Swiss Supreme Court Defines 'Very High Remuneration' And Sets A Framework For Managers' Remuneration

 
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Summary

In a recent noteworthy decision, the Swiss Supreme Court (the "Supreme Court") has ruled that a remuneration which exceeds five times the Swiss median salary is considered as a "very high remuneration" and as such does not deserve the protection generally granted by Swiss employment legislation.

Facts

The plaintiff (the "Employee") was a managing director of a large Swiss bank (the "Bank"). In mid 2009, he resigned from his position to join another financial establishment. At the time of his resignation, the Employee's remuneration was composed of a fixed annual base salary of CHF 300,000 (USD 310K approx.) with a two-fold bonus incentive scheme composed of Incentive Share Units (ISU) and a Cash Retention Award (CRA). The bonus incentive scheme provided for a claw back clause (the "Claw Back Clause") entitling the Bank to claw back pro rata the cash bonus (CRA) if the Employee were to resign (the "Clawback Event") within a two year period as of January 2009 (the "Claw Back Period").

At the end of February 2009, the Employee received a bonus payment of CHF 501,719 (USD 520K approx.) in the form of shares (ISU) and a cash bonus payment (CRA) of CHF 848,242 (USD 880K approx.). With the payment, the Bank emphasized that the bonus was paid at the Bank's sole discretion.

At the beginning of March 2009, i.e., a few days after the bonus payment, the Employee notified the Bank that he was resigning from his job, effective at the end of June 2009. The Bank released the Employee from his obligation to work and informed him of his contractual (pro rata) repayment obligation amounting to CHF 636,210.95 (USD 660K approx.) (due to the triggering of the Clawback Event). As the Employee failed to comply with the request for repayment, the Bank exercised the right of set off by debiting the amount of CHF 636,210.95 (USD 660K approx.) from the Employee's account held at the Bank.

The Employee brought an action before the local court claiming, inter alia, the payment of CHF 636,210.95 (USD 660K approx.) representing the amount set off by the Bank. The Employee argued that the bonus (the "Disputed Bonus") should be considered and treated as salary (as opposed to a gratuity) and that, as such, it was not "recoverable" by the Bank. The lower court found that the Disputed Bonus actually qualified as a variable salary and as such was due and payable. On appeal lodged by the Bank, the Appellate Court partially reversed the lower court's decision: it ruled...

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