During the week of 21 to 25 September 2026, the following headlines appeared in the press: ‘Leclanché, in crisis, has failed to pay August wages’ and ‘The bankruptcy of the Hairdressing Academy leaves 24 employees out of work’[1]. These press headlines provide an opportunity to revisit the options available to employees and apprentices – in the case of the Hairdressing Academy – should their employer go into liquidation.
Firstly, with regard to apprentices, in a previous article, the undersigned had already pointed out that the apprenticeship contract is unique in that it is governed by both private law and public law provisions.
As regards to private law provisions, Article 346 of the Swiss Code of Obligations (CO) sets out certain specific rules concerning termination. Thus, the apprenticeship contract may, in particular, be terminated with immediate effect on valid grounds in the following circumstances: if the training cannot be completed, or can only be completed under conditions that are substantially different from those originally envisaged. The employer’s bankruptcy clearly falls within this category.
As regards public law provisions at federal level, the apprenticeship contract is governed by the Federal Act on Vocational Training (LFPr) and its implementing ordinance (OFPr).
Article 14 of the LFPr refers the matter to the cantons in the event of the employer’s closure and, consequently, bankruptcy.
This article reads as follows: ‘If the apprenticeship contract is terminated, the training provider must immediately notify the cantonal authority and, where applicable, the vocational school. If the training company ceases trading or no longer provides initial vocational training in accordance with the legal requirements, the cantonal authority shall ensure that the initial training already commenced can, as far as possible, be completed as normal”.
Following a parliamentary question on 13 December 2017 regarding whether the phrase ‘as far as possible’ might ‘give the cantons too much leeway, thereby too often leaving the apprentice to fend for themselves’, the Federal Council replied as follows:
‘Experience shows that, in the event of company liquidations, a willingness to help apprentices is important, as they are not responsible for the difficult situation in which they find themselves. Often, other training companies take on responsibility for the training of these young people. The cantonal authorities also need a certain degree of flexibility to be able to find and implement pragmatic solutions.
Given that the cantons are responsible for the delivery of initial vocational training and that training organisations cannot be compelled to take on an apprentice, the Confederation cannot and does not wish to intervene further in this process, particularly as extreme cases have almost always been avoided to date.’[2]
It is therefore up to the relevant cantonal authority to try to find a solution for the apprentice. In the canton of Vaud, the relevant authority is the Department of Education and Vocational Training (DEF).
In the case of the apprentices at the Hairdressing Academy, according to press reports, the DEF is currently assisting them in finding another training provider so that the apprentices can continue attending their courses.
Apprentices who may find themselves in a similar situation are therefore advised to contact the relevant cantonal authority immediately so that it can help them find a solution and enable them to continue their training without interruption.
As regards other employees, their employment contracts are governed by the provisions of private law, and the authorities do not, in principle, intervene directly.
The employer’s bankruptcy, insolvency or failure to pay wages does not automatically terminate the employment contract.
An employee faced with an employer who is not paying or is insolvent must therefore make a decision and is faced with several options.
With regard to the payment of unpaid and overdue wages – that is, wages and other components of remuneration that have not been paid for past months – the employee is advised to send written reminders to their employer.
The employee may then, if necessary, suspend their work until the amounts due have been paid, but they must nevertheless exercise caution.
The employee may also decide to terminate their employment contract on valid grounds with immediate effect under section 337 of the Swiss Code of Obligations. If they choose this option, they are again advised to set the employer a deadline, in writing, to pay the outstanding wages; failing this, the contract will be terminated with immediate effect.
Of course, the employee may always opt for ordinary termination, that is, terminate their contract by giving the required notice period. In principle, however, the situation is often urgent, and termination with immediate effect is often the preferred option. This is all the more so because, if the termination is justified, the employee is entitled to what they would have received had the contract ended at its contractual term, namely the wages they would have received during the notice period (Article 337b of the Swiss Code of Obligations).
With regard to future wages – that is those not yet due – Article 337a of the Swiss Code of Obligations (CO) provides that ‘in the event of the employer’s insolvency, the employee may terminate the contract with immediate effect if no security is provided within a reasonable period to guarantee their contractual claims’.
The employee may therefore, on the basis of this article, set a deadline for their employer to provide security to guarantee all their future contractual claims, and state that, failing this, the contract will be terminated with immediate effect. The deadline must be reasonable; a period of 3 to 5 days is generally accepted. As for the amount of the security, this may, for example, comprise the amount of wages and all wage claims up to the end of the contract, if the contract is of fixed duration. If the contract is of indefinite duration, it may, for example, comprise the amount of wages and all wage claims up to the expiry of the notice period.
