The Employment Law Review: Switzerland
Employment law in Switzerland is mainly based on the following sources, listed in order of priority:
- the Federal Constitution;
- cantonal constitutions;
- public law, in particular the Federal Act on Work in Industry, Crafts and Commerce (the Labour Act), and five ordinances issued under this Act that regulate work, health and safety conditions;
- civil law, in particular the Swiss Code of Obligations (CO);
- collective bargaining agreements, if applicable;
- individual employment agreements; and
- usage, custom, doctrine and case law.
The following sources also play an important part in Swiss employment law:
- the Federal Act on the Equal Treatment of Women and Men;
- the Federal Act on Personnel Recruitment and Hiring-out of Employees;
- the Federal Act on Information and Consultation of Workers (the Participation Act);
- the Federal Data Protection Act;
- the Federal Merger Act;
- the Federal Act on Private International Law;
- the Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1988 (known as the Lugano Convention);
- the Agreement on Free Movement of Persons between Switzerland and the European Union and European Free Trade Association; and
- the Federal Act on Foreign Nationals and Integration.
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 the 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 establish the facts ex officio and appraise the evidence at his or her discretion.
In general, federal, cantonal and communal authorities – except the courts – do not have a very important role with regard to individual employment contracts. In some areas, however, the authorities may have a greater role, such as in the issuing of work and residence permits, notification of collective dismissal, or authorisation for night shifts or working on Sundays.
Year in review
The year 2020 was characterised by the coronavirus. To secure jobs, the government decided to ease the usually strict requirements for short-term work compensation. Short-term work is the temporary reduction or suspension of labour while the employment contract remains in force. However, the state provides compensation for up to 80 per cent of lost working hours. Furthermore, the government introduced the right for vulnerable individuals to work from home. It must be noted that, under normal circumstances, an employee is not allowed to perform his or her duties from home without the employer's consent. If an employee insists on working from home, it may be considered as a refusal to work and, as such, the employee risks their employment being terminated with immediate effect.
Besides the coronavirus and the effect it has had on Swiss labour law, the Swiss population voted in favour of the introduction of a paid two-week paternity leave. The respective amendment of the Swiss Federal Act on Compensation for Loss of Earnings for Persons on Military Service or Maternity Leave will enter into force on 1 January 2021.
In a recent decision, the Federal Supreme Court addressed the question of whether a change to a pension fund requires the prior consent of affected employees.2 As stated in the Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans Act, employees have the right to participate in a decision to terminate an affiliation contract with a pension fund. According to the Federal Supreme Court, it is not sufficient merely to inform the employees or to obtain employees' approval subsequent to such a decision. Therefore, the termination of an affiliation contract with a pension fund cannot be effective without the prior consent of the employees. Further, according to the Federal Supreme Court, obtaining employees' approval subsequent to a termination decision is not deemed sufficient. Hence, the Federal Supreme Court considers the termination of an affiliation contract with a pension fund without the prior consent of the employees as invalid. However, the Federal Supreme Court has not stipulated any specific modalities or procedures in respect of the participation of employees. Usually a vote on the approval needs to take place, for which the necessary quorum and majorities must be determined in advance.
Basics of entering into 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:
- names of the contracting parties;
- starting date;
- the employee's duties;
- salary (including bonuses, allowances and other remuneration); and
- working hours per week.
The usual recommendation is for all individual employment contracts to be in written form, particularly because certain deviations from statutory law must be stated in writing. 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:
- the term of the employment relationship;
- rules on probation and notice periods that deviate from the law;
- vacation entitlement;
- rules on continued payment of wages when ill or pregnant; and
- other specific agreements made during contractual negotiations (for example, 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 an open-ended employment relationship is considered the probationary period. During this period, the employment agreement may be terminated with seven days' notice. The parties may mutually waive a probationary period, or 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. However, Swiss law does not provide for any probationary periods in respect of fixed-term employment relationships. If the parties wish to apply a probationary period, it is essential to have a written provision in the employment contract.
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 its employees. The employees' social security contributions must be withheld by the foreign company. Withholding of income tax only applies to employees who do not have a permanent residence permit.
