Protection of Workers' Claims (Employer's Insolvency) Convention, 1992 (No. 173) - Switzerland (Ratification: 1995)

Replies received to the issues raised in a direct request which do not give rise to further comments (CEACR) - adopted 2019, published 109th ILC session (2021)

The Committee notes the information provided by the Government, which answers the points raised in its previous direct request and has no further matters to raise in this regard.

Direct Request (CEACR) - adopted 2012, published 102nd ILC session (2013)

Articles 7(2) and 13(2) of the Convention. Limits to wage claims protected by means of a privilege and by a guarantee institution. The Committee notes that, in its communication of 17 September 2010, the Swiss Federation of Trade Unions (USS) indicated that the federal chambers accepted the Zanetti parliamentary initiative, supported by the USS, aiming at limiting the privileged protection of the highest salaries in the event of bankruptcy so as to avoid the settlement of wage claims being restricted by some very large claims. It also notes that, following the acceptance of this initiative, section 219(4) of the Act on debt recovery and bankruptcy (LP) was amended by Federal Act of 18 June 2010 and, as a result, first-rank privilege is now granted to wage claims relating to a period of up to four months and an amount not exceeding the maximum annual income insured under the compulsory accident insurance.

With respect to wage claims protected by a guarantee institution, the Committee notes that, under section 52(1) of the Federal Act on compulsory unemployment insurance and compensation in the event of insolvency (LACI), read in conjunction with section 3(2) of the LACI, compensation in the event of insolvency covers wage claims relating to a period of the last four months, at the most, arising from the same employment relationship, and limited to a monthly amount not exceeding the maximum monthly income insured under the compulsory accident insurance.

Recalling that, pursuant to Articles 7(2) and 13(2) of the Convention, where the workers’ claims protected by means of a privilege and by a guarantee institution, respectively, are limited to a prescribed amount, this amount must be adjusted as necessary so as to maintain its value, the Committee requests the Government to provide information on the ceilings set under section 219(4) of the LP and section 52(1) of the LACI.

Article 12(a) and (b). Claims protected by a guarantee institution – Claims for wages and holiday pay. The Committee notes the judgment of the Federal Tribunal dated 25 February 2011, a copy of which was attached to the Government’s report, according to which the compensation in the event of insolvency does not cover claims for unused days of leave when workers have not received holiday pay throughout the duration of their employment contract’s duration, nor does it cover claims for overtime pay. It recalls that, according to Article 12(a) of the Convention, workers’ claims protected by a guarantee institution must include wage claims without any distinction being made between basic wages and overtime pay. In addition, under Article 12(b), protected claims must also include claims for holiday pay. The Committee requests the Government to indicate how the national legislation ensures compliance with these two requirements of the Convention in the light of the abovementioned case law of the Federal Tribunal.

Article 12(d). Claims protected by a guarantee institution – Severance pay. Further to its previous comment, the Committee notes that the Government refers to the case law of the Federal Tribunal according to which the compensation in the event of insolvency covers only wage claims for work actually performed and not claims arising from the unfair and immediate dismissal of a worker. It has not been made clear, however, whether severance pay (being separate from compensation for unfair dismissal) is actually among the wage claims covered by the insolvency protection regime, as required under Article 12(d) of the Convention. The Committee requests the Government to provide further clarification in this regard. In addition, it draws the Government’s attention to Paragraph 9 of the Protection of Workers’ Claims (Employer’s Insolvency) Recommendation, 1992 (No. 180), according to which protected claims should include payments due in lieu of notice of termination of employment (clause (e)), and severance pay, compensation for unfair dismissal and other payments due to workers upon termination of their employment (clause (f)).

Parts III and IV of the report form. Judicial decisions and application in practice. The Committee requests the Government to provide information on the practical application of the Convention, such as statistical data on the number of bankruptcies per year or the total amount of workers’ claims that have been settled through preferential treatment as prescribed by the Act on debt recovery and bankruptcy as well as the sums paid by the guarantee institution. The Government is also requested to continue to provide information on the case law of the Federal Tribunal which might have an impact on the implementation of the Convention.

