Dismissals and Termination of Employment in Switzerland

Notice may be given without providing any reason (‘Kündigungsfreiheit’).

Both employer and employee may end the employment relationship without providing reason or cause.

However, a dismissal must not be abusive (wrongful, discriminatory or unlawful dismissal, etc.). Subject to certain exceptions, such a notice is abusive where issued in particular:

• due to an inherent personal quality of the other party (skin colour, nationality, gender or sexual orientation); or
• because the other party exercises a constitutional right; or
• solely in order to prevent claims under the employment relationship from accruing to the other party; or
• because the other party asserts claims under the employment relationship in good faith; or
• because the other party is performing compulsory military or civil defence service or alternative civilian service or a non-voluntary legal obligation; or
• because the employee is or is not a member of an employees’ organisation or because he carries out trade union activities in a lawful manner; or
• while the employee is an elected employee representative on the works council and the employer cannot cite just cause to terminate his/her employment; or
• in the context of mass redundancies ordered by the employer if the consultation process is not observed.

In addition to the above-mentioned circumstances as specified in the Swiss Code of Obligations, case-law has defined other situations in which a notice of termination can be abusive (e.g. a termination in a conflict situation; contradictory behaviour of the employer; violation of the employer's duty of care; improper notice of termination with the offer of employment with altered terms; manner in which the employer makes use of its right to terminate the employment relationship).

In any of the above circumstances, the notice remains valid, but the party abusively giving notice may be obliged by the court to pay an indemnity of up to six months' salary, except in the case of an abusive dismissal on the grounds of gender discrimination, where the employee may, in certain circumstances, seek, instead of an indemnity, the annulment of the notice and his/her reinstatement.

The employer may not terminate the employment relationship during in particular the following periods, and notice given during these periods is void (non-exhaustive list):

• while the employee is performing Swiss compulsory military or civil defence service or Swiss alternative civilian service, and during the four weeks preceding and following the service if the service lasts for more than 11 days;
• while the employee, through no fault of his/her own, is prevented from working (even partially) due to illness or accident, for up to 30 days in the first year of service, 90 days between the second and fifth years of service, or 180 days thereafter; or
• during the pregnancy of an employee, and for 16 weeks following the birth.

There is no specific requirement defined in the Swiss Code of Obligations. Notice of termination may be communicated verbally or by other means. For evidentiary purposes, it is strongly recommended that all notices be issued in writing. If the employment agreement requires notice in written form (which is common), both parties must comply with this requirement.

The statutory notice periods include: one month in the first year of service; two months between the second and ninth year of service; and three months thereafter.

The notice period may vary depending on the written individual contract or collective employment agreement. However, the notice period may be reduced to less than one month only by a collective employment agreement and only for the first year of service. The notice period must be the same for both parties.

The parties may agree on a probationary period of up to three months with a notice period of seven days or possibly less.

Either party may also terminate an employment contract at any time for cause without observing the applicable statutory or contractual notice period (see section 1.8 below).

The concept of "payment in lieu of notice" (PILON) as known in other jurisdictions does not exist in Switzerland. Consequently, employers cannot choose to terminate an employment contract with immediate effect and make a payment instead of observing the notice period.

Employers can choose to place employees on garden leave for all or part of the notice period. In this case, apart from the employee's duty to work, which is waived, the employment contract remains in full force and effect for the remainder of the notice period.

Except for mass dismissals, there is no statutory requirement to involve an employee representation (if existing).

No involvement.

Not necessary.

The statutory provisions regarding mass dismissals apply where the employer – within a period of 30 days – gives notice for reasons unrelated to any particular employee and affecting:

1. at least 10 employees at a business normally employing between 21 and 99 employees;
2. at least 10% of the employees at a business normally employing between 100 and 300 employees; or
3. at least 30 employees at a business normally employing more than 300 employees.

The provisions governing mass redundancies do not apply in the event that business operations have ceased by court order or mass redundancies have occurred due to bankruptcy or a composition agreement with assignment of assets.

Prior to deciding on the collective redundancy, the employer must consult the employee’s representative body or the employees, and at the same time notify the cantonal labour office in writing of the planned mass dismissal. These bodies have consultation rights only. Neither the employees nor the cantonal office can block a mass dismissal.

