1. The aim of the Posted Workers Act
The federal act of 8 October 1999 on pay and working conditions for posted workers and controls on minimum pay laid down in standard contracts (RS 823.2; Posted Workers Act, PWA) came into force on 1 June 2004. There is a related Federal Council ordinance (RS 823.201; Posted Workers Ordinance, PWO).
As readers will recall, we talk about “posted workers” when an employer sends workers, for a set period of time, to work in a state other than the state where the company has its head office and in which the workers normally work. Although they are working on the site of a third party in Switzerland, the posted workers remain bound by an employment contract with their employer (and work on behalf of and under the supervision of this employer) throughout the duration of the posting and remain covered by the original country’s social security system.
This law exists as an accompanying measure to the Agreement on the Free Movement of Persons (AFMP). It sets the minimum pay and working conditions that must be guaranteed to workers posted to Switzerland. In other words, its aim is to fight social dumping by ensuring that posted workers benefit from the same standards that apply to Switzerland’s workers.
Areas covered by the compulsory rules on posted workers include the minimum duration of paid leave, working time and rest periods, minimum pay, health and safety at work, protection for pregnant women, new mothers, children and young people, and gender equality. Legislation in these areas arises from various federal laws (such as the Federal Employment Act [LTr]) and Federal Council ordinances (for example ordinance 1 on the employment act [OLT 1]), extended collective agreements and standard contracts as mentioned in article 360a of the Code of Obligations. The law also imposes several other obligations, such as for example a due diligence requirement for businesses sub-contracting and a requirement for employers to file a notification for every worker posted to Switzerland.
The authorities have the right to impose a range of sanctions on any company that breaches the provisions applicable in Switzerland, as we will explore in this document. For more information about the process of posting workers to Switzerland, please read our detailed article here (in English only).
First and foremost, please be aware that the sanctions provided for by the Posted Workers Act were amended in April 2017. In particular, the maximum fines were increased and the option was added to both fine a company and ban it from operating in Switzerland, and the distinction between “minor” and “more serious” breaches within the meaning of article 2 of the PWA was abolished.
In addition, a further amendment to the Posted Workers Act is being undertaken in order to extend its scope of application to cover cantonal minimum wage legislation.
2. The types of sanctions provided for by the Posted Workers Act
Firstly, it is important to remember that EU member states and Switzerland are free to set their own sanctions in this area, so long as they comply with the principles of effectiveness, proportionality and non-discrimination.
Consequently, in Switzerland, the sanctions provided for by the Posted Workers Act range from a simple warning to fines and ultimately a ban on posting workers to the country for a given period (PWA, article 9).
To understand what type of sanction will be imposed, we first need to look at the behaviour that has led to the administrative proceedings.
So, for example, under the Posted Workers Act, only a fine of up to CHF 5,000 can be imposed for failure to present the required documents (A1 form, confirmation of advertisement, cross-border service agreement or a contract for work and services) during a compliance check. The penalty is the same in the case of failure to file notification of the posted worker, or if the accommodation provided during the assignment is insufficient (in terms of hygiene or comfort).
A breach of minimum pay or working conditions (rest period, health, safety and hygiene, gender equality, etc.) will result in a fine of up to CHF 30,000 or a ban on posting workers to Switzerland for between one and five years. In serious cases, the Posted Workers Act allows for these two penalties to be applied cumulatively.
A contracting business that fails in its duty of due diligence as regards sub-contractors (to ensure the sub-contractor complies with working and pay conditions) is liable for a maximum fine of CHF 5,000 or can be banned from posting workers to Switzerland for between one and five years.
Failure to pay an administrative fine also results in a ban on working in Switzerland for at least one year (and up to five years).
Lastly, a breach of the minimum pay conditions laid down by the standard employment contract when taking on a worker in Switzerland results only in a fine, of up to CHF 30,000.
Of course, for all the breaches listed above, the company in breach can in addition be ordered to meet the full cost of checks.
It is also important to note that any authority that imposes a sanction sends a copy of its decision to the State Secretariat for Economic Affairs (SECO) and to the joint body responsible for the enforcement of the collective agreement. The SECO keeps a list of businesses against which penalties have been imposed and publishes it online. Under the Posted Workers Act, workers’ and employers’ organisations have the power to bring action seeking an investigation into a possible breach of the law. The jurisdiction of the administrative authorities to impose sanctions is determined by cantonal law, (for example, in Geneva, the OCIRT [work inspectorate and labour relations office] under the Work Inspectorate Act [LIRT], and in the Canton of Vaud, the employment department [the cantonal tripartite commission for the implementation of support measures or the labour market and worker protection control department]).
In addition to administrative sanctions, the Posted Workers Act gives the authorities the power to impose criminal fines of up to CHF 40,000 (PWA, article 12), unless the breach constitutes a crime or offence carrying a heavier penalty under the Criminal Code (for example, under labour laws), in particular in the event of:
- refusing to provide information or deliberately providing false information,
- objecting to or blocking an inspection by the authority,
- breaching a ban on posting workers to Switzerland.
Additionally, fines of up to CHF 1,000,000 can be imposed if the employer fails to provide workers with the minimum pay or working conditions systematically or with the aim of maximising profit.
3. Degree of sanctions set by the authorities
Once the nature of the sanction has been determined, attention turns to its extent.
First of all, any authority that imposes an administrative measure that constitutes a sanction, and especially a fine, is required to follow the general principles of criminal law, and in particular articles 47 and following of the Swiss Criminal Code. This is because there are no criteria for clearly distinguishing an administrative fine from a fine as it is understood in criminal law (ATA/1057/2017 du 04.07.2017).
