On August 15 2011 the Supreme Court had to decide whether Article 333 of the Code of Obligations, pursuant to which employment agreements are transferred to the transferee of a business, applies to composition agreements.

The court has hitherto left open the question of the application of Article 333 of the code in insolvency situations. According to Article 333 in the case of a transfer of a business, an employment agreement, with all rights and obligations, passes to the transferee. Thus, the transferor and transferee are jointly liable for employee claims that arose before the transfer and those that arise after the transfer up to the date that the employment agreement could have been terminated (Article 333(3) of the code).

However, the court has now found that in hypothetical cases to which Article 333 would apply, the transferee's liability according to Article 333(3) for employee claims that arose before the transfer will not apply in the case of a transfer from a transferor which is in administration.

The court held that there is nothing in the law which would permit the conclusion that Article 333 of the code should not apply to composition agreements and found that the court of lower instance had been correct to apply Article 333 to the transfer. The former employer thus remained liable pursuant to Article 333(3). However, the court was not required to address the question of whether the liability of the transferee according to Article 333(3) of the code also applies to composition plans.

For further information on this topic please contact Thomas Rihm at Thouvenin Rechtsanwälte by telephone (+41 44 421 45 45) fax (+41 44 421 45 00) or email ([email protected]).