Pursuant to Swiss employment law, an employee may make a commitment to an employer to refrain from any competing activity for an established period after termination of their 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 that 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 a 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 for, or provoked, the termination.
Three Swiss cantons have implemented a general minimum wage into their cantonal constitutions. In a fourth canton, the population voted in favour of a general minimum wage. However, neither the other cantons nor federal laws provide for the same.
Nevertheless, 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 within 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 merger and acquisition transactions.
ii Distinction between variable pay and discretionary bonuses
Swiss law makes an important distinction between variable pay and a gratification (a fully discretionary payment). The term 'bonus' is not regulated in employment law. Hence, a bonus is qualified as either (variable) salary or a 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. Although 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 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 is it possible for the employer to deny the (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. Although an entitlement would suggest (variable) salary, a possible payment at the 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 at the full discretion of the employer. However, 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 depends solely 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 has 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 most recent 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 for companies to maintain detailed records of time-keeping (including the start and end 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 part of business.
A huge disparity has evolved during the past few years between this obligation and the reality of day-to-day operations in many businesses. The law provides for possibilities to simplify or even waive the obligation to record time-keeping. 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. Employees to be exempted from this obligation must earn more than 120,000 Swiss francs per year and must have a high degree of autonomy in their work. Even for a simplified record of working hours, a collective agreement between employer and employee representation must be in place, and employees benefiting from a simplified record of hours worked must have a considerable working time autonomy.
The Labour Act determines the maximum number of working hours per week, distinguishing between two categories of employees:
- category 1 – workers employed in industrial enterprises and white-collar workers (office workers, technical staff and other salaried employees), and sales staff in large retail undertakings; and
- category 2 – other workers, employed mainly in the construction sector, and craftsmen, workers in commerce and sales staff in small retail undertakings.
The maximum number of working hours is fixed at 45 a week for category 1 and 50 a week for category 2. If a single enterprise has employees in both categories, the maximum of 50 hours applies to all employees. 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 event, the night work may not exceed nine hours within a maximum time frame of 10 hours, including breaks. If an 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 doing night work.
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 an employee works more than the number of hours stipulated in the employment contract, up to the maximum working time allowed under the Labour Act (i.e., 45 or 50 hours). 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.
The term 'excess hours' relate to the hours worked beyond the Labour Act limits of 45 or 50 hours (see Section VI.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 of excess hours worked exceeds 60 hours per calendar year. Additionally, an employee may not work more than two excess hours on any day except on a free weekday or in a case of urgency. Employees whose maximum working time is 45 hours per week may not work more than 170 excess hours per year. Employees whose maximum working time is 50 hours a week,may not work more than 140 excess hours per year.
Switzerland has a dual system for the admission of foreign workers. Nationals from countries within the European Union or European Free Trade Association (EFTA) benefit from the Agreement on Free Movement of Persons and, in general, are entitled to receive a work permit, which can be obtained quite easily. 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 temporarily in Switzerland 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 to the number of foreign employees who 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 citizens.
Pursuant to the Federal Act on Private International Law, the applicable law regarding employment relationships is that of the country where the employee usually performs his or her duties. However, the parties may 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 from foreign entities to the laws of their home country. However, social security obligations may not be overridden by such a choice of law.
An employer may establish general directives and give specific instructions about the execution of work and the conduct of its employees. Furthermore, the employer must take prescribed measures to protect the life, health and integrity of its employees and in particular to take care that the employee is not subjected to sexual harassment or discrimination. Therefore, it is very common in Switzerland for companies to set up rules on accepted behaviour and the consequences in the event of non-compliance. Usually, employees must agree in writing that they will comply with the rules. 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 ban on discrimination based on gender, including sexual harassment. Furthermore, this Act provides for a ban on any discrimination that leads to refusal of employment or to dismissals and foresees sanctions if an employer does not comply.
