Introduction
Legal situation de lege lata
Legal situation de lege ferenda
Comment


Introduction

In September 2014 the Council of States – the lower chamber of Parliament – approved(1) in principle a new piece of legislation regarding whistleblowing employees in the private sector. The law was proposed by the Federal Council in November 2013 based on several parliamentary initiatives launched in 2003.(2)

The proposed legislation focuses on the rules for reporting irregularities to employers, the competent authorities and the public. The suggested reporting mechanism aims to establish a three-step process which requires that an employee always inform his or her employer before notifying the authorities, and always bring a matter to the attention of the authorities before reporting to the public. Employees may not take the next step unless certain requirements are met (eg, the failure of the employer or the authorities to take action within a certain timeframe).

The proposed legislation does not stipulate special rules for the protection of employees using their reporting rights in regard to:

  • harassment;
  • intimidation;
  • discrimination; or
  • acts of reprisal by the employer.

It merely provides that any termination of the employment contract related to the reporting of irregularities by the employee would constitute an abuse of law.

The new whistleblowing legislation is likely to be scheduled for debate in early 2015 by the National Council – the higher chamber of Parliament. Accordingly, it may be still subject to change in the course of the parliamentary process or a later referendum.

Legal situation de lege lata

In 2011 Switzerland introduced whistleblowing rules for federal authority personnel (with the exception of certain federal institutions independent from the government). However, existing Swiss law provides no specific statutory rules on whistleblowing in the private sector.

Whistleblowing employees in the private sector are subject to the general rules and principles of company law, criminal law, data protection law and employment law. These rules serve as guidelines for establishing suitable internal control systems and reporting procedures.

Company law
Company law does not require companies to set up a specific internal whistleblowing unit to which employees may report confidentially.

Criminal law
Criminal law states that companies may be fined instead of their employees if crimes or misdemeanours are committed which are linked to the company's business and if no individual person can be held criminally liable as a result of organisational deficiencies. In case of specific offences (eg, money laundering and corruption), companies may be fined in addition to their employees if they are unable to demonstrate that proper compliance systems are in place.(3)

Data protection law
Data protection law requires employers, on one hand, not to disclose the identity of a whistleblower without valid reason, and on the other hand to inform the suspected party in due time about the complaint. Internal investigations against the suspected party are subject to restrictions imposed by the laws on surveillance of employees.(4)

Employment law
Employment law provides that employers must protect the employees' personality rights and health, particularly against sexual harassment and mobbing. It is widely acknowledged that companies should do this by, among other things, appointing a person of trust to whom employees may report issues on a confidential basis.(5)

Employees must report in compliance with applicable internal rules and regulations of the employer.(6) Where no dedicated internal reporting system exists, the default addressee of reports on suspected irregularities will be the employee's supervisor, unless he or she is involved in the subject of the reporting.

The law imposes duties of loyalty(7) and confidentiality(8) on the employee, which may require the employee to inform his or her employer about any irregularities observed and to abstain from disclosing irregularities to the authorities and the public.

Swiss Federal Tribunal case law
Swiss Federal Tribunal case law provides additional guidance, particularly in respect of the requirements which employees must meet before reporting to the public.(9) The Swiss Federal Tribunal places great importance on employees' duties of loyalty and confidentiality. The highest Swiss court has confirmed that an employee is duty bound not to disclose to the public any information concerning his or her employer and its business which is not in the public domain. This confidentiality obligation includes not only information marked as confidential, but all confidential information for which the employer has a legitimate interest that it is not disclosed to the public. The Swiss Federal Tribunal has noted in numerous leading cases that, as a matter of principle, employees must remain silent about offences committed by the employer unless there is a public interest in the disclosure which overrides the employer's interest in keeping unlawful conduct confidential.

Even in cases where the offence at hand has harmed third parties, employees may invoke an overriding interest in the disclosure of the offence only if they act in accordance with the principle of proportionality. It is confirmed Swiss Federal Tribunal case law that the principle of proportionality requires an employee to inform his or her employer before notifying the authorities, and to notify the authorities before reporting to the public. Employees may report to the public only if the notified authorities fail to take action.

Legal situation de lege ferenda

The proposed legislation seeks to make the Swiss Federal Tribunal case law into statutory law.

Three-step process for reporting to the public
Step one: informing the employer
Draft Article 321a-bis(1) of the Code of Obligations confirms that an employee may inform his or her employer about irregularities without breaching his or her duty of loyalty if there are sufficient grounds for suspicion. It is further confirmed that an employee may talk to persons other than his or her superior (including external persons) only if those persons have been appointed by the employer to deal with the reporting of irregularities. Draft Article 321a-bis(2) of the code further states that the term 'irregularities' includes:

  • offences;
  • unlawful acts; and
  • violations of the employer's internal rules and regulations.

