New minimum wage in Geneva: challenges for employers

New minimum wage in Geneva: challenges for employers
On November 1st, 2020, barely one month after the adoption by the voters in the canton of Geneva of the initiative known as "23 frs, c'est un minimum", the cantonal law on inspection and labor relations (LIRT; RS GE J 1 05) was amended, with the addition of a new chapter composed of articles 39I to 39N.

Employers must now adapt their contractual relations, in line with the changes brought about by the entry into force of the cantonal minimum wage.

The present newsletter doesn't provide an exhaustive overview of the implications of this legislative change, but rather tries to provide information and other practical recommendations. In addition, we recommend reading the Memento sur le salaire minimum edited by the State of Geneva.

Until now, there has been no unified minimum wage in Geneva. However, as the social partners have concluded many collective labor agreements and standard employment contracts guaranteeing minimum wages, multiple different regimes coexisted in Geneva, specific to each sector of the economy.

Scope of application

From now on, the Geneva cantonal law provides for a minimum gross hourly wage of CHF 23.-, applicable to all workers "performing their work in the canton on a regular basis" (art. 39I LIRT). This geographical anchoring is understood in the sense of article 34 of the Swiss Civil Procedure Code, i.e. that the place of work must be determined according to the circumstances of the concrete case and is located where the employee normally carries out his or her work (Supreme Court decision from August 26th, 2016, in case 4A_236/2016, consid. 2 et 5.5.1.). Thus, as soon as a company, regardless of the location of its seat, carries out an activity within Geneva and that its worker regularly carries out his or her work there, the LIRT will apply and the worker in question will be entitled to the cantonal minimum wage.

The initial minimum gross hourly wage of CHF 23.- must be indexed "on the basis of the consumer price index for the month of August" (art. 39K al. 1 and 3 of the LIRT). Since January 1st, 2021, the minimum gross hourly wage already amounts to CHF 23.14 (Memento sur le salaire minimum [as of November 17th, 2020], p. 5).

It should be noted, however, that the law provides for exceptions to the minimum wage for apprentices, employees bound by an internship contract as part of a school or professional training and for contracts established with persons under the age of 18 (art. 39J LIRT). Internship contracts include all internships "[...] validated by a training institute, provided as part of a training and/or orientation course between two training courses [and] internships for professional or social integration insofar as they are covered by a federal or cantonal legislation" (Memento sur le salaire minimum [as of November 17th, 2020], p. 8 et 9). In the sectors of agriculture and floriculture, minimum wages remain below CHF 23.14, as provided by law (art. 39K para. 2 LIRT cum art. 2 para. 1 let. d of the Law on labor in industry, trade and commerce (LTr; RS 822.11); Memento sur le salaire minimum [as of November 17th, 2020], p. 4).

Salary calculation and exceptions

"Wage means the determining salary within the meaning of the Federal Act on Old-Age and Survivors Insurance, excluding any compensation paid for vacations and public holidays" (ASIA) (art. 39K para. 4 LIRT).

Thus, in order to determine whether or not it is necessary to revise upwards the salaries applied to its employees, the employer - whether a natural or legal person - will have to take into account all the benefits already paid, whether in cash or in kind, to the latter.

Indeed, the contractual salary will have to be adapted by taking into account any possible supplements which could fall due in the composition of the ASIA salary, such as "housing allowances, gratuities, gifts for seniority, tips or service taxes (if they represent an important part of the salary), benefits in kind of a regular nature (food, housing, use of a company car for private purposes, etc.)" (Memento sur le salaire minimum [as of November 17th, 2020], p. 5). The exhaustive list of remunerations to be considered in the calculation of the determining salary within the meaning of the ASIA can be found here.

The minimum gross monthly salary, paid twelve times a year, amounts to CHF 4'007.85 (for a minimum gross hourly wage of CHF 23.14, 40 hours a week and an average of 4.33 weeks worked).

It should be noted, however, that if the salary is paid thirteen times a year, the minimum hourly wage will be reduced to CHF 21.36 (for 2021); the hourly wage is de facto reduced on a pro rata basis.

If vacation and public holiday entitlements, as well as the share of the thirteenth salary, are included in the wage - in particular for employment contracts providing for an hourly wage and "on-call" labor - the public holiday entitlements (0.41% of the basic wage per public holiday), the vacation entitlement (8. 33% of the basic wage for four weeks of vacation) as well as the share of the thirteenth salary (8.33% of the basic wage) will have to be included in the calculation method mentioned above, since said amounts are excluded from the basic minimum wage (art. 39K para. 4 LIRT; Memento sur le salaire minimum [as of November 17th, 2020], p. 8 et 10s).

Employers must bear in mind that the law imposes an automatic adjustment of wages already provided for in existing contracts (individual contracts, collective agreements and standard contracts - art. 39L LIRT) so that the new minimum wage is automatically applicable as of November 1st, 2020. Employers are therefore obliged to verify and increase their employees' wages on their own if they fall below the new minimum wage.

The minimum wages in the vast majority of collective labor agreements or standard employment contracts have also been increased as a result, particularly in the areas of domestic economy, retail trade, building cleaning, hotel and restaurant services, bank employees, but also in architecture firms.

It should be noted that this wage increase may have other consequences on a company's payroll, in particular an adjustment of social security contributions, possibly of the withholding tax deducted by the employer, or a change in the accident insurance policy provided by the employer.

Controls and sanctions

Compliance with the minimum wage is monitored (art. 39M LIRT) and any violation can be sanctioned by an administrative fine of up to CHF 30'000.- (art. 39N para. 1 LIRT) - an amount that can be doubled in the event of a repeated offence (art. 39N para. 1 LIRT).

If companies are subject to professional practices (art. 25 LIRT), notably with respect to their participation in a public tender, the maximum fine amounts to CHF 60'000.- at most (art. 45 al. 1 let. b LIRT). This fine may be cumulated with a refusal regarding the issuance of a certificate of conformity with customary practice, for a period of three months and up to five years (art. 45 al. 1 let. a and al. 2 LIRT), as well as with an exclusion of all public tenders for a period of five years at thep most (art. 45 al. 1 let. c and al. 2 LIRT).

Finally, and as criticized by the opponents of the initiative, if an employer can certainly be led to make this minimum wage a reference wage within his company, it should be specified that any unfavorable reduction of working conditions, particularly salary conditions, can only be undertaken by way of termination-modification of contract (congé-modification). As such, a termination of the employment contract - because of the employee's refusal to see his or her salary reduced - could be qualified as abusive (art. 336 CO) if it were to result in putting pressure on the employee to accept an unfavorable modification of the contract; this, even though neither the market conditions nor the situation of the company would impose it (Supreme Court decision from November 28th, 2002, in case 4C.209/2002, consid. 2.1 ; ATF 125 III 70 consid. 2a ; ATF 123 III 246 consid. 3b).

We remain available to answer any questions you may have in the context of adapting your contractual relations in the face of this legislative amendment.