I INTRODUCTION

The employment law in Switzerland is mainly based upon the following sources, set out in order of their priority:

  1. the Federal Constitution;
  2. cantonal constitutions;
  3. public law, in particular the Federal Act on Work in Industry, Crafts and Commerce (the Labour Act), and five ordinances issued under this Act regulating work, health and safety conditions;
  4. civil law, in particular the Swiss Code of Obligations (CO);
  5. collective bargaining agreements, if applicable;
  6. individual employment agreements; and
  7. usage, custom, doctrine and case law.

The following sources also play an important part in Swiss employment law:

  1. the Federal Act on the Equal Treatment of Women and Men;
  2. the Federal Act on Personnel Recruitment and Hiring-out of Employees;
  3. the Federal Act on Information and Consultation of Workers (the Participation Act);
  4. the Federal Data Protection Act;
  5. the Federal Merger Act;
  6. the Federal Act on Private International Law;
  7. the Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1988 (the Lugano Convention);
  8. the Agreement on Free Movement of Persons between Switzerland and the European Union and European Free Trade Association; and
  9. the Federal Act on Foreigners.

Generally, Swiss law-governed disputes that fall within the jurisdiction of the court of first instance cannot be heard unless there has first been an attempt at conciliation before a conciliation authority. If no agreement is reached before the conciliation authority, the conciliation authority records this fact and grants authorisation to proceed. The plaintiff is entitled to file the action in court within three months of authorisation to proceed being granted.

For amounts in dispute not exceeding 30,000 Swiss francs, a simplified procedure is provided. Up to that amount, the parties shall not be charged any court fees and the judge shall ex officio establish the facts and appraise the evidence at his or her discretion.

Federal, cantonal and communal authorities – except the courts – in general do not play a very important role with regard to individual employment contracts. In some areas, however, the authorities may play a greater role, such as in the issuing of work and residence permits, notification of collective dismissal, or authorisation for night shifts or work on Sundays.

II YEAR IN REVIEW

The State Secretariat for Economic Affairs tightened its licensing practice for hiring out employees from one group company to another group company. Its previous practice was liberal and practicable but was not compatible with the Federal Act on Personnel Recruitment and Hiring-out of Employees. Accordingly, hiring out within a group is only exempt from authorisation if it is an individual case and exclusively promotes the acquisition of experience in technical, linguistic or other respects, serves the transfer of know-how within the group or occurs occasionally.

III SIGNIFICANT CASES

Swiss law distinguishes between variable pay and a fully discretionary bonus. The distinction is important because in the case of variable pay, the employee has a right to a pro rata payment (if the employment is terminated before the payment date) and any change to the bonus needs to be enforced in the same way as a contractual change.

The courts consider a variety of elements for the determination of what constitutes variable pay and what constitutes a discretionary bonus – for example, how often bonuses are paid, how they are calculated (e.g., when they can be calculated exactly they are variable pay and not a discretionary bonus), and the ratio between base pay and a bonus (whereby a high bonus is, in principle, an indication for variable pay). The Federal Supreme Court ruled in August 2015 that the ratio between base pay and a bonus is not important for very high salaries, which are defined as being five times the median salary (currently every annual salary above 354,000 Swiss francs).2 Recently, the Federal Supreme Court further and sensitively restricted the case law applicable to the ratio between base pay and a bonus by creating a new employee category of 'medium to high incomes'.3 For these incomes, which are defined as being between the median wage and five times the median wage (i.e., currently an annual salary of between 70,800 and 354,000 Swiss francs), a bonus might only qualify as variable pay if it exceeds the level of annual income. In the present case, the bonuses claimed by the employee did not surpass the level of annual income, which meant that his argument that the payments were a variable salary to which he had a pro rata entitlement was rejected.

IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP

i Employment relationship

Article 319 et seq. of the CO sets out the mandatory, semi-mandatory and optional provisions relating to individual employment contracts. An individual employment contract can be made in writing, orally or even implicitly (with a few exceptions, such as apprenticeship contracts, which must be in writing) and the law stipulates no time limits with regard to the conclusion of an employment contract. However, certain provisions must be agreed in writing if the parties want to deviate from the provisions set forth in the CO (e.g., notice periods or probation periods). Collective bargaining agreements may also stipulate that deviations from the provisions must be set out in writing.

