Employee of a Company in Bankruptcy

Employee of a Company in Bankruptcy in Switzerland

The bankruptcy of a company in Switzerland is a particularly difficult situation for employees who suddenly face great uncertainty about their professional and financial future. Swiss law provides a specific legal framework aimed at protecting employees' rights. From the continuity of employment relationships to privileged wage claims, through unemployment benefits and available remedies, workers have several protective mechanisms. Our law firm accompanies employees in understanding and exercising their rights when their employer goes bankrupt, providing specialist legal expertise in this complex area of Swiss employment law.

Legal Status of the Employee in a Company Bankruptcy

Under Swiss law, a company's bankruptcy does not automatically terminate employment contracts. This fundamental distinction from other legal systems deserves emphasis. When a company is declared bankrupt by the court, the bankruptcy administration, generally the bankruptcy office, becomes responsible for managing the bankruptcy estate, including existing employment relationships.

Immediate Effects of Bankruptcy on the Employment Contract

The bankruptcy declaration has several direct consequences for the employee:

• Employment contracts are not automatically terminated
• The bankruptcy administration becomes the employee's new interlocutor
• This administration may decide whether or not to continue the company's activities
• If activities continue, the administration may maintain certain employment contracts
• If activities cease, contracts will be terminated respecting the statutory or contractual notice periods

Even after the bankruptcy declaration, the employee remains obliged to perform their work until the expiry of the notice period, unless the bankruptcy administration expressly releases them from this obligation. The administration must continue to pay wages during this period, these claims being treated as priority debts of the bankruptcy estate.

Employee protection is manifested notably by the fact that wage claims enjoy a privilege in the bankruptcy, pursuant to art. 219 DEBA. This privilege concerns claims arising during the six months preceding the opening of bankruptcy, up to a ceiling periodically determined by the Federal Council.

Financial Rights of Employees Facing Employer Insolvency

Unemployment Insurance and the Insolvency Benefit

One of the main safety nets for employees is the insolvency benefit (ICI) provided by the Federal Act on Compulsory Unemployment Insurance (UEIA). This mechanism allows workers to receive the amounts corresponding to their unpaid wage claims, without having to wait for the completion of the bankruptcy liquidation, a process that is often lengthy and uncertain.

The insolvency benefit covers:

• Wages for the last four months of the employment relationship
• Allowances due for those same four months
• Mandatory social insurance contributions
• Occupational pension contributions
• Holiday and public holiday entitlements

To benefit from this allowance, the employee must file a request with an unemployment insurance fund of their choice within 60 days of publication of the bankruptcy in the Swiss Official Gazette of Commerce (SOGC). This deadline is absolute and failure to comply results in permanent loss of entitlement.

Priority of Wage Claims in the Bankruptcy Procedure

Under art. 219 DEBA, employees' claims benefit from preferential treatment in the distribution of the bankrupt company's assets. These claims are classified in the first class of creditors, giving them payment priority over second- and third-class creditors.

This privilege applies to:

• Wage claims arising within the six months preceding the opening of bankruptcy
• Contractual or statutory severance pay
• Unpaid social insurance contributions

However, this privilege is capped at a maximum amount set periodically. Above this ceiling, wage claims are treated as third-class claims, with a generally very low recovery rate.

Procedures for Asserting Rights

Filing Claims in the Bankruptcy

From the publication of the bankruptcy in the SOGC, the bankruptcy office launches a creditors' call. Each employee must then file their claims within the specified deadline, generally 30 days. This filing must be precise and documented, including:

• The exact amount of the wage claims
• The relevant period
• The nature of the claims (wages, holidays, overtime)
• Supporting documents (employment contract, pay slips, time records)

Challenge of the Schedule of Claims

The bankruptcy office draws up a schedule of claims determining which claims are admitted and in which class they are ranked. If an employee's claims are rejected or incorrectly classified, they must act promptly:

• Consult the schedule of claims upon its publication
• In case of disagreement, bring a contestation action before the competent court
• Comply with the absolute deadline of 20 days from publication

Specific Situation of Senior Managers and Director-Employees

Senior managers and directors who are simultaneously employees of the bankrupt company are in a particular legal position that deserves specific attention. Certain restrictions apply:

• The insolvency benefit may be refused to persons who exercised notable influence over the employer's decisions (art. 51 UEIA)
• The wage claims of persons close to the employer may be subject to more rigorous scrutiny
• The risk of having their management acts challenged is higher

Beyond their rights as employees, directors must be aware of risks of personal liability. Several legal bases may be invoked, including liability under art. 754 CO (directors' liability) and revocation actions under arts. 285 et seq. DEBA.

Frequently Asked Questions about Employees' Rights in Bankruptcy