<h3>What Swiss Employers Need to Know</h3>
<h3>1. A New Regulatory Reality in Europe</h3>
<p>The EU Pay Transparency Directive (Directive (EU) 2023/970; the Directive) entered into force on June 6, 2023. Member States have until June 7, 2026, to transpose it into national law. Several jurisdictions — including Germany, France, and the Netherlands — are already well advanced in their implementation efforts. This is not a distant regulatory prospect. It is taking effect now.</p>
<p>Although the Directive does not directly apply to Swiss employers, its practical implications for companies with European operations, international talent pools, or EU-facing commercial relationships are significant and warrant careful attention.</p>
<h3>2. Scope and Key Provisions of the Directive</h3>
<p>The Directive pursues a straightforward objective: to ensure equal pay for equal work or work of equal value through transparency mechanisms and robust enforcement. Its key provisions include:</p>
<p><strong>Broad definition of remuneration.</strong> The Directive adopts an expansive concept of <em>«pay»</em> encompassing not only base salary but also variable components, bonuses, overtime compensation, benefits in kind, equity-based instruments, supplementary pension contributions, and severance payments (Art. 3(1)(a)). For employers operating nuanced, multi-component compensation structures, this breadth is significant.</p>
<p><strong>Pre-employment transparency.</strong> Employers must inform applicants of the initial pay level or range for a position — either in the vacancy notice or before the interview stage — without requiring the candidate to disclose prior earnings (Art. 5). This provision alone will require many organizations to formalize pay bands that have historically remained informal or manager-driven.</p>
<p><strong>Right to information for employees.</strong> Employees gain the right to request and receive written information about their individual pay level and the average pay levels — broken down by sex — for categories of employees performing equal work or work of equal value (Art. 7). Employers must respond within two months.</p>
<p><strong>Employees’ Right to Pay Transparency. </strong>Employers must make the objective and gender-neutral criteria that govern pay determinations available to employees (Art. 6). If an employee representative body exists, these criteria must be agreed with the relevant employee representative body (Art. 4).</p>
<p><strong>Pay reporting obligations.</strong> Employers with 100 or more employees must report on the gender pay gap within their organization at regular intervals (Art. 9). For employers with 250 or more employees, reporting is annual. Where reporting reveals a gender pay gap of 5% or more that cannot be justified by objective, gender-neutral criteria, the employer must conduct a joint pay assessment with employee representatives (Art. 10).</p>
<p><strong>Reversal of the burden of proof.</strong> In pay discrimination proceedings, the burden of proof shifts to the employer where an employee establishes facts from which discrimination may be presumed (Art. 18). This is a substantial procedural change in many Member States and creates meaningful litigation exposure.</p>
<p><strong>Full compensation and collective redress.</strong> Victims of pay discrimination are entitled to full compensation, including back pay, related bonuses, and compensation for lost opportunities. Member States must enable representative actions and collective proceedings (Art. 16, 23).</p>
<h3>3. The Swiss Legal Framework: Limited Obligations, Structural Gaps</h3>
<p>Switzerland&#8217;s existing pay equity framework primarily relies on Article 8(3) of the Federal Constitution and the Federal Act on Gender Equality (GEA). Since July 1, 2020, employers with 100 or more employees have been required to conduct an internal pay equity analysis (Art. 13a ff. GEA), have it verified by an independent body, and communicate the results to their employees.</p>
<p>However, this framework differs from the Directive in several critical aspects:</p>
<p><strong>No individual right to comparative information.</strong> Swiss employees cannot request data on how their pay compares to that of colleagues performing equivalent work. In complex proceedings, however, employees may petition the court to appoint an expert to conduct a pay equity analysis report.</p>
<p><strong>No mandatory pay reporting to authorities.</strong> The Swiss obligation is essentially an internal self-assessment, not a disclosure regime.</p>
<p><strong>No pre-employment transparency requirement.</strong> Salary ranges do not need to be communicated to applicants.</p>
<p><strong>Sunset clause.</strong> The pay equity analysis obligation under the GEA is limited in time and will expire on June 30, 2032, unless the legislature acts to extend it.</p>
<p><strong>No reversal of burden of proof specific to pay transparency.</strong> Standard procedural rules continue to apply to Swiss employment litigation. However, where an employee renders discrimination plausible, a presumption of discrimination arises, thereby easing the burden of proof — this applies to allocation of tasks, working conditions, remuneration, training, promotion, and termination (Art. 6 GEA).</p>