Direct Request (CEACR) - adopted 2008, published 98th ILC session (2009)

Article 6(b) of the Convention. Claims for holiday pay. Further to its previous comments on this point, the Committee notes with satisfaction that, owing to changes in case law, the national legislation, as interpreted by the Swiss Federal Tribunal, is now in full conformity with the Convention with regard to the protection by a privilege of workers’ claims in respect of paid holidays. Specifically, the Federal Tribunal ruled that the holiday entitlement for the respective year of service is no longer deemed expired if it is not exercised by the end of the following year but is now subject to the ordinary limitation of five years, which allows the employee to claim the holiday entitlement due to him for a period up to five years before the commencement of the bankruptcy and otherwise to submit a claim for financial compensation. Moreover, the Federal Tribunal ruled in another case that cash claims in respect of holidays which have not been taken arise where the latter can no longer be remunerated in kind; consequently, the cash claims arise at the commencement of the bankruptcy, and must therefore be placed entirely in the first category.

Articles 6(a) and (d). Wage claims covered by a privilege. The Committee notes with interest that, following the amendment of section 219(4)(a) of the Federal Act of 11 April 1889 concerning debt recovery and bankruptcy (LP), the privilege now covers not only wage claims arising in the six months preceding the bankruptcy but also those which have become enforceable within this period, such as the 13th month’s wage.

Article 12(d). Claims protected by a guarantee institution – Severance pay. The Committee notes that, in a previous report, the Government indicated that wage claims covered by compensation in the event of the employer’s insolvency, pursuant to section 52(1) of the Federal Act on unemployment insurance (LACI), correspond to the “determining wage” defined by section 5(2) of the Federal Act on old-age and survivors’ insurance (LAVS). It also notes, from reading the memo published by the AVS-AI on contributions to the AVS, AI and APG (p.7), that the determining wage includes benefits paid by the employer at the time of termination of employment, with the exception of contributions to family allowance funds. However, it notes that the pamphlet on compensation in the event of insolvency published by the Federal Department of Economic Affairs, which the Government attached to its report, states (p. 8) that claims for compensation, including those arising from immediate termination of the employment contract, are not covered by this compensation. The Committee requests the Government to supply further details of the types of severance pay actually covered by section 52(1) of the LACI. In this regard, the Government may wish to take account of the provisions of Paragraph 9 of the Protection of Workers’ Claims (Employer’s Insolvency) Recommendation, 1992 (No. 180), which state that claims protected by a guarantee institution should include not only “payments due in lieu of notice of termination of employment” (clause (e)), but also “severance pay, compensation for unfair dismissal and other payments due to workers upon termination of their employment” (clause (f)).

Parts III and IV of the report form. The Committee notes with interest that the amount of compensation paid by unemployment funds in cases of insolvency and the number of enterprises concerned decreased considerably between 2004 and 2006, while the recovery rate in relation to amounts advanced by these unemployment funds increased sharply during the same period, from 43 to 87 per cent. The Committee requests the Government to continue providing information on the practical application of the Convention, particularly on any changes in the case law of the Federal Tribunal in this area, and also on any agreements concluded relating to the takeover of enterprises in difficulty under the terms of which the buyer is released from the obligation to pay the wage arrears of the enterprise which has been taken over.

Direct Request (CEACR) - adopted 2003, published 92nd ILC session (2004)

The Committee notes the information contained in the Government’s report, and particularly the reduction in the maximum period covered by compensation in the event of insolvency to the last four months of the employment relationship, instead of the last six months as previously envisaged.

