This newsletter contains a brief summary of the most recent decisions of the Swiss Federal Court in the field of labour law, covering several key issues in this field, including questions relating to remuneration and bonuses, as well as those relating to the termination of employment contracts. It aims mainly to give professionals in this sector an overview of the latest developments in case law as well as practical guidelines for the decisions to be taken in this respect.

Salary / Bonus Payments

Decision of 6 August 2018 (4A_72/2018)

For hourly paid workers, there is no legal obligation to compensate public holidays, with the exception of the national holiday on 1 August (Art. 110 (3) of the Swiss Constitution). However, an indemnity is due if the contract or customs so provide.

If the parties wish to provide for such a contractual clause, the portion of salary corresponding to the remuneration for public holidays must be specifically indicated (just as it is done for the payment of holiday entitlement).

Decision of 14 June 2018 (4A_178/2017)

It is possible to provide that overtime will be compensated without any supplement or will not be paid at all.

However, according to the theory of unforeseen circumstances, the employer cannot use this agreement to refuse specific remuneration if the employee is required to work overtime to an extent that significantly exceeds what was foreseeable at the time the agreement was concluded.

Decision of 17 May 2018 (4A_666/2017)

A written contract may be tacitly amended.

If the employer does not assert claims of which he was aware before the end of the employment relationship, his conduct may be interpreted as a waiver of these claim or as a tacit amendment of the contract with a salary increase.

In this case, the employer, an elderly person who needed assistance in her daily life and had a dependent relationship with her employee, did not want to assert her rights for fear of losing her employee and having to establish a new personal relationship with a third party.

Given the employer’s weak position vis-à-vis her employee, the fact that she only raised the issue of recouping the unworked hours at the end of the employment contract cannot be considered as a waiver of her claim against the employee.

Decision of 4 April 2018 (4A_651/2017)

An employee may claim the payment of a bonus on the basis of the principle of equal treatment (Art. 328 CO) when he/she is placed in a clearly less advantageous situation than a large number of employees.

In the present case, the Federal Court considered that the fact that all the other employees of the team (comprised of 5 people) had received a bonus constituted an unjustified discrimination against the employee concerned. Since the employment contract had not yet been terminated when the bonus was paid, there was no reason to treat the employee differently from his colleagues.

Moreover, where the bonus is intended solely to reward the employee for the work performed (and not to ensure his/her loyalty for the future), it cannot be reduced or suppressed on the grounds that the contract has been terminated in the absence of a corresponding contractual provision. In this case, the letters accompanying the payment of the previous bonuses showed that the bonus was paid in connection with the benefits of the previous year. The Federal Court therefore considered that the employer should pay the bonus to its employee.

Decision of 4 May 2018 (4A_463/2017)

In this decision, the Federal Court recalled the bases of its case law on bonuses. Three scenarios must be distinguished:

  • Where the contractually agreed bonus is determined or objectively ascertainable and does not depend on the employer’s discretionary assessment, it must be qualified as a salary and not as a bonus. It is then due on a pro rata basis even in the event of the employee’s departure during the year.
  • If the parties have contractually agreed on the principle of a bonus, but the contract does not set a specific percentage or distribution key that would allow the employee to calculate it him/herself, the employer must pay the bonus. However, the latter keeps a certain degree of freedom in determining its amount. In this case, the employee is only entitled to a proportional share of the bonus in the event of termination of the employment relationship (before the occasion giving rise to it) if this has been agreed upon. The employee bears the burden of proving the existence of such an agreement under Art. 8 CC. The fact that the granting or payment of the bonus is subject to the condition that the employee is still in the company's workforce, respectively has not resigned or been dismissed at the time the bonus is payable, is a typical characteristic of a bonus, and not a salary.
  • Finally, if the parties have reserved both the principle and the amount of the bonus, it is a genuine discretionary bonus. Where the bonus has been paid from year to year with the reservation that it is discretionary, there is in principle no tacit agreement and a bonus is not automatically due by the employer. In such a case, the question of the accessory nature of the bonus in relation to the basic salary must also be analyzed. Case law provides for a reclassification of the bonus as salary if it appears that the bonus is disproportionate to the agreed salary. However, such a requalification is excluded for employees with very high incomes (threshold set at 5x the median Swiss salary).

It is further to be noted that the actual determination of the bonus amount for the period in question does not in principle constitute a change in the salary contractually agreed between the parties and therefore does not entail a change in the nature of the bonus.

Decision of 25 July 2018 (4A_215/2018)

A bonus, which can be qualified as "guaranteed" according to the parties’ agreement, is a component of the contractual salary and not a bonus. This is particularly so when the conditions to be fulfilled for the payment of the bonus are not clear.

When the bonus is qualified as a salary component, it forms an integral part of the amount covered by Art. 324a CO (salary in the event of incapacity to work).

Termination of employment

Decision of 11 May 2017 (ATF 143 III 290)

Withdrawing certain tasks from an employee or changing his or her status constitutes a just cause of termination within the meaning of Art. 337 CO.

In such case, the termination period for just cause of 2-3 days only starts to run once the change is actually implemented and not on the day these were announced to the employee.

Decision of 17 September 2018 (8C_134/2018)

A dismissal following an employee's initiation of internal proceedings based on a discrimination claim does not necessarily constitute an unfair dismissal.

When an employee is absent for a considerable period of time in comparison with the total duration of the employment relationship, the employer may mention this absence in the employment certificate (Art. 330a CO). Indeed, failure to do so could give a false picture of the employee's professional experience. In this case, the Federal Court ruled that it was admissible to mention in the employment certificate that the long-term absence was related to the employee’s maternity leave.