This country-specific Q&A provides an overview to employment and labour law in Switzerland.
It will cover termination of employment, procedures, protection for workers, compensation as well as insight and opinion on the most common difficulties employers face and any upcoming legal changes planned..
This Q&A is part of the global guide to Employment & Labour. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/employment-labour-law/
Does an employer need a reason in order to lawfully terminate an employment relationship? If so, what reasons are lawful in the jurisdiction?
Swiss labour law is governed by the principle of freedom to dismiss. This means that an employer does not need a specific lawful reason for terminating an employment. Nevertheless, upon request of the employee, an employer terminating the employment must state its respective reasons in writing (see art. 335 para. 2 of the Swiss Code of Obligations).
Notwithstanding the principle of freedom to dismiss, Swiss labour law does not allow terminations in bad faith (so called abusive terminations). While such terminations do not invalidate the termination as such, they may lead to a compensation claim of the wrongfully terminated employee in an amount of up to six month’s salary provided that the employee adheres to the respective procedural requirements (see art. 336 et seqq. of the Swiss Code of Obligations).
What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?
Swiss labour law provides specific procedural requirements for mass redundancies (see art. 335d et seqq. of the Swiss Code of Obligations).
One speaks of a mass redundancy if an employer gives notice to a certain minimum number of employees (at least 10 employees) of a business normally encompassing more than 20 employees within 30 days and for reasons not pertaining personally to the affected employees.
An employer intending to make such mass redundancy must inform (in writing and with a copy to the cantonal labour office) and consult the organisation that represents the employees respectively the employees themselves. In order to enable them to safeguard their interests, the employer must give the employees at least the opportunity to formulate proposals on how to avoid redundancies, limit their number and/or mitigate their consequences (see art. 335f of the Swiss Code of Obligations). Failure to consult the employees leads to the wrongfulness of the notices given respectively to compensation claims in an amount of up to two month’s salary per employee (see art. 336 et seqq. of the Swiss Code of Obligations).
An employer still intending to make a mass redundancy must inform the cantonal labour office accordingly.
Finally, an employer normally employing at least 250 employees is also obliged to issue a social plan respectively reach an agreement with the employees on how to avoid redundancies, limit their number and/or mitigate their consequences (see art. 335h et seqq. of the Swiss Code of Obligations).
What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?
First of all, one has to differentiate whether the business is sold by way of a share purchase agreement or by way of an asset purchase agreement.
In case of a share purchase agreement, no additional considerations apply.
In case an asset purchase agreement provides for a transfer of a business or a part thereof to a third party, however, the business’ employments and all attendant rights and obligations automatically pass to the third party as of the day of the transfer, unless the respective employee refuses such transfer. In the latter case, the employment ends on expiry of the statutory notice period (see art. 333 of the Swiss Code of Obligations). Before such transfer takes place, the employer must inform the organisation that represents the employees respectively the employees themselves on the reasons for the transfer and its consequences. Where measures affecting the employees are envisaged as a result of such transfer, the employer must furthermore consult the employees before the relevant decisions are taken (see art. 333a of the Swiss Code of Obligations). According to the prevailing doctrine, non-compliance with these provisions does not lead to the wrongfulness of notices given. Depending on the specific case, there might be other sanctions (such as a commercial register ban according to the Swiss Merger Act), however.
What, if any, is the minimum notice period to terminate employment?
According to the statutory provisions, during the probation period (ie the first month of an employment), the employment may be terminated at any time by giving seven days' notice. The parties are basically free to exclude, shorten or prolong the probation period as well as the respective notice period. The probation period cannot exceed three months, though (see art. 335b et seq. of the Swiss Code of Obligations).
According to the statutory provisions, after completion of the probation period, if any, the employment may be terminated at one month's notice during the first year of service, at two months' notice between the second and the ninth year of service and at three months' notice thereafter, all such notice to expire at the end of a calendar month. The parties are basically free to vary these notice periods. The notice period may be reduced to less than one month only by collective agreement and only for the first year of service, however (see art. 335c of the Swiss Code of Obligations).
Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?
In principle, it is possible to terminate an employment by mutual consent instead of an unilateral termination by the employer. One has to be aware, though, that such termination agreements must not be concluded in order to circumvent provisions which safeguard the interests of the employee (eg provisions protecting employees incapacitated for work due to illness; there is no circumvention if such employee has an own interest in concluding a termination agreement, however) and must comply with mandatory provisions of labour law and collective agreements. If there is no adequate balance of the employer’s and the employee’s (in particular financial) interests, respective termination agreements are deemed null and void.
Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to stay at home and not participate in any work?
In principle, an employer is allowed to put an employee on garden leave even against the latter’s will.