An employee facing an employer who fails to pay or is insolvent may also, under certain conditions, receive insolvency benefits from the Unemployment Fund.
Indeed, under Article 52 of the Federal Act on Compulsory Unemployment Insurance and Insolvency Benefits (LACI), ‘employees liable to pay contributions who are in the service of an insolvent employer subject to enforcement proceedings in Switzerland or employing workers in Switzerland are entitled to insolvency benefits’.
An employee is entitled to this compensation in three circumstances. The first circumstance is where bankruptcy proceedings are brought against the employer and the employee has ‘at that time, outstanding wage claims against the employer’. The second scenario is where bankruptcy proceedings are not initiated ‘solely because no creditor is prepared, due to the employer’s well-known indebtedness, to advance the costs’. Finally, the third scenario is where the employee has filed an application for attachment of the employer’s assets to secure a claim for outstanding wages.
Persons who determine the decisions taken by the employer – or who can significantly influence them – are not entitled to this compensation. These may include partners, members of the company’s governing body or those holding a financial stake in the company. Their spouses are also not entitled to this compensation, ‘where they are employed by the same company ’.
To be entitled to this benefit, the employee must ‘submit their claim for compensation to the relevant public fund based on the location of the debt enforcement or bankruptcy office, within 60 days of the date of publication of the bankruptcy in the Swiss Official Commercial Journal’ (Article 53 of the Unemployment Insurance Act (LACI)). In the event of the employer’s assets being seized, the employee must do so ‘within 60 days of the date on which the seizure was carried out’ (Article 53 of the Unemployment Insurance Act (LACI)).
If the employee fails to act within this time limit, the entitlement to compensation lapses.
An employee whose employer has been declared bankrupt may also, in certain circumstances, continue to work, and their contract may be taken over by the insolvency administrators.
Indeed, as mentioned above, the employer’s bankruptcy does not automatically terminate the employment contract. It is therefore possible, in certain situations, for the employment contract to be taken over by the insolvency practitioners or the administrator. The insolvency administrator may also enter into a new contract with the employee and may, of course, terminate the contract if this has not already been done by the employee.
If the employment contract is taken over, the employee is also entitled in this case to the option provided for in section 337a of the Swiss Code of Obligations (CO).
If the insolvency estate or the administrator does not take over the employment contract and terminates it, all claims relating to the employment contract become debts of the insolvency estate, including wages for the period between the declaration of insolvency and the termination of the contract and the notice period.
According to section 219 of the Federal Act on Debt Enforcement and Bankruptcy (LP), ‘claims which an employee may assert under the employment contract and which arose or became due during the six months preceding the commencement of bankruptcy proceedings or thereafter, up to a total of the maximum annual amount of insured earnings under compulsory accident insurance’ are classified in the First Class. This means that they will be repaid before other creditors if there are any remaining assets in the bankruptcy estate.
Finally (though this point will not be elaborated on here), an employee facing an insolvent or bankrupt employer must bear in mind that, if redundancies are initiated by the employer and certain thresholds are met, the provisions relating to collective redundancies apply, with a collective redundancy procedure being put in place.
The only exception concerns the obligation to negotiate a redundancy plan if the thresholds set out in Article 335i of the Swiss Code of Obligations (CO) are met. Indeed, Article 335k of the Swiss Code of Obligations (CO) provides that ‘the provisions relating to the redundancy plan (Articles 335h to 335j) shall not apply in the event of collective redundancies carried out during bankruptcy proceedings or composition proceedings leading to the conclusion of a composition agreement’.
In addition to the human and financial aspects – which, of course, must not be overlooked – their employer’s bankruptcy places employees in a difficult and stressful situation, and they may find themselves having to make decisions very quickly. It is essential that apprentices contact the relevant cantonal authority responsible for training immediately so that they can receive advice and guidance. Other employees are advised to seek advice promptly from, for example, a solicitor, a trade union, the unemployment benefit office or the employment service.
[1] www.24heures.ch/lausanne-lacademie-de-coiffure-en-faillite-24-personnes-touchees-987136228546; www.24heures.ch/leclanche-les-salaires-impayes-deux-filiales-en-faillite-384114864498.
[2] www.parlament.ch/fr/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20174116.