Employment law

Employment contract

Flexibilty

Employment contracts can be drafted flexibly to meet the needs of the company and, if necessary, also of the employee. Mandatory provisions of the Code of Obligations and the Labour Code must be complied with. If a collective labour agreement is applicable, it must also be complied with.

Form

Employment contracts may be concluded orally or in writing. Collective agreements may stipulate the written form. The written form is recommended to create clarity and security (e.g. duration of the probationary period, workload, salary, holidays, etc.).

Hourly wages

In the case of hourly paid employment contracts, the hourly wage and the holiday supplement must be specified and shown on the pay slips. The holiday supplement is 8.33% for four weeks’ holiday per year, and 10.64% for five weeks.

Work on call

Work on call can be structured in such a way that the employee has to comply with call-ups (genuine work on call). The employee may not accept any other work in view of possible assignments. In principle, the waiting time must be compensated. It is also possible to work on call without the employee being obliged to comply (non-genuine work on call). The employee does not have to stand by and may accept other work. There is no waiting period to be compensated.

Wages

Overtime and wage supplements

In the case of overtime, the additional hours worked must in principle be compensated (with a supplement) or compensated by time off of the same duration (Art. 321c CO). In the case of executive staff and managers, it is often agreed that all overtime is compensated by compensations provided by the employer (salary, bonuses, etc.).

Overtime (Überstunden) is defined as hours worked in excess of the contractually agreed working hours (if 40 hours per week have been agreed, the additional hours are overtime). Working hours in excess of the maximum working hours (Überzeit) according to the Labour Code (Art. 9 ArG) must be compensated by time off or with a supplement (Art. 13 ArG).

Gratuity, bonus

A gratuity is a voluntary payment by the employer, to which the employer is not obliged. Accordingly, there is no entitlement.

The bonus is not regulated by law. A distinction must be made as to whether the bonus is to be qualified in whole or in part as a wage payment or as a gratuity. A bonus is more likely to qualify as gratuity if the payment is at the employer’s discretion. In this case, there is no entitlement.

If, on the other hand, the payment of the bonus was made dependent on the fulfilment of certain conditions (e.g. reaching a turnover target), it is more likely to have the character of a salary component and there is an entitlement.

In international companies and groups, options or shares are often awarded as a bonus, which the employee can only dispose over after a vesting period. Often the conditions of the participation plan contain special rules in case of termination of employment. Options or shares granted as an incentive for future performance may be subject to forfeiture.

Salary continuation

In the event of an employee’s absence through no fault of his or her own (e.g. illness or accident), the employer must continue to pay the salary for a certain period (Art. 324a CO). The law specifies the duration only for the first year of service. In practice, tables have been developed (Zurich scale, Basel scale and Bern scale).

If there is a daily sickness benefit insurance, it usually takes over the continued payment of wages after a waiting period. The employer must pay 100% of the salary during the waiting period unless otherwise agreed in the employment contract. It is permissible to agree that the continued payment of wages will be at the same level as the insurance benefits (e.g. 80%).

Accident insurance is compulsory. The minimum level of continued salary payment is 80%.

Holidays and days off

Holidays

Employees are legally entitled to four weeks’ holiday per year, five weeks up to the age of 20 (Art. 329a CO). Collective agreements may stipulate other minimum entitlements. The parties may agree on longer holidays.

The taking of holidays must be agreed between the employer and the employee.

Holidays not taken at the end of the year shall be carried over to the following year. When holidays are taken, the oldest days of the accrued holiday entitlement are taken first. Agreements according to which the holiday entitlement expires after a certain date are not valid.

No compensation during ongoing employment

Holidays may not be compensated in cash (Art. 329d para. 2 CO). However, in the case of hourly paid employment (irregular working hours), compensation for holidays is permitted.

