Facts
The case concerns a conflict of interest between employee B. and the employer A. Fabrication AG, regarding the validity of a severance payment.
B. was employed as the Chief Financial Officer (CFO) and a member of the executive management of the A. Group. A. Fabrication AG was a subsidiary of A. Holding AG, which in turn was wholly owned by A. Europe Ltd. B. was thus the sole shareholder of the employer A. Fabrication AG.
In 2006, B.'s employment contract was amended to provide him with a severance payment of two annual base salaries in the event of early termination of the employment relationship. B. subsequently filed a claim for payment of this compensation, while the employer demanded the repayment of unlawfully received loan interest.
Considerations
The Federal Supreme Court decided that in cases where a representative of a legal entity contracts with himself, there is generally a conflict of interest and the legal transaction is therefore invalid. However, an exception exists if the representative is also the sole shareholder, as in this case it can be assumed that the transaction corresponds to the will of the general meeting and is thus covered…