There is currently no obligation in Switzerland to offer a social compensation plan, but this will change from 2014. On 1 January 2014, an amendment to the law will enter into force under which employers will be obliged to offer a social compensation plan for mass dismissals if certain requirements as to numbers are met.
Statutory obligation only for companies with at least 250 employees
The new articles 335h to 335k of the Swiss Code of Obligations (CO) govern the obligation to offer a social compensation plan. Companies that usually employ at least 250 people and intend to dismiss at least 30 employees within 30 days for reasons unrelated to the person of the employee, i.e. for financial reasons, are obliged to enter into negotiations with the employees with the objective of formulating a social compensation plan. To prevent the circumvention of this obligation, notices of termination that are issued for the same reasons but outside of this 30-day deadline are included – and no time limit for this is planned.
The law defines a social compensation plan as an agreement in which the employer and employees agree on measures to avoid dismissals, restrict their number, and soften their impact. This formulation is similar to article 335f par. 2 CO, which sets out the right of the employees to submit proposals in the event of a mass dismissal. It is very broad and covers both measures to avoid dismissals and measures to soften the impact of the intended dismissals. The employees are not, however, entitled to any redundancy payments, but the social compensation plan must be drawn up ad hoc for each case to take account of the specific circumstances.
As the social compensation plan should not jeopardise the continued existence of the company, it must be drawn up to ensure that the employer does not experience financial difficulties.
No social compensation plan is required if the mass dismissal is carried out as part of bankruptcy or debt restructuring proceedings agreed under a composition.
Arbitration court issues binding award if no agreement can be reached
The employer must negotiate the social compensation plan with the employee representative bodies affiliated with the collective labour agreement if the employer has joined such a collective labour agreement. If not, it must negotiate directly with its employee representation or, if none, with the employees themselves. The employee associations, employee representation or employees may also involve experts who are obliged to maintain confidentiality vis-à-vis external third parties.
If the employer and employee representation or employees themselves cannot come to an agreement, they must appoint an arbitration court which will then implement a social compensation plan by way of a binding arbitral award.
Background to the amendment to the law
These provisions on a compulsory social compensation plan were included in the law as part of a comprehensive revision of the debt collection and bankruptcy legislation. With this revision the legislator wants to simplify the restructuring of companies that have difficulties meeting their payment obligations.
Until now employers making mass dismissals were only obliged to consult the employees before issuing the notices of termination and give them an opportunity to make proposals. Currently only the Merger Act mentions the social compensation plan by stating that the report on the merger and splitting of the company and the transfer of the assets must describe and justify the effects of this process on the employees and should refer to any social compensation plan.
Meyerlustenberger Lachenal has in-depth experience with personnel measures implemented under labour and company law, i.e. step-by-step workforce reductions, reorganisations, outsourcing, mass dismissals and business transfers where in the past social compensation plan benefits have often been discussed, albeit only on a voluntary basis until now, and sometimes also granted. We would be happy to provide you with more information.