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The Employment Law Review

Law Business Research

Second Edition

Editor

Erika C Collins

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LawBusinessResearch

The Employment Law Review

Reproduced with permission from Law Business Research Ltd.

This article was first published in The Employment Law Review, 2nd edition (published in March 2011 - editor Erika C Collins).

For further information please email Adam.Sargent@lbresearch.com

SECOND EDITION

THE EMPLOYMENT

LAW REVIEW

Second Edition

EditorErika C Collins

Law Business Research Ltd

PuBLISHER Gideon Roberton

BuSINESS DEVELOPMENT MANAGER Adam Sargent

MARkETING MANAGERS Nick Barette

Hannah Thwaites

EDITORIAL ASSISTANT Nina Nowak

PRODuCTION MANAGER Adam Myers

PRODuCTION EDITOR kathryn Smuland

SuBEDITOR Davet Hyland

EDITOR-IN-CHIEF Callum Campbell

MANAGING DIRECTOR Richard Davey

Published in the united kingdom by Law Business Research Ltd, London

87 Lancaster Road, London, W11 1QQ, uk© 2011 Law Business Research Ltd

www.TheLawReviews.co.uk© Copyright in individual chapters vests with the contributors

No photocopying: copyright licences do not apply.The information provided in this publication is general and may not apply in a specific

situation. Legal advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or

omissions contained herein. Although the information provided is accurate as of March 2011, be advised that this is a developing area.

Enquiries concerning reproduction should be sent to Law Business Research, at the address above. Enquiries concerning editorial content should be directed

to the Publisher – gideon.roberton@lbresearch.com

ISBN: 978-1-907606-00-7

Printed in Great Britain by Encompass Print Solutions, Derbyshire

Tel: +44 844 2480 112

v

ACkNOWLEDGEMENTS

The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:

ALI BuDIARDjO, NuGROHO, REkSODIPuTRO

ALRuD LAW FIRM

BAkER & MCkENzIE, TAIPEI

BASHAM, RINGE Y CORREA, SC

BAYkANIDEA LAW OFFICES

BELL GuLLY

BRISTOWS

CASTEGNARO

CONSORTIuM CENTRO AMÉRICA ABOGADOS – EL SALVADOR

CONSORTIuM CENTRO AMÉRICA ABOGADOS – LACLÉ & GuTIÉRREz – COSTA RICA

DELOITTE ADVOkATFIRMA AS

DITTMAR & INDRENIuS

EDWARD NATHAN SONNENBERGS

GANADO & ASSOCIATES, ADVOCATES

GEORGE z GEORGIOu & ASSOCIATES LLC

GIANNI, ORIGONI, GRIPPO & PARTNERS

vi

Acknowledgements

GIDE LOYRETTE NOuEL

GIESE & PARTNER, V.O.S.

GRAF & PITkOWITz RECHTSANWäLTE GMBH

HEENAN BLAIkIE LLP

kOCHHAR & CO

kROMANN REuMERT

kYRIAkIDES GEORGOPOuLOS & DANIOLOS ISSAIAS LAW FIRM

LIEPA, SkOPIņA/BORENIuS ATTORNEYS AT LAW

MANNHEIMER SWARTLING ADVOkATBYRå AB

MARVAL, O’FARRELL & MAIRAL

MATHESON ORMSBY PRENTICE

NESTOR NESTOR DICuLESCu kINGSTON PETERSEN

NICEA ABOGADOS

PALACIOS, ORTEGA Y ASOCIADOS

PAuL HASTINGS LLP

PAuL HASTINGS LLP SHANGHAI REPRESENTATIVE OFFICE

PBBR – PEDRO PINTO, BESSA MONTEIRO, REIS, BRANCO & ASSOCIADOS

PINHEIRO NETO ADVOGADOS

SAYENkO kHARENkO

vii

SHIN & kIM

SkRINE

SNR DENTON & CO

SOŁTYSIŃSkI, kAWECkI & SzLĘzAk

STAMFORD LAW CORPORATION

TAYLOR WESSING

VAN DOORNE NV

VAN OLMEN WYNANT

WALDER WYSS LTD

zYSMAN, AHARONI, GAYER & CO

Acknowledgements

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Editor’s Preface ................................................................................................ xv Erika C Collins

Chapter 1 ARGENTINA.......................................................................... 1Enrique M Stile

Chapter 2 AuSTRIA .............................................................................. 13Jakob Widner

Chapter 3 BELGIuM ............................................................................. 32Chris Van Olmen

Chapter 4 BRAzIL ................................................................................. 50Luís Antônio Ferraz Mendes and Maurício Fróes Guidi

Chapter 5 CANADA .............................................................................. 60Jeffrey E Goodman and Christopher D Pigott

Chapter 6 CHINA .................................................................................. 73K Lesli Ligorner

Chapter 7 COSTA RICA........................................................................ 89Carolina Soto Monge

Chapter 8 CYPRuS ................................................................................ 99George Z Georgiou, Anna Praxitelous and Natasa Aplikiotou

Chapter 9 CzECH REPuBLIC ........................................................... 113Michal Smejkal

CONTENTS

Contents

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Chapter 10 DENMARk ......................................................................... 125Marianne Granhøj and Tommy Angermair

Chapter 11 EL SALVADOR ................................................................... 138Diego Martín-Menjívar

Chapter 12 FINLAND ........................................................................... 152Petteri Uoti

Chapter 13 FRANCE ............................................................................. 162Jérémie Gicquel

Chapter 14 GERMANY ......................................................................... 179Thomas Griebe and Jan-Ove Becker

Chapter 15 GREECE ............................................................................. 199Effie Mitsopoulou, Nicholas Maheriotis, Ioanna Kyriazi and Ioanna Argyraki

Chapter 16 HONG kONG ................................................................... 220Michael J Downey

