Labour-Law Issues Affecting Outsourcing

 
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Outsourcing occurs when a company wants to outsource a single business unit and mandate a third party to provide services that were previously rendered by its own employees. An example would be a bank that wants to outsource an internal IT function to an IT service provider. In addition to economic, technical, fiscal and contractual issues, this also goes hand in hand with questions regarding labour law.

  1. Problems

    Depending on the way it is structured, an outsourcing transaction can qualify as the transfer of a business unit as defined in Art. 333 of the Swiss Code of Obligations (SCO) if the company not only replaces a service that was previously provided internally by a service bought from an external party, but also outsources operating resources and employees. If an outsourcing transaction falls within the scope of application of Art. 333 SCO, this will have serious consequences for the companies involved in the transaction as well as the affected employees. This impacts the relationship between the outsourcing company and its affected employees as well as the contract negotiations between the outsourcing company and the service company. The companies involved in the transaction cannot freely decide which employees should stay with the former employer and which should transfer to the new employer and what employment conditions should apply to the transferring employees. The employees affected by the transaction must also take specific decisions and comply with certain rules.

  2. Outsourcing as a transfer of a business unit pursuant to Art. 333 SCO

    A basic requirement for the application of Art. 333 SCO is that a company transfers an operational unit (or just part of an operational unit) to another company and that this operational unit (or part of an operational unit) is generally continued, i.e. the purpose of the operational unit, its organisational structure and individual character are retained. The vague formulation of these criteria already shows that it is not easy to decide in which situations an outsourcing transaction will qualify as the transfer of a business unit as defined in Art. 333 SCO, with the resulting consequences. A requirement for the transfer of a business unit is that tangible or intangible operational resources are transferred to the service provider and that these resources are generally used for the same purpose as before. A business unit can also be transferred without a takeover of operational resources if a...

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