The case heard by the Supreme Court concerns a Muslim woman who was dismissed from her job after she told her bosses she wanted to wear a full face veil in the future.
The woman, who already wore a headscarf and over-garment known as the Abaya, also said her company discriminated against her while being assigned work tasks due to her religious dress.
She also accused her boss of making discriminatory comments, including saying she was carrying out an “experiment in ethnic clothing”.
The first court recognised the case was likely discriminatory but did not make a legal judgement after deciding further clarification was needed and passing it up to a higher court.
The Supreme Court - the OGH - agreed that the woman was probably discriminated against when it came to being given duties at work, which was further worsened by the comments from her boss.
When it came to wearing a face veil, however, the court ruled that employer was allowed to ban them if they prevent communication and interaction between employers, employees and clients.
In its ruling, the court said leaving the face uncovered is one of the “undisputed basic rules of communication” in Austria.
They concluded that the “stubborn” refusal to comply with her employer's rules meant it was not discriminatory to dismiss the woman from the job.
The woman was awarded €1,200 of the €7,000 compensation she was seeking.