Step two: notifying competent authorities
Draft Article 321a-ter(1) of the code further provides that an employee may report offences and violations of statutory regulations to the competent authorities, provided that the employer has been informed within a reasonable timeframe (to be determined by the employer, but no later than 60 days after the date of information) by the employee and that the employer has failed to:

  • take appropriate action to resolve the issue;
  • confirm receipt of the information and inform the employee of the timeframe determined by it for a response; or
  • follow up on the status of proceedings in due time or at the employee's request.

Pursuant to the proposed bill, two exceptions will exist – one in favour of the employer and one in favour of the employee, as follows:

  • Draft Article 321a-ter(2) of the code specifies in favour of the employer that the employee cannot notify the competent authorities (even in cases where the employer does not respond to the employer's information in a timely manner) if the employer has a suitable reporting system in place. A reporting system is considered suitable if it:
    • provides an independent whistleblowing unit to talk to;
    • sets out a detailed whistleblowing procedure; and
    • ensures that an employee is not exposed to any kind of retaliation in the event of a valid concern raised by the employee.
  • Draft Article 321a-ter(3) of the code provides in favour of the employee that the employee may in any event notify the competent authorities if the employer terminates the employment or otherwise retaliates against the employee as a consequence of a justified concern raised by the employee.

Finally, draft Article 321a-quater of the code states that an employee may notify the competent authorities directly (without first informing his or her employer) if:

  • the employer has no suitable reporting system in place and if the employer has valid reason to assume that informing the employer would not improve the situation;
  • any later notification of the competent authorities would prevent the authorities from taking appropriate action; or
  • immediate notification of the competent authority is required to avert imminent danger to life, health, safety, the environment or other serious damage.

Step three: reporting to the public
Draft Article 321a-quinquies of the code provides that an employee may report to the public if the following requirements are cumulatively met:

  • the employee firmly believes, and has valid reason to believe, that the circumstances he or she reports to the public are true; and
  • the employee has notified the competent authority and requested that the authority keep the reporting employee informed, but the authority has failed to respond within 14 days of the request.

Abusive terminations of employment
Draft Article 336(2)(d) of the code clarifies that employers cannot terminate employment if a valid concern is made known to the employer, the authorities or the public, in line with the three-step process. The new article states that any such termination is presumed by law to be abusive.

However, in accordance with the law, the verdict of abuse of termination rights does not render the termination of the employment relationship void or invalid. Rather, it entitles the employee to compensation at the maximum amount corresponding to six months' salary.(10)

The new bill does not provide for any further rules for the protection of the employee from acts of retaliation. However, the Federal Council has announced that it might propose at a later time a revision of the employment law to ensure better protection of employees in the event of unfair dismissals.

Comment

Compared to Swiss Federal Tribunal case law, the proposed rules on whistleblowing make the notification of the authorities and reporting to the public considerably more difficult.

In the event that the employer has a suitable reporting system in place, an employee will generally not be allowed to notify the authorities (draft Article 321a-ter(2) of the code). An employee may deviate from this rule only in emergency situations (draft Article 321a-quater(1)(b) of the code) or where there is a risk to life, health, safety or the environment or the threat of serious damage (draft Article 321a-quater(1)(c) of the code).

Any meaningful response by the authorities to a report within 14 days of notification will deprive an employee of his or her right to report irregularities to the public (draft Article 321a-quinquies(1)(b)).

The proposed legislation awards the employer and tightens the screws on whistleblowers, provided that the employer puts in place an adequate reporting system. Swiss companies are thus well advised to establish such reporting systems, which should include:

  • an independent whistleblowing unit;
  • rules on the procedure to be followed in case of detection of irregularities; and
  • a clear statement that the reporting of irregularities is encouraged by the management.

For further information on this topic please contact Bernhard Loetscher or Axel Buhr at CMS von Erlach Poncet Ltd by telephone (+41 44 285 11 11), fax (+41 44 285 11 22) or email (bernhard.loetscher@cms-vep.com or axel.buhr@cms-vep.com). The CMS von Erlach PoncetLtd website can be accessed at www.cms-vep.com.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

Endnotes

(1) The amendments to the government bill made by the Council of States are available at www.parlament.ch/d/suche/seiten/geschaefte.aspx?gesch_id=20130094 (in German).

(2) The government bill and message to Parliament (November 20 2013) are available online at www.admin.ch/opc/de/federal-gazette/2013/9589.pdf (in German) and www.admin.ch/opc/de/federal-gazette/2013/9513.pdf (in German).

(3) See Article 102(1) and (2) of the Criminal Code.

(4) See Article 328b of the Code of Obligations.

(5) See Article 328 of the Code of Obligations.

(6) See Article 321d of the Code of Obligations.

(7) See Article 321a(1) of the Code of Obligations.

(8) See Article 321a(4) of the Code of Obligations.

(9) See DFT 127 III 310, March 30 2011, consid 5.

(10) See Article 336a of the Code of Obligations.