Furthermore, Article 330b of the CO states that for employment relationships with an indefinite term or with a term of more than a month, the employer must provide the following information in written form to the employee no later than one month after the starting date:

  1. names of the contracting parties;
  2. starting date;
  3. the employee's function;
  4. salary (including bonuses, allowances and other remuneration); and
  5. working time per week.

The written form is usually recommended for all individual employment contracts, particularly because some deviations from the statutory law require written form. Thereby, it is important that 'written' means a wet signature or an electronic signature process approved by the Swiss government based on the Swiss Law on Electronic Signatures.

In addition to the above elements, it is advisable to include the following:

  1. the term of the employment relationship;
  2. rules on probation and notice periods that deviate from the law;
  3. vacation entitlement;
  4. rules on continued payment of wages when ill or pregnant; and
  5. other specific agreements made during contractual negotiations (e.g., non-compete agreements).

Changes to an employment contract can be made by mutual agreement, by concluding an amendment agreement or by issuing a formal notice of change.

ii Probationary periods

If not stated otherwise in the employment contract, the first month of employment is considered the probationary period. During this period, the employment agreement may be terminated with seven days' notice. The parties may mutually agree on a longer probation period, which may not exceed three months. Any inability to work during the probation period (e.g., owing to illness) may extend the probation period.

iii Establishing a presence

A foreign company that is not registered in Switzerland may hire employees to work in Switzerland. It may also hire Swiss employees through a Swiss agency or a third party without registering. A foreign company may also hire an independent contractor; however, due care must be taken that the contractor does not qualify as an actual employee because the risks involved can be substantial (e.g., lack of insurance cover).

An independent contractor may create a permanent establishment (PE) for tax purposes, depending on the form of organisation and the work performed. The more a contractor gives the appearance of being a part of the organisation of the foreign company, for example with offices acting in the name or on behalf of the company, the higher the risk of creating a PE. A company that establishes a PE is subject to taxation in Switzerland.

Generally, the foreign company and its Swiss employees become subject to the same social security regime as any Swiss company. Therefore, the foreign company must register with all social security organisations and establish a pension scheme for the employees. The employees' social security contributions must be withheld by the foreign company. Withholding of income tax only applies to employees that do not have a permanent residence permit.

V RESTRICTIVE COVENANTS

Pursuant to Swiss employment law, an employee may make a commitment to the employer to refrain from any competing activity for a period after termination of the employment relationship. A post-termination non-compete clause is only binding if the employment relationship gives the employee access to customer data, manufacturing secrets or business secrets, and if the use of such knowledge could significantly damage the employer. According to the Federal Supreme Court this is never the case when the relationship between client and employer or between client and employee is strongly personal. The non-compete clause must be made in writing and shall be reasonably limited in terms of place, time and subject, to preclude an unreasonable impairment of the employee's economic prospects. The statutory maximum duration of a post-termination non-compete clause is three years, but typically does not exceed one year. The law does not require consideration for the post-termination non-compete covenant.

A judge may limit an excessive prohibition of competition. If an employer gives consideration in return for a non-compete agreement – although this is not legally required – it is more likely that the covenant will be fully enforceable. A prohibition on competition lapses if the employer no longer has a significant interest in upholding the prohibition. As a matter of law, any non-compete clause will cease to apply if the employment is terminated by the employer, unless the employee has set a reason, or even provoked the termination.

VI WAGES

i General

Two Swiss cantons have implemented a general minimum wage into their cantonal constitutions. Other cantons or federal laws do not provide for the same.

However, many collective employment contracts include a minimum wage. In light of the freedom of movement of labour within the European Union, the authorities started to implement a mandatory minimum wage in areas where undercutting of market standard wages by foreign labour has become an issue (e.g., in Geneva, the government implemented a minimum wage for the retail sector).