Chapter 17 HuNGARY ......................................................................... 236Dániel Gera and Nelly Prokec

Chapter 18 INDIA ................................................................................. 251Manishi Pathak and Sehba Kanwal

Chapter 19 INDONESIA ...................................................................... 266Nafis Adwani

Chapter 20 IRELAND ........................................................................... 280John Dunne

Chapter 21 ISRAEL ................................................................................ 296Mor Limanovich and Tal Keret

xi

Chapter 22 ITALY .................................................................................. 307Raffaella Betti Berutto and Filippo Pucci

Chapter 23 jAPAN ................................................................................. 319Setsuko Ueno, Yuko Ohba and Hiroyuki Takahashi

Chapter 24 kOREA ................................................................................ 334Young-Seok Ki and John Kim

Chapter 25 LATVIA ............................................................................... 345Sigita Kravale

Chapter 26 LuxEMBOuRG ................................................................. 360Guy Castegnaro, Ariane Claverie, Alexandra Castegnaro, Céline Defay, Nadège Arcanger and Christophe Domingos

Chapter 27 MALAYSIA .......................................................................... 378Siva Kumar Kanagasabai, Selvamalar Alagaratnam, Sharmila Ravindran and Foo Siew Li

Chapter 28 MALTA ................................................................................ 396Matthew Brincat and Julienne Portelli Demajo

Chapter 29 MExICO ............................................................................. 412Oscar de la Vega and Mónica Schiaffino

Chapter 30 NETHERLANDS ............................................................... 425Els de Wind and Aedzer Oreel

Chapter 31 NEW zEALAND ................................................................ 444Rob Towner and Tim Clarke

Chapter 32 NORWAY ............................................................................ 457Gro Forsdal Helvik

Contents

Contents

xii

Chapter 33 POLAND ............................................................................ 469Sławomir Paruch, Roch Pałubicki and Agnieszka Gałka

Chapter 34 PORTuGAL ....................................................................... 483Inês Reis and Sofia Costa Lobo

Chapter 35 ROMANIA .......................................................................... 495Monica Elena Preoţescu, Roxana Ionescu, Alexandru Lupu and Patricia-Sabina Măcelaru

Chapter 36 RuSSIA ............................................................................... 507Irina Anyukhina

Chapter 37 SINGAPORE ...................................................................... 524Daniel Lim and Min-tze Lean

Chapter 38 SOuTH AFRICA ................................................................ 536Susan Stelzner, Stuart Harrison, Brian Patterson and Zahida Ebrahim

Chapter 39 SPAIN .................................................................................. 554Jacobo Martínez Pérez-Espinosa

Chapter 40 SWEDEN ............................................................................ 567Henric Diefke

Chapter 41 SWITzERLAND ................................................................ 578Ueli Sommer

Chapter 42 TAIWAN ............................................................................. 591Seraphim Mar

Chapter 43 TuRkEY ............................................................................. 603Serbulent Baykan and Handan Bektas

Contents

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Chapter 44 ukRAINE ........................................................................... 614Svitlana Kheda

Chapter 45 uNITED ARAB EMIRATES ............................................. 626Ibrahim Elsadig

Chapter 46 uNITED kINGDOM ........................................................ 636Linda Farrell and Charlotte Halfweeg

Chapter 47 uNITED STATES .............................................................. 652Patrick Shea and Mitch Mosvick

Chapter 48 VENEzuELA ..................................................................... 665José Manuel Ortega P

Appendix 1 ABOuT THE AuTHORS ................................................. 681

Appendix 2 CONTRIBuTING LAW FIRMS’ CONTACT DETAILS ..715

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Editor’s PrEfacE

Erika C Collins

over the past year we have witnessed both the beginnings of a recovery from and the continuing effects of the financial crisis that has dogged the world economy and characterised employment relations over the past several years. all signs indicate that these trends are likely to continue for the foreseeable future. The ‘Year in review’ and ‘outlook’ sections of nearly every chapter in this edition detail efforts by countries to address the continuing effects of the economic downturn. for example, in an apparent effort to increase competitiveness and stimulate business, and, in particular, to battle unemployment, a number of governments have made or are considering efforts to decrease financial burdens on businesses, including the costs of labour. in New Zealand, for example, recent amendments to the Employment relations act, including with regard to trial periods, union access and the test for unjustified dismissal, were designed to provide employers with more flexibility in making hiring and firing decisions. similarly, proposals to implement two new working shift regimes in costa rica are designed to provide employers with flexibility to compete in the global market. There is also a trend, however, of cash-strapped governments strengthening certain regulatory requirements and increasing enforcement of new and existing regulations in an effort to collect much-needed funds in the form of taxes or penalties for non-compliance. The new UK Bribery act, which was passed in 2010 and comes into force in april 2011, and china’s increased scrutiny of secondment arrangements for corporate tax purposes are both excellent examples of this phenomenon. similarly, a number of countries, including the czech republic, france and Ukraine, have passed, or are considering, pension reform in an effort to alleviate government budget concerns. We expect that many of the recent changes to employment regulations throughout the world, and those that will be encountered in the coming years, are or will be driven by similar motives.

The Employment Law Review is meant to serve as a helpful guide during these somewhat unpredictable and alternatively difficult and exciting times. for example, an increase in merger and acquisition activity is expected as companies continue to rebound and experience increased liquidity. in anticipation of this, we have added to this edition

Editor’s Preface

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a section on the business transfer laws in each country as they relate to transfers of employees. This edition also boasts the addition of 12 new countries, bringing the number of covered jurisdictions to 48. as with the first edition, this book is not meant to provide a comprehensive treatise on the law of any of these countries but rather is intended to assist practitioners and human resources professionals in identifying the issues and determining what might land their client or company in hot water. This will be particularly important as companies continue to grow their global footprint, including through merger and acquisition activity, and find themselves in new jurisdictions with unfamiliar laws.

