Is The Bonus Part Of The Salary Or A Gratification? Swiss Federal Supreme Court Sets Threshold Amount

Author:Ms Marie-Christine Balzan and Laura Widmer
Profession:Bär & Karrer

In its decision 4A_653/2014 dated 11 August 2015, the Swiss Federal Supreme Court confirmed its most recent case law on bonus entitlements (ATF 139 III 155) and introduced a threshold to distinguish between salary and gratification in cases where the bonus amount is neither determined nor objectively determinable but lying in the employer's discretion. To the extent that the employee is a high income earner, that is a total compensation in excess of CHF 354,000 per year, a bonus will remain a gratification and does not qualify as salary, irrespective of the ratio between the employee's base salary and bonus.

The rationale of the Swiss Federal Supreme Court is that employees with high income are not in need of specific employment law protection. As a consequence, such employees might for instance lose their bonus entitlement if their employment ends before the bonus payment date.

The present briefing aims at providing a short overview of the most recent case law on this issue, with a particular focus on the new criteria developed by the Swiss Federal Supreme Court.

Factual Background

The case was brought to the Swiss Federal Supreme Court by a managing director of a Swiss bank, whose compensation in 2008 consisted of a base salary of CHF 300,000 and a bonus of CHF 1,750,000. In January 2009, the bank enacted a new retention policy, encompassing a so-called clawback clause providing for partial reimbursement of the bonus, should the employee resign within the two years following payout date.

In February 2009, the employee gave notice of termination per the end of June 2009 and the bank, as a consequence, asked him to reimburse ¾ of the bonus received. The employee refused and the dispute was escalated up to the Swiss Federal Supreme Court, with the employee arguing that the bonus amount exceeded (by far) the amount of the base salary and therefore was part of his salary. Thus, the bonus could not be made subject to conditions and was owed to him despite the termination of his employment.

Recent Case Law

Swiss legal doctrine distinguishes between bonuses that form part of the salary and gratifications.

Bonuses are considered part of the employee's salary where the amount of the bonus is clearly determined or at least objectively determinable, which is the case where the remuneration does not fall within the employer's assessment (ATF 139 III 155, cons. 3.1). In such cases, the Swiss Federal Supreme Court has repeatedly stated that the bonus...

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