Consequently, the authority must demonstrate that the offender is at fault, even if only by negligence.
The authority has considerable discretion when setting a fine, and the fine can only be reviewed if it is excessive or abusive. The authority must of course be harsh so that employers comply with the law, but it must also apply the principle of proportionality. The authority will therefore take into account the culpability of the offender. It will also consider, in particular, their previous conduct and personal circumstances (CC art. 47 para. 1). “Culpability is assessed according to the seriousness of the damage or the danger to the legal interest concerned, the reprehensibility of the conduct, the offender’s motives and aims and the extent to which the offender, in view of their personal and external circumstances, could have avoided causing the danger or damage,” (CC art. 47 para. 2).
As we saw above, as regards proportionality, article 9 of the PWA specifically sets out a scale of sanctions. Moreover, a notion of degree (duration of one to five years) is actually integrated into the ban on operating in Switzerland so that the authority can adapt the sanction to the seriousness of the breach.
On a practical level, there is unfortunately little precedent as regards breaches of the Posted Workers Act. Since the law came into force in 2004, there have been a handful of Federal Supreme Court decisions, and even fewer concerning bans on posting workers to Switzerland. (Caution, however: this does not mean the authorities rarely impose penalties. Quite the opposite in fact.)
The Swiss Supreme Court did nevertheless take the opportunity to give further information on the notion of a minor breach in decision 2C_150/2016 of 22 May 2017. This decision was handed down under the former law, but it nevertheless remains relevant.
According to the judges, the proportionality principle does not mean that employers can only be banned from detaching workers to Switzerland for repeat offences. They absolutely can be banned as a result of a first offence, if it is sufficiently serious. Moreover, sanctions apply not only to breaches relating to staff health and safety, but indeed those relating to all minimum working conditions applicable to companies that post workers to Switzerland, and in particular working time and rest periods – which in reality do contribute to health and safety.
The Federal Supreme Court seems to want to go further, and considers that a ban on operating in Switzerland should be the rule, unless an employer can demonstrate mitigating circumstances as they are understood in criminal law which would cause the violation to be classed as a “minor” breach. This is clearly not the case if a company has accepted at the outset that it breached employment conditions.
The Swiss Supreme Court justifies this principle by the fact that the sanction must be effective, proportionate and dissuasive and that, by banning the offender from detaching workers to Switzerland, it is ensuring compliance with provisions that are in the public interest in a more effective way than it could if it just imposed a fine.
The SECO has however issued recommendations (most recently in 2017) in the form of a catalogue of sanctions for the Posted Workers Act, in order to harmonise practices across the cantons.
Under these for example, failure to file notification of posted workers (for up to 5 people) will lead to a fine of CHF 500 for the first offence. The fine will be doubled for each further offence up to a ceiling of CHF 5,000. Late filings (for example, fewer than eight days before work begins) will result in a warning only for the first offence, and then a fine which doubles with each further offence.
As regards breaches of minimum pay, wage dumping to a total value for all staff of between CHF 100 and CHF 4,999 will result in a fine of 50% of the difference between the salary paid and that calculated in Switzerland, if it is a first offence and the employer in breach pays the arrears to the staff (If the difference is less than CHF 100, employers are generally just given a warning). If the arrears are not paid to employees or if the payment is undocumented, the fine is 160%. On the second offence, the percentages are increased to 60% and 170%, and then 70% and 180% on the third offence.
If the total pay shortfall for all staff is between CHF 5,000 and CHF 10,000, the fine is 160% of the difference in pay or a 12-month ban on working in Switzerland for a first offence, if the arrears have not been paid or the payment is undocumented. If the arrears are paid and the payment documented, the fine is 50% or a 12-month ban on detaching workers.
Between CHF 10,001 and CHF 20,000, the fine in the first case is 160% of the shortfall (up to a maximum of CHF 30,000) and a 12- to 24-month ban on operating in Switzerland. If the arrears are paid (second case), the fine is 50% of the shortfall or a 12- to 18-month ban on working in Switzerland.
If the value of the wage dumping is between CHF 20,001 and CHF 30,000, the sanction is a fine of CHF 30,000 and a 24- to 36-month ban on working in Switzerland in the first case. In the second case, the authorities can opt for either a fine of CHF 30,000 or an 18- to 24-month ban on posting workers.
Each additional CHF 10,000 of wage dumping will lead to an extension of up to 12 months in the duration of the ban if the arrears have not been paid to the workers, and up to 6 months if they have. As stated in the Posted Workers Act, the ban is subject to a maximum duration of 5 years.
The system of reducing the fine or duration of the ban on operating in Switzerland outlined above puts a certain amount of pressure on businesses to pay employees the arrears owing to them.
It is important to note that where the wage dumping is of a high total value and concerns a small number of employees over a short contract, the authorities can deviate from the standard calculation. This situation makes the offence significantly more serious because the pay shortfall is concentrated over a smaller number of workers and a shorter time period (so it is less “diluted”).
Last but not least, penalties for breaches of working conditions legislation, such as for example those laid down in the labour law (LTr), are decided on a case-by-case basis.
In conclusion, the main point to remember is that the Posted Workers Act provides for significant sanctions. While it is generally fairly easy from a financial point of view for a company to pay a fine, being banned from operating in Switzerland can have far-reaching consequences. Forewarned is forearmed!
Our lawyers have been specialising in immigration for more than 15 years. We will be happy to answer your questions and to assist you in any administrative proceedings relating to a breach of the Posted Workers Act, anywhere in Switzerland, and in English, German, French or Italian as required.