The second edition of The Employment Law Review has once again been the product of excellent collaboration, and i wish to thank our publisher and all of our contributors, as well as Michelle Gyves, an associate in the international employment law practice group at Paul Hastings, for their tireless efforts to bring this book to fruition.

Erika C Collins

Paul Hastings LLPNew YorkMarch 2011

578

Chapter 41

SwitzerlandUeli Sommer*

* UeliSommerisapartneratwalderwyssltd.

I INTRODUCTION

TheemploymentlawinSwitzerlandismainlybaseduponthefollowingsources,setoutinorderoftheirpriority:a theFederalConstitution;b publiclaw,inparticulartheFederalactonworkinindustry,CraftsandCommerce

(‘the labour act’), and five ordinances issued under this act regulating work,healthandsafetyconditions;

c civillaw,inparticulartheSwissCodeofObligations;d collectivebargainingagreements,ifapplicable;e individualemploymentagreement;andf usage,custom,doctrineandcaselaw.

ThefollowingsourcesalsoplayanimportantpartinSwissemploymentlaw:a theFederalactontheequaltreatmentofwomenandMen;b theFederalactonPersonnelrecruitmentandHiring-outofemployees;c theFederalactoninformationandConsultationofworkers(‘theParticipation

act’);d theFederaldataProtectionact;e theFederalMergeract;f theFederalactonPrivateinternationallaw;g the eC/eFtaConvention on Jurisdiction and enforcement of Judgments in

CivilandCommercialMatters(‘theluganoConvention’);h theagreementonFreeMovementofPersonsbetweenSwitzerlandandeC/eFta;

andi theFederalactonForeigners.

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inmostoftheSwisscantonsclaimsarisingfromanemploymentrelationshipmusttobefiledwithadistrictcourt.Somecantonshaveestablishedspecialisedemploymentcourts.appealsfromthedistrictcourtsaresubmittedtothecantonalcourtandsubsequentlytotheFederalSupremeCourt.

For amounts in dispute not exceeding 30,000 Swiss francs the cantons mustprovideforasimpleandexpeditiousprocedure.Uptothatamount,thepartiesshallnotbechargedanycourtfeesandthejudgeshallex officio establishthefactsandappraisetheevidenceathisorherdiscretion.

Federal,cantonal,andcommunalauthorities–exceptthecourts–ingeneraldonotplayaveryimportantrolewithregardtoindividualemploymentcontracts.insomeareas,however,theauthoritiesmayplayagreaterrole,suchasintheissuingofworkandresidencepermits,notificationofcollectivedismissal,orauthorisationfornightshiftsorworkonSundays.

II YEAR IN REVIEW

TherehasnotbeenanymajoremploymentlawrevisioninSwitzerlandin2011.However,alegislativeproposaltoenhancetheprotectionofwhistle-blowerswassubmittedbytheSwissFederalCouncil.Furthermore,theSwissFederalCouncilpublishedafirstdraftofalegislativeproposaltoincreasetheterminationprotectionofemployees.ThisisinlinewiththecontinuingdevelopmenttoincreasetheratherlowSwissterminationprotectionbyawideningofqualificationofterminationeventsasabusive.

One of the topics in the aftermathof theworldwide financial crisis remainedtherevisionofremunerationsystems,inparticularinthefinancialindustry.TheSwissFinancial Market Supervisory authority (‘FinMa’) issued minimum standards forremunerationschemesinthefinancialindustrywhichenteredintoforceon1January2010.However,fullcompliancewiththeseminimumstandardsisonlymandatoryforverylargebanksandinsurancecompanies.Further,somerequirements,forinstancethatvariablepayshallbelinkedtothelong-termeconomicdevelopmentofacompany,areverydifficulttobringintocompliancewiththecurrentcaselawthatvariablepaymaynotbeforfeitedinthecaseofatermination.itwillbeveryinterestingtoseewhethertheSwissFederalCourtwillchangeitsdisputedapproachtosuchremunerationsystemsinthelightofthenewFinMarequirements.

III SIGNIFICANT CASES

i Variablepayandterminationofemployment

Swisslawmakesanimportantdistinctionbetweensalaryanda‘gratification’,whichisfullydiscretionary.Theterm‘bonus’isnotregulatedinemploymentlaw.Hence,abonuseitherqualifiesassalaryorasgratification.duringthelastfewyearstheSwissFederalCourtconfirmedseveraltimesthatthepaymentofanyvariablesalarycannotbemadesubjecttotheconditionthattheemploymenthasnotbeenterminated.Thiscaselawismuchdiscussedandheavilydisputedbysomepartofthedoctrine.

TheSwissSupremeCourtmoreoftenhadtodealwithbonusentitlements, inparticularwithpro rataentitlementsinthecaseofterminatedemploymentagreements.

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TheCodeofObligationsdistinguishesbetweenentitlement to salary andasoutlinedabove, gratification (and does not mention ‘bonus’). whereas the employee has astatutoryrighttoreceiveasalary,theentitlementtogratificationonlyexistsinthecaseofanagreement.withoutanyagreementitisbasicallyatthediscretionoftheemployertoprovidegratification.Therefore,it iscrucialwhetherthebonusisconsideredsalaryorgratificationasonlyinthelattercasemaytheemployerhaveachancetodenya(pro rata)entitlementofanemployee leavingthecompany.TheSwissSupremeCourthasestablishedcertainrulestodistinguishbetweenthetwopayments(e.g.byconsideringthe justified expectations of employees and the quota of the bonus compared to thesalary).inaddition,althoughtheCodeofObligationsstatesthatthepro rataentitlementforgratificationonlyexistsincaseitwasagreedupon,theSwissSupremeCourtdecidedthatsuchagreementmaybemadeimplicitly.Hence,itisextremelyimportanttoincludeappropriatewording intobonusplans that stipulate the contrary and include awidediscretionofthecompanyinregardtothedeterminationoftheactualbonus.Otherwise,thereisasubstantialriskthattheemployerisbeingforcedtopayanypro-ratebonusestoleavingemployees.

