• The immediate termination of an employment contract under Swiss law
  • May 17, 2007 | Author: Florence Thiébaud
  • Law Firm: LT - Lenz Thiébaud - Geneva Office
  • 1.                       The characteristics of a termination with immediate effect
    The immediate termination of an employment contract is regulated by Art. 337 of the Swiss Code of Obligations ("CO") which states that each party may terminate the employment contract with immediate effect and at any time on the basis of a just cause.
    "At any time" means that the termination can even take place during the so-called protection periods listed in Art. 336c CO during which a termination without cause would normally be void.
    These protection periods apply in the following circumstances: while the employee is on active duty in the Swiss military or civil defense service, during sickness and pregnancy and while the employee participates in a foreign aid service assignment abroad.
    The concept of "just cause" shall be analyzed in detail under 2 infra.
    2.                       The just cause
    A.           The legal definition of a just cause
    The applicable legislation contains only a rather vague definition of the just cause which is "any circumstance that under the concept of good faith would not permit to force the party that claims the just cause to continue the employment relationship".
    In other words, the event that leads to the immediate termination must so significantly shatter the trust between the parties that a reasonable person could not be expected to continue to work with the other party who is responsible for the just cause.
    B.            The fundamental breach of contract as a just cause
    The case law distinguishes two types of breach of contract: i) the fundamental breach which constitutes a just cause for immediate termination, and ii) the minor breach which is sanctioned by a warning and, if it occurs again, might justify an immediate termination.
    In this context, it is also possible that a minor breach which happens frequently may result in a situation that justifies an immediate termination of the employment contract (e.g. an employee insulted her colleague on a regular basis and eventually threw a glass at her).
    C.           Summary of recent case law in relation to the just cause
    1.                        Critics against the employer
    An employee had filmed his working environment in a geriatric care entity and made this film publicly available. He also harshly criticized his employer. According to the Swiss Supreme Court, the immediate termination of this employee was justified.
    In a different case, the fact that an employee disclosed that bribes were paid to his employers was not considered as a just cause.
    2.                        Disclosure of confidential facts
    As a matter of principle, the disclosure by an employee of confidential facts relating to his employer is considered as a just cause.
    3.                        Criminal offense
    A criminal offense is in general considered as a just cause.
    However, the following two scenarios must be distinguished:
    ·                          If the offense was committed against the employer, it is – except in particular circumstances – considered as a just cause.
    ·                          If the offense was committed against a third party, it constitutes a just cause only if the reputation of the employer was tarnished as a result of the offense.
    An important question is if a guilty verdict against the employee in question is a prerequisite to the termination. In most cases, the recent court decisions confirm that a guilty verdict is necessary in order for the employer to validly terminate the employment agreement with immediate effect.
    This being said, however, there are areas - such as the banking and financial sector - where the protection of the client is crucial and therefore, an immediate termination of an employee may be justified even on the basis of suspicions only in order to prevent additional damage.
    4.                        Invasion of the employer’s privacy
    The fact that an employee bounced the employer’s e-mail box to his own was considered as a just cause since the privacy of the employer in question was invaded.
    5.                        Late arrival at work
    The fact of arriving less than 15 minutes late at work was not considered as a fundamental breach of contract and therefore did not justify an immediate termination.
    6.                        Preparation of a competing activity during the course of employment
    The fact of causing clients and employees to leave during the course of employment in view of building up a competing professional activity was considered as a just cause.
    7.                        Participation in a strike
    The fact that an employee participates in a strike was not considered as a just cause.
    D.           Discretion of the judge
    Under art. 337 para. 3 CO, the judge may decide in his own discretion on the existence of a just cause. In no event however shall he consider as a just cause the fact that an employee is prevented from working without his fault.
    3.                       Consequences of the termination with immediate effect
    A.           Consequences of the justified termination by either party
    Art. 337b CO states that if the just cause for the immediate termination of the employment agreement is one party's conduct in breach of the contract, this party shall fully compensate the other party for damages, taking into account all claims arising from the employment relationship.
    The employer can thus claim compensation for loss of profit as well as for the additional costs caused by the immediate termination (e.g. the payment of overtime worked by an employee who replaces the terminated individual).
    The employee can claim compensation for the salary he would have earned until the ordinary termination of the employment agreement (including the thirteenth salary pro rata temporis, the vacation days not taken and the bonus pro rata temporis).
    B.            Consequences in case of unjustified termination by the employer
    If the employer dismisses the employee in the absence of a just cause, the latter shall have a claim for compensation of what he would have earned if the employment relationship had been terminated by observing the notice period or until the expiration of the fixed agreement period.
    This compensation also includes the contributions of the employer to the social security system, the compensation for vacation days not taken, the bonus pro rata temporis as well as the compensation for fringe benefits such as a company car.
    The employee must permit a set-off against this amount for what he saved because of the termination of the employment relationship, or which he earned from other work, or which he has intentionally failed to earn.
    The judge may force the employer to pay an indemnity to the employee which he may determine in his discretion, taking into account all circumstances. Such indemnity may not, however, exceed the employee's salary for six months.
    This indemnity serves two purposes:
    ·                          It has a punitive character which shall prevent employers from dismissing employees without just cause.
    ·                          It shall compensate the employee not only for actual damage, but also for emotional distress suffered as a result of the termination of the employment contract.
    The compensations and indemnities under Art. 337c are due when the employer terminated the contract, and interests are due as of said date.
    C.           Consequences in case of unjustified termination by the employee
    If the employee, without a valid reason, does not appear at the work place, or if he leaves it without notice, the employer shall have a claim for compensation equal to one quarter of the salary for one month, and moreover, he shall be entitled to compensation for additional damages (Art. 337d CO).
    The judge may reduce the compensation in his discretion if no damage was caused, or if the damage was less than the compensation provided for in the foregoing paragraph.
    If the claim for compensation is not extinguished by set-off, it shall be asserted by legal action or by debt enforcement within thirty days from the failure to appear at or the leaving of the working place; otherwise, the claim is forfeited.