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In Switzerland, private placement and leasing of services are governed by the Federal Employment Service and Leasing Service Act (LSE) and its Ordinances (OSE & Oemol-LSE).

Since 2003, intra-group mobility has expressly been excluded from the scope of the LSE by the State Secretariat for Economic Affairs (SECO), in the framework of its 2003 LSE Guidelines still in force. The new 2017 Directive, SECO seems to have some contradictions and calls for clarifications.

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Written by

Emilie RULLAND * Chief Chief Legal Officer & Head of International Mobility Consulting Department, Mariana SANTOS * Quality & Marketing Manager, William FORNARA * HR Specialist, Maria BELEN AGUILERA * Legal Officer Junior.

LSE Provisions - Activities subject to prior LSE authorization

The main purpose of the LSE is to ensure the protection of workers by introducing specific requirements related to private placement and leasing of services activities. These activities are subject to prior authorization from Swiss institutions, but only under specific cumulative conditions. When such activities are carried out on a regular basis, for commercial purpose, to a third entity, in this case a prior authorization from the Swiss competent institutions is then required. An extensive definition of these criteria’s is given by the law as well as SECO guidelines suggests that almost all deployment of employees should fall under the scope of the LSE with exceptions particularly recognized for seconded employees and intragroup mobility as set out bellow.
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Consequences of applying for authorization

Companies falling within the scope of the LSE should obtain prior authorization from cantonal and federal competent Swiss institutions for cross border activities and face many administrative constraints in this regards as per the number of documents that would then need to be provided.

Such authorization could also lead to the application of the collective bargaining agreement of the temporary employment sector, mandatory in Switzerland for Companies having a LSE license.

Fees & Surety

The fees collected in the framework of an LSE authorization request are regulated in the Ordinance (OEmol – LSE). The amount varies between CHF 750.- to CHF 1’650.-. Surety deposit (up to a maximum amount of CHF 1’000’000) can also be required depending on the number of hours of work leased.

Sanctions

Leasing of services without prior authorization could lead to pecuniary penalty (up to 100’000 CHF) and deprivation of liberty for those who obtained an authorization by giving false information.

Exception of Intra-group mobility - Federal Council’s position

Although there is no specific provision related to intra-group mobility within the LSE and its ordinances, there however exists a clear position from the Federal Council excluding intra-group mobility from the LSE’s scope, in the framework of its Message of the 11th of November 1985.

In this Message, the Federal Council noted the absence of exposure for employees to the risk associated to the LSE within a group and confirmed the exemption of authorization for intra-group mobility.

Although employee mobility takes place between two independent entities, the essential “rental” factor is not established according to the Federal Council.

The Federal Council noted that risks associated with a triangular relationship between employees, service providers and third companies can be excluded.

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SECO 2003 LSE Guidelines still in force

The SECO LSE Guidelines published in 2003 ensured the proper application of the LSE by cantonal Labor Offices.

These Guidelines officially confirmed the Federal Council’s position and expressly exempted the intra-group mobility from the LSE’s scope, so that the leasing of employees between a parent company and its subsidiaries or between two subsidiaries is not subject to any LSE authorization.

Confirmation of the Federal Council’s position

In 2015, a parliamentarian was questioned about the draft of the new 2017 SECO Directive and its provision related to a potential extension of the LSE to intra-group mobility.

On this occasion, the Federal Council reaffirmed the principle of an exemption of LSE authorization for intra-group mobility and confirmed the absence of a new interpretation by the SECO as well as the absence of intention to extend the LSE’s scope to intra-group mobility. The intention was to target specific new practices within groups, particularly so-called “Staffing firms”, defined as dedicated companies within a group which would cover from a single location, for commercial purpose, the entire worldwide staffing group needs. The Federal Council recalled in this context that leasing of services for commercial purpose is subject to LSE authorization.

New SECO 2017 Directive on leasing of services & Intra-group mobility

A New SECO Directive has been issued in June 2017, which does not annul the previous SECO 2003 LSE Guidelines. This new SECO Directive seems to be more restrictive regarding the intra-group mobility, even being contrary to the Federal Council’s position.

Introduction of new principles

The new SECO 2017 Directive provides general LSE authorization requirements for intra-group mobility and very few exemptions are possible on an exceptional basis:
• deployment of employees on an occasional basis (“isolated cases”);
• acquisition of professional experience & transfer of expertise within the Group;
• leasing of services does not represent main objective.
When these criteria’s are met, the intra-group mobility is not subject to authorization.
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Conclusion

As mentioned here above, the new 2017 Directive does not cancel nor replace the previous 2003 Directive which expressly excludes intra-group mobility from the scope of the LSE. As the message of the Federal Council should prevail, we can therefore wonder about the validity of the 2017 SECO directive.

As mentioned here above, the new 2017 Directive does not cancel nor replace the previous 2003 Directive which expressly excludes intra-group mobility from the scope of the LSE. As the message of the Federal Council should prevail, we can therefore wonder about the validity of the 2017 SECO directive.

In the worst scenario, these elements should enable multinational companies to be exceptionally exempted from an authorization in the sense of the new 2017 SECO Directive.
Nevertheless the situation does merit more analysis due to the restrictive nature of the new 2017 SECO Directive. In this respect, actions have been launched through cantonal administration so as to keep the principle of an exemption of intra-group mobility from the LSE and obtain clarification with regards to the conflicting provisions of the SECO guidelines.

For further information

Contact ITX International Mobility Consulting Emilie RULLAND, Chief Legal Officer & Head of International Mobility Consulting Department * erulland@itx-ge.com

The information enclosed within the present newsletter are not exhaustive and do not cover necessarily all legal aspect of the subject. This in no case can replace a legal professional advice particularly regarding the considered case under any particular situation. Copyrights are reserved, except with prior written consent.