Effects of Russian sanctions on employees in Switzerland

What do the sanctions against individuals and companies that were put into effect following Russia’s attack on Ukraine mean for the employees of the sanctioned individuals or companies?

The current situation caused by Russia’s attack on Ukraine and the sanctions against individuals and companies that have been implemented as a result have far-reaching effects. These are sometimes underestimated by the public. It is important to note that in the event of breach of sanctions, it is not the sanctioned persons and companies who are sanctioned. The sanction affects the person doing business with a sanctioned person or company.

What does this mean for employees of sanctioned individuals or companies?

The Ordinance of 4 March 2022 on measures relating to the situation in Ukraine (SR 946.231.176.72; “Ordinance on Ukraine”) prohibits in art. 15 par. 2 the direct or indirect provision of “economic resources” to sanctioned persons or companies. The supply of labor is also considered an economic resource. If his own employer is thus placed on the Swiss sanctions list, the worker is prohibited from continuing to work for the employer in Switzerland. Often, however, especially in the case of the current sanctions related to the situation in Ukraine, it is not Swiss companies but natural persons who appear on the sanctions lists. These people may in turn have a relationship with Swiss companies. The corresponding Swiss companies are affected by the sanction if the sanctioned natural person owns or controls de jure or de facto these Swiss companies. Whether this is the case is not determined by the sanctions lists, but is assessed and decided by SECO.

A violation of this prohibition is punished and sanctioned on the basis of Art. 32 par. 1 of the Ukrainian Ordinance in conjunction with Art. 9 of the Federal Law on the Execution of International Sanctions (Embargo Law; EmbA) of March 22, 2002 (SR 946.241). The penalty varies depending on whether the offense was committed intentionally or negligently, or whether it is a serious case:

  • § An intentional violation is punishable by imprisonment of up to one year or a fine of up to CHF 500,000.
  • § In serious cases, the penalty is imprisonment for up to five years. The custodial sentence may be accompanied by a fine of up to 1 million francs.
  • § If the offense was committed through negligence, the penalty is imprisonment for up to three months or a fine of up to 100,000 francs.

All these acts are qualified by law as misdemeanors (“Vergehen”), which means that if they are sanctioned, an entry in the criminal record will be made. It is also important to note that the penalty cannot validly be borne by the employer. It is therefore not possible for employees to be promised compensation by the employer in exchange for the continuation of their work.

It is more widely known that the funds of sanctioned individuals and companies are blocked. This effectively makes it impossible for sanctioned companies and individuals to pay unpaid wages. Employees of sanctioned employers should therefore expect wage losses for unpaid wages. In certain circumstances, however, it is possible to obtain authorization from Seco both for the performance of work and for the payment of wages. According to art. 15 Para. 3 of the Ukrainian Ordinance, such authorization is possible in the following circumstances:

  • § Avoidance of difficulties;
  • § Execution of existing contracts;
  • § Execution of claims that are the subject of an existing decision of a court, an administrative body or an arbitral tribunal;
  • § fulfillment of official purposes of Russian diplomatic or consular representations; Where
  • § safeguarding Swiss interests.

Based on this exception, unpaid salary payments will likely be approved. However, this cannot be conclusively assessed and will also be considered by SECO on a case-by-case basis.

The courts have not yet clarified – as far as can be seen – whether sanctioned employers are still obliged to pay wages even if employees no longer work or are no longer allowed to work. This question depends on whether the imposition of the sanctions is attributed to the employer’s sphere of risk or whether a case of force majeure is presumed. In our view, it is likely that a court will find that the penalties are attributable to the employer’s sphere of risk and therefore there is still an obligation to pay the wages. However, it should be noted that employees generally have a duty to limit damages and are therefore obligated to seek alternative income. If they fail to do so, there is a risk that they will later be imputed hypothetical earnings, which will reduce any wage claim against the employer.

It should also be noted that non-payment of wages for the duration of the employment relationship does not qualify as unemployment and therefore does not give rise to a claim for unemployment benefits. As long as an employment contract exists, there is legally no unemployment. However, workers have the right to terminate the employment contract without notice in the event of imminent insolvency if the claims resulting from the employment contract are not secured (Art. 337a CO). There is also a right to terminate the employment contract without notice for important reasons, which may also include the existence of an employment relationship that cannot be fulfilled. However, as far as can be seen, this has not yet been judged by the courts. Termination without notice terminates the employment relationship and leads to unemployment. However, employees must take care to document themselves correctly in this regard in order to be able to plead as effectively as possible against the days of suspension ordered by the unemployment insurance fund.

Another option is to take legal action for unpaid salary payments. If a court decision is available, it increases the chances that Seco will grant authorization for payment. If the penalties lead to the bankruptcy of the employer, the employee can apply for insolvency compensation from the unemployment insurance fund. This request must be made within 60 days of the opening of bankruptcy proceedings, otherwise it is lost. The insolvency indemnity covers a maximum of the last four months of salary before the opening of the bankruptcy procedure. Other wage claims must then be filed as part of the bankruptcy proceedings.

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