<p>In short, Swiss law imposes a significantly lighter regime. However, for many Swiss-based employers, the more pertinent question is not whether Swiss law mandates compliance with certain aspects of EU law — but whether commercial, operational and social realities require adherence to the higher standards set out in the Directive regardless.</p>
<h3>4. Why Swiss Employers Are Affected</h3>
<p>Three vectors of indirect impact deserve particular attention:</p>
<p><strong>Group-Level Governance and Policy Harmonization.</strong> Multinational groups subject to the Directive in one or more EU Member States will face strong incentives — and in some cases, regulatory expectations — to implement consistent pay transparency frameworks across all jurisdictions. Swiss headquarters, regional hubs, and local subsidiaries will be drawn into these processes. Compensation committees, HR leadership, and legal teams will need to decide whether to carve out Swiss entities (creating complexity and potential inconsistency) or to extend EU standard processes group-wide (thereby creating obligations beyond those required under Swiss law). Neither path is without cost. Additionally, reputational aspects might suggest adherence to the EU standards.</p>
<p><strong>Cross-Border Talent and Labor Market Expectations. </strong>The normalization of salary transparency in the EU will reshape candidate expectations across borders. Swiss employers competing for talent in an integrated European labor market — particularly in financial services, technology, life sciences, and professional services — will face increasing pressure to disclose pay ranges and justify compensation decisions. Employers perceived as opaque risk reputational disadvantage and reduced attractiveness to high-caliber candidates.</p>
<p><strong>Supply Chain, Procurement, and ESG Conditionality.</strong> The Directive explicitly encourages Member States to consider pay transparency compliance in the context of public procurement (Art. 24(3)). More broadly, the growing ESG and social sustainability agenda means that institutional clients, investors, and business partners increasingly expect demonstrable pay equity practices from their counterparties. Swiss companies serving EU-regulated clients or participating in EU public tenders may face contractual or qualification-related transparency expectations. Even companies operating exclusively at the local level are unlikely to escape the resulting pressure. To remain competitive and avoid reputational and competitive disadvantages, greater transparency will be necessary.</p>
<h3>5. Practical Implications: What Deserves Attention Now</h3>
<p>Even in the absence of a direct Swiss transposition obligation, prudent employers should consider the following:</p>
<p><strong>Compensation architecture.</strong> Are existing pay structures — particularly discretionary bonus schemes, ad hoc equity grants, and historically grown salary differences — capable of withstanding structured scrutiny? The Directive&#8217;s broad pay definition means that virtually every element of total compensation must be justifiable on objective, gender-neutral grounds.</p>
<p><strong>Documentation and decision criteria.</strong> Can the organization explain, in writing, why employees performing comparable work are compensated differently? <em>«Market conditions at the time of hire»</em> or <em>«individual negotiation outcomes»</em> are precisely the types of justifications that the Directive&#8217;s framework is designed to challenge.</p>
<p><strong>Internal data readiness.</strong> Does the organization have the data infrastructure to produce meaningful pay gap analyses — broken down by job category, seniority level, and gender? Many companies discover only upon attempting such analysis that their job architecture and grading systems are insufficiently standardized.</p>
<p><strong>Governance ownership.</strong> Pay equity governance requires clear accountability. It intersects compensation, legal, compliance, HR, and — for listed companies — investor relations and board-level oversight. Fragmented ownership is a common source of inaction.</p>
<p><strong>Contractual and policy review.</strong> Employment contracts, bonus plan rules, and internal policies may require updating to align with transparency expectations — particularly confidentiality clauses that restrict employees from discussing compensation (which the Directive expressly prohibits, Art. 7(5)).</p>
<h3>6. Conclusion</h3>
<p>The Directive represents the most significant regulatory intervention in compensation practices in a generation. Its effects will not remain confined to EU borders.</p>
<p>Swiss employers — particularly those operating internationally or competing in cross-border talent markets — are well advised to treat this not merely as a foreign compliance exercise, but as a development that may significantly affect their Swiss operations as well. The organizations that begin this work now will have the advantage of shaping their approach proactively, on their own terms, and without the pressure of imminent regulatory deadlines or litigation risk.</p>