For Swiss stock corporations listed in Switzerland or abroad, the ordinance on compensation provides for a prohibition of certain compensation payments to senior management. The prohibited payments are, inter alia, severance payments, sign-on bonuses and bonuses for certain M&A transactions.

ii Distinction between variable pay and discretionary bonuses

As outlined in Section III, Swiss law makes an important distinction between variable pay and a gratification (a fully discretionary bonus). The term 'bonus' is not regulated in employment law. Hence, a bonus either qualifies as (variable) salary or as gratification.

The Federal Supreme Court has often had to deal with bonus entitlements, in particular with pro rata entitlements in the case of terminated employment agreements. While the employee has a statutory right to receive a (variable) salary, the entitlement to a gratification only exists in the case of an agreement. Without any agreement it is basically at the discretion of the employer to provide a gratification. Whether the bonus is considered (variable) salary or a gratification is crucial as only in the latter case may the employer have a chance to deny a (pro rata) entitlement of an employee leaving the company.

The qualification of a payment as either salary or a gratification depends first on the wording of the employment agreement. While an entitlement would suggest (variable) salary, a possible payment in the full discretion of the employer suggests a gratification. Additionally, the communication of the employer when granting a payment is taken into account: when granting a gratification, it should always be stated that the payment was made voluntarily and in the full discretion of the employer. But even if the agreement between the parties and each bonus communication provides that the payment is not mandatory and the grant remains at the full discretion of the employer, the payment may still be qualified as salary. This is the case, for instance, if the amount of the payment exclusively depends on objective factors – for instance, if the amount of the payment can be calculated according to a certain formula. Further, the employee might have a right to the payment if the employer's reservation of the voluntary status of the bonus payments is considered rhetoric without any real meaning. Courts tend to assume this when bonus payments are made continuously for a number of years.

In addition, the Federal Supreme Court ruled that only payments that are of a secondary nature compared with the salary itself can be considered as a gratification. In light of the Federal Supreme Court's latest case law, this is true for employees with low incomes (i.e., below the simple median wage, which is currently 70,800 Swiss francs). For such low incomes, larger bonus payments are categorised as salary. For medium to high incomes, which are between the median wage and five times the median wage (between 70,800 Swiss francs and 354,000 Swiss francs), a bonus might only qualify as variable pay if it exceeds the level of the annual income. Whenever a very high salary is granted, a bonus will be qualified as a gratification unless the documentation indicates otherwise.

The distinction between salary and a gratification is relevant because if a bonus qualifies as (variable) salary, then the employee has a right to receive a bonus during any period of gardening leave (e.g., based on past bonus payments) and any condition that the employee may not be under notice to receive a bonus is considered void.

iii Working time

The Labour Act provides for a strict obligation of companies to maintain detailed time-keeping records (including the start and ending times of the working day and break times) of all employees being governed by the Labour Act. In principle, the Labour Act applies to all employees. Only certain types of professional and very senior management personnel are exempt. Very senior management personnel are those employees who are allowed to make important decisions that can affect the structure, the course of business and the development of a business or a part of business.

A huge disparity has evolved over the past few years between this obligation and the reality of day-to-day operations in many businesses. The law provides for two possibilities to simplify the time-recording obligation: employees who meet certain requirements may not be required to record their hours at all or will be required to keep track of their hours in a simplified form. In order to make use of one of these possibilities, companies must meet very strict requirements. To be able to waive the recording of working hours, an employer must have a collective agreement in place allowing for an exemption of the time-keeping obligation, and employees to be exempted from this obligation must earn more than 120,000 Swiss francs per year.

The Labour Act determines the maximum weekly hours of work, distinguishing between two categories of employees:

  1. workers employed in industrial enterprises and white-collar workers (office workers, technical staff and other salaried employees) as well as sales staff in large retail undertakings; and
  2. other workers, mainly in the construction sector, and craftsmen, workers in commerce and sales staff in small retail undertakings.

The maximum hours of work are fixed at 45 hours a week for the first category and 50 hours a week for the second. If both categories of employees are employed in the same enterprise the maximum of 50 hours applies to both categories. Within these limits the effective hours of work are fixed by collective agreements and individual contracts.