ii Increasingterminationprotection

Thecase lawiscontinuously increasingtheterminationprotection.althoughthe lawprovidesforan‘employmentatwill’conceptwithverylimitedterminationprotection,thecourtsusetheirdiscretiontowidentheprotectionbyexpandingthefiduciarydutyoftheemployerandtheprincipletoexecuterightsinadiligentway.ifsuchprinciplesarenotfollowedcourtsquiteoftenconcludethataterminationisabusive(seealsoSectionXi,sub-section(i),infra).Forinstance,theSwissFederalCourtruledthatinthecaseof a long-term employee who was shortly before retirement and whose performancewasnever substantially criticizedmaynotbe terminated for aundoubtedlywrongfulbehaviour without first contemplating less harsh disciplinary measures, i.e. the courtimplementedtosomeextentanagediscriminationprotection.inanothercasetheSwissFederalCourtheldthatalternativemeasuresshallbeconsideredinthecaseofalackofperformance,inotherwords–althoughnotclearlysaid–itruledforalimiteddutytosetupaperformanceimprovementplanpriortoissuingatermination.

IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP

i Employmentrelationship

article319etseqoftheCodeofObligationssetsoutthemandatory,semimandatoryand optional provisions relating to individual employment contracts. an individualemploymentcontractcan,basically,bemadeinwriting,orally,orevenimplicitly(withafewexceptions,suchasapprenticeshipcontracts,whichmustbeinwriting)andthelawstipulatesnotimelimitswithregardtotheconclusionofanemploymentcontract.However, certain provisions must be agreed in writing if the parties want to deviatefromtheprovisionssetforthintheCodeofObligations(e.g.,noticeperiods,probationperiods).Collectivebargainingagreementsmayalsostipulatethatdeviationsfromtheprovisionsrequirewrittenform.

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Furthermore,article330boftheCodeofObligationsstatesthatforemploymentrelationshipswithanindefinitetermorwithatermofmorethanamonth,theemployermustprovidethefollowinginformationinwrittenformtotheemployeenolaterthanonemonthafterthestartingdate:a namesofthecontractingparties;b startingdate;c theemployee’sfunction;d salary(includingbonuses,allowances,andotherremuneration);ande workingtimeperweek.

Thewrittenformisusuallyrecommendedforallindividualemploymentcontracts.inadditiontotheaboveelements,itisadvisabletoincludethefollowing:a termoftheemploymentrelationship;b rulesonprobationandnoticeperiodsthatdeviatefromthelaw;c holidayentitlement;d rulesoncontinuedpaymentofwageswhenillorpregnant;ande otherspecific agreements made during contractual negotiations (e.g., non-

competitionundertakings).

Changestoanemploymentcontractcanbemadebymutualagreement,byconcludinganamendmentagreementorbyissuingaformalnoticeofchange.

ii Probationaryperiods

if not stated otherwise in the employment contract, the first month of employmentisconsideredtheprobationaryperiod.duringthisperiod,theemploymentagreementmaybeterminatedwithsevendays’notice.Thepartiesmaymutuallyagreeonalongerprobationperiod,whichmaynotexceedthreemonths.

iii Establishingapresence

aforeigncompanythatisnotregisteredinSwitzerlandmayhireemployeestoworkinSwitzerland.itmayalsohireSwissemployeesthroughaSwissagencyorathirdpartywithoutregistering.aforeigncompanymayalsohireanindependentcontractor,however,duecaremustbetakenthatsuchcontractordoesnotbequalifyasanactualemployeebecausetherisksinvolvedcanbesubstantial(e.g.,lackofinsurancecoverage).

whetheranindependentcontractormaycreateapermanentestablishment(Pe)dependsontheformoforganisationandtheworkperformed.Themoreacontractorgives the appearance of being a part of the organisation of the foreign company, forexample,withofficesactinginthenameoronbehalfofthecompany,thehighertheriskofcreatingaPe.acompanythatestablishesaPeissubjecttotaxationinSwitzerland.

Generally,theforeigncompanyanditsSwissemployeesbecomesubjecttothesamesocialsecurityregimeasanySwisscompany.Therefore,theforeigncompanymustregister with all social security organisations and establish a pension scheme for theemployees.Theemployees’socialsecuritycontributionsmustbewithheldbytheforeigncompany. withholding of income tax only applies to employees that do not have apermanentresidencepermit.

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V RESTRICTIVE COVENANTS

Pursuant to Swiss employment law, an employee may make a commitment to theemployer to refrain from any competitive activity during and for a period afterterminationoftheemploymentrelationship.apostterminationnon-competitionclauseisonlybindingiftheemploymentrelationshipgivestheemployeeaccesstocustomersdata,manufacturingsecretsorbusinesssecrets,andiftheuseofsuchknowledgecouldsignificantlydamagetheemployer.Thenon-competitionclausemustbemadeinwritingandshallbereasonablylimitedintermsofplace,timeandsubjectinordertoprecludean unreasonable impairment of the employee’s economic prospects. The maximumdurationofapostterminationnon-competitionclauseisthreeyears.Thelawdoesnotrequireconsiderationforthepost-terminationnon-competitioncovenant.

ajudgemaylimitanexcessiveprohibitionagainstcompetition.ifanemployergives consideration in return for a non-competition undertaking – although this isnot legally required– it ismore likely that the covenantwill be fully enforceable.aprohibitionagainstcompetitionlapsesiftheemployernolongerhasasignificantinteresttouphold theprohibition.Furthermore, it also lapses if the employer terminates theemploymentrelationshipwithoutjustification.

