New federal court ruling on pandemic-related short-time work compensation

In order to enable such a huge increase in short-time work compensation claims to be handled the Federal Council decided on March 13, 2020, by emergency ordinance, to take immediate measures and introduced, among other things, a summary procedure to replace the more time-consuming normal procedure that had applied until then (Art. 8i of the Covid 19 Unemployment Insurance Ordinance, in force until December 31, 2021). This enabled short-time working payments to be applied for and processed quickly and summarily by employment offices. The summary procedure was designed to help employers and employees, while also reducing the workload of the authorities. SECO provided a form that considerably simplified both the application and the processing by the offices. Otherwise, timely processing of the numerous applications would not have been possible at all.

Although Art. 34 (2) AVIG clearly provides that holiday compensation, among other topics, should be included in the calculation of the short-time work allowance, SECO was of the opinion at the time that this was not owed in the case of employees employed on a monthly wage. Accordingly, the form provided by SECO for applying for short-time compensation for monthly wage earners did not provide for the possibility of including vacation / public holiday allowances in the short-time work compensation. In this regard, SECO relied on Article 8i of the aforementioned emergency ordinance of the Federal Council, which, however, does not contain any deviation from Article 34 (2) AVIG with regard to vacation compensation for monthly wage earners.

In the canton of Lucerne, the cantonal unemployment fund initially paid a company vacation and public holiday compensation. However, the fund later took the position that these payments were incorrect and demanded the company repay them. As a result, the fund stopped paying short-time working allowances to the company altogether. The company challenged the fund’s decision in the Cantonal Court of Lucerne and won. In February 2021 the cantonal court found that the fund had been wrong to refuse the vacation and holiday compensation, because there was no legal basis for doing so. In its carefully reasoned judgment of November 17, 2021, the Federal Supreme Court followed the opinion of the lower court and reprimanded SECO, at least between the lines. The views of SECO and the Lucerne unemployment insurance fund are not compatible with the clear legal mandate of AVIG. Moreover, when it introduced the summary procedure, the Federal Council never intended to set aside the rights of monthly wage earners to vacation and compensation pay when they were paid short-time work compensation.

It follows from the ruling of the Federal Supreme Court that all company that applied for short-time working compensation for their employees on monthly wage were underpaid because the unemployment insurance funds did not include vacation and holiday compensation to SECO's incorrect interpretation of the law. The question arises as to whether the companies affected can, at best, obtain this money retroactively. The sums involved could be considerable in certain circumstances.

In its media release of December 10, 2021, SECO announced that it had taken note of the judgment and would now analyse its impact on the implementation of short-time work compensation in detail. The consequences for an accounting procedure that complies with the Federal Court ruling should be determined as quickly as possible. SECO will comply with the demands of the Federal Supreme Court, with the aim of submitting corresponding proposals to the Federal Council at the beginning of this year.

A key question that will arise in this case is the significance of the three-month forfeiture period for the assertion of short-time compensation claims, which would in fact lead to a substantial part of the claims in question being forfeited. This can be countered by the fact that SECO itself made it impossible to assert the vacation claims with its form.
Furthermore, immediately after the Lucerne ruling in February 2021, SECO had expressly requested employers via its website not to make the corresponding claims for vacation and public holidays. If SECO were to invoke forfeiture, this would violate the principle of good faith. In any case, companies would be able to invoke that the relevant deadline was not met through no fault of their own.