Homburger Bulletin

EU Pay Transparency Directive

<h3>A. Introduction</h3>
<p>The Swiss Federal Supreme Court&#8217;s January 19, 2024 decision, which was published on February 12, 2024, concerns an internal investigation into sexual harassment allegations against an employee. In that context, the Court assessed whether the internal investigation, which confirmed a reasonable suspicion of sexual harassment and ultimately led to the employee&#8217;s dismissal, had been conducted properly.</p>
<p>The key rulings from the Court&#8217;s decision are:</p>
<ol>
<li>When private employers perform internal investigations, the standard criminal procedural guarantees do not apply;</li>
<li>Employers do not need to provide an employee subject to investigation with advance notice of an interview or an opportunity to prepare. Rather, it suffices if the employer informs the accused employee at the beginning of the interview of its purpose and content;</li>
<li>The absence of a «person of trust» at the interview does not constitute a serious deficiency in the investigation process that would render the employee&#8217;s termination abusive, even if an employer&#8217;s internal regulations entitle employees to be accompanied by a «person of trust» at such interviews;</li>
<li>Employers are not required to inform the accused employee in detail of the allegations against him or her. Generic and anonymized information about the allegations is sufficient;</li>
<li>A reasonable suspicion, confirmed by an internal investigation, is sufficient basis to ordinarily terminate an employee lawfully even if the suspicion is later proven to be unfounded. Before terminating an employee, the employer is not required to prove the truth of the allegations.</li>
</ol>
<p>The Court&#8217;s ruling rejects the views previously expressed by some legal scholars that employers must provide employees subject to investigation the procedural guarantees accorded to the accused person in criminal investigations.</p>
<h3>B. Summary of Facts and Procedural History</h3>
<p>As noted above, the case concerned an internal investigation regarding allegations of sexual harassment at a bank. Employee A contacted the bank&#8217;s ombudswoman for conduct and ethics and reported sexual harassment by Employee B. The bank conducted an internal investigation to clarify the sexual harassment allegations. As part of the investigation, several employees, including Employee B, were interviewed. The internal investigation concluded that there was sufficient basis for a reasonable suspicion that Employee B had sexually harassed Employee A. As a result, the bank terminated Employee B by observing the applicable notice period.</p>
<p>Employee B then brought a claim for unfair dismissal and damages. The Zurich Labor Court rejected the claim. It held that it was irrelevant whether the allegations of sexual harassment were true or not. Rather, the only relevant factor was whether the bank had sufficiently investigated the allegations. The Labor Court found that it had.</p>
<p>Employee B appealed to the High Court of the Canton of Zurich, which concluded that the bank had not afforded Employee B an adequate opportunity to defend himself against the allegations. In particular, it focused on the lack of detail provided by the bank regarding the allegations, which, according to the High Court, prevented Employee B from adequately defending himself and, in particular, from providing exculpatory facts and evidences. The High Court therefore held that the termination was abusive.<a href="#_ftn1" name="_ftnref1">[1]</a></p>
<p>Thereafter the bank appealed to the Swiss Federal Supreme Court, which overturned the High Court&#8217;s decision.</p>
<h3>C. Findings of the Swiss Federal Supreme Court</h3>
<h4>1. No equivalent procedural guarantees as in criminal investigations</h4>