VI WAGES

i Workingtime

Thelabouractdeterminesthemaximumweeklyhoursofwork,distinguishingbetweentwocategoriesofemployees:a workersemployed in industrial enterprises and white-collar workers (office

workers,technicalstaffandothersalariedemployees)aswellassalesstaffinlargeretailundertakings;and

b otherworkers, mainly workers in the construction sector and craftsman, incommerceaswellassalesstaffinsmallretailundertakings.

Themaximumhoursofworkarefixedat45hoursaweekforthefirstcategoryand50hoursaweekforthesecond.ifbothcategoriesofemployeesareemployedinthesameenterprisethemaximumof50hoursappliestobothcategories.withintheselimitstheeffectivehoursofworkarefixedbycollectiveagreementsandindividualcontracts.

workingbetween11pmand6amisconsiderednightwork.asarule,nightworkis forbidden.However, a specialpermit for suchworkmaybe issued if theemployerevidences a special or urgentneed. in any case thenightworkmaynot exceedninehoursinamaximumtimeframeof10hours,includingbreaks.iftheemployeeprovidesservicesonlyonthreeoutofsevenconsecutivenights,thenightworkmayamountto10hoursinamaximumtimeframeof12hours,includingbreaks.employeesmaybeentitledtoatimeorsalarypremiumwhenworkingatnight.

Thelabouractdoesnotapplytoseniormanagementpersonnelwithregardtoworkinghoursandovertime.Seniormanagementpersonnelarethoseemployeesthatareallowedtomakeimportantdecisionsthatcanaffectthestructure,thecourseofbusinessandthedevelopmentofabusinessorapartofbusiness.

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ii Overtime

UnderSwisslawtherearetwocategoriesofovertimework.Thefirstcategoryisaddressedinarticle321coftheCodeofObligationsandconcernscasesinwhichtheemployeeworks more than the working hours stipulated in the contract up to the maximumworking time allowed under the labour act. Pursuant to the Code of Obligations,anyovertimenot compensated forby timeoffmustbepaidby the employerwith asupplementofatleast25percentoftheapplicablewage,unlessthereisanagreementtothecontraryinwriting(i.e.,collectiveagreementorindividualemploymentcontract).Thus, an agreementmayprovide thatno supplement applies or that anyovertime isincludedinthestandardwage.Generally,thesecondoptionisoftenusedinmanagementcontracts.

Thesecondformofovertimeworkrelatestothehoursworkedinexcessofthelabouractlimitsof45or50hours.Thepaymentofawagesupplementof25percentofthehourlywageisamandatoryprovisionfromwhichthepartiesmaynotdepartbyagreement(incontrasttothefirstcategoryofovertime.).Thelabouractspecifiesthatforwhite-collarworkersandsalesstaffinlargeretailundertakings,thesupplementisdueonlyiftheovertimeworkexceeds60hourspercalendaryear.

Pursuanttothelabouract,theovertimeofasingleemployeemaynotexceedtwohoursperdayexceptonafreeweekdayorinthecaseofurgencyandmaynot,foremployeeswithamaximumworkingtimeof45hoursperweek,exceed170hoursperyear.Foremployeeswithamaximumworkingtimeof50hoursperweekthemaximumovertimeperyearmaynotexceed140hours.

VII FOREIGN WORKERS

Switzerlandhasadualsystemfortheadmissionofforeignworkers.nationalsfromeCoreFtacountriesbenefitfromtheagreementonFreeMovementofPersonsand,ingeneral,donotneedaworkpermitifresidenceistakeninSwitzerland,subjecttocertainrestrictionsandexceptionsfornationalsfromtheneweCcountries.inregardtonon-eCandnon-eFtanationals,onlyalimitednumberofmanagement-levelemployees,specialistsandotherqualifiedemployeesareadmittedfromallothercountries(subjecttoaquotaasdeterminedbytheFederalCouncil).

if non-eC or non-eFta nationals (without residence in Switzerland) workin Switzerland temporarily for more than eight days for a non-Swiss company, suchemployeesmustbereportedtotheauthoritiesinadvanceevenifnoworkorresidencepermitisrequired.Furthermore,theemployermustcomplywiththestandardworkingconditions,includingminimumsalarylevels.Forcertainemploymentsectors,reporting,orevenapermit,isrequiredfromthefirstdayofwork.

Thereisnolimitastohowmanyforeignemployeesmayworkforonecompanyandnoobligationontheemployertomaintainalistofforeignworkers.

allforeignemployeesresidentinSwitzerlandbutwithnopermanentresidencepermit are subject to tax at source.Foreignworkers are subject to the sameworkingconditionsandbenefitsasSwissemployees.

Pursuant to the Federal act on Private international law, the applicable lawregardingemploymentrelationshipsisthecountrywheretheemployeeusuallyperforms

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his or her duties.Thepartiesmay, however, agree that either the lawof the countryinwhich theemployeehashisorherpermanent residenceor the lawof thecountryinwhichtheemployerisdomiciledapply.Consequently, itmaybepossibletosubmitforeignworkersofforeignentitiestothe lawsoftheirhomecountry.However,socialsecurityobligationsmaynotbeoverriddenbysuchchoiceoflaw.

VIII GLOBAL POLICIES

Theemployermayestablishgeneraldirectivesandgivespecificinstructionsabouttheexecution of work and the conduct of employees in the company. Furthermore, theemployer must take prescribed measures to protect the life, health and integrity oftheemployeesandinparticulartotakecarethattheemployeeisnotsubjecttosexualharassmentordiscrimination.Therefore,itisverycommoninSwitzerlandtosetuprulesonacceptedbehaviourand theconsequences incaseofnon-compliance.Usually, theemployeesmustconfirmreceiptofafuturecompliancewiththerulesinwriting.Thereisnostrictrequirement,however,thatemployeessignsuchpolicies,butitisrecommendedtohaveevidenceonfilethatanemployeereceivedthepolicy.Further,theemployermustensurethatemployeesunderstandthelanguageinwhichpoliciesarewrittenandthatthecurrentversionoftherulesareeasilyaccessible(e.g.,onanintranet).