By statute, mothers are entitled to maternity leave of 14 weeks. Federal statutory maternity pay amounts to 80 per cent of the remuneration received before childbirth and is capped, currently, at a maximum of 196 Swiss francs per day during the 14 weeks. Federal maternity pay is financed by the social security contributions of all employers and employees and administrated by a government agency. Mothers are entitled to the federal maternity pay if, during the nine months immediately prior to childbirth, she (1) was compulsorily insured during those nine months within the meaning of the Retirement and Survivors Act, (2) has been gainfully employed for at least five months during this period and (3) at the time of confinement, is either an employed or self-employed person or works in her husband's business and receives a cash wage.
In addition to the federal statutory maternity pay arrangements, some employers grant additional maternity pay benefits: for example, they might cover the difference between federal statutory maternity pay and the employee's full salary or pay benefits for a longer period, or both.
During pregnancy and for 16 weeks following childbirth, employees are protected from being dismissed. Any termination notice issued during this period is void. Any notice served before this period starts is suspended when the period begins and then recommences after the protection period (see also Section XIII.i).
Fathers are entitled to paternity leave for two weeks. In general, paternity leave follows the principles of maternity leave. The allowance amounts to 80 per cent of the average income received before childbirth and is capped at a maximum of 196 Swiss francs per day during the two weeks. Both maternity pay and paternity pay are financed by the same government agency.
Those entitled to paid paternity leave are (1) the legal father, who (2) has been mandatorily insured with social security during the nine months prior to the child's birth, (3) was gainfully employed for at least five months during the nine months prior to the child's birth, and (4) is employed or self-employed at the time of the child's birth.
In contrast to maternity leave, the CO has no provisions regarding protection from dismissal during paternity leave. Hence, an employer may terminate a employment contract during an employee's paternity leave.
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 those 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 regarding the translation. However, it should be clearly stated which language shall prevail in the event of any conflict between the languages. Further, a formal translation by a recognised translator may be necessary if only foreign documents exist in respect of a court dispute. This is not the case when a document was already translated when it was drawn up.
Pursuant to the Participation Act, employees at companies with at least 50 employees may elect a works council. 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:
- security at work and health protection;
- collective dismissals;
- affiliation to an occupational pension fund and termination of the affiliation agreement; and
- transfer of undertakings.
Before a works council can be established, a resolution by at least one-fifth of all employees must be passed. 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 fewer than three. The employer must inform the works council at least once a year about how the course of business will affect employees. Within the framework of the Participation Act, 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 these rights are recognised by some collective agreements.
A substantial number of companies with more than 50 employees do not have a works council.
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 employers must collect certain data about their employees pursuant to social security laws, tax law and the CO (e.g., with regard to the data required to issue a reference letter), they are exempt from the duty to register. However, if 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. Further, personal data is only allowed for the purpose indicated for 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 an employee's aptitude for a job or is necessary for the performance of services.
ii Cross-border data transfers
Cross-border data transfers without the employee's consent are permitted only if adequate cross-border data protection agreements are in place and information about those 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 about private individuals, the Commissioner has established a list of countries that have implemented equivalent data protection legislation, which is publicly available on the internet.3 For example, the level of protection provided for private individuals by EU Member States is deemed adequate. By contrast, the level of protection provided by the United States is not considered as being adequate. 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
Pursuant to the Federal Data Protection Act, personal data means all data that refers to a certain person. Sensitive personal data means all data relating to:
- religious, ideological, political or trade union-related views or activities;
- health, personal life or racial origin;
- social security measures; and
- administrative or criminal proceedings and sanctions.
The processing of sensitive personal data is allowed only 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, an employer may not conduct background checks or have these checks performed by third parties without the explicit consent of a job applicant. Even if the applicant has 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 limited to 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.
A contract concluded for an indefinite period terminates after notice is 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. However, the parties may not 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, an employee has a statutory right, on request, to be informed in writing of the reasons for termination of the contract.
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. Termination of the employment contract by either party is considered abusive if, for example, it occurs for one of the following reasons:
- a personal characteristic of one party (e.g., race, creed, sexual orientation, age), unless this aspect is relevant to the employment relationship or significantly impairs cooperation within the enterprise;
- the other party makes use of a constitutional or contractual right; or
- where the sole purpose was to frustrate the formation of claims arising out of the employment relationship.
