Legal Update Labour Law 2019


Read our summary about the recent decisions of the Swiss Federal Court in the field of labour law, covering several key issues in this field, including questions relating to remuneration and bonuses, as well as those relating to the termination of employment contracts. It aims to give professionals in this sector an overview of the latest developments in case law as well as practical guidelines for the decisions to be taken in this respect.

Contract conclusion / Qualification

Decision of 21 February 2019 (4A_187/2018)

Only the company’s executive organs with the power of representation may represent the “Sàrl” and thus validly conclude an employment contract.

If it has not been ratified by the company, a letter of commitment to pay the salary does not engage the company, in particular if there is no authorization to delegate and/or sub-delegate to the manager who signed the employment contract. It also cannot be considered that there is a civil representation.

Mention of the invalidity of an amendment signed by only one person with a collective power of signature on the employer’s side.

Decision of 11 April 2019 (4A_500/2018)

There is a right of control, and thus an employment relationship, when instructions given to the “employee” go beyond general guidelines and have an influence on the object and organization of the work.

In this context, the economic dependence of the employee is not a decisive criterion for qualifying the contractual relationship.

 

Salary / Bonus payments

Decision of 11 April 2019 (4A_498/2018)

The contract may not provide that the employer’s share of social security contributions will be deducted from the employee’s gross salary.

However, the parties may agree to take into account the employer’s share of social contributions in the calculation of the employee’s variable salary, provided that the actual payment of this share is indeed made by the employer.

Decision of 15 January 2019 (4A_215/2017)

It is possible to agree that the salary is paid in a currency other than the Swiss franc, in particular in euros.

However, setting a fixed exchange rate in the employment agreement, which is higher than the market’s real rate, raises a problem of discrimination under Article 9 of the Agreement on the Free Movement of Persons which prohibits direct and indirect discrimination (the former is expressly based on nationality whereas the latter results, through the application of other criteria, in affecting European Union nationals more than Swiss nationals). This situation may lead to the agreement being null and void.

Decision of 18 April 2019 (4A_464/2018)

If the end date of the contract is postponed due to an incapacity of the employee (namely in case of illness or pregnancy) during the notice period, the employee benefitting from garden leave is required to offer his/her services to the employer again as of the day following the expiration of the initial notice period. The employee cannot assume that the garden leave is automatically extended until the (new) end date.

The employer can refuse to pay the salary if the employee does not offer his/her services as of that date or if he/she does not have a genuine intention to return to work during the extension period.

Decision of 20 September 2019 (4A_230/2019)

Whether the parties have agreed on a determined or objectively ascertainable bonus (i.e. a salary) or, on the contrary, on an indefinite or objectively unascertainable bonus (i.e. a discretionary bonus) is a question of interpretation of their expressions of will.

The following elements tend to show that the parties agreed on a discretionary bonus instead of a salary:

  • there is no factual evidence that the amount paid as a bonus was determined in advance according to predefined objective criteria ;
  • the employment contract mentions the discretionary nature of the bonus, specifies that it depends on multiple factors and stipulates that the payment of a bonus is not guaranteed ;
  • the provisions of the Bonus Plan refer to the discretionary nature of the bonus and state that the calculation of the bonus is based on
    multiple factors, which may be adjusted by the employer at its discretion depending on the circumstances;
  • the contract stipulates that the payment of a bonus one year or several years in a row does not compel the employer to pay it in the following years;
  • the amount of the bonus can vary between 0 and 40% of the annual base salary;
  • the payment of the bonus is systematically accompanied by a reservation specifying its discretionary nature.

The employer is furthermore required to comply with the rules of good faith when assessing the performance of the employee claiming for payment of a bonus. The employer may not adopt a contradictory attitude and argue that the employee’s performance is deficient in order to refuse the bonus, when it has previously expressed its complete satisfaction.

 

Vacation

Decision of 6 June 2019 (4A_225/2018)

Where the worker’s salary includes a variable component, paid in the form of commission or provision, the worker must not be disadvantaged financially while on vacation.

Thus, where the commissions paid to the employee vary each month (i.e., where they are not paid monthly throughout the year on an instalment basis), he/she must receive an allowance during his or her vacation, calculated according to the lump-sum method which consists of paying a percentage of the income earned during a certain period of time (e.g.: 8.33% for 4 weeks of annual vacation).

 

Extra hours

Decision of 28 February 2019 (4A_184/2018)

Distinction between the tardiness in the announcement of overtime hours worked by the worker and the claim for the compensation of said hours.

The duty to report overtime hours applies even when the employer is aware of the need for such hours.

The employee who waits for seven years to announce the overtime hours worked each month commits an abuse of right and his/her claim must thus be deemed abusive.

 

Termination of employment

Decision of 20 March 2019 (4A_166/2018)

Where a conflict situation in the workplace significantly interferes with the work performed, the dismissal of one of the employees involved in the conflict is unfair if the employer has not complied with its duty to protect its workers by first taking all the measures that could be expected of it to defuse the conflict.

Similarly, a “congé-modifcation” is abusive when it is motivated by the employee’s behavior in a conflict situation, when the employer has not taken all the necessary measures to protect the employee’s wellbeing in this context.

Decision of 10 December 2019 (4A_395/2018)

Where the parties enter into a contract of minimum duration, such a contract shall have the effects of a fixed-term contract, in the sense that the employment relationship may not be terminated by ordinary notice prior to the expiry of the minimum duration period contractually agreed.

In such circumstances, the only possibility of unilaterally terminating the employment contract during this period is an immediate termination for just cause (337 CO).

Thus, if the employer terminates the contract during the minimum term, this termination is to be regarded as an immediate extraordinary termination, regardless of whether it is justified or not.

The employment relationship legally and factually ends on the day the extraordinary termination is communicated (the end of the contract is not postponed to the next term).

The employer who has terminated the contract during the minimum term may however revoke its declaration if the employee agrees with the revocation or if he/she has challenged the validity of the termination and, in so doing, has expressed his/her willingness to maintain the contractual relationship.

 

Non-compete

Decision of 28 March 2019 (4A_116/2018)

If the worker has knowledge of the clientele and must keep it a secret after the end of the employment relationship, it cannot be considered a business secret.

An employee who wishes to become self-employed may not, as part of the necessary preparations of this operation, compete with his employer, poach other employees or divert customers. It is however often difficult to determine when these lines are crossed.

Once the employment relationship is over, the former employee can send letter to clients of his former employer on the letterhead of the new employer without violating his duty of loyalty.

The Swiss Supreme Court points out that the relationship between a wealth manager and his client is built up over time. Therefore, it is not arbitrary to assume that clients attach more importance the capabilities of their wealth manager than to the bank for which said manager works.