The purpose of the Federal act on the equaltreatment ofwomen and Men(‘eta’) is to ensure equal treatment at work by means of a general prohibition ofdiscrimination based on gender – including a prohibition of sexual harassment. Theetaprovidesforsanctionsincaseofnon-complianceoftheemployer.

IX EMPLOYEE REPRESENTATION

Pursuant to the Participation act, employees may elect a works council incompanies with at least 50 employees. The works council representatives have to beinformedonallmattersonwhichtheyneedinformationtofulfiltheirtasks,andtheymustbeconsultedonthefollowingmatters:a securityatworkandhealthprotection;b collectivedismissals;c affiliationto an occupational pension fund and termination of the affiliation

agreement;andd transferofundertakings.

Theestablishmentofaworkscouncilmustbepassedbyaresolutionofatleastone-fifthofallemployees.Onceapositivedecisionhasbeenmade,theelectionoftherepresentativesmaytakeplace.Thenumberofrepresentativesmustbedeterminedbytheemployerandtheemployeesaccordingtothesizeofthecompanybutmaynotbebelowthree.Theemployermustinformtheworkscouncilat leastonceayearabouttheimpactofthecourseofbusinessontheemployees.withintheframeworkoftheParticipationacttheworkscouncilsmaydecidehowtoorganisethemselves.

apartfromtheParticipationact,thelawsetsoutnospecialrightsforworkscouncilswithinthecompany,butsuchrightsarerecognisedbysomecollectiveagreements.

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Generally,asubstantialnumberofcompanieswithmorethan50employeesdonothaveaworkscouncil.

X DATA PROTECTION

i Requirementsforregistration

Privatepersonsmustregistertheirdatabase if theyregularlyprocesssensitivepersonaldataorpersonalityprofiles;oriftheyregularlydiscloseortransferpersonaldatatothirdparties. However, because the employers must collect certain data of the employeespursuant to social security laws, tax law and also theCodeofObligations (e.g.withregardtothedatarequiredtoissueareferenceletter),theyareexemptedfromthedutytoregister.if,however,companiescollectadditionaldatathatneednotbecollectedbylaw,therecouldbeadutytoregister.

Pursuant to the Federal data Protection act, personal data must be acquiredlawfully,andprocessingmustbelawful,ingoodfaithandnotbeexcessive,andisonlyallowedforthepurposeindicatedfortheprocessingorevidentunderthecircumstancesorgivenbylaw.employmentlawfurtherextendsthescopeofprotectiongrantedunderthe act. article 328b of the Code of Obligations only allows the processing of datathatreferstotheemployee’saptitudeforthejoborisnecessaryfortheperformanceofservices.

Personaldatamustbeprotectedfromunauthorisedprocessingthroughadequatetechnical and organisational measures. The employee must be informed about thecollectionandprocessingofsensitivepersonaldataorpersonalityprofiles(seebelow),forexample,inadataprotectionandprivacypolicy.Theemployeemayrequestatanytimeaccesstotheemployeefile.

ii Cross-borderdatatransfers

Cross-borderdata transferswithout the employee’s consent arepermitted if adequatecross-border data protection agreements are in place and information about suchagreementsisgiventotheFederaldataProtectionandinformationCommissioneroriftherespectivecountriesprovideforanadequatelevelofdataprotection.withregardto the processing of data of private individuals, the Commissioner has established alist of countries that have implemented equivalent data protection legislation, whichispubliclyavailableontheinternet.1Forexample,thelevelofprotectionprovidedforprivateindividualsbyeUcountriesisdeemedadequate.Pursuanttothesafe-harbourframework agreement between the US and Switzerland, self-certification of the UScompanies to theUSdepartmentofCommerce to complywith thedataprotectionrulesassetoutbytheagreementissufficient.itisimportanttonotethatmererecoursetothesafe-harbourframeworkagreementbetweentheUSandtheeuropeanUnionisinsufficient.

1 http://www.edoeb.admin.ch/themen/00794/00827/index.html?lang=en

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Theprocessingofpersonaldatamaybeassignedtothirdpartiesbyagreementorbylawifthedataisprocessedonlyinthemannerpermittedfortheinstructingpartyitself;anditisnotprohibitedbyastatutoryorcontractualdutyofconfidentiality.

iii Sensitivedata

PersonaldatapursuanttothedataProtectionactmeansalldatathatreferstoacertainperson.Sensitivepersonaldatameansalldataona religious,ideological,politicalortradeunion-relatedviewsoractivities;b health,personalliferacialorigin;c socialsecuritymeasures;andd administrativeorcriminalproceedingsandsanctions.

Theprocessingofsensitivepersonaldataisonlyallowediftherelevantpersonisinformedaboutthecontroller,thepurposeoftheprocessingandthecategoriesofdatarecipientifadisclosureofpersonaldataisplanned.

iv Backgroundchecks

as a rule, the employer may not conduct background checks or have these checksperformedby thirdpartieswithout the explicit consent of the applicant.even if theapplicantconsentedtoabackgroundcheck,thecheckwouldbe–inconsiderationoftheapplicant’sprivacy–limitedtoinformationthatstrictlyrelatestowhethertheapplicantfulfilstherequirementsofthejob.Forinstance,anyquestionsinregardtotheapplicant’shealthmustbedirectedtofindoutwhethertheapplicantiscurrentlyfittowork.anyfurtherinvestigationstofindoutwhetherthereisageneralriskthattheapplicantcouldbecomeillinthelongtermwouldnotbeallowed.