Work between 11pm and 6am is considered night work. With the exception of certain businesses and groups of employees (as outlined by Ordinance No. 5 to the Labour Act), night work is forbidden. However, a special permit for such work may be issued if the employer evidences a special or urgent need. In any case the night work may not exceed nine hours in a maximum time frame of 10 hours, including breaks. If the employee provides services on only three of seven consecutive nights, the night work may amount to 10 hours in a maximum time frame of 12 hours, including breaks. Employees may be entitled to a time or salary premium when working at night.

iv Overtime and excess hours

Swiss law provides for overtime and excess hours. Overtime is addressed in Article 321c of the CO and concerns cases in which the employee works more than the working hours stipulated in the employment contract, up to the maximum working time allowed under the Labour Act. Pursuant to the CO, any overtime not compensated by time off must be paid by the employer with a supplement of at least 25 per cent of the applicable wage, unless there is an agreement to the contrary in writing (i.e., a collective agreement or individual employment contract). Thus, an agreement may provide that no supplement applies or that any overtime is included in the standard wage. Generally, the second option is used in management contracts.

Excess hours relate to the hours worked in excess of the Labour Act limits of 45 or 50 hours (see subsection iii). The payment of a wage supplement of 25 per cent of the hourly wage is a mandatory provision from which the parties may not depart by agreement (in contrast to overtime). The Labour Act specifies that for white-collar workers and sales staff in large retail undertakings, the supplement is due only if the total excess hours performed exceed 60 hours per calendar year. Additionally, excess hours of a single employee may not exceed two hours a day except on a free weekday or in a case of urgency and may not, for employees with a maximum working time of 45 hours a week, exceed 170 hours a year. For employees with a maximum working time of 50 hours a week, the maximum excess hours per annum may not exceed 140 hours.

VII FOREIGN WORKERS

Switzerland has a dual system for the admission of foreign workers. Nationals from EU or EFTA countries benefit from the Agreement on Free Movement of Persons and, in general, do not need a work permit if residence is taken in Switzerland. With regard to non-EU and non-EFTA nationals, only a limited number of management-level employees, specialists and other qualified employees are admitted from all other countries (subject to a quota as determined by the Federal Council).

If foreign nationals (without residence in Switzerland) work in Switzerland temporarily for more than eight days for a non-Swiss company, they must be reported to the authorities in advance even if no work or residence permit is required. Furthermore, the employer must comply with the standard working conditions, including minimum salary levels. For certain employment sectors, reporting, or even a permit, is required from the first day of work.

There is no limit as to how many foreign employees may work for one company and no obligation on the employer to maintain a list of foreign workers.

All foreign employees resident in Switzerland but with no permanent residence permit are subject to tax at source. Foreign workers are subject to the same working conditions and benefits as Swiss employees.

Pursuant to the Federal Act on Private International Law, the applicable law regarding employment relationships is the country where the employee usually performs his or her duties. The parties may, however, agree that either the law of the country in which the employee has his or her permanent residence or the law of the country in which the employer is domiciled apply. Consequently, it may be possible to submit foreign workers of foreign entities to the laws of their home country. However, social security obligations may not be overridden by such choice of law.

VIII GLOBAL POLICIES

The employer may establish general directives and give specific instructions about the execution of work and the conduct of employees in the company. Furthermore, the employer must take prescribed measures to protect the life, health and integrity of the employees and in particular to take care that the employee is not subject to sexual harassment or discrimination. Therefore, it is very common in Switzerland to set up rules on accepted behaviour and the consequences in case of non-compliance. Usually, employees must accept that they will comply with the rules in writing. There is no strict requirement, however, that employees sign such policies, but it is recommended to have evidence on file that an employee received the policy.

The purpose of the Federal Act on the Equal Treatment of Women and Men is to ensure equal treatment at work by means of a general prohibition of discrimination based on gender – including a prohibition of sexual harassment. This Act provides for sanctions if the employer does not comply.

