Switzerland: Swiss Federal Supreme Court Clarifies Case Law on Prohibition of Continuous Compensation of Vacation through Wage Supplements

The employment contract of an employee provided for a full time employment and an hourly wage of 18 Swiss francs, plus an 8.33% vacation allowance supplement because the monthly working hours varied up to 20%. After the employee was dismissed in 2020, she sued the company. The Civil District Court of Basel-Landschaft West ordered the employer to pay, among other things, CHF 17’340.00 in vacation compensation, which was confirmed by the Cantonal Court of Basel-Landschaft. The Federal Supreme Court dismissed the employer’s appeal on the following grounds:

Article 329d of the Swiss Code of Obligations (OR) stipulates that the employer must pay the employee the entire salary during vacations. This means that the employee may not be placed in a worse position in terms of wages during the vacation than if he/she had worked during this period. In addition, it is stipulated that during the term of the employment relationship, vacations may not be compensated by cash benefits or other benefits. The purpose of the provision is to ensure that when the employee actually takes the vacation, he or she also has the money to spend it without worrying; it should enable him or her to relax without being prevented from doing so by a loss of wages.

Previous case law of the Federal Supreme Court allowed deviations from this mandatory provision in the case of irregular employment. This was intended to take into account difficulties in calculating the salary attributable to a vacation when there are irregular work assignments. However, in view of the software and time recording systems available today, the calculation of the vacation pay even in the case of monthly wage fluctuations no longer appears unreasonable. The Federal Supreme Court therefore held that the protective purpose of Article 329d OR would be undermined if, in the case of a full-time workload, due to fluctuations in the salary owed, a continues compensation of vacation payments through wage supplement was allowed.

Federal Supreme Court Decisions of January 30, 2023, (4A_357/2022), media release March 2, 2023