XI DISCONTINUING EMPLOYMENT

i Dismissal

acontractconcludedforanindefiniteperiodterminatesafteranoticegivenbyeitheroftheparties(ordinarytermination).inprinciple,nocausetoterminateanemploymentrelationship is required. The minimum notice period is set forth in the Code ofObligations.Thepartiesmaynot,however,reducesuchperiodtolessthanonemonth,subjecttoanylongerperiodssetforthincollectivebargainingagreementsnevertheless,becauseoftheprotectionagainstabusivetermination,theemployeehasastatutoryrighttobeinformedofthereasonsfortheterminationinwriting,onrequest.

aterminationofanemploymentagreementmustnotbeabusive.apartythatabusively gives notice of termination of the employment relationship must pay anindemnity to theotherparty.The terminationof the employment contractby eitherpartyisconsideredabusiveif,forexample,itoccursforoneofthefollowingreasons:a personalcharacteristic of one party (e.g., race, creed, sexual orientation, age),

unlesstheyarerelevanttotheemploymentrelationshiporsignificantlyimpairthecooperationwithintheenterprise;

b theotherpartymakesuseofaconstitutionalorcontractualright;or

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c wherethesolepurposewastofrustratetheformationofclaimsarisingoutoftheemploymentrelationship.

ifanyofthepartieshasa‘significantcause’itmayterminatethecontractatanytime,withoutpriornotice(extraordinaryterminationorsummarydismissal)andmayclaimtheotherpartytocompensateforthedamagecaused.But,iftheemployerterminatesthecontactwithimmediateeffectwithoutasignificantcause,theemployermustcompensatetheemployeeforthedamagethathasthusbeencausedtohimplusapenaltyuptosixmonths’remuneration.

Generally,ifanemployeeaged50orolderleavesemploymentafter20ormoreyearsofservice,theemployermustpayaseverancecompensationofbetweentwoandeightmonths’salary.Suchseverancepay,however,isnotverycommoninSwitzerland,becausetheemployercandeductthecontributionsmadetothe(mandatory)pensionplanfromthemandatoryseverancepay.

Thepartiesmayagreeupon(immediate)terminationofanemploymentagreementatanytime.TheCodeofObligationssetsforthnoexplicitprovisionswithregardtoaterminationagreement.However,accordingtothecaselaw,themandatoryprovisionsof theCodeshallbe taken intoaccountandtheagreementmust includebenefits forboth employer and the employee. Otherwise, the judge may declare the terminationagreementasnullandvoid.

no categories of employees are protected fromdismissal in general.But therearecertainperiodsduringwhichanoticeofterminationisinvalid.aftertheprobationperiodhasexpired,theemployermaynotterminatetheemploymentrelationshipatthefollowingtimes:a whentheemployeeisperformingmilitaryorcivildefence;b whenthe employee is prevented fromworking throughno fault of his or her

ownduetosicknessoraccident(foracertainperioddependingontheyearofemployment,upto180days);

c duringpregnancyandfor16weeksfollowingthebirthofthebaby;ord whentheemployeeparticipatesinanofficialaidprojectinanothercountry.

anynoticetoterminateanemploymentcontractduringsuchperiodsisinvalid.anynoticeservedbeforesuchperiodsissuspendedwhentheperiodbeginsandthenrecommencesafterrecoveryfromillnessoraccidentorexpirationoftheprotectionperiod.

in principle, an employee who is dismissed by ordinary termination may bereleasedfromhisorherdutytowork(‘gardeningleave’)atanytime.Theemployermustcontinuetopaysalaryuntilexpiryoftheordinaryterminationperiod,buttheemployermaysetoffanyincomegeneratedbytheemployeeduringthetimeoftherelease(iftheemployeewasallowedtostartanewjob).

apart fromthe regulations regardingmassdismissal thecompanyhasnodutytoinformanyauthorityaboutadismissal(exceptionsapplyinregardtoapprenticeshipcontracts).

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ii Collectivedismissals

TheCodeofObligationsprovides special rules regardingcollectivedismissals.article335dCodedefines‘collectivedismissals’asnoticesofterminationinenterprisesissuedbytheemployerwithinaperiodof30daysforreasonsunrelatedtothepersonoftheemployeeandthataffect:a atleast10employeesincompaniesusuallyemployingmorethan20andfewer

than100persons;b atleast10percentofallemployeesincompaniesusuallyemployingmorethan

100andfewerthan300persons;andc atleast30employeesincompaniesusuallyemployingatleast300persons.

regardingcollectivedismissal, theemployermust informandconsultwiththeworkscouncilortheemployees.employersalsomustinformthecantonallabourofficeofeveryplannedcollectivedismissal.

non-compliancewiththeproceduralrulesbytheemployerconstitutesabusivetermination of the affected employment, which may lead to damages payment andadditionalremunerationsandinthecaseofsubstantialnon-compliancetheterminationscanbefoundvoidandreinstatementordered.

Bylaw,thereisnoobligationtoissueasocialplanfortheterminatedemployees.However, there can be obligations to negotiate or issue a plan based on collectiveagreements. in addition, any mandatory early retirement obligations set forth in thepensionplanregulationsofacompanyshouldbeconsidered.

