Transferring employees on an outsourcing in Switzerland: overview

A Q&A guide to outsourcing in Switzerland.

This Q&A guide gives a high level overview of the rules relating to transferring employees on an outsourcing, including structuring employee arrangements (including any notice, information and consultation obligations) and calculating redundancy pay.

To compare answers across multiple jurisdictions, visit the Transferring employees Country Q&A tool.

This Q&A is part of the global guide to outsourcing. For a full list of jurisdictional Q&As, visit www.practicallaw.com/outsourcing-guide.

For the general rules relating to outsourcing, visit Outsourcing: Switzerland overview.

Contents

Transfer by operation of law

1. In what circumstances (if any) are employees transferred by operation of law?

Initial outsourcing

In the private sector, where a transferor transfers a business (or part of it) to a transferee:

  • The employment agreements and all rights and obligations derived from them transfer by operation of law from the transferor to the transferee at the date of transfer of the business, unless the employee refuses this transfer (Article 333 CO).

  • The transferor and the transferee are jointly and severally liable for certain employees' claims (in particular for claims which have become due before the transfer of the business) (Article 333 CO).

  • The transferor must inform or consult with the employees' representatives or, where there is none, the employees themselves in good time before the transfer takes place (Article 333a CO).

Article 333 of the CO applies to the transfer of a business, or part of a business, if the business retains essential parts of its identity (that is, its business purpose, organisation and individual character) when infrastructure, operating resources and/or customers are transferred to the transferee. It is essential that the transferee continues or resumes the same or similar business activity. According to court practice and doctrine, "business" is any permanent self-contained organisational unit which is economically autonomous, and "part of a business" is an organisational unit which lacks economic autonomy.

In outsourcings that do not fall under Article 333 of the CO, the transfer of employment agreements requires the consent of each employee.

Change of supplier

If a change of supplier leads to a transfer of a business from the previous to the new supplier, the same rules apply as under an initial outsourcing (see above, Initial outsourcing).

Termination

If termination of an outsourcing agreement leads to the re-transfer of the outsourced business from the supplier to the customer, the same rules apply as under an initial outsourcing (see above, Initial outsourcing).

 
2. If employees transfer by operation of law, what are the terms on which they do so?

General terms

To the extent that employment agreements are automatically transferred to the supplier under Article 333 of the CO, they are transferred on essentially all their existing terms and conditions. After the transfer, the transferee can modify the employment terms (see Question 4).

Pensions

Employers must set up or join a pension scheme for employees who meet certain minimum requirements. The pension scheme is independent from the employer's business. When employees are transferred under Article 333 of the CO, the employees' vested benefits under the transferor's pension scheme are transferred to the transferee's pension scheme. After the transfer, the employees' pension benefits are calculated according to the new scheme's regulations.

If the workforce that forms part of the transferor's pension scheme reduces substantially, the respective pension scheme must be partially liquidated. The employees then have individual or collective claims to a portion of the non-committed funds (free reserves) in addition to their ordinary claims to the vested benefit.

Employee benefits

The transferred employees keep all contractual benefits related to their employment agreements (for example, share option plans, benefits granted for years of service and accrued holiday entitlements).

Other matters

The transferee must comply with any collective agreements that apply to the transferred employees immediately before the transfer for one year after the transfer (unless the collective agreement expires earlier or is terminated by notice).

Both the transferor and, on completion of the transfer, the transferee may in principle make transferring or transferred employees redundant, subject to compliance with the applicable notice period. The employer's freedom of termination, which is a signature feature of Swiss employment law, is in principle not affected by a transfer of business (see Question 9 for a particular restriction). In the event the notice period of terminated employees has not expired on completion of the transfer of business, these employees will transfer, and will be employed by the transferee for the remainder of the relevant notice period.

 

Redundancy pay

3. How is redundancy pay calculated?

In general, Swiss law does not require the employer to pay severance or specific redundancy pay in case of dismissal. Therefore, in the absence of severance payment agreed in an individual employment agreement, collective bargaining agreement or social plan, the employer must simply continue to pay regular salary and benefits during the relevant notice period.

 

Harmonisation

4. To what extent can a transferee harmonise terms and conditions of transferring employees with those of its existing workforce?

The transferor must not terminate the employment agreement in connection with the transfer of a business (or part of it), and simultaneously arrange for the offering of new employment agreements with the transferee on the transferee's terms and conditions. This would avoid the employees' protection rights under Article 333 of the Federal Code of Obligations (CO).

