Switzerland: Transfer of Employment Contracts in an Asset Deal under Swiss Law

In an Asset Deal, the transfer of employment contracts is governed by Articles 333 ff. of the Swiss Code of Obligations (CO). These contracts automatically transfer to the acquiring party unless the employees object. If they do, the employment ends with the statutory notice period, and the employees lose their right to potentially longer notice periods that may be stipulated in their contracts.

Article 333a CO establishes information and consultation obligations: Employees must be informed about the reasons and consequences of the business transfer well in advance. If the transfer is accompanied by measures such as layoffs, employees must be consulted to provide their input and suggestions. However, these obligations often conflict with the desire of the parties involved to keep the transaction confidential until it is completed. If the employer fails to meet these obligations, they may be liable for damages, although proving such damages can be difficult.

If the Asset Deal is conducted under the Swiss Merger Act (Art. 69 ff. MA), employees have the right to block the registration of the business transfer in the commercial register, offering strong protection.

In many cases, there is a desire to align the terms of the acquired employees’ contracts with those of the acquiring company. While this is legally possible, the new terms must not be less favorable to the employees. If they are, this could be seen as an attempt to circumvent employee protection laws. In such cases, it is advisable to offer the new terms only after the transfer is complete to avoid legal complications.