<p>The Court&#8217;s decision clarifies uncertainty respecting the law applicable to internal investigations in private companies. In a case from May 2016,<a href="#_ftn2" name="_ftnref2">[2]</a> the Court quoted legal scholars who expressed the view that in internal investigations, employers had to provide accused employees with procedural guarantees equivalent to those of a criminal proceedings (i.e., a right to prepare for the defense, be represented by a lawyer, and request the taking of evidence).<a href="#_ftn3" name="_ftnref3">[3]</a> As a result, following the Court&#8217;s May 2016 decision, it was unclear what procedural guarantees, if any, were required in internal investigations. In its recent decision, the Court clarified that its 2016 ruling merely reproduced the views expressed by some legal scholars but did not endorse them.<a href="#_ftn4" name="_ftnref4">[4]</a></p>
<p>The Court further explained that, unlike in a criminal proceedings, in which an accused person is subject to the state&#8217;s criminal power and may face criminal liability (including imprisonment and fines), employees and employers voluntarily enter into an employment relationship and the worst threat an employee can face is termination.</p>
<p>According to the Court, the bank&#8217;s internal investigation provided adequate protections for Employee B because the bank interviewed several employees, reviewed Employee B&#8217;s electronic communications, and provided Employee B an opportunity to comment on the minutes of his interview.</p>
<h4>2. No obligation to announce the purpose and the content of the interview in advance</h4>
<p>The Court held that, unlike in criminal proceedings, employers are not required to inform employees in advance of the purpose and content of an internal investigation interview. Rather, it is sufficient if the employee is informed at the beginning of the interview of its purpose and content. There is no legal requirement to provide the employee with an opportunity to prepare for the interview.<a href="#_ftn5" name="_ftnref5">[5]</a></p>
<h4>3. No right to be accompanied by a «person of trust»</h4>
<p>The Court held that the absence of a «person of trust» at the interview does not constitute a serious deficiency in the investigation process that would render the employee&#8217;s termination abusive, even if an employer&#8217;s internal regulations entitle employees to be accompanied by a «person of trust» at such interviews.<a href="#_ftn6" name="_ftnref6">[6]</a></p>
<h4>4. Right to have the allegations clarified</h4>
<p>The Court confirmed that the internal investigation of a private employer is not comparable to a state criminal investigation and that therefore the employer is not required to inform the employee in detail of the allegations against him or her. Rather, generic and anonymized information about the allegations is sufficient. The Court also explained that accuser&#8217;s identity must be kept confidential and may not be disclosed to the accused employee.</p>
<h4>5. Ordinary termination due to reasonable suspicion is not abusive</h4>
<p>The Court&#8217;s ruling reminded that Swiss employment law is governed by the principle of freedom of termination. This means that there are no particular reasons required for an ordinary termination of the employment relationship.</p>
<p>Accordingly, unlike in criminal proceedings, in which there can be no conviction unless the alleged crime is proven beyond a reasonable doubt, an employee may be terminated based on mere suspicions, even if the suspicions later turn out to be unfounded.</p>
<p>Employers still have an obligation to establish that their suspicions are reasonable before terminating their employees. Termination may be abusive if based on mere allegations absent an adequate investigation to ascertain the trustworthiness of the allegations, or if the investigation fails to establish a reasonable suspicion that the allegations are indeed true.<a href="#_ftn7" name="_ftnref7">[7]</a></p>
<h6><a href="#_ftnref1" name="_ftn1">[1]</a>        OGer ZH LA210022 of May 23, 2023.</h6>
<h6><a href="#_ftnref2" name="_ftn2">[2]</a>        BGer 4A_694/2015 of May 4, 2016, E. 2.4.</h6>
<h6><a href="#_ftnref3" name="_ftn3">[3]</a>        BGer 4A_694/2015 of May 4, 2016, E. 2.4.</h6>
<h6><a href="#_ftnref4" name="_ftn4">[4]</a>        BGer 4A_368/2023 of January 19, 2024, E. 4.1.</h6>
<h6><a href="#_ftnref5" name="_ftn5">[5]</a>        BGer 4A_368/2023 of January 19, 2024, E. 4.4.1.</h6>
<h6><a href="#_ftnref6" name="_ftn6">[6]</a>        BGer 4A_368/2023 of January 19, 2024, E. 4.4.2.</h6>
<h6><a href="#_ftnref7" name="_ftn7">[7]</a>        BGer 4A_368/2023 of January 19, 2024, E. 4.2.</h6>