However, after the transfer, the transferee can modify the employment agreements (and harmonise them with those of its existing workforce) with immediate effect if either:

  • The change relates to formal (non-material) aspects only.

  • The transferred employees consent to the change.

The transferee can also terminate the employment agreements (by giving contractual notice) and offer new agreements on changed terms of employment (constructive dismissal). The new terms can enter into force only once the notice periods have expired.

Collective agreements can exclude or restrict the employer's termination rights in a transfer of all or part of a business.

Special rules apply to occupational pension schemes (see Question 2, Pensions).

 

Dismissals

5. To what extent can dismissals be implemented before or after the outsourcing?

Generally, dismissals can be implemented before or after an outsourcing if the party giving notice complies with the contractual notice period and applicable employment regulations and collective agreements. However, employees are protected against untimely termination of employment (for example, in case of illness, accident or pregnancy) as well as against wrongful (abusive) termination, such as:

  • An unlawful avoidance of the employees' protection rights under Article 333 of the CO (see Question 4).

  • Non-compliance with the consultation obligations required for a mass dismissal (see Question 9).

Untimely termination of employment is null and void. Wrongful termination is valid, but the employer must indemnify the employee up to six times the employee's monthly salary.

 

National restrictions

6. To what extent can particular services only be performed by a local national trained in your jurisdiction?

Certain professional activities are subject to a licence or authorisation requirement. Citizens of the EU or EFTA member states may exercise these professions provided they have valid professional certificates in their respective country of citizenship. Certain restrictions apply for citizens of the new EU member countries.

Citizens of non-EU/EFTA member states must obtain a work permit prior to performing work in Switzerland. In contrast to citizens of most EU/EFTA member states (in particular EU-17), who generally have the right to be employed in Switzerland and receive a residence permit, citizens of non-EU/EFTA member states can only receive a work permit if they have certain qualifications and particular skills. Such work permits are subject to a quota defined by the Swiss Federal Council (Bundesrat).

 

Secondment

7. In what circumstances (if any) can the parties structure the employee arrangements of an outsourcing as a secondment?

If Article 333 of the Federal Code of Obligations (CO) applies, employment agreements transfer to the transferee as a matter of law. A contractual clause which provides that certain employment agreements (which belong to the business) do not pass on to the transferee (and that the employee remains an employee of the customer) is invalid.

If Article 333 of the CO does not apply, the parties can arrange an outsourcing as a secondment. Employment agreements must meet certain material and formal requirements. In addition, depending on the circumstances of the case and, in particular, on the number of the seconded employees, the secondment can qualify as professional leasing of personnel. If so, the employer must obtain authorisation for the secondment from the competent authorities.

 

Information, notice and consultation obligations

8. What information must the transferor or the transferee provide to the other party in relation to any employees?

There is no statutory rule on information the transferor and the transferee must exchange during an outsourcing. However, for a smooth transition of the outsourced parts, the outsourcing agreement must at least set out:

  • Which employment agreements transfer to the transferee.

  • The duty of each party to pass to the other party any employees' termination notices.

  • The duty of the transferor to pass the personnel files to the transferee at the date of the transfer.

However, in view of applicable data protection provisions (see Outsourcing: Switzerland overview: Question 10 ( www.practicallaw.com/2-501-4798) ), the exchange of information is limited to information:

  • On whether the employees meet their job requirements.

  • That is necessary for the performance of employment agreements.

 
9. What are the notice, information and consultation obligations that arise for the transferor and the transferee in relation to employees or employees' representatives?

In the case of a business transfer under Article 333a of the Federal Code of Obligations (CO) (see Question 4), the transferor and/or the transferee must:

  • Inform the employees' representative body (or, if no such body exists, the employees) before the transfer of the business (or part of it) of both the:

    • reasons for the transfer;

    • legal, economic and social consequences of the transfer on employees.

  • This information can be given after all relevant decisions have been taken, contracts signed and a public announcement of the outsourcing made (but before the outsourcing is implemented).

  • Consult the employees' representative body before the decision is made (or, if no such body exists, the employees) if, in connection with the outsourcing, measures affecting the employees are planned, such as dismissals or salary cuts. This consultation obligation requires the transferor and/or transferee to hear the employees, but it is not clear whether there is an obligation to discuss with them or explain why counterproposals are not being considered.