The employer is obliged to enter into social-plan negotiations if it (i) usually employs at least 250 employees; and (ii) intends to terminate at least 30 employees within 30 days for reasons that are unrelated to an individual employee. Notices given over a longer period but based on the same operational decision must be added together.

The employer negotiates:

• with the employee associations that are party to the collective employment agreement;
• with the organisation representing the employees; or
• directly with the employees if they have no representative organisation.

An arbitral tribunal will establish a social plan by way of an arbitral award if such negotiations fail.

Both the employer and employee may terminate the employment relationship with immediate effect at any time for cause.

The requirements for termination for cause are high. There must be a severe breach of contract and – except for very serious cases (e.g. theft) – a clear warning must be given, which is then ignored by the other party. The notice must be issued within two to three workdays of the party becoming aware of the serious breach allowing termination for cause.

1.9 Consequences if requirements are not met

Ordinary dismissals:

• In case of abusive dismissal, the notice remains valid, but the party abusively giving notice may be obliged by the court to pay an indemnity of up to six months' salary. The notice can be annulled and the employee reinstated only if the dismissal is abusive on the grounds of gender discrimination.
• The employer must not terminate the employment relationship during certain protected periods, as mentioned above under ‘Reasons for dismissal’. Any notice given during these periods is void. If any of these protected periods apply after notice has been given, the notice remains valid, but the notice period is extended accordingly.

Where a termination is made with immediate effect for cause but the requirements are not met (e.g. no serious breach, no or insufficient warning, or late notice), the employee is entitled to the salary for the period until the contract would have expired (fixed-term contract) or could have been ordinarily terminated (indefinite term contract). In addition, the court may require the employer to pay an indemnity of up to six months' salary.

In a case of mass dismissal, a notice of termination given without or before completion of the consultation process is deemed abusive. The notice of termination remains valid, but the employer is obliged to pay an indemnity to the employee of a sum fixed by the court not exceeding two months' salary.

In principle, employees are not entitled to statutory severance payment upon dismissal, with the exception of employees who are over 50 years old and whose employment contract comes to an end after 20 or more years of service. In the absence of an agreement between the parties, the amount of the severance payment will be determined by the court, taking due account of the circumstances, and could range between two- and eight-months' salary. However, if the employee receives or will receive benefits from an occupational pension fund, these benefits may be deducted from the severance payment over the entire period of service insofar as they have been funded either directly or indirectly by the employer (i.e. through its contributions to the occupational pension scheme). As a result, such statutory severance payments are rare in practice.

The parties to an employment contract may agree on post-termination restrictive covenants prohibiting competitive activity by the former employee. Such covenants are subject to a number of requirements and limitations, including the following:

1. The non-competition restriction must be agreed upon in writing and duly signed by the parties.
2. Also, the non-competition restriction is only valid in those cases where the employee has had access to the employer’s customers or to manufacturing or business secrets during the term of the employment, and the use of such knowledge could significantly damage the employer.
3. In addition, post-termination restriction on competition must be limited to a specific activity, a reasonable geographic area, and a reasonable duration (i.e. maximum three years, unless there are exceptional reasons for a longer period).  
4. The restriction does not apply if the employer terminates the employment relationship without the employee having given good cause to do so, or if the employee terminates it for good cause attributable to the employer.
5. Where an employee infringing the restriction is liable to pay a contractual penalty based on a corresponding contractual agreement, the employee may exempt himself/herself from the prohibition by paying the penalty. However, he/she remains liable for any further damage suffered by the employer. Only where expressly agreed upon in writing, the employer may insist that the employee continue to observe the non-competition restriction in addition to seeking the agreed-upon contractual penalty and any further damages.
6. Injunctive relief is available to the employer only if agreed in writing.

According to case law, the above requirements and limitations also apply to other restrictive covenants, such as non-solicitation undertakings. 

Not applicable. 

In general, the managing director is an employee of the company. In certain situations, and subject to the prohibition of circumventing employment law, the managing director might be a self-employed person who has entered into a service agreement with the company.

The following comments relate to situations whereby the managing director is an employee of the company.

