A termination agreement or termination contract is a mutually agreed-upon way to terminate an employment contract and end the employment relationship at any time.
Permissibility
Mutual termination of employment contracts is generally permissible at any time (Art. 115 OR).
Statutory (and contractual) notice periods need not be observed. However, failure to comply with the notice period may have consequences for the employee’s entitlement to unemployment benefits.
The termination agreement can also be concluded after a termination has already been issued.
Termination of the employment relationship is generally also permissible during a blocking period pursuant to Art. 336c OR (illness, military service, etc.). However, if the intention is to circumvent the termination protection provisions, the termination of the contract is considered void.
Form
The termination agreement is not subject to any special form (Art. 115 OR) and can also be concluded orally. For evidentiary reasons, written form is recommended.
If a form has been reserved in the employment contract (reservation of form for adjustment and supplement), the termination agreement must also comply with this form.
Contents
A termination agreement typically contains provisions regarding the termination of the employment contract, release, wage payment, and vacation.
Termination of employment relationship
The employment relationship is terminated by mutual agreement on a specific date determined by the parties.
Garden leave
There is neither an obligation to release nor a right to garden leave. It lies in the discretion of the employer to decide to release the employee from the duty to work or not. The employer may define conditions for such a release.
In the event of a release from the duty to work employees are usually placed on garden leave until the termination date. This is particularly the case for those employees whose activities could affect the employer’s interests if they were to work for a competitor (employees with access to trade secrets, customer relations, etc.).
Salary
If the employee is not released from work or placed on garden leave, wages must be paid as usual until the termination date.
When the employee is placed on garden leave, wages must be paid up to the termination date because the release is a case of the employer’s default of acceptance (Art. 324 OR). During the release, the employee is entitled to the average variable remuneration earned.
Handover
Often, the orderly handover of the employee’s work is regulated. Occasionally, the employee’s obligation to be available for questions and information is also agreed upon.
Holidays
The employee’s vacation entitlement continues to accrue until the termination date.
If the employee is not released from the duty to work, he or she may take their vacation, if possible. If this is not possible, the vacation must be paid out at the end of the employment relationship.
In the case of an employee released from work, the vacation is generally considered to have been taken due to the release.
Return obligations
At the end of the employment relationship, the parties must return everything they have given each other (Art. 339a OR). In termination agreements, the return obligations are often regulated in detail, and the return is sometimes set for an earlier date than the last day of the employment relationship.
Non-competition
If a non-competition clause has already been agreed upon in the employment contract, the employee is sometimes informed of this in the termination agreement. The non-competition clause can also be adapted, for example, to make it easier for the employee to make economic progress.
From the employee’s perspective, the agreement of a new non-competition clause should only be considered if they already know with certainty that they will not switch to a competitor. In case of doubt, a non-competition clause should be rejected.
Limitations
The termination agreement must not be used to circumvent any laws. A circumvention of the law may occur if the employment relationship is to be terminated by mutual agreement during a blocking period.
According to Art. 341 of the Swiss Code of Obligations, employees may not validly waive claims arising from mandatory legal provisions or mandatory provisions of a collective bargaining agreement during the term of the employment relationship and for one month after its termination.
The mandatory provisions include those under Art. 361 and 362 of the Code of Obligations, as well as claims arising from public law provisions. Examples of claims by employees under such provisions include:
- Child allowances
- Holiday pay
- Reference letter
- etc.
If the agreement is one-sided, i.e. if only the employee waives claims without receiving adequate consideration, termination agreements are usually strictly scrutinized by the courts, and circumvention of the law is assumed.
Consequences
Termination
The employment relationship is terminated as of the agreed date.
Salary continuation
The employer’s obligation to continue paying salary during sickness or accident ends with the agreed end of the employment relationship. If the employee was already sick, this may be regarded as circumventing the protection against dismissal.
Unemployment insurance
If the employee waives compliance with the notice period when terminating the employment relationship, the unemployment insurance usually orders waiting periods until the end of the theoretical notice period.
If the employment relationship was terminated at the employee’s request, this is regarded by the unemployment insurance as a termination by the employee, with the result that waiting periods are ordered. If the termination was initiated by the employer, it is advisable to make this clear in the agreement.