Article 6(b). The Committee notes the Government’s reply to its previous comment in which it indicated that the issue of the holiday pay due in respect of the work performed during the year in which the insolvency occurred and for the previous year only arises in Swiss law where it is not possible, due to the termination of employment relationships, for the workers to benefit from their entitlement to holidays remunerated in kind. The Government indicates that in such a case the entitlement to the holiday may be replaced by a compensatory benefit included in the privileged claims within the meaning of section 219(4)(a) of the Federal Act respecting debt recovery and bankruptcy (LP) and must be placed in the first category. The Government also refers to the case law of the Swiss Federal Tribunal according to which a worker who has not used her or his entitlement to leave during the year following that in which it should have been taken is deemed, according to the rules of good faith, to have renounced the entitlement. Noting that the judgement referred to by the Government in its report does not relate to a case of the insolvency of an employer, the Committee requests the Government to provide with its next report additional information on any cases in which Swiss courts have explicitly considered compensatory benefits as a replacement of holidays due in respect of the work performed during the year in which the insolvency or the termination of the employment relationship occurred or in the previous year as privileged claims within the meaning of section 219(4)(a) of the above Act (LP).

Article 6(d). The Committee notes the Government’s reply to its previous comments to the effect that all workers’ claims resulting from the employment contract, including termination allowances, form part of the claims that have to be placed in the first category under section 219(4)(a) of the Act (LP), provided that they arose during the six months preceding the commencement of the bankruptcy.

Article 12(b), (c) and (d). With reference to its previous comment, the Committee notes that the Government refers in its report to case law establishing that all the amounts received by employees, where their payment is economically derived from the contract of employment, should be considered as forming part of the determining wage within the meaning of section 5(2) of the Federal Act on old-age and survivors’ insurance (LAVS). The Committee notes that this case law also deemed to be income from a salaried activity, subject to contributions, not only the compensation paid for the work performed, but in theory any benefit or allowance bearing any relation whatsoever with the service relationship, in so far as such benefits are not exempt from contributions under the terms of explicitly formulated legal prescriptions. The Committee infers from the above that termination allowances form part of the "determining wage", at least in the context of old-age and survivors’ insurance. Nevertheless, noting that the case law referred to by the Government is not related to a case of the insolvency of the enterprise, and in view of the specificity of law respecting insolvency, the Committee would be grateful to be provided with copies of the judicial decisions which, where appropriate, have affirmed the status of termination allowances as an integral part of "wage claims" within the meaning of section 52 of the Federal Act on compulsory unemployment insurance and compensation in the event of insolvency (LACI).

Furthermore, the Committee would be grateful if the Government would provide a copy of any regulation or administrative text (such as instructions, circulars, etc.) relating to the operation of unemployment funds which addresses the issue of the scope of compensation in the event of insolvency and which defines the various types of benefits classified as claims for the purposes of the payment of this compensation.

Part IV of the report form. The Committee notes that there has been an increase in the number of bankruptcies in recent years, particularly of large enterprises. It also notes that in a number of cases of enterprise restructuring, the payment of wage arrears and termination allowances has not been required of the purchaser, either because re-employed workers agreed to renounce them, or because the action taken in this regard by unemployment insurance institutions failed. The Committee requests the Government in its next report to provide detailed information, including statistics, on the number of recent instances of insolvency and assessing the operation of institutions which guarantee the payment of wage arrears and other termination allowances (such as the number of applications received per year, the total amount of compensation paid, the recuperation rate of the amounts advanced by unemployment funds, etc.).

Direct Request (CEACR) - adopted 2001, published 90th ILC session (2002)

The Committee notes the information in the Government’s report, in particular the information relating to Articles 4, 8 and 10 of the Convention. It wishes to draw the Government’s attention to the following points.

Article 6(b). The Committee recalls its previous comment in which it had asked the Government to take the necessary measures in order to extend the period of protection for workers’ claims concerning holiday pay to the year in which the insolvency or the termination of employment occurred, as well as to the preceding year, in accordance with the provisions of this Article of the Convention. The Committee notes the Government’s statement to the effect that no such measure is envisaged in the field of bankruptcy law. It therefore requests the Government once again to take all necessary measures to bring its legislation into conformity with the provisions of the Convention.

