Author: Dr. Burkhard Georg Mötz

Recently, the Supreme Court changed its long-standing line of case law on the protection of the tenant’s interest in property compensation under a property insurance contract and re-evaluated this question. Accordingly, the interpretation of the landlord’s insurance contract may result in the inclusion of the tenant’s interest in property compensation in the form of an implied waiver of recourse by the insurer for cases of slight negligence (OGH of 27 September 2023, 7 Ob 99/23v).

By the action underlying the Supreme Court’s decision, the claimant insurance company sought payment in respect of a claim for damages of the landlord insured with it (the policyholder) against her tenant, the defendant, which had allegedly passed to the insurer pursuant to § 67 VersVG. Between the landlord and the claimant insurer there was a water-pipe damage insurance for the building in which the leased object was also located, which contained no waiver of recourse by the insurer in favour of the tenants. The defendant tenant paid the costs of the water-pipe damage insurance premium proportionately within the framework of the operating-cost statement.

Following a re-evaluation of the question of the protection of the tenant’s interest in property compensation under the landlord’s property insurance contract, the Supreme Court now departs from its previous line of case law (cf. e.g. RIS-Justiz RS0081376, RS0081376, RS0081503) and assumes that the interpretation of the property insurance contract under § 914 ABGB may result in the inclusion of the tenant’s interest in property compensation in the form of an implied waiver of recourse by the insurer for cases of slight negligence.

In the interpretation of the contract, therefore, the recognisable interest situation of the owner (policyholder/landlord) is decisive. This is characterised by the fact that he wishes to avoid disputes with a possessor (tenant) to whom he has – usually on the basis of a contract – granted control of the property. If the tenant’s interest in property compensation were not protected, the policyholder (landlord) would, after the occurrence of the insured event, be compelled to support the insurer in enforcing the claims that had passed to it, which can lead to a considerable strain on the relationship with the tenant. In addition, he may have an interest in protecting the tenant because he has passed the premium (proportionately) on to him. Finally – especially in the case of continuing obligations – the owner’s (landlord’s) interest is to be emphasised in avoiding an impairment of the financial capacity of the property user (tenant) through recourse by the insurer.

According to the Supreme Court, the recognisable and worthy-of-protection interest of the policyholder in a waiver of recourse on account of slight negligence is also not opposed by any such interests of the insurer as would allow it to escape a waiver of recourse. Nor is the protection of the interest in property compensation by way of a waiver of recourse subject to the proviso that no liability insurance exists in favour of the person liable which covers the damage.

In the case assessed by the Supreme Court, the interest situation of the landlord (policyholder) was recognisable for the insurer at the conclusion of the insurance contract, above all because the insurance policy expressly stated that the insured building was an „office, commercial and hospitality operation, dwellings“ and thus a „tenement house“. An honest recipient of the declaration was therefore entitled to rely on the insurer waiving, in any event, claims for recourse on account of slight negligence against those tenants onto whom its policyholder (landlord) typically passes its premiums.

Following the most recent case law of the ECJ on the limitation of holiday entitlements, it was only a matter of time before the principles thereby established would also be reflected in Austrian case law. As a result, the principle hitherto firmly anchored in people’s minds (and strongly simplifying) – that holiday must be taken within three years, failing which it lapses – is largely undermined (OGH 27 June 2023, 8 ObA 23/23z).

The Supreme Court’s decision was based on facts in which the claimant had been employed by the defendant for around 17 years as a gamekeeper and later also as an estate manager. In the event of his absence, temporary staff were deployed, but they lacked the knowledge and experience to fully take over the claimant’s tasks. For this reason he worked for the defendant largely seven days a week in order to ensure the care of the animals and the maintenance of the estate operation.

During his employment relationship the claimant took only 121 days of holiday. The claimant was neither requested by the defendant to take his holiday nor alerted to the looming limitation. At the end of the employment relationship the claimant had (according to his submissions) an open holiday entitlement of 322.75 days. However, relying on § 4(5) UrlG, the employer paid only a holiday compensation payment for the holiday not yet time-barred from its point of view, i.e. for the holiday entitlement of the last three years before the end of the employment relationship. The claimant now also sought the holiday compensation payment for the remaining holiday which, according to his employer’s legal position, was already time-barred.

By law, every employee is entitled to paid annual leave under Article 31(2) of the Charter of Fundamental Rights (CFR). Under Article 7(1) of the Working Time Directive 2003/88/EC, the employee is entitled to a paid minimum annual leave of four weeks. Austrian employment law goes beyond the requirements of EU law by providing, under § 2(1) UrlG, for an annual holiday entitlement of at least 30 working days. Under § 4(5) UrlG, this holiday entitlement becomes time-barred two years after the end of the holiday year in which it arose. A total of three years is thus available for the actual taking of the leave in kind.

While the court of first instance still denied the claimant’s claim on the basis of this legal position, the Higher Regional Court granted his claim to that effect. The Supreme Court confirmed this decision and reasoned it by reference to the case law of the ECJ:

As early as 2018, in a much-noted decision on German holiday law, the ECJ had held that Article 31(2) CFR and Article 7 of the Working Time Directive preclude a limitation of the holiday entitlement where the employee, as the weaker party to the employment contract, did not actually have the possibility of taking the leave – for instance as a result of appropriate information provided by the employer. According to this case law, the task of ensuring that annual leave is actually taken may therefore not be shifted entirely onto the employee. Although, as already noted, these ECJ decisions concerned German legal provisions, they were also widely discussed in Austria, and even then considerable doubts were raised as to the tenability of the previous domestic case law on the limitation of holiday. For the time being, however, the Supreme Court still assumed that the three-year limitation under § 4(5) UrlG conformed to EU law, arguing that three years gave employees a reasonable period to enforce their holiday entitlement.

