News - Switzerland

Switzerland - November 2013

Construction industry: Main contractor liable for employment breaches of its subcontractors

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.

Background

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.

Deployment Act

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.

Commentary

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.

Resources

Deployment Act (Entsendegesetz, EntG)

For further information or to discuss any of the issues raised, please contact Stefanie Monge or Nadja Flühler on +41 44 220 12 12 at Poledna Boss Kurer AG – www.pbklaw.ch.

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