IX TRANSLATION

In principle, there are no regulations regarding the required language of employment documents. However, employees need to be able to understand the employment conditions because otherwise such conditions may not be enforceable. Therefore, it is recommended to translate all employment conditions into a local language. This is very important in particular for the main documents, such as the employment contract and general employment conditions.

There are no formalities for the translation. However, it should be clearly stated which language shall prevail in the event of any conflict between the languages. Further, formal translation by a recognised translator may be necessary if only foreign documents exist in case of a court dispute. This is not the case when the document was already translated when it was entered into.

X EMPLOYEE REPRESENTATION

Pursuant to the Participation Act, employees may elect a works council in companies with at least 50 employees. The works council representatives must be informed of all matters on which they need information to fulfil their tasks, and they must be consulted on the following matters:

  1. security at work and health protection;
  2. collective dismissals;
  3. affiliation to an occupational pension fund and termination of the affiliation agreement; and
  4. transfer of undertakings.

The establishment of a works council must be passed by a resolution of at least one-fifth of all employees. Once a positive decision has been made, the election of the representatives may take place. The number of representatives must be determined by the employer and the employees according to the size of the company but may not be below three. The employer must inform the works council at least once a year about the impact of the course of business on the employees. Within the framework of the Participation Act the works councils may decide how to organise themselves.

Apart from the Participation Act, the law sets out no special rights for works councils within the company, but such rights are recognised by some collective agreements.

Generally, a substantial number of companies with more than 50 employees do not have a works council.

XI DATA PROTECTION

i Requirements for registration

Private persons must register their database if they regularly process sensitive personal data or personality profiles, or if they regularly disclose or transfer personal data to third parties. However, because the employers must collect certain data of the employees pursuant to social security laws, tax law and also the CO (e.g., with regard to the data required to issue a reference letter), they are exempted from the duty to register. If, however, companies collect additional data that, by law, does not need to be collected, there could be a duty to register.

Pursuant to the Federal Data Protection Act, personal data must be acquired lawfully, and processing must be lawful, in good faith and not be excessive, and is only allowed for the purpose indicated for the processing or evident under the circumstances or given by law. Employment law further extends the scope of protection granted under the Act. Article 328b of the CO only allows the processing of data that refers to the employee's aptitude for the job or is necessary for the performance of services.

Personal data must be protected from unauthorised processing through adequate technical and organisational measures. The employee must be informed about the collection and processing of sensitive personal data or personality profiles (see subsection iii), for example, in a data protection and privacy policy. An employee may at any time request access to his or her employee file.

ii Cross-border data transfers

Cross-border data transfers without the employee's consent are permitted if adequate cross-border data protection agreements are in place and information about such agreements is given to the Federal Data Protection and Information Commissioner or if the respective countries provide for an adequate level of data protection. With regard to the processing of data of private individuals, the Commissioner has established a list of countries that have implemented equivalent data protection legislation, which is publicly available on the internet.4 For example, the level of protection provided for private individuals by EU countries is deemed adequate. By contrast, the level of protection provided for the United States is not considered as being adequate. In order to reach an adequate level of protection, the Swiss–US Privacy Shield Framework provides a valid legal mechanism to comply with Swiss requirements when transferring personal data from Switzerland to the United States.

The processing of personal data may be assigned to third parties by agreement or by law if the data is processed only in the manner permitted for the instructing party itself, and it is not prohibited by a statutory or contractual duty of confidentiality.

iii Sensitive data

Personal data pursuant to the Data Protection Act means all data that refers to a certain person. Sensitive personal data means all data relating to:

  1. religious, ideological, political or trade union-related views or activities;
  2. health, personal life or racial origin;
  3. social security measures; and
  4. administrative or criminal proceedings and sanctions.

The processing of sensitive personal data is only allowed if the relevant person is informed about the controller, the purpose of the processing and the categories of data recipient if a disclosure of personal data is planned.

iv Background checks

As a rule, the employer may not conduct background checks or have these checks performed by third parties without the explicit consent of the applicant. Even if the applicant consented to a background check, the check would be – in consideration of the applicant's privacy – limited to information that strictly relates to whether the applicant fulfils the requirements of the job. For instance, any questions in regard to the applicant's health must be directed to find out whether the applicant is currently fit to work. Any further investigations to find out whether there is a general risk that the applicant could become ill in the long term would not be allowed.