Notice may be given without providing any reason (‘Kündigungsfreiheit’).

Both the employer and the managing director may end the employment relationship without providing reason or cause.

However, a dismissal must not be abusive (wrongful, discriminatory or unlawful dismissal). Subject to certain exceptions, such a notice is abusive where issued in particular:

• due to an inherent personal quality of the other party (skin colour, nationality, gender or sexual orientation, etc.);
• because the other party exercises a constitutional right;
• solely in order to prevent claims under the employment relationship from accruing to the other party;
• because the other party asserts claims under the employment relationship in good faith;
• because the other party is performing compulsory military or civil defence service or alternative civilian service or a non-voluntary legal obligation; or
• in the context of mass redundancies by the employer if the consultation process is not observed.

In addition to the above-mentioned circumstances as specified in the Swiss Code of Obligations, case-law has defined other situations in which a notice of termination can be abusive (e.g. a termination in a conflict situation; contradictory behaviour of the employer; violation of the employer's duty of care; improper notice of termination with the offer of employment with altered terms; manner in which the employer makes use of its right to terminate the employment relationship).

In any of the above circumstances, the notice remains valid, but the party abusively giving notice may be obliged by the court to pay an indemnity of up to six months’ salary, except in the case of an abusive dismissal on the grounds of gender discrimination, where the employee may, in certain circumstances, seek, instead of an indemnity, the annulment of the notice and his/her reinstatement.

The employer may not terminate the employment relationship in particular during the following periods, and notice given during these periods is void (non-exhaustive list):

• while the managing director is performing Swiss compulsory military or civil defence service or Swiss alternative civilian service, and during the four weeks preceding and following the service if the service lasts for more than 11 days;
• while the managing director, through no fault of his/her own, is prevented from working (even partially) due to illness or accident, for up to 30 days in the first year of service, 90 days in the second to fifth years of service, or 180 days thereafter; or
• during the pregnancy of the managing director, and for 16 weeks following the birth.

There is no specific requirement defined in the Swiss Code of Obligations. Notice of termination may be communicated verbally or by other means. For evidentiary purposes, it is strongly recommended that any notice be issued in writing. If the employment agreement requires notice in written form (which is common), both parties must comply with this requirement.

The provisions set forth by Swiss Company Law must also be taken into account for managing directors. For example, in a company limited by shares (‘Aktiengesellschaft’), the appointment and dismissal of persons entrusted with managing and representing the company is part of the non-transferable and inalienable duties of the board of directors.

The statutory notice periods include: one month in the first year of service; two months between the second and ninth year of service; and three months thereafter.

The notice period may vary depending on the written individual contract or collective employment agreement (if applicable to managing directors). Often employers and managing directors agree on longer notice periods in their employment agreements than the default rule foreseen by law. The notice period must be the same for both parties.

The parties may agree on a probationary period of up to three months with a notice period of seven days or possibly less.

Either party may also terminate an employment contract at any time for cause without observing the applicable statutory or contractual notice period (see section 1.8 below).

The concept of "payment in lieu of notice" (PILON) as known in other jurisdictions does not exist in Switzerland. Consequently, employers cannot choose to terminate the managing director's employment contract with immediate effect and make a payment instead of observing the notice period.

Employers can – and often do – choose to place managing directors on garden leave for all or part of the notice period. In this case, apart from the employee's duty to work, which is waived, the employment contract remains in full force and effect for the remainder of the notice period (including the employer's obligation to pay the managing director's salary).

Except for mass dismissals, there is no statutory requirement to involve an employee representation (if existing).

No involvement.

Not necessary.

The statutory provisions regarding mass dismissals apply where the employer – within a period of 30 days – gives notice for reasons unrelated to an individual employee (including a managing director) and affecting (numbers include employees and managing directors):

1. at least 10 employees at a business normally employing between 21 and 99 employees;
2. at least 10% of the employees at a business normally employing between 100 and 300 employees;
3. at least 30 employees at a business normally employing more than 300 employees.

The provisions governing mass redundancies do not apply in the event business operations have ceased by court order or mass redundancies have occurred due to bankruptcy or a composition agreement with assignment of assets.

