The Swiss Federal Supreme Court has recently published an important decision on arbitration in employment law matters which clarifies relevant questions in this area.

1. Basis

For arbitration matters, Swiss law distinguishes between national and international contracts. Whereas art. 353 et seqq. of the Swiss Civil Procedure Code (CPC) of 19 December 2008 applies to the former, the latter are governed by art. 176 et seqq. of the Swiss Federal Code on International Private Law (PILA) of 18 December 1987. Art. 353 para. 2 CPC provides for the possibility to exclude the application of the regulations of the CPC and agree on the application of the provisions of the PILA instead. Art. 176 para. 2 PILA provides for the same option vice-versa (so called «Opt-Out»).

One of the most significant differences between the two codes is the topic of arbitrability. In international matters all claims involving an economic interest («vermögensrechtliche Ansprüche») can be subject to arbitration (art. 177 para. 1 PILA). In national matters, however, only claims over which the parties may freely dispose are arbitrable (Art. 354 CPC).

For employment law matters this difference is decisive because employment law claims are of an economic interest but it is disputed whether parties can freely dispose of such claims. Thus, it is generally accepted that arbitration clauses are valid in international employment agreements whereas this is disputed for national employment agreements.

Prior to the CPC coming into force, the Swiss Federal Supreme Court decided that employment law claims are – in national matters – only arbitrable in so far as the Parties can freely renounce the respective claims pursuant to art. 341 of the Swiss Code of Obligations (CO) of 30 March 1911 (cf. BGE 136 III 467). This means that mandatory claims based on employment law are not arbitrable during the term of the employment agreement as well as during one month after the end of the employment agreement. This can lead to a situation in which the claimant has to take different legal action depending on the claims being made: Any non-mandatory claims (such as e.g. bonus claims) must be filed in front of the arbitral tribunal as agreed between the parties whereas any mandatory claims (such as e.g. vacation days, overtime, reference letters) have to be claimed with a regular state court despite the arbitration clause in the employment agreement.

It was disputed amongst legal scholars whether this decision also applies for the time after the CPC entered into force. The Swiss Federal Supreme Court has now confirmed this in the decision 4A_7/2018 (E. 2.3.1. to 2.3.3.). This means the following: Mandatory employment law claims cannot be subject to an arbitration clause for the duration of the employment relationship and for one month thereafter. Any other employment law claims, however, can be subject to such clause. Thus, if a national employment agreement contains an arbitration clause, this can lead to a situation in which different legal action has to be taken depending on the claims which are to be pursued.

In this context, the Swiss Federal Supreme Court has taken a second important decision: It is not possible to avoid the risk of having to pursue different legal actions to enforce different claims by agreeing on a so-called Opt-Out (i.e. agreeing that the provisions of the PILA apply instead of the provisions of the CPC). Such Opt-Out is not admissible in the area of employment law pursuant to the Swiss Federal Supreme Court (E. 2.3.3.).

The third and equally important statement of the Swiss Federal Supreme Court in the mentioned decision refers to the extent of the validity of an arbitration clause within a national employment agreement. Pursuant to what has been stated above, a comprehensive arbitration clause in a national employment agreement would at least be partially void. Referring to art. 20 para. 2 CO the Swiss Federal Supreme Court furthermore stated that “it is generally not to be expected” that the parties would have agreed upon an arbitration clause if they had known that this would lead to them having to pursue different legal action depending on the claim they want to file (cons. 2.3.4.). Consequently, it is to be expected that the Swiss Federal Supreme Court would – in case of doubt – conclude that an arbitration clause in a national employment agreement is totally (and not only partially) void. This means that it is recommended to clearly state within an arbitration clause that this clause shall also be valid if not all claims can be filed with the arbitral tribunal, provided the parties even want to agree upon such clause.

For international employment agreements, the decision 4A_7/2018 has no major implications. Nevertheless, if arbitration clauses shall be included in employment agreements or are already include therein, a conclusive analysis is always recommendable.