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07. Termination of Employment Contracts
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07. Termination of Employment Contracts

Grounds for Termination

As a principle, both parties to an employment contract may terminate the employment agreement at any time, subject to either the statutory or contractual notice period; without the need to fulfill any particular grounds for termination. The party issuing the termination must provide a written explanation of the termination upon the other party’s request. Employees are, however, protected against abusive dismissal. Such abuse exists, for example, if notice of termination is given because the employee raises a bona fide claim arising out of the employment agreement, because the employee exercises a constitutional right, because notice is only given to prevent the coming into existence of a claim arising out of the contract, or because notice is given for a reason that is inherent to the personality of the other party (gender, race, origin, nationality, age, etc.).

In recent years, courts have established stricter rules for dismissing elder employees with many years of service. The Federal Supreme Court has ruled that an employer has a higher duty of care toward these employees. In particular, the employer must inform the employee in good time, of the intended dismissal and the employee must have an opportunity to be heard. Solutions must be sought in order to maintain the employment relationship and avoid dismissal. Only if these measures do not bear fruit, can dismissal be pronounced as a last resort. If this procedure is not followed, the dismissal is considered abusive.

An abusive dismissal will be effective, but the employee is entitled to compensation up to six months’ salary. Furthermore, the employer shall not give notice of termination during protected periods. Such protection against dismissal exists while the employee is on military or civil service or a foreign aid project, or while the employee is totally or partially incapacitated to work because of sickness or accident (the latter protection period is limited to 30 to 180 days, depending on years of service). In addition, protection against dismissal exists during pregnancy and for a period of 16 weeks following birth. A notice of termination given during such a protected period is null and void.

Collective Dismissals

The Code of Obligations provides special rules regarding collective dismissals. Article 335d CO defines “collective dismissals” as notices of termination in enterprises issued by the employer within the period of 30 days for reasons unrelated to the person of the employee and that effect:

  • at least 10 employees in companies usually employing more than 20 and fewer than 100 persons;
  • at least 10% of all employees in companies usually employing more than 100 and fewer than 300 persons; and
  • at least 30 employees in companies usually employing more than 300

Before a collective dismissal, the employer must consult with the works council (if any) or the employees. Employers must also inform the cantonal labour office of every planned collective dismissal. Non-compliance with the procedural rules by the employer constitutes abusive termination of the affected employment, which may lead to the payment of damages and additional remunerations, and in the case of substantial non-compliance, the terminations can be found void and reinstatement  ordered.

The employer must hold negotiations with the employees with the aim of preparing a social plan if the employer:

  • normally employs at least 250 employees; and
  • intends to make at least 30 employees redundant within 30 days for reasons that have no connection with such

Individual Dismissals

Employees have to be given notice of termination of their employment. The length of the notice period is agreed in the employment contract, subject to statutory rules on minimum length and equality of the notice periods for notice to be given by employer, and employee. An employment relationship can be terminated with immediate effect for cause.

Is Severance Pay Required?

There are no statutory severance payment obligations. An obligation may, however, be provided by a collective agreement or by a social plan in case of collective redundancy.

Separation Agreements

The termination of an employment relationship does not require a separation agreement. A separation agreement may, however, be advisable in order to amicably settle all mutual claims relating to the employment and its termination. Although the parties are free to terminate employment by mutual consent as per any day, separation agreements are considered valid by the Federal Supreme Court, only if the terms of the agreement are well-balanced, favoring both the employer as well as the employee. Consequently, if the initiative for the termination of employment is taken by the employer, it is advisable to not only consider the notice period, but 1-2 months on top of the notice period (as the employee waives her/his protection rights in case of illness, accident or pregnancy).

A separation agreement usually provides the following content:

  • termination date;
  • financial arrangements;
  • garden leave (if any);
  • communication arrangements (internal/external);
  • work reference;
  • restrictive covenants (if any);
  • full and final waiver clause

Does the age of the employee make a difference?

In the case of the separation of employees who are about to soon retire, it may be appropriate to make interim payments in order not to reduce the pension. However, such an obligation does not exist by law.

Regarding the dismissal of elder employees with many years of service, the Federal Supreme Court has ruled that an employer has a higher duty of care toward these employees.

Remedies for Employee Seeking to Challenge Wrongful Termination

An abusive termination must be challenged by the employee before expiration of the notice period by written communication to the employer. After the last day of employment, the employee has a 180 day deadline to submit a request for a conciliation hearing with the competent conciliation authorities. If no settlement can be reached before the conciliation authorities, the claiming party has a 3-month period to submit the claim to the court of 1st instance. The employee can claim up to 6 months’ salary as indemnification in case of an abusive termination.

Whistleblower Laws

Swiss labour law still lacks explicit labour law protection for whistleblowers despite political advances and government efforts. De lege lata, an employee must first turn to the employer’s internal departments to uncover grievances. Only if they do not react can the authorities or the public be informed. However, there is still no effective protection against dismissal. A dismissal as a result of a permissible disclosure of grievances would be abusive, but valid. The employer could be sanctioned by penalty of payment up to a maximum of 6 monthly salaries.

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