Prior to deciding on the collective redundancy, the employer must consult the employee’s representative body or the employees, and at the same time notify the cantonal labour office in writing of the planned mass dismissal. These bodies have consultation rights only. Neither the employees nor the cantonal office can block a mass dismissal.

The employer is obliged to enter into social-plan negotiations if it (i) usually employs at least 250 employees (including managing directors); and (ii) intends to terminate at least 30 employees (including managing directors) within 30 days for reasons that are unrelated to an individual employee. Notices given over a longer period but based on the same operational decision must be added together.

The employer negotiates:

• with the employee associations that are party to the collective employment agreement;
• with the organisation representing the employees; or
• directly with the employees if they have no representative organisation.

An arbitral tribunal will establish a social plan by way of an arbitral award if such negotiations fail.

Both the employer and the managing director may terminate the employment relationship with immediate effect at any time for cause.

The requirements for a termination for cause are high. There must be a severe breach of contract and – except for very serious cases (e.g. theft) – a clear warning must be given, which is then ignored by the other party. The notice must be issued within two to three workdays of the party becoming aware of the serious breach allowing termination for cause.

Ordinary dismissals:

• In case of abusive dismissal, the notice remains valid, but the party abusively giving notice may be obliged by the court to pay an indemnity of up to six months' salary. The notice can be annulled and the employee reinstated only if the dismissal is abusive on the grounds of gender discrimination.
• The employer must not terminate the employment relationship during certain protected periods, as mentioned above under ‘Reasons for dismissal’. Any notice given during these periods is void. If any of these protected periods apply after notice has been given, the notice remains valid, but the notice period is extended accordingly.

Where a termination is made with immediate effect for cause but the requirements are not met (e.g. no serious breach, no or insufficient warning, or late notice), the managing director is entitled to the salary for the period until the contract would have expired (fixed-term contract) or could have been ordinarily terminated (indefinite term contract). In addition, the court may require the employer to pay an indemnity of up to six months' salary.

In a case of mass dismissal, a notice of termination given without or before completion of the consultation process is deemed abusive. The notice of termination remains valid, but the employer is obliged to pay an indemnity to the managing director of a sum fixed by the court not exceeding two months' salary.

In principle, managing directors are not entitled to statutory severance payment upon dismissal, except for managing directors who are over 50 years old and whose employment contract comes to an end after 20 or more years of service. In the absence of an agreement between the parties, the amount of the severance payment will be determined by the court, taking due account of the circumstances, and could range between two- and eight-months' salary. However, if the managing director receives or will receive benefits from an occupational pension fund, these benefits may be deducted from the severance payment over the entire period of service insofar as they have been funded either directly or indirectly by the employer (i.e. through its contributions to the occupational pension scheme). As a result, such statutory severance payments are rare in practice.

The parties to an employment contract may agree on post-termination restrictive covenants prohibiting competitive activity by the former managing director. Such covenants are subject to a number of requirements and restrictions, including the following: 

1. The non-competition restriction must be agreed upon in writing and duly signed by the parties.
2. In addition, a non-competition restriction is only valid in those cases where the managing director has had access to the employer’s customers or to manufacturing or business secrets during the term of the employment, and the use of such knowledge could significantly damage the employer.
3. In addition, post-termination restriction on competition must be limited to a specific activity, a reasonable geographic area, and a reasonable duration (i.e. maximum three years, unless there are exceptional reasons for a longer period).
4. The restriction does not apply if the employer terminates the employment relationship without the managing director having given good cause to do so, or if the managing director terminates it for good cause attributable to the employer.
5. Where a managing director infringing the restriction is liable to pay a contractual penalty based on a corresponding contractual agreement, the managing director may exempt himself/herself from the prohibition by paying the penalty. However, he/she remains liable for any further damage suffered by the employer. Only where expressly agreed upon in writing, the employer may insist that the managing director continue to observe the non-competition restriction in addition to seeking the agreed-upon contractual penalty and any further damages.
6. Injunctive relief is available to the employer only if agreed in writing. 

According to case law, the above requirements and limitations also apply to other restrictive covenants, such as non-solicitation undertakings.

Not applicable