AN ARRANGEMENT BETWEEN THE SELLER AND THE PURCHASER WHICH AIMS TO REDUCE THE NUMBER OF TRANSFERRING EMPLOYEES, DOES NOT BREACH THE LEGAL REQUIREMENTS IF SUCH ARRANGEMENT IS JUSTIFIED ON ECONOMIC GROUNDS
- Impact date: 8 October 2010
The case concerned an ambulance business (Business) operated by
X (Employer) and its 26 employees.
As the Business was in financial difficulties, the Employer
envisaged transferring it to Y (Acquirer). The Employer and the
Acquirer agreed that the transfer would take place on 1 October
2008 and that only some of the 26 employees would transfer on that
date. In July 2008, the Employer gave notice to all 26 employees
effective on 30 September 2008. In August, the Employer withdrew
the notices of termination in respect of 20 employees. The notice
period of the 6 other employees lapsed on 30 September 2008, i.e.
one day before the transfer date. As a result, the 6 employees did
not transfer to the Acquirer. They claimed that their dismissals
were null and void.
Under Swiss law, the transfer of a business unit from an employer
to a third party automatically triggers the transfer of all the
employees of that business unit to the third party. The acquirer
assumes the benefit and the burden of all employment contracts (i)
relating to the acquired business unit; and (ii) existing at the
time of the transfer.
Employees whose dismissal notices have not expired at the time of
the transfer are automatically transferred to the third party
acquirer. Any arrangement or agreement to the contrary between an
employer and a third party acquirer breaches the legal
requirements. In addition, the employer and the third party are
jointly liable for any employees' claims which accrue during
the period before the transfer and until the expiry of the notice
period immediately after the transfer.
In this case, the Supreme Court had to assess whether planning the
Business transfer immediately after the expiry of the notice
periods was a circumvention of the law, which was the view of the
higher cantonal court that dealt with the case before the Supreme
Court.
The Supreme Court dismissed the employees' claims: while the
Supreme Court
acknowledged that the Employer and the Acquirer aimed to reduce the
number of transferring employees, it found that the primary purpose
of such reduction was not to circumvent the statutory transfer of
all existing employment contracts, but rather to deal with the
Employer's difficult economic situation. Accordingly, the
Supreme Court considered that the 6 employees were validly
dismissed, since their dismissals were economically justified. The
consequences of a potential circumvention of the law, which are a
matter of academic controversy, were left open by the Supreme
Court.
We see two potential major impacts of the Supreme Court's
decision. From a legal perspective, it will be difficult for
dismissed employees to challenge the termination of their
employment contracts in connection with the transfer of a business
unit, as such terminations could usually be justified on economic
grounds. Furthermore, the Supreme Court's decision should
facilitate the transfer of businesses in difficult financial
situations, which must be welcomed in the current economic
climate.
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