The prevailing doctrine and jurisdiction provide for a few exceptions where an employee has a legitimate interest in effectively rendering his/her work, though. This particularly applies to professional groups such as artists, professional athletes, surgeons, pilots, etc.
Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, what are the requirements of that procedure or procedures?
In principle, an employer does not have to follow a prescribed procedure to effectively terminate an employment. The employer must only observe the proscribed periods according to art. 336c of the Swiss Code of Obligations (eg applicable in case of the employee’s absence from work due to illness; the maximum duration of such proscribed period depends on the employee’s years of service).
In case of a termination of an older employee with many years of service, the employer has to inform and consult the employee and evaluate the possibilities to continue the employment prior to making him/her redundant according to Swiss case law. Non-compliance with these requirements only leads to the wrongfulness of the termination according to art. 336 of the Swiss Code of Obligations and not to the invalidity of the termination, however.
If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?
If notice is given during a proscribed period according to art. 336c of the Swiss Code of Obligations, the notice has no legal effects at all. If the proscribed period falls within an ongoing notice period, the latter only stands still, however.
Non-compliance with the requirements regarding a termination of an older employee with many years of service only leads to the wrongfulness of the termination according to art. 336 of the Swiss Code of Obligations.
How, if at all, are collective agreements relevant to the termination of employment?
Collective agreements often contain provisions dealing with the termination of employment (eg restricting the freedom to dismiss by defining good cause as a requirement for every termination).
Does the employer have to obtain the permission of or inform a third party (e.g local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?
In principle, no permission or information of a third party is required for a valid termination of an employment.
The employer must inform the cantonal labour office about any intended mass redundancy, however. Notwithstanding the contractual and statutory provisions, employments terminated in the course of the respective mass redundancy may not end before the expiry of 30 days since such information to the cantonal labour office (see art. 335g of the Swiss Code of Obligations).
What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?
First of all, Swiss labour law generally prohibits any termination in bad faith respectively abusive termination (see art. 336 of the Swiss Code of Obligations). Unfortunately, there are hardly any general guidelines in order to concretise this term. In case of older employees with many years of service the employer must, for example, timely inform and consult the employee regarding a planned termination and moreover evaluate the possibilities to continue the employment before effectively making him/her redundant. In case of an employee involved in a conflict at work, the employer must, for example, take reasonable measures in order to defuse the conflict before effectively making the employee redundant.
Besides that, there is very specific protection against gender-discriminatory terminations:
- The Federal Act on Gender Equality rigorously prohibits any gender-discriminatory termination;
- Art. 336 and art. 336c of the Swiss Code of Obligations protect (male) employees performing Swiss compulsory military service, civil defense service or alternative civilian service against terminations for reason of their status and against any termination while performing these services (and potentially some weeks before and following the performance of these services); and
- Art. 336c of the Swiss Code of Obligations protects pregnant employees against terminations during their pregnancy and sixteen weeks after the birth.
What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?
Abusive terminations according to art. 336 of the Swiss Code of Obligations and the Federal Act on Gender Equality generally lead to a compensation claim of the employee in an amount up to six month’s salary (art. 336a of the Swiss Code of Obligations and art. 5 of the Federal Act on Gender Equality). In order not to forfeit such compensation claim, the employee must adhere to some procedural requirements: The employee must submit his/her written objection to the notice before expiry of the notice period, fail to reach an agreement with the employer on the continuation of the employment and bring the compensation claim before the courts within 180 days since the end of the employment (art. 336b of the Swiss Code of Obligations and art. 9 of the Federal Act on Gender Equality). Only in selected cases of gender-discriminatory ‘revenge terminations’, the employee can also request a continued employment instead (art. 10 of the Federal Act on Gender Equality).
If notice is given during a proscribed period according to art. 336c of the Swiss Code of Obligations, the notice has no legal effects at all. If the proscribed period falls within an ongoing notice period, the latter at least stands still.
Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?
Particularly the following categories of employees are also entitled to specific protection according to art. 336 and/or art. 336c of the Swiss Code of Obligations:
- Employees being partially or entirely prevented from working by illness or accident through no fault of their own (against any termination during specified periods depending on the years of service);
- Employees fulfilling non-voluntary legal obligations (against terminations for reason of their status);
- Members of an employees' organisation and employees carrying out trade union activities in a lawful manner (against terminations for reason of their status);
- Elected employee representatives on the staff council for the business or on a body linked to the business (against terminations for reason of their status respectively if the employer cannot prove just cause for terminating the employment); and
- Employees participating in an overseas aid project ordered by the competent federal
authority and with the employer's consent (against any termination during this participation).
Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?
Whistleblowers are basically protected under art. 336 of the Swiss Code of Obligations which prohibits any termination in bad faith respectively abusive termination. However, only whistleblowing worthy of protection will benefit from respective protection. This particularly requires that the employee acts in good faith and in compliance with the principle of proportionality (complaining internally before informing the competent authorities and informing the competent authorities before going public with a complaint).
