Compensation (Art. 120-126 CO) is a legal mechanism that allows a debtor to settle their debt by sacrificing their own claim against the creditor.
Compensation, as defined in Art. 323b para. 2 CO, differs from salary deductions in its function (see the article "Salary Deductions"). Indeed, while the purpose of salary deductions is to serve as a guarantee for the employer, compensation is a method of extinguishing debts. In practice, cases that typically involve compensation are those where an employer chooses to use an employee's salary to offset a debt the employee owes to them.
For compensation to be possible, it must meet the general conditions of Art. 120 CO, namely:
There are two claims between the same parties, meaning each person is both a creditor and a debtor of the other.
The claims are of the same nature (e.g., a sum of money).
Both claims are due (except for the exception in Art. 120 para. 3 CO).
Art. 323b para. 2 CO provides a specific restriction in labor law, stating that "the employer can only offset the salary with a claim against the employee to the extent that the salary is attachable." This means that salary compensation is only possible if it respects the employee's minimum subsistence level as set out in Art. 93 LP.
"However, claims arising from intentional damage can be offset without restriction," specifies the final part of Art. 323b para. 2 CO. In other words, the employer has the right to offset their claim with the entire salary of the employee when the damage was caused intentionally, including in cases of potential fraud (e.g., property damage, theft, damage due to immediate dismissal without just cause, etc.). However, if the damage is caused by negligence (even gross negligence), the compensation will be subject to the restriction of respecting the employee's minimum subsistence level.
Finally, it should be noted that deductions for salary advances (Art. 323 para. 4 CO) are neither cases of compensation nor salary deductions, as they simply involve deducting the advance payment from a portion of the salary.
If you wish to obtain further information or need our assistance, please do not hesitate to contact the Valentin Legal Consultation (021 351 30 00 or www.cjdv.ch) so we can support you in your procedures.
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