Payment at the end of the employment relationship

Holidays must be paid out at the end of the employment relationship if they cannot be taken. Since the employee has worked more than is due under the contract, he acquires an additional holiday entitlement for the additional days worked. When calculating the holiday compensation after termination of the employment relationship, any agreed thirteenth month’s salary is included. Therefore, the annual salary shall be used as a basis. The holiday allowance shall be calculated according to the following formulae.

There are two calculation formulas for calculating the number of average working days per year:

In the case of a 5-day week, the number of weeks per year is multiplied by the number of working days per week, which gives the year 260 working days (52 x 5 = 260). It is assumed that the 365th day is a Saturday or Sunday. This calculation results in an average of 21.67 working days per month (260 : 12 = 21.67). In practice, this calculation method is usually used to calculate the value of a holiday.

Since the year does not have exactly 52 weeks (52 x 7 =364), one day is added to the above formula and one arrives at 261 working days per year (52 x 5 + 1 = 261). In this case, it is assumed that the 365th day is a working day. This calculation results in 21.75 working days per month (261 : 12 = 21.75).

Holiday pay as a percentage of annual salary Y% = number of holiday days owed : (number of average working days per year – number of holiday days owed).

For four weeks (20 days) of holidays per year: 8.33 % = 20 : (260 – 20)

For five weeks (25 days) of holidays per year: 10.64% = 25 : (260 – 25)

Value of a holiday: Y% x annual salary : number of holiday days per year.

Value of unused holidays: Value of a holiday x number of holiday days not taken.

Days and hours off

Employees are entitled to at least one day off (usually Sunday) per week (Art. 329 CO). Two days off per week (usually Saturday and Sunday) are customary.

The law provides that employees must be granted the usual hours and days off. Occasions for days off (moving house, wedding, etc.) are not expressly regulated. These may result from a collective labour agreement. In other cases, it is advisable to regulate them in the employment contract.

If the employment contract is terminated, the employee must be given the necessary time to find another job (interviews).

The employer and the employee may agree on unpaid leave. During unpaid leave, the employee is not entitled to a salary. The continuation of accident insurance and, if necessary, the payment of pension fund contributions and who pays the premiums or contributions must be determined in each individual case.

Maternity leave

After giving birth, employees are entitled to maternity leave of at least 14 weeks (art. 329f para. 2 CO). Maternity allowance is paid during this period (Art. 16c para. 2 EOG).

If the child has to be hospitalised, the maternity leave is extended by the extended duration of the maternity allowance (Art. 329f para. 2 CO). The period of maternity allowance is extended by the duration of hospitalisation, but by no more than 56 days, if the child remains in hospital for at least two weeks immediately after birth and the mother had decided to return to work at the end of maternity leave (Art. 16c para. 3 EOG).

In the case of women who are unable to work due to incapacity or unemployment, the entitlement to maternity allowance is also extended under certain circumstances (Art. 16c para. 4 EOG in conjunction with Arts. 29 and 30 EOV).

Paternity leave

An employee who is the legal father of a child at the time of its birth (married persons) or who becomes the legal father within six months (recognition of the child) is entitled to paternity leave of two weeks. Paternity leave must be taken within six months of the birth and may be taken on a weekly or daily basis (Art. 329h CO).

Childcare leave

Employees whose child’s health is seriously impaired due to illness or accident are entitled to a maximum of 14 weeks’ care leave, provided they are entitled to care allowance under Art. 16n to 16s EOG (Art. 329j OR). Art. 16n to 16s EOG define the requirements for the employee and when a child is considered to have a severe health impairment. Only one parent is entitled to a childcare allowance and, as a consequence, to childcare leave.

Termination

Fixed-term and open-ended employment relationships

Fixed-term employment relationships end without further ado at the end of the agreed contract period. Notice of termination is not required. If the employment relationship is continued beyond the agreed duration, the employment relationship is considered open-ended.

Open-ended employment relationships end by notice of termination, termination by mutual agreement, death of the employee or reaching retirement age.

