Foundation board member as employee: service agreement, removal and pay

The foundation board manages and represents the private foundation and implements its purpose. These functions arise from section 17(1) PSG. The office therefore follows from appointment and acceptance of the mandate. A service agreement is not a prerequisite for holding the office.

Section 1151 ABGB describes a service agreement as an undertaking to provide services to another for a specified period. The label on a document, and the fact that a board member works regularly, do not settle the classification. The agreed services, their actual performance and their relationship to statutory board duties must be examined together.

The foundation deed, appointment documents, rules of procedure and any service agreement should be read as one file, while keeping their legal functions distinct. A clause that merely describes board responsibilities is not automatically a contract for additional services. Conversely, calling a document a service agreement does not turn all board activities into employment.

The first question concerns the work the person is actually expected to perform. Additional professional work may be possible where it goes beyond managing and representing the private foundation. The description must be concrete and must distinguish the additional work from the duties already attached to section 17 PSG.

The way the work is performed is then relevant. Personal performance, instructions, working-time obligations, integration into an organisation and ongoing supervision may matter when classifying an employment relationship. None of these elements should be inferred from the heading of the agreement alone. The overall factual picture is decisive.

A general clause appointing someone as board member and adviser for all activities does not provide a reliable separation. The foundation should document the board responsibilities, additional services, reporting lines, working resources and remuneration in distinct parts. That makes it possible to identify which payment corresponds to which service.

Appointment or removal of a board member remains a foundation-law decision. A possible employee status does not automatically change that corporate decision. Equally, removal should not be treated as proof that an independent contractual claim disappears without reviewing the service agreement.

If a private foundation without a supervisory board enters into a legal transaction with a foundation board member, section 17(5) PSG requires approval by all other board members and by the court. A separate service agreement may therefore raise a special approval issue in addition to the classification of the work.

Before signature, the foundation deed, the existence of a supervisory board, the representation rules and the consideration for the services should be checked. The file should show which board member is affected and who may validly represent the foundation when the agreement is made, changed or performed.

Approval does not replace a clear description of the services. It also does not decide whether a payment is remuneration for the office under section 19 PSG or consideration for additional work. The article on beneficiary advisory boards and foundation board appointments shows why the allocation of powers within the foundation must be documented carefully.

Section 19(1) PSG provides for remuneration for foundation board members that is consistent with their duties and with the position of the private foundation, unless the foundation deed provides otherwise. This remuneration is linked to the office. The deed may define the amount, calculation or decision-making process in more detail.

If no other rule applies, the court determines the amount under section 19(2) PSG on an application by a foundation body or a board member. The court considers the duties and the position of the private foundation. A separate agreement cannot bypass that structure merely by using a different label for the same board duties.

For services outside the board office, the agreement should state the work, period, consideration and accounting method in a way that can be checked later. If the agreement simply repeats statutory board duties, the basis for a separate payment becomes difficult to demonstrate. Fees, expenses, insurance and additional services should therefore be shown separately.

A payment may appear commercially reasonable and still rest on the wrong legal basis. Before payment, the foundation should compare the deed, resolutions, agreement, approvals and evidence of performance. The file should explain why the payment serves the foundation and its purpose.

Section 27(2) PSG permits removal of a member of a foundation body where the foundation deed provides for it or where there is good cause. The provision refers in particular to serious breaches of duty, inability to perform the tasks properly and specified insolvency or enforcement situations. Removal concerns the corporate office.

Whether a service agreement ends with removal depends on its wording and the applicable rules on termination. A clause may link the contractual end to the office. It may instead contain a separate notice period or arrangements for outstanding work. Without reading the agreement, neither automatic continuation nor automatic termination can be stated safely.

Payment periods should be separated: office remuneration up to the end of the office, payment for additional services actually performed and any claims connected with ending the agreement. The foundation should record the relevant date, outstanding work and the authority of the board after the change.

The article on foundation board remuneration addresses the statutory basis and court determination. It does not replace a separate review of the service agreement or employment-law consequences.