Soon External Arbiters to Handle Conflicts?

Soon external arbitrators to prevent conflicts? A Federal Supreme Court ruling from May 2012 invites employers to appoint a trusted person to prevent internal conflicts. The interpretation of this case law raises a number of questions.

The Federal Supreme Court ruling passed almost unnoticed in May 2012 when it was published. It is now causing shockwaves in French-speaking Swiss employer circles. In deciding a case that had pitted Geneva’s labour inspector against a company in the canton (see box), the Federal Supreme Court wrote that it is “perfectly possible to require a company to appoint a trusted person with the aim of preventing internal conflicts that may arise within it”. Those few lines will certainly continue to generate much comment. As is often the case with a Federal Supreme Court decision, interpretations of the ruling vary significantly. As Jean-Philippe Dunand, Professor of Law at the University of Neuchâtel, points out, “this ruling must be interpreted with nuance and one should be careful not to give it too broad a scope. Its practical implications will have to be clarified, because many questions remain unresolved”.

The first unknown concerns the profile of this “trusted person”. According to a commentary on the Labour Act by the State Secretariat for Economic Affairs (SECO), “it is necessary for this person to guarantee the confidentiality of the discussions they will have with the company’s employees and, if they are part of an already existing internal structure, that they have no hierarchical relationship with the employees concerned”. Must the person necessarily be external to the company? The question is of particular concern to SMEs. Head of legal services at the Vaud Chamber of Commerce and Industry (CVCI), Mathieu Piguet says that this “famous ruling” is causing a great deal of anxiety among its members. “We have received numerous enquiries on the subject. We are currently working on a solution that we will present to our members this autumn.” And what about the HR director? Would they be able to take on this role as a neutral intervenor? Marianne Favre Moreillon, a specialist in employment law, believes not. “HR directors may find it difficult to be neutral. Yet neutrality is the corollary of trust.”

The second unknown concerns this neutral intervenor’s duty of confidentiality. According to Pierre Matile, an employment law specialist in Neuchâtel, respect for confidentiality is not compatible with the employer’s duty to protect the health of its staff. “For the employer to fulfil their duty of protection, they must obviously be informed of conflicts that are under way,” notes Pierre Matile, who warns here against an overly rigid interpretation of this ruling.

“The spirit of this ruling is above all to prevent conflicts”

Another point open to debate concerns the definition of the “internal conflicts” that this trusted person should prevent. According to Jean-Philippe Dunand, these would rather be “minor conflicts”. He explains: “The spirit of this ruling is above all to prevent conflicts. In a way, it is about putting in place a safety valve that would allow employees to report, in complete confidence, a conflict in the making. But once the conflict escalates, it becomes the employer’s responsibility to take all necessary measures to protect the personal integrity of workers, under Article 6 paragraph 1 of the Labour Act and Article 328 of the Code of Obligations.”

What is the situation on the ground? Geneva private bank Pictet & Cie is a pioneer in these matters. The firm put in place a neutral arbitration system external to the company in 2009. An article by professor, consultant and business leader Raphaël H Cohen in Expansion Management Review analysed its ins and outs in July 2010. Well before the UBS Birkenfeld affair or the Falciani case at HSBC’s Geneva subsidiary, which showed the impact of a poorly managed conflict, Pictet had the wisdom to anticipate the “human risk” by appointing, as a preventive measure, Europe’s first internal arbitrator, Yasmine Jhabvala, to whom it entrusted the task of ruling on any conflicts in complete independence. Yasmine Jhabvala left the firm in 2012, after more than six years of service, to devote herself to her passion, the piano. She was replaced by an external mediator. The system put in place at Pictet is worth pausing over for a moment. In his very well-documented article, Raphaël H Cohen shows how the creation of this post of external and neutral arbitrator is “a radical paradigm shift in corporate governance”. He compares this external arrangement to the creation of a third power, judicial in nature, with the means to investigate and rule in conflicts without coming under pressure from anyone whatsoever. It is the guarantor of greater fairness.

The power to conduct an investigation within the company

The great advantage of this third power lies in its objectivity and independence. According to Geneva psychiatrist Davor Komplita, mediation, which is usually used in workplace conflicts, is not always appropriate. The principle of mediation is to place the two conflicting parties on an equal footing so that they can find a solution together. In a situation of mobbing, for example, forcing the victim to find a solution with their tormentor is an untenable position. Davor Komplita suggests naming this neutral and external arbitrator the “justice of the peace within the company”. A title that would give them the power to conduct an investigation within the company, without coming under pressure from management and without being drawn into taking sides by employees. As Raphaël H Cohen writes, this judge-arbitrator “protects the company and reassures shareholders, the board of directors and the owners that the values and principles they have chosen are indeed being applied. Employees obviously also benefit, which should equally satisfy the unions. The real losers are the managers or employees who take advantage of the current system, in which the exercise of justice is at the prince’s discretion. They are likely to be the most opposed to the introduction of a fairer conflict-resolution mechanism.”

Elsewhere in French-speaking Switzerland, a similar system—though a less binding one—was introduced in the new collective agreement between Impressum (the association of Swiss journalists) and Presse Suisse (the publishers), in whose negotiations the undersigned took part. Among the new features of this collective agreement, Article 17 bis states that “Presse Suisse undertakes to promote among its members the use of neutral external intervenors (consulting doctor, occupational health specialist, social worker, etc.) to prevent and resolve workplace conflicts that may arise in their newsrooms”. This provision was never put into practice because the publishers terminated the collective agreement in 2012. So this is a case to watch.

Marc Benninger

Case law

The case that set the cat among the pigeons

It was a disagreement between the Cantonal Office for Labour Inspection and Industrial Relations of the canton of Geneva and an employer in the same canton that gave rise to this Federal Supreme Court ruling. The labour inspector required the company to submit conflict-resolution regulations. The employer refused and the matter was taken to court. As the State is involved in the case, a legal basis is needed to undertake future action. The Federal Supreme Court ruling of 9 May 2012 was therefore extrapolated to all employers in Switzerland. According to our sources, the other labour inspection offices in French-speaking Switzerland have adopted the same line and would therefore now be in a position to require employers to have regulations dealing with conflict management, including the appointment of a trusted person with the aim of preventing conflicts.