RZ_20240213_Bulletin-Illustration-Preview_1000x1000_01

No Criminal Procedural Guarantees in Internal Investigations

<p>On January 15, 2024, the EU Commission published its <a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_24_161" target="_blank" rel="noopener">report</a> on the results of its first review of the adequacy decisions previously taken under the old EU Data Protection Directive. The EU Commission concludes that <strong>Switzerland continues to provide an adequate level of protection for personal data</strong> transferred from the EU.</p>
<p>According to its report, the EU Commission welcomes the developments in the Swiss legal framework since the adoption of the first adequacy decision in July 2000, including in particular the modernization of the Swiss Data Protection Act (cf. our <a href="https://www.homburger.ch/en/insights/revision-of-the-swiss-data-protection-law-is-complete" target="_blank" rel="noopener">Bulletin</a> of August 31, 2022). These developments have contributed to an increased level of data protection, in a manner sufficient for the EU Commission to maintain its adequacy decision.</p>
<p>Maintaining the EU adequacy decision was one of the main objectives of the revision of the Swiss Data Protection Act, which entered into force on September 1, 2023: Without the EU&#8217;s recognition of the adequacy of Swiss data protection law, the export of personal data from the EU to Switzerland would have become much more burdensome. Today&#8217;s confirmation by the EU Commission thus marks the achievement of a key goal in the efforts to modernize Swiss data protection law in a manner consistent with the EU General Data Protection Regulation (GDPR).</p>
<p>The review of adequacy decisions by the EU Commission, which has now been completed, is the first such review since the GDPR came into force in 2018. The GDPR calls for regular reviews, and the EU underlines its intention to further intensify dialogue and cooperation with like-minded international partners on data flows and digital issues in general.</p>


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<p>The Homburger team advising CPP on this transaction includes Anna Peter, Francesco Bernasconi, Tobias Gloor, Luca Ellenberger and Matteo Gasser (all Corporate / M&amp;A), Jeremy Reichlin and Claudine Schär (both Employment and Executive Compensation), Stefan Oesterhelt and Philippe Weber (both Tax), Stefan Gäumann and Olivier Bühlmann (both Real Estate), Luca Dal Molin and Berem Brun (both IP / IT), Stefan Bindschedler (Financing) as well as Allegra Arnold (Competition).</p>


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<p>The Homburger team is led by partners Dieter Gericke and Daniel Häusermann and includes Timo Hasler, Florian Gasche and David Fankhauser (all Corporate / M&amp;A), Gregor Bühler, Philippe Baumann and Vanessa Huber (all IP / IT, Technology and Digital Economy), Stefan Oesterhelt and Juliette Buob (both Tax), Richard Stäuber and Timothy Porter (both Competition, Regulatory) as well as Jeremy Reichlin (Employment / Executive Compensation).</p>


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Homburger advises Consolidated Precision Products on its acquisition of the aerospace and industrial gas turbine operations from Georg Fischer

Homburger advises Temenos on the acquisition of additiv

Homburger advises Eli Lilly on the acquisition of LimmaTech Biologics

EU Pay Transparency Directive

No Criminal Procedural Guarantees in Internal Investigations

EU Confirms Adequacy of Swiss Data Protection Law

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Homburger advises Consolidated Precision Products on its acquisition of the aerospace and industrial gas turbine operations from Georg Fischer

Homburger advises Temenos on the acquisition of additiv

Homburger advises Eli Lilly on the acquisition of LimmaTech Biologics

EU Pay Transparency Directive

No Criminal Procedural Guarantees in Internal Investigations

EU Confirms Adequacy of Swiss Data Protection Law

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