If any party has a 'significant cause', it may terminate the contract at any time, without prior notice (extraordinary termination or summary dismissal), and may claim compensation from the other party for the damage caused. However, if an employer terminates a contract 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 equivalent to between two and eight months' salary. Severance pay is not very common in Switzerland, however, because the employer can deduct the contributions made to the (mandatory) pension plan from the mandatory severance pay.
The parties may agree on the (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 case law, the mandatory provisions of the CO shall be taken into account and the agreement must include benefits for both the employer and the employee. If these provisions do not exist, the judge may declare the termination agreement to be null and void.
In general terms, no categories of employees are protected from dismissal, but there are certain periods during which a notice of termination is invalid. After a probation period has expired, an employer may not terminate an employment relationship at the following times:
- when the employee is performing military service or civil defence;
- 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);
- during pregnancy and for 16 weeks following the birth of the baby;
- when the employee participates in an official aid project in another country; or
- during the employee's entitlement to care leave for a child whose health is seriously impaired by illness or accident, but for no longer than six months from the day on which the employee's entitlement arises (see Section XV).
Any notice to terminate an employment contract during any such period is invalid. Any notice served before such a period starts is suspended when the period begins and then recommences following recovery from illness or accident or expiry of the protection period.
In principle, an employee who is dismissed by ordinary termination of contract may be released from his or her duty to work (gardening leave) at any time. The employer must continue to pay the employee's 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, a company has no duty to inform any authority about a dismissal (although there are exceptions that apply in respect of 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:
- at least 10 employees in companies usually employing more than 20 and fewer than 100 persons;
- at least 10 per cent of all employees in companies usually employing more than 100 and fewer than 300 persons; and
- at least 30 employees in companies usually employing at least 300 persons.
Regarding collective dismissal, an employer must inform and consult the organisation's works council or 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 payment of damages, 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 at least 30 employees redundant within a period of 30 days 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 dismissed 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.
Transfer of business
In general, the Swiss law applicable to the transfer of undertakings is quite similar to the provisions laid out in EU Council Directive 2001/23/EC 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 as part of a restructuring. 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 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 those 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 on expiry of the statutory notice period, 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 on which the employment relationship could have been terminated validly.
If the business transfer takes place within certain types of restructurings, the transfer of employees dedicated to the transferred business is not automatic. Only the employees chosen by the buyer will transfer. Also, within certain types of restructurings, the purchaser is not jointly and severally liable with the seller for pre-transaction claims by employees.
If a collective employment contract applies to any transferred employment relationship, 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 to working conditions are planned in connection with a business transfer, the works council (or the employees, if there is no works council) must be consulted in due time before a decision about redundancies is made or any changes in working conditions are 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 these dismissals and changes would be regarded 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 case law, the works council or employees need to be allowed at least 14 days to make their suggestions or proposals. If there is a breach of the duty to consult, the employer could become liable for any damage incurred by the employees. Further, the government can force the involved parties to conduct a 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 that have been issued or changes that have been implemented are void.
After the consultation, or directly if no consultation is required, the works council (or the employees, if there is no works council) must be informed in due time before the transfer of:
- the reasons for the transfer;
- the results of the consultation process (if any are required); and
- the final legal, economic and social consequences of the transfer for the employees (including the number of dismissals and changes to the working conditions).
New provisions obliging employers to continue to pay wages during absences of employees who need to care for closely related persons will gradually come into force during 2021. One of these provisions is that employees are newly entitled to paid leave when it is necessary for them to care for a family member or partner whose health has been impaired. However, the paid leave may not exceed three days per case and is capped at 10 days per year. The other new provision is the introduction of care leave. If an employee cares for a child whose health is seriously impaired because of illness or accident, the employee is entitled to paid leave for up to 14 weeks. The 14 weeks of care leave may be taken within a time frame of 18 months.
1 Ueli Sommer is a partner and Simone Wetzstein is a managing associate at Walder Wyss Ltd.
2 BGE 9C_409/2019 as of 5 May 2020.