Longstanding discussions about an explicit legal anchoring of an increased protection for whistleblowers have not yet produced any concrete results.
What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?
Swiss labour law basically only requires an employer to pay the employee’s salary during the notice period. There is – subject to severance payments agreed by employment contract – principally no need for any additional payment, however. For certain categories of listed stock corporations’ executives, severance payments are even prohibited by the Ordinance Against Excessive Remunerations in Listed Stock Corporations.
Additional payments other than those foreseen in an employment contract are only customary if the employer wishes to terminate the employment by mutual consent (for example in order to avoid the observance of the applicable notice period or an imminent prolongation of the employment due to the employee’s incapacity to work because of illness). This is due to the fact that respective termination agreements must not be concluded in order to circumvent provisions which safeguard the interests of the employee, must comply with mandatory provisions of labour law and collective agreements and are therefore deemed null and void if there is no adequate balance of the employer’s and the employee’s (particularly financial) interests.
Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.
For the duration of the employment and for one month after its end, the employee may not waive claims arising from mandatory provisions of labour law or a collective agreement (see art. 341 para. 1 of the Swiss Code of Obligations).
Apart from these limits, it is however recognised by doctrine and jurisdiction that the employee can waive any of his/her claims in the context of a termination agreement as long as it is not concluded in order to circumvent safeguarding provisions for the benefit of the employee respectively sufficiently reconciles the employer’s and the employee’s (particularly financial) interests.
Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.
While an employer cannot unilaterally restrict the employee from working for a competitor after the termination of employment, the parties are principally free to agree on a post-contractual prohibition of competition.
In order to be valid, such non-competition agreement must fulfil the following requirements, however:
- The Employee must have been capable of acting when concluding the agreement;
- the agreement must observe the written form;
- the employment must have provided the employee insight into the employer's clientele or manufacturing and trade secrets and the use of such knowledge must potentially cause substantial harm to the employer; and
- the employer (still) has a substantial interest in the prohibition of competition (this interest ceases in case of a termination of employment by the employer without the employee having given it any good cause or in case of a termination of employment by the employee for good cause attributable to the employer).
Furthermore, the prohibited competition must be appropriately limited with regard to place, time and scope so that it does not unfairly compromise the employee's future economic activity. Excessive prohibitions of competition may be reduced at a court’s discretion.
Finally, it is important to know that the employer may only insist on the rectification of a situation that breaches the non-competition agreement if this is expressly agreed in writing and only to the extent justified by the injury or threat to the employer's interests and the employee’s conduct.
Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?
According to art. 321a para. 4 of the Swiss Code of Obligations the employee must – after termination of employment – not exploit or reveal any confidential information obtained while in the employer's service such as manufacturing or trade secrets insofar as this is required to safeguard the employer's legitimate interests.
Within certain limits, the parties are furthermore free to intensify this statutory duty of confidentiality.
Are employers obliged to provide references to new employers if these are requested?
According to the prevailing doctrine, every provision of references requires the employee’s consent. If the employee does consent, he/she is principally entitled to a provision of references by the former employer, however.
What, in your opinion, are the most common difficulties faced by employers in your jurisdiction when terminating employment and how do you consider employers can mitigate these?
The most common difficulties are
- the potential voidness of a given notice respectively the potential standstill of the notice period in case of terminations of employees incapacitated for work due to illness (see art. 336c of the Swiss Code of Obligations);
- the special approach the employer has to adhere to in case of a termination of older employees with many years of service respectively the impending wrongfulness of a termination in case of non-adherence to this approach (see art. 336 of the Swiss Code of Obligations);
- the specific procedural requirements in case of terminations in the course of a mass redundancy respectively the impending wrongfulness of a termination in case of non-compliance with these requirements (see art. 335d et seqq. and art. 336 of the Swiss Code of Obligations);
- uncertainties regarding the impact of the termination of employment on an employee’s bonus entitlement; and
- uncertainties regarding the enforceability of non-competition agreements.
The employer can mitigate these difficulties by
- terminating an employment by means of concluding a termination agreement instead of giving notice;
- taking a prudent approach when intending to terminate the employments of older employees with many years of service (ie the employer should timely inform and consult the employee regarding the planned termination and carefully evaluate the possibilities to continue the employment);
- complying with the specific procedural requirements in case of a mass redundancy;
- agreeing on a clear bonus provision in the employment contract; and
- agreeing on a clear and moderate non-competition clause in the employment contract.
Are any legal changes planned that are likely to impact on the way employers in your jurisdiction approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?
Longstanding discussions about an explicit legal anchoring of an increased protection for whistleblowers have not yet produced any concrete results.
Moreover, there are no sufficiently concrete legislation projects.