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Switzerland

2. Re-Characterisation of Independent Contractors as Employees

a. Laws and Guiding Principles

As with most jurisdictions, Swiss law upholds the following principle: when assessing the form and terms of a contract, the true and common intention of the parties must be ascertained without dwelling on any inexact expressions or designations they may have used either in error or by way of disguising the true nature of the agreement.

Hence, the re-characterization as an employee depends on the aforementioned several criteria, which have been developed by Swiss courts in conjunction with the few statuto-ry law provisions on the issue.

b. The Legal Consequences of a Re-Characterisation

In the event of a re-characterization, the employer faces wide-ranging financial risks. The contractor may claim he is employed by the principal/employer, thus gaining the status of an employee, including any and all applicable benefits and protection rights.

In particular, the employee may retroactively claim compensation for accrued holiday, overtime, pension contributions etc. The consequences for the employer can be devas-tating in cases where the presumed independent contractor suffers a serious accident and is not properly insured against its consequences.

It goes without saying that in the case of a re-characterization, all protection rights in connection with the termination of employment apply.

Moreover, the employer will be retroactively obligated to pay social security contribu-tions for the re-characterized employment relationship. This obligation covers the en-tire duration of the re-characterized employment relationship and is only limited by the applicable statute of limitation, which is five years.

c. Judicial Remedies Available to Persons Seeking ‘Employee’ Status

Persons seeking “employee” status can submit a respective claim with the competent labour court requesting the defendant to apply Swiss employment laws to the contrac-tual relationship. At the same time, or alternatively, they can request a formal decision with the competent social security authority regarding their social security status (inde-pendent or dependent worker).

d. Legal or Administrative Penalties or Damages for the Employers in the Event of Re-Characterisation

In the event of re-characterization, the employer must pay the outstanding social security contributions for up to five years plus late payment interests. The company organs (including the board members) are jointly and severally liable for the payment of the social security contributions for the first pillar (Old Age and Survivors Insurance).

Criminal charges due to deliberate breach of mandatory protection rules (e.g. in con-nection with work time regulations) are possible but only in exceptional cases awarded.

Any questions

Ask our member firm lelex Attorneys at Law in Switzerland