In the ECJ’s decision in Case C-120/21, LB v TO, it has now, however, been clarified that Article 7(1) of the Working Time Directive also precludes a national rule under which the entitlement to paid annual leave becomes time-barred after a period of three years where the employer has not actually put the employee in a position to exercise that entitlement.

As a result of this ECJ decision on a rule quite similar to § 4(5) UrlG, it is now also established – according to the Supreme Court – that the holiday entitlement secured under EU law (!) cannot become time-barred where the employer has not complied with its (now indisputably existing) duty to request and to inform vis-à-vis the employee. With the latest decision it is thus also clarified that the ECJ lays down, retroactively, a distinct obligation of conduct on the part of the employer in the form of a duty to request and to inform. The Supreme Court did not address the question of whether all of this also applies to the holiday entitlement not secured under EU law, i.e. going beyond the minimum amount of holiday under the Working Time Directive. A certain need for clarification therefore remains here.

For practice, this Supreme Court decision – in particular through the duty to request and to inform vis-à-vis the employee now expressly established also for Austria by the highest court – has serious consequences in many cases. For a breach of these duties entails considerable (financial) consequences. To that extent, in this area not only will the previous handling of open holiday entitlements have to be reviewed, but – where they do not already exist – (ideally automated) systems will also have to be considered in order to comply with the duty to request and to inform. We will of course be happy to support you in this!

Recently, against the background of the COVID-19 pandemic, the Supreme Court issued a decision on the justification of dismissals of „querulous“ employees, from which it can also be inferred, for situations without any COVID connection, that the employer need not accept private opinions voiced within the workforce that conflict with important company concerns or objectives (OGH 25 May 2022, 8 ObA 24/22w).

In the facts underlying the Supreme Court’s decision, the employee announced, in a circular email „couched in a missionary tone“ to all staff in his area of work at a provincial hospital, that he would defy justified instructions of the employer regarding the COVID access tests, or would comply with them only under conditions dictated by himself. The employment relationship was terminated by the employer on account of this conduct.

The justification put forward by the employee in the proceedings – that he was free to hold and express, regarding the reasonableness of the instructions, an opinion deviating from the „mainstream“ – was not called into question by any of the instances. This justification did not, however, help the claimant, because, according to the findings, the reason for his dismissal was not his opinion and the expression thereof as such, but the manner in which he expressed it towards the workforce („missionary“), thereby unsettling the workforce. According to the entirely correct assessment of the Supreme Court, the employer has an overriding interest in avoiding an unsettling of the workforce through statements presented in such a manner.

The decision certainly has a significance going beyond the criticism of COVID measures when it comes to dismissing employees who position themselves, through their statements, against important company concerns or who work against such concerns.

In a recent landmark decision, the Supreme Court clarified the question – hitherto disputed in legal scholarship – of whether a general contractor within a chain of vicarious agents (Erfüllungsgehilfen) can take direct recourse, for example against a sub-subcontractor (so-called „leapfrog recourse“). In summary, according to the Supreme Court this is not possible. Under § 1313 ABGB a contractor can therefore take recourse only against its own agent, but not against the agent of its agent (OGH 30 June 2022, 4 Ob 99/22w).

In the facts underlying the decision of the highest court, the apartment owners of a property (hereinafter: the client) concluded a contract for work with the plaintiff as contractor and property developer for the refurbishment of the residential building. The plaintiff passed the construction work on to another construction company (hereinafter: the subcontractor), which in turn availed itself of further construction companies, including the defendant (as „sub-subcontractor“), for the performance of individual trades. The defendant performed its works and remedial works defectively, as a result of which two of the clients/apartment owners suffered damage due to the ingress of moisture.

In prior proceedings, two of the clients asserted this damage against the plaintiff, i.e. the contractor. Because of the defective works, the plaintiff was ordered by final judgment to compensate the refurbishment costs. The plaintiff contractor now sought, by way of recourse under § 1313 second sentence ABGB, the refurbishment costs it had had to compensate in the prior proceedings from the defendant sub-subcontractor in respect of the construction and execution defects the latter had caused. In summary, it argued that it was irrelevant that the parties to the dispute had not been in a direct contractual relationship in the construction project, because under this provision recourse could be taken by way of the chain of vicarious agents.

The Supreme Court disagreed with the plaintiff’s legal view, denied the asserted claim and gave, in summary, the following reasons for its decision:

§ 1313 second sentence ABGB governs the right of recourse under § 1313 ABGB on account of a breach in the internal relationship between the principal and the agent connected to him by a contractual relationship. In this respect it is also undisputed under the previous case law of the Supreme Court that a contracting party (e.g. a general contractor) in a so-called chain of vicarious agents is also liable for the fault of the further vicarious agent (sub-subcontractor) used by its own vicarious agent. This liability of (e.g.) a general contractor in a chain of vicarious agents is based on the fact that it also avails itself of the „sub-subcontractor“ to pursue its interests vis-à-vis the client. An agent (and thus also a „sub-subcontractor“) itself, however, is – leaving aside the case of a contract with protective effects in favour of third parties – not liable in contract vis-à-vis the client, which is offset by the (contractual) liability of the general contractor for the conduct of the agent.

In view of the fact that, for contractual claims, the client must turn to its contracting party (e.g. the general contractor), it would, according to the Supreme Court, be an inconsistency in the statutory scheme if that contracting party (general contractor) in a chain of vicarious agents could choose whether to take recourse against its own contracting party (subcontractor) or against a further agent (sub-subcontractor).