Article 6(d). The Committee notes that, according to the Government’s indications, the worker’s claim for severance pay is protected in case the termination of employment occurs in the six months prior to the bankruptcy, and that no additional measure is foreseen in the field of bankruptcy law. The Committee recalls that the Convention requires the protection of claims for severance pay due upon termination of employment, even if the termination occurred before the bankruptcy or for other reasons than bankruptcy. Therefore, the Committee again asks the Government to take all appropriate measures to guarantee the protection of severance pay, in case that the employment contract is terminated prior to bankruptcy or for other reasons than bankruptcy, in accordance with the provisions of the Convention in this regard.

Article 12(b), (c), and (d). The Committee notes that, in accordance with the terms of section 3(1) of the federal law on compulsory unemployment insurance and compensation in case of insolvency (LACI), the legal notion for "wage" in the federal law on the old-age and survivor insurance (LAVS) is applicable in the field of compensation in case of insolvency. The Government indicates that the term "wage claims" refers to the determining wage as defined in section 5(2) LAVS. The Committee notes that, according to the text of this provision, the term "wage" covers the claims for holiday pay (Article 12(b)) and for amounts due in respect of other types of paid absence (Article 12(c)), but does not seem to include the claims for severance pay (Article 12(d)). The Committee accordingly requests the Government to indicate the measures taken or envisaged, in order to ensure that severance pay, due to workers upon termination of their employment, is declared an integral part of the "wage claims" under section 52 LACI.

Finally the Committee would be grateful to the Government for supplying information, in conformity with Part IV of the report form, on the manner in which the Convention is applied in practice.

Direct Request (CEACR) - adopted 1998, published 87th ILC session (1999)

The Committee notes the Government's first report and the legislative texts appended to the report. The Committee requests the Government to provide additional information on the following points.

Article 4, paragraphs 2 and 3, of the Convention. The Committee notes the statement in the Government's report to the effect that persons who are covered by a foreign country's state old-age and survivors' pension scheme are excluded among others from the scope of the Convention. Since these workers do not appear to be excluded from the Federal Act respecting debt recovery and bankruptcy (LP) which gives effect to Part II of the Convention, the Committee requests the Government to specify whether these workers are only excluded from Part III or from both Parts II and III of the Convention.

Article 6(b). The Committee notes that section 219(4)(a) of the above Act (LP) protects the claims of the worker, including claims respecting holiday pay, due as a result of work performed only in the six months preceding the filing of the bankruptcy petition. Consequently, the Committee requests the Government to indicate the measures adopted or envisaged to extend this period to the year in which the insolvency or the termination of the employment occurred, as well as the preceding year.

Article 6(d). The Committee notes that under section 219(4)(a) of the above Act (LP) concerning claims resulting from the anticipated termination of the employment contract, protection is limited to termination of the employment contract as a consequence of the employer's insolvency. The Committee requests the Government to indicate the measures adopted or envisaged to protect claims resulting from termination of employment, even where termination of employment occurred prior to the insolvency.

Article 8. The Committee notes that the explanation contained in the Government's report, which refers to five ranks of claims, does not correspond with the texts of the version appended to the report of section 219(4) of the Act (LP), which stipulates three ranks of claims. The Committee requests the Government to clarify this point and to state whether the claims of the State and of the social security are still given a lower rank of privilege than those of workers or whether other legislation exists which guarantees their privilege.

Article 10. The Committee would be grateful to the Government to provide information with regard to the progress made in revising the Federal Act respecting compulsory unemployment insurance and indemnity in the case of insolvency (LACI), to strengthen the measures to prevent abuse as well as the consultations held with the employers' and workers' organizations in this regard.

Article 12(b), (c) and (d). The Committee notes that, under section 52 of the Federal Act (LACI), indemnity in the event of insolvency covers wage claims for the last six months of employment and that benefits due to workers are considered to be an integral part of the wage. The Committee requests the Government to indicate whether claims in respect of holiday pay (Article 12(b)), amounts due in respect of other types of paid absence (Article 12(c)) and severance pay (Article 12(d)) are guaranteed within the meaning of wage as laid down in these provisions. The Committee requests the Government to provide further information on this point and to transmit copies of the relevant legislative provisions or jurisprudence.