The relevant legislation does not set out specific rules on the duration of the information and consultation procedure. In practice, a consultation period of at least ten business days should be sufficient. The law does not state the consequences for not complying with these information and consultation obligations. Under legal doctrine, the business transfer and measures affecting employees (including termination of employment contracts) remain valid.

The employer has additional information and consultation obligations if there are mass dismissals in connection with an outsourcing. These apply if the following number of employment agreements is terminated by the employer for economic reasons:

  • More than ten agreements if the transferor employs between 20 and 100 employees on a regular basis.

  • More than 10% of all employment agreements if the transferor employs between 100 and 300 persons on a regular basis.

  • More than 30 agreements if more than 300 persons are employed on a regular basis.

If the employer does not comply with consultation obligations, it could be liable for penalty payments for unfair dismissals and damages.

 

Online resources

The Federal Authorities of the Swiss Confederation website

W www.admin.ch/gov/en/start/federal-law/classified-compilation.html

Description. Official and up-to-date classified compilation of the Swiss federal legislation. Translations of certain legislation in English are provided for information purposes only and have no legal force.

Specific websites regarding legislation/case law/rules referred to in the article

W www.admin.ch/opc/de/classified-compilation/19340083/index.html

Description. Banking Act, official and up-to-date legislation.

W http://assets.kpmg.com/content/dam/kpmg/pdf/2016/02/ch-banking-act-sr952.0-en.pdf

Description. Banking Act, unofficial English translation.

W www.finma.ch/de/~/media/finma/dokumente/dokumentencenter/myfinma/rundschreiben/finma-rs-2008-07.pdf?la=de

Description. Outsourcing circular.

W www.admin.ch/opc/de/classified-compilation/19970160/index.html

Description. Federal Telecommunications Act.

W www.admin.ch/ch/e/rs/c784_10.html

Description. Federal Telecommunications Act, unofficial English translation.

W www.admin.ch/opc/de/classified-compilation/19940432/index.html

Description. Federal Act on Public Procurement.

W www.admin.ch/opc/de/classified-compilation/19950538/index.html

Description. Ordinance on Public Procurement.

W www.admin.ch/opc/de/official-compilation/2003/196.pdf

Description. Inter-Cantonal Agreement on Public Procurement.

W www.admin.ch/ch/d/sr/c0_632_231_422.html

Description. WTO Government Procurement Agreement.

W www.wto.org/english/docs_e/legal_e/gpr-94_01_e.htm

Description. WTO Government Procurement Agreement, English translation.

W www.admin.ch/opc/de/classified-compilation/19994643/index.html

Description. Bilateral agreement between Switzerland and the EU on procurement.

W http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:22002A0430(06):EN:HTML

Description. Bilateral agreement between Switzerland and the EU on procurement, English translation.

W www.admin.ch/opc/de/classified-compilation/19920153/index.html

Description. Federal Act on Data Protection.

W www.admin.ch/opc/de/classified-compilation/19930159/index.html

Description. Federal Ordinance on Data Protection.

W www.admin.ch/ch/e/rs/c235_1.html

Description. Federal Act on Data Protection, unofficial English translation.

W www.admin.ch/ch/e/rs/c235_11.html

Description. Federal Ordinance on Data Protection, unofficial English translation.



Contributor profiles

Lukas Morscher

Lenz & Staehelin

T +41 58 450 80 00
F +41 58 450 80 01
E lukas.morscher@lenzstaehelin.com
W www.lenzstaehelin.com

Professional qualifications. Admitted to the Bar, 1994

Areas of practice. Outsourcing (ITO, BPO transactions); technology, media and telecoms; internet and e-commerce.

Non-professional qualifications. Harvard Business School AMP, 2012; Doctorate in Law, 1992; Masters in Law, 1990; Masters in Economics, 1987