XII TRANSFER OF BUSINESS

Generallyspeaking,theSwisslawapplicabletotransferofundertakingsisquitesimilarto the provisions laid out in the european Union Council directive 2001/23 of 12March 2001. Pursuant to article 333 of the Code of Obligations, the employmentrelationshipistransferredfromtheemployertoathirdparty,iftheemployertransferstheenterpriseorapartthereoftosuchthirdparty.article333oftheCodeofObligationsisalsoapplicableifasinglebusinessunitoftheenterpriseistransferred.However,itisrequiredthatthebusinessunitmaintainsitsstructureandorganisationafterthetransfer,althoughitisnotrequiredthatanyassetsaretransferredtogetherwiththeemploymentrelationship.article333mayalsoapplyinthecaseofanoutsourcingorre-sourcing.itdependsonhowtheoutsourcingorre-sourcingisstructured,namely,theservicesthatareoutsourcedorre-sourced,theassetstransferredandtheorganisationoftheprovisionoftheservicesbeforeandaftertheoutsourcingorre-sourcing.

ifatransactionqualifiesas(partial)businesstransfer,theemploymentrelationshipsexistingatthetimeofthetransfer(includingtheonesundernotice)areautomaticallytransferred including all rights and obligations as of the date of transfer, unless anemployeeobjectstothetransfer.ifanemployeeobjectstoatransfer,theemploymentrelationship is terminatedupon the expirationof the statutorynoticeperiods even iflongerorshortercontractualnoticeperiodsapply.

itisimportanttonotethatthecurrentemployerandthenewemployerarejointlyandseverallyliableforanemployee’sclaimsthathavebecomeduepriortotheautomatic

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transfer, and that will later become due until the date upon which the employmentrelationshipcouldhavevalidlybeenterminated.

if a collective employment contract applies to any employment relationshiptransferred, thenew employerwouldneed to complywith it for one yearunless thecollectiveemploymentcontractexpiresearlieroristerminatedbynotice.

if any redundancies, terminations or changes in the working conditions areplannedinconnectionwithabusinesstransfer,theworkscouncil,ifany,orotherwisetheemployeesneedtobeconsultedinduetimepriortothedecisionthatemployeesaremaderedundantor the changes in theworking conditions implemented.This consultationprocessisalsonecessaryiftheemployeeswillbedismissedorthechangesimplementedafterthetransfer(bythenewemployer),becausesuchdismissalsandchangeswouldbeseenasaresultofthetransferofthebusinessifimplementedwithinthefirstfewmonthsafterthetransfer.itisveryimportanttonotethattheconsultationprocessneedstobeconductedbeforeanydecisionsinregardtoanymeasuresaremade.Theemployerneedstogivetheworkscouncilortheemployeesatleastthepossibilitytomakesuggestionsonhowtoavoidanymeasures,specificallyonhowtolimitthenumberofdismissals.

The employer has to provide all pertinent information to the works councilor to the employees. according to the case law, the employees or the works councilneedtohaveat least14days tomaketheir suggestionsorproposals. inthecaseofabreachof theduty to consult, the employer couldbecome liable for anydamagesoftheemployees.Further,thegovernmentcanforcetheinvolvedpartiestoconducttheconsultationprocess(whichcoulddelayacontemplatedtransferconsiderably)andcanfinetheparties.inaddition,itisarguedbysomescholarsthatanyterminationsissuedorimplementedchangesarevoid.

aftertheconsultation,ordirectlyifnoconsultationisrequired,theworkscouncilortheemployees,ifnoworkscouncilisestablished,needtobeinformedinduetimepriortothetransferon:a thereasonsforthetransfer;b theresultsoftheconsultationprocess(ifanyrequired);andc thefinallegal,economicandsocialconsequencesofthetransferfortheemployees

(includingthenumberofdismissals;changesintheworkingconditions).

XIII OUTLOOK

i Bonuspayments

inthewakeofthefinancialcrisis,bonuspaymentsremainaveryhottopic.apublicinitiativeforanewarticleintheSwissconstitutionagainstexcessivebonuspaymentswillcomeupforapublicvote,mostlikelyduring2011.Currently,thereareseveralalternativeproposalsdiscussedintheSwissparliament.apossibleoutcomeisthatbonuspaymentsexceeding3millionSwissfrancsaredeemedaprofitdistributionunderbothcorporateand tax lawaspects.Sucha rulewould implement substantialdisadvantages forhighbonuspayments;inparticular,itwouldbeverydifficulttomakesuchbonuspaymentsifacompanywerenotmakinganyprofit.Forallemployersitwillbeveryimportanttohavethesedevelopmentsinmindifnewcompensationschemesaresetup.

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ii Employmentlawrevisionprojects

TheFederalCouncilproposedtotheparliament,inspiredbythelawofothercountries,an amendmentof theCodeofObligationswith regard to theprotectionofwhistle-blowers.However,althoughtheprotectionofwhistle-blowersisgenerallysupported,thedrafthasbeenwidelycriticised.atthispointintimeitisveryunlikelythatthelawwillenterintoforcebefore2012.

asmentionedat theverybeginningof thischapter, theSwissFederalCouncilpublished afirst draft of a legislativeproposal to increase the terminationprotectionforemployees.Thedraftprovidesfor,inter alia,asubstantialincreasetothepenaltyforabusiveterminationfromsixto12months.

About the Authors

Ueli SommerWalder Wyss LtdUeli Sommer is a partner of Walder Wyss Ltd, one of the leading law firms in Switzerland. Ueli heads the law firm’s employment group. He has many years of experience in all aspects of employment law with a focus on compensation schemes, option and participation plans. He also advises international companies and private individuals on immigration and choice of domicile issues. He supported many companies and high level executives in regard to the conclusion and termination of employment agreements and termination arrangements.

Born in 1970, Ueli Sommer was educated at Zurich University (lic iur 1995, Dr iur 1999) and at the University of New South Wales in Sydney (LLM 2001). In 2001 and 2002, he worked as a foreign associate for Allens Arthur Robinson in Sydney.

Ueli Sommer acts currently as co-chair of the International Employment Law Committee of the Section of International Law of the American Bar Association. He is also a board member of the European Employment Lawyers Association (‘EELA’). Further, he publishes regularly in legal journals and speeches at national and international congresses. Ueli Sommer is recommended by Chambers and Partners for his employment expertise and is mentioned as leading in his field by Practical Law.

Walder WySS ltdSeefeldstrasse 1238008 ZurichSwitzerlandTel: +41 44 498 95 16Fax: +41 44 498 98 99ueli.sommer@walderwyss.comwww.walderwyss.com