Cantonal Court of Lucerne finds error in calculation of short-time work benefits

In its landmark decision 5V 20 396 (LGVE 2021 III No. 2), the Cantonal Court of Lucerne ruled on the non-inclusion of holiday and public holiday entitlements in the assessment of short-time work (STW) benefits in the summary procedure introduced due to the Covid 19 pandemic for employees on monthly wages.

The Court found that, based on Art. 34 paras. 1 and 2 of the Federal Act on Compulsory Unemployment Insurance and Insolvency Compensation (UIA) STW benefits amount to 80 % of the attributable loss of earnings. STW benefits are calculated based on the contractually agreed salary, up to a maximum of CHF 148,200.00 per year (i.e. CHF 12,350.00 per month). Paid holidays, paid public holidays and any other contractual indemnities are included in attributable loss of earnings, unless they continue to be paid during the STW period or constitute compensation for work-related disadvantages.

Following the outbreak of the Covid-19 pandemic, the Federal Council issued the Ordinance on Unemployment Insurance Measures in Connection with the Coronavirus (Covid-19 UIO) on 20 March 2020. Pursuant to Art. 8i para. 1 Covid-19 UIO, the attributable loss of earnings is to be assessed in a summary procedure and STW benefits entitlement is set at 80 % thereof.

In the aforementioned ruling, the Appellant (employer) objected to the fact that, on the basis of STW benefits assessed in summary proceedings, paid holidays and paid public holidays entitlements were not included in the calculation, notwithstanding the fact that employers owed indemnities to workers for holidays and public holidays accrued during the same period nonetheless. This placed employers in a worse position compared to STW benefits calculated in standard proceedings pursuant to Art. 34 paras. 1 and 2 UIA.

In the view of the respondent (unemployment insurance fund) however, Art. 34 UIA was not applicable in the context of summary proceedings under Art. 8i Covid-19 Ordinance. Furthermore, it was clear from official application and settlement forms, as well as from SECO’s FAQ, that only earnings subject to AHV / AVS contributions were decisive for the calculation.

In its ruling, the Cantonal Court based its decision on a version of Art. 8i Covid-19 UIO in force until 31 August 2021, as it considered that the amended wording of Art. 8i Covid-19 UAO as of 1 September 2020, in particular the insertion of “In derogation of Articles 34(2) and 38(3)(b) AVIG”, had not been put into effect retroactively as of 1 March 2020.

After a detailed analysis of STW benefits entitlement and the calculation of attributable earnings under standard proceedings, as well as the correct recognition that holiday and public holiday compensation is subject to AHV contributions, the Cantonal Court came to the sensible conclusion that holiday and public holiday entitlements must also be taken into account in the STW benefits calculation under summary proceedings. According to the cantonal court, neither materials related to the Covid-19 UIO nor SECO’s guidelines allow for any other interpretation, especially considering the unequal treatment of monthly and hourly compensated employees is nowhere explicitly mentioned. Furthermore, guidelines issued by SECO and STW benefits forms are merely administrative documents and do not provide an adequate basis for disregarding holiday pay and public holiday compensation. As such, there are no valid legal grounds for disregarding holiday pay and public holiday entitlements.

The ruling of the Cantonal Court is not yet final. Whether the Swiss Federal Supreme Court will rule differently will have to be seen.

SECO has not yet issued a directive based on the ruling of the Cantonal Court of Lucerne that incorrect calculations must be corrected and back payments made. For this reason, affected companies should immediately apply to the unemployment insurance fund responsible for a contestable ruling or, in the event that a ruling has already been issued, for a reconsideration. Should you require assistance in this regard, our labour law specialists will be happy to help.

Simon Fricker
Attorney at Law Certified Specialist SBA Employment Law
[email protected]
Philipp Bachmann
Attorney-at-Law, Notary Public, LL.M. Certified Specialist SBA Employment Law
[email protected]

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