Recent transactions

  • Advised Zimmer Group, a world-leading provider of healthcare products, on its outsourcing and extension of finance and accounting operations in more than 20 countries to US-based global supplier Genpact.
  • Advised a global audit firm on strategic outsourcings of infrastructure and business processes, including managed print services (MPS) both onsite and offsite.
  • Advised Xerox on the sale of its Information Technology Outsourcing (ITO) business to Atos and related Swiss aspects.
  • Advised Xerox on the sale of its Print Service Center around Zurich to B-Source Outline.
  • Advised private individuals on all aspects of data protection and privacy, including enforcement of their "right to be forgotten" from search engines such as Google, Yahoo, and Bing.
  • Advised Pershing LLC (a BNY Mellon company) on its provision of world-wide banking securities custody and execution services for a global banking group with major Swiss operations.
  • Advised a global financial messaging provider and SWIFT service bureau operator on various aspects of data protection and ICT security and related regulatory and compliance issues in their domestic and cross-border business.
  • Advised a global banking group on its international migration of core banking systems (CBS) and outsourcing of infrastructure, CBS operation and back office services including joint venture arrangements.
  • Advised a global audit firm on strategic infrastructure and business process outsourcings, managed service and facility management arrangements.
  • Advised a world-leading insurance group on its global outsourcing of network communication and security services.
  • Advised a global technology provider on multiple domestic and cross-border transactions for the supply of infrastructure and BPO services.
  • Advised a global manufacturing group on its international implementation of ICT systems, collaborative tools and cloud services.

Recent publications

  • Lukas Morscher, Kaj Seidl-Nussbaumer, Data Protection & Privacy – Switzerland, in: European Lawyer Reference Series, 3rd edition, London 2016.
  • Lukas Morscher, Kaj Seidl-Nussbaumer (Baebler), Digital Business in Switzerland, in: Practical Law Global Guide 2015/16.
  • Lukas Morscher, Kaj Seidl-Nussbaumer (Baebler), Data Protection & Privacy – Switzerland, in: Getting the Deal Through, Law Business Research 2015, 140-147.
  • Lukas Morscher, International Outsourcing Transactions, Chapter on Switzerland, in: Sourcing World (Lukas Morscher, Ole Horsfeldt eds.), 2nd edition, Thomson Reuters London 2015, 465-491.
  • Lukas Morscher, Aktuelle Entwicklungen im Technologie- und Kommunikationsrecht, in: ZBJV, volume 147, issue 3/2011, 177-221.
  • Lukas Morscher, Philipp Frech, Media and Communications in Switzerland, in: PLC Cross-Border Handbooks, Media and Communications 2009/2010, 1-11.
  • Lukas Morscher, Lara Dorigo, Software-Lizenzverträge, Erschöpfung bei Computerprogrammen und Gebrauchthandel mit Softwarelizenzen, in: Jörg/Arter (eds.), Internet-Recht und IT-Verträge, 2nd edition, Bern 2009, 17-72.
  • Lukas Morscher, Business Process Outsourcing (BPO) - Strukturelle und rechtliche Aspekte, in: ICT-Verträge – Outsourcing (Oliver Arter, Lukas Morscher eds.), Bern 2008, 19-62.

Kaj Seidl-Nussbaumer

Lenz & Staehelin

T +41 58 450 80 00
F +41 58 450 80 01
E kaj.seidl-nussbaumer@lenzstaehelin.com
W www.lenzstaehelin.com

Professional qualifications. Admitted to the Bar 2014

Areas of practice. Outsourcing; IT and e-commerce.

Non-professional qualifications. Masters in Law, 2010

Recent transactions

  • Advised Schweizerische Mobiliar on its acquisition of a 50% interest in Scout24 Schweiz, the leading Swiss network of online marketplaces for cars, real estate and general classifieds.
  • Advised Zimmer Group, a world-leading provider of healthcare products, on its outsourcing and extension of finance and accounting operations in more than 20 countries to US-based global supplier Genpact.
  • Advised a global audit firm on strategic outsourcings of infrastructure and business processes, including managed print services (MPS) both onsite and offsite.
  • Advised Xerox on the sale of its Print Service Center around Zurich to B-Source Outline.
  • Advised private individuals on all aspects of data protection and privacy, including enforcement of their "right to be forgotten" from search engines such as Google, Yahoo, and Bing.
  • Advised Pershing LLC (a BNY Mellon company) on its provision of world-wide banking securities custody and execution services for a global banking group with major Swiss operations.
  • Advised a global audit firm on strategic outsourcing of ICT and business processes, including communication network and managed print services (MPS).

Recent publications

  • Lukas Morscher, Kaj Seidl-Nussbaumer, Data Protection & Privacy – Switzerland, in: European Lawyer Reference Series, 3rd edition, London 2016.
  • Lukas Morscher, Kaj Seidl-Nussbaumer (Baebler), Digital Business in Switzerland, in: Practical Law Global Guide 2015/16.
  • Lukas Morscher, Kaj Seidl-Nussbaumer (Baebler), Data Protection & Privacy – Switzerland, in: Getting the Deal Through, Law Business Research 2015, 140-147.

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