rules that permission is required for purely "virtual" leasing of personnel to non-EEA countries
The Austrian Supreme Administrative Court (Verwaltungsgerichtshof, "VwGH") clarified in a recent decision[1] that leasing employees "remotely" from Austria to a third party based in a non-EEA country constitutes cross-border leasing of employees and requires a special permit. The consequences of this decision affect not only employee leasing agencies or "Employers of Record" but are also significant for groups of companies that "virtually" deploy employees to group companies located in third countries.
Permission requirement for employee leasing to third countries
An Austrian company leased a total of 44 employees from Austria to a company seated outside the EU between 1 July 2021 and 5 April 2023. The employees performed their work exclusively "remotely", meaning they worked and were physically present in Austria and were registered with the Austrian social security system. According to the VwGH, it was undisputed in the present case that employee leasing within the meaning of the Austrian Temporary Employment Act (Arbeitskräfteüberlassungsgesetz, "AÜG") was involved. No special permissions for the cross-border leasing of employees were obtained.
In case of personnel leasing, the employer ("Überlasser") and the third party must comply with the AÜG which also applies to the leasing of employees from Austria to foreign countries. While no permits are required for leasing within the EEA, cross-border leasing from Austria to a third country is only permitted if a regulation[2] on the permissibility of employee leasing to certain countries is in place or if special permission has been issued in advance.[3]
The (Austrian) employer must apply for permission from the competent trade authority, which is granted provided there are no labour market or economic objections to the employee leasing and the protection of employees is not endangered (Section 16 para 2 AÜG). Permission may be denied, in particular, in cases of a shortage of employees with specific qualifications on the Austrian labour market or, for example, if the employee is to be leased to a company based in a country subject to EU sanctions.
Physical border crossing not required
Due to a lack of applicable case law, it was controversially discussed whether permission was required for "virtual" cross-border employee leases. The VwGH now clarifies that leasing employees cross-border to a third country requires permission, even if the employees do not "physically cross the border".
The VwGH based its decision on the fact that the wording of Section 16 para 1 AÜG ("The leasing of employees from Austria to a foreign country is only permitted if [...] a permission pursuant to para. 2 has been granted.") does not require a physical change of location. In addition, the requirements for permission under Section 16 para 2 AÜG, i.e. the protection of employees and the absence of labour market or economic objections to employee leasing, must be met cumulatively.
In the present case, the protection of the employees was not at risk, especially as their physical place of work remained in Austria and they were protected under employment and social security law. Nevertheless, permission may be denied if there are labour market or economic objections to employee leasing. According to the VwGH, such objections may also exist if employees physically perform their work in Austria for a company based in a third country. It therefore follows from the protective purpose of Section 16 AÜG that leasing employees to a company based in a third country requires permission, even if the employees do not physically cross the Austrian border.
Practical consequences of the decision
The VwGH decision has significant consequences not only for personnel leasing agencies and "Employers of Record" but also for (group) companies. Precaution is especially required in cases where employees are employed in Austria but are deployed for other (group) companies in third countries, or if employees are subject to the instructions and supervision of superiors in a third country (e.g. within matrix organisations). In such cases, it is important to assess whether personnel leasing is involved and whether prior permission must be obtained.
If employees whose usual place of work is in Austria are leased to a company based in a third country without prior permission, high administrative penalties may be imposed (up to EUR 5,000, and up to EUR 10,000 in the case of a repeated offence). In addition, further sanctions may be imposed, such as the prohibition of employee leasing or even the withdrawal of the trade licence.
Companies are therefore advised to assess the risk of administrative penalties and to define appropriate strategies to avoid such offences.[4] Our employment law team will be pleased to answer any questions you may have in this regard.
[1] VwGH Ro 2024/11/0002.
[2] Pursuant to Section 15 para 2 AÜG, the Federal Minister of Labour, Social Affairs and Consumer Protection may, after consulting the statutory interest groups and professional associations of employers and employees authorised to conclude collective bargaining agreements, issue a regulation permitting the leasing of employees from Austria to certain countries for specific statutory interest groups, professional associations or their subdivisions. To date, no such regulation pursuant to Section 15 para 2 AÜG appears to be in place, meaning permission must be obtained in all cases.
[3] Permission is required both for leasing from Austria to a third country and from a third country to Austria.
[4] Administrative penalties may be imposed not only for future violations but also for currently pending or previous cross-border "virtual" employee leasing without prior permission (provided the offence is not already time-barred).
Authors: Karin Pusch / Christina Unterdünhofen
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