XII DISCONTINUING EMPLOYMENT

i Dismissal

A contract concluded for an indefinite period terminates after a notice given by either of the parties (ordinary termination). In principle, no cause to terminate an employment relationship is required. The minimum notice period is set forth in the CO. The parties may not, however, reduce this period to less than one month, subject to any longer periods set forth in collective bargaining agreements. Nevertheless, because of the protection against abusive termination, the employee has a statutory right to be informed of the reasons for the termination in writing, on request.

A termination of an employment agreement must not be abusive. A party that abusively gives notice of termination of the employment relationship must pay an indemnity to the other party. The termination of the employment contract by either party is considered abusive if, for example, it occurs for one of the following reasons:

  1. personal characteristic of one party (e.g., race, creed, sexual orientation, age), unless they are relevant to the employment relationship or significantly impair the cooperation within the enterprise;
  2. the other party makes use of a constitutional or contractual right; or
  3. where the sole purpose was to frustrate the formation of claims arising out of the employment relationship.

If any of the parties has a 'significant cause' it may terminate the contract at any time, without prior notice (extraordinary termination or summary dismissal) and may claim compensation for the damage caused from the other party. But, if the employer terminates the contact with immediate effect without a significant cause, the employer must compensate the employee for the damage that has thus been caused to him or her plus a penalty of up to six months' remuneration.

Generally, if an employee aged 50 or older leaves employment after 20 or more years of service, the employer must pay severance compensation of between two and eight months' salary. Such severance pay, however, is not very common in Switzerland, because the employer can deduct the contributions made to the (mandatory) pension plan from the mandatory severance pay.

The parties may agree upon (immediate) termination of an employment agreement at any time. The CO sets forth no explicit provisions with regard to a termination agreement. However, according to the case law, the mandatory provisions of the CO shall be taken into account and the agreement must include benefits for both employer and the employee. Otherwise, the judge may declare the termination agreement as null and void.

No categories of employees are protected from dismissal in general, but there are certain periods during which a notice of termination is invalid. After the probation period has expired, the employer may not terminate the employment relationship at the following times:

  1. when the employee is performing military service or civil defence;
  2. when the employee is prevented from working through no fault of his or her own as a result of sickness or an accident (for a certain period depending on the year of employment, up to 180 days);
  3. during pregnancy and for 16 weeks following the birth of the baby; or
  4. when the employee participates in an official aid project in another country.

Any notice to terminate an employment contract during such period is invalid. Any notice served before such period starts is suspended when the period begins and then recommences after recovery from illness or accident or expiration of the protection period.

In principle, an employee who is dismissed by ordinary termination may be released from his or her duty to work (gardening leave) at any time. The employer must continue to pay salary until expiry of the ordinary termination period, but the employer may set off any income generated by the employee during the time of the release (if the employee was allowed to start a new job).

Apart from the regulations regarding mass dismissal the company has no duty to inform any authority about a dismissal (exceptions apply in regard to apprenticeship contracts).

ii Collective dismissals

The CO provides special rules regarding collective dismissals. Article 335d defines collective dismissals as notices of termination in enterprises issued by the employer within a period of 30 days for reasons unrelated to the person of the employee and that affect:

  1. at least 10 employees in companies usually employing more than 20 and fewer than 100 persons;
  2. at least 10 per cent of all employees in companies usually employing more than 100 and fewer than 300 persons; and
  3. at least 30 employees in companies usually employing at least 300 persons.

Regarding collective dismissal, the employer must inform and consult with the works council or the employees. Employers must also inform the cantonal labour office of every planned collective dismissal.

Non-compliance with the procedural rules by the employer constitutes abusive termination of the affected employment, which may lead to damages payment and additional remunerations and in the case of substantial non-compliance the terminations can be found void and reinstatement ordered.

