In order to protect employees' rights in the construction industry, the main contractor is now jointly and severally liable if the subcontractor does not comply with the relevant Swiss working conditions or minimum pay.
In many industries it is common practice to pass work on to a subcontractor. Since the enactment of the Agreement on the Free Movement of Persons between Switzerland and the European Union, work may be passed on by Swiss based companies to foreign companies for up to 90 days a year without proof that these companies comply with the relevant Swiss working conditions and minimum pay.
With the amendments to the Swiss Deployment Act (Entsendegesetz, EntG) dated July 15, 2013, the Swiss Federal Council provided for joint and several liability for the entire chain of contractors in order to prevent wage dumping. Thus, in the construction industry the main contractor is liable for the subcontractor and its entire contractual chain in the event these companies do not comply with the relevant Swiss working conditions or minimum pay. However, the main contractor is only liable if the subcontractors cannot be prosecuted themselves and if he cannot show that he acted with due diligence when passing the work on to the subcontractor. In order to meet the required due diligence standard, the contractor has to verify in advance whether its subcontractors comply with the relevant provisions. Even though it is the Deployment Act that regulates the joint and several liability for the contractor – that Act applies principally to cross-border deployment situations whereas this particular provision also applies to situations where work is passed on to a domestic subcontractor.
Contractors should ensure in advance that any organisation to which they intend to subcontract complies with the Swiss provisions regarding working conditions and minimum pay. Any subcontractors looking to do business with Swiss companies would be well advised to ensure also that they are compliant with Swiss law to ensure they are competitive.
Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information click here.
Circular 230 disclosure
To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.