Companies normally employing 250 employees or more and making within a period of 30 days at least 30 employees redundant have to negotiate with the employees or their representatives a social plan to work as a safety net for the dismissed employees. For companies below that threshold no obligation to issue a social plan for the terminated employees exists. However, there can be obligations to negotiate or issue a plan based on collective agreements. In addition, any mandatory early retirement obligations set forth in the pension plan regulations of a company should be considered.

XIII TRANSFER OF BUSINESS

Generally speaking, the Swiss law applicable to the transfer of undertakings is quite similar to the provisions laid out in the EU Council Directive 2001/23 of 12 March 2001. Pursuant to Article 333 of the CO, the employment relationship is transferred from the employer to a third party if the employer transfers the enterprise or a part thereof to the third party and if this transfer does not take place within a restructuring scenario. Article 333 is also applicable if a single business unit of the enterprise is transferred. However, it is required that the business unit maintains its structure and organisation after the transfer, although it is not required that any assets are transferred together with the employment relationship. Article 333 may also apply in the case of an outsourcing or re-sourcing. It depends on how the outsourcing or re-sourcing is structured, namely, the services that are outsourced or re-sourced, the assets transferred and the organisation of the provision of the services before and after the outsourcing or re-sourcing.

If a transaction qualifies as a (partial) business transfer, the employment relationships existing at the time of the transfer (including the ones under notice) are automatically transferred, including all rights and obligations as of the date of transfer, unless an employee objects to the transfer. If an employee objects to a transfer, the employment relationship is terminated upon the expiry of the statutory notice periods even if longer or shorter contractual notice periods apply.

The current employer and the new employer are jointly and severally liable for an employee's claims that have become due before the automatic transfer and that will later become due until the date upon which the employment relationship could have validly been terminated.

If the business transfer takes place within certain restructuring scenarios, the automatic transfer of employees dedicated to the transferred business does not take place. Only the employees chosen by the buyer will transfer. Also, the purchaser is – within certain restructuring scenarios – not jointly and severally liable with the seller for pre-transaction claims of the employees.

If a collective employment contract applies to any employment relationship transferred, the new employer would need to comply with it for one year unless the collective employment contract expires earlier or is terminated by notice.

If any redundancies, terminations or changes in the working conditions are planned in connection with a business transfer, the works council, if any, or otherwise the employees need to be consulted in due time before the decision to make employees redundant is made or the changes in the working conditions implemented. This consultation process is also necessary if the employees will be dismissed or the changes implemented after the transfer (by the new employer), because such dismissals and changes would be seen as a result of the transfer of the business if implemented within the first few months of the transfer. The consultation process needs to be conducted before any decisions in regard to any measures are made. The employer needs to give the works council or the employees at least the possibility to make suggestions on how to avoid any measures, specifically on how to limit the number of dismissals.

The employer has to provide all pertinent information to the works council or to the employees. According to the case law, the employees or the works council need to have at least 14 days to make their suggestions or proposals. In the case of a breach of the duty to consult, the employer could become liable for any damages of the employees. Further, the government can force the involved parties to conduct the consultation process (which could delay a contemplated transfer considerably) and can fine the parties. In addition, it is argued by some scholars that any terminations issued or implemented changes are void.

After the consultation, or directly if no consultation is required, the works council or the employees, if no works council is established, need to be informed in due time before the transfer of:

  1. the reasons for the transfer;
  2. the results of the consultation process (if any required); and
  3. the final legal, economic and social consequences of the transfer for the employees (including the number of dismissals and changes to the working conditions).

XIV OUTLOOK

The legislative process for a new data protection law commenced some time ago. The Federal Council published a draft of this law on 15 September 2017, which is similar to the EU General Data Protection Regulation. The draft is currently under discussion and will be amended during the legislative process.


Footnotes

1 Ueli Sommer is a partner and Simone Wetzstein is a managing associate at Walder Wyss Ltd.

2 BGE 141 III 407 as of 11 August 2015.

3 BGer 4A_714/2016 of 29 August 2017.