Termination in general

The termination of an employment contract is generally possible without any formal requirements. Thus, notice of termination can be given orally, in writing, by e-mail or even text message (SMS, etc.).

For reasons of proof, it is advisable to always put the notice of termination in writing and send it by registered mail or have the recipient confirm receipt when handing it over.

If the employment contract stipulates a certain form for the notice of termination (e.g. written form), this must be observed. If the employment contract also stipulates a certain method of delivery (e.g. registered mail), this must also be complied with. Sometimes it is unclear in such clauses whether it is a validity provision or a proof provision. In the first case, the termination is only valid if the form and method of delivery have been complied with; in the second case, the termination and its delivery can also be proven by other means. In case of doubt, written notice with proof of delivery or receipt is recommended.

The notice of termination is a declaration of intent which must be received. As such, it only takes effect when it has been delivered to the recipient or at least has reached his or her sphere of control and he or she has the opportunity to take note of it.

The delivery of the notice of termination has effects on the beginning of the period of notice. If a notice is sent too late, it will not reach the recipient before the end of the month. This means that the notice period starts one month later and the employment relationship runs one month longer. If the notice is not delivered in time before the end of the probationary period, the ordinary notice period applies and no longer the short notice period during the probationary period.

A notice of termination sent by registered mail is deemed to be delivered on the first day on which the recipient could collect it from the post office for the first time, usually one day after delivery of the invitation to collect (fiction of delivery).

Reasons must be given for the termination if the other party so requests (Art. 335 para. 2 CO).

Ordinary notice of termination

In the case of ordinary termination, the notice period agreed in the contract must be observed, whereby the statutory minimum notice periods or those provided for in a CLA must be observed (Art. 335c CO).

If the notice period is not observed, the termination takes effect on the date on which the employment relationship should have been terminated.

Resolution without notice

Termination without notice

Termination without notice by employer and employee for good cause is generally possible. Good cause exists if the continuation of the employment relationship is unreasonable in good faith (Art. 337 CO). Good cause includes, for example, the commission of criminal offences against the employer by the employee (theft, embezzlement, etc.). The employee’s hindrance through no fault of his or her own is not an important reason.

The case law is strict in its assumption of a good cause or an unreasonableness of the continuation of the employment relationship. If the court comes to the conclusion that there was no good cause, the employer who terminates the employment without notice must pay the employee the salary attributable to the notice period and, as a rule, compensation of up to six months’ salary (Art. 337c CO).

For these reasons, it is advisable to inform oneself in detail about the important reasons permitted by case law before terminating the employment without notice.

Failure to take up post and departure without cause

If the employee does not take up the job without good cause or leaves the job without notice, the employer may claim compensation of one quarter of one month’s salary. In addition, the employer may claim damages (Art. 337d CO). In practice, it is often difficult for the employer to prove the damages.

The courts do not lightly assume that the employee left the job without notice and require clarity that the employee has no intention of returning.

Protection against dismissal

The employer may not terminate the employment relationship after the end of the probationary period (Art. 336c CO):

• during the employee’s compulsory military, protective or civilian service and in the four weeks before and after the service if the service lasts more than eleven days
• while the employee is prevented from working through no fault of his own as a result of illness or accident (in the first year of service for 30 days, from the second to the fifth year of service for 90 days, from the sixth year of service for 180 days, after which notice may be given)
• during pregnancy and the 16 weeks following childbirth
• before the end of extended maternity leave due to hospitalisation of the child (Art. 329f para. 2 CO)
• for as long as the employee is entitled to childcare leave in accordance with Art. 329j CO, for a maximum of six months from the beginning of the framework period
• while the employee is participating, with the employer’s consent, in a service ordered by a competent federal authority for an aid operation abroad.

A notice of termination given during these blocking periods is null and void and the employment relationship continues. If the notice of termination was given before the start of the blocking period, the course of the notice period is interrupted and continues after the end of the blocking period.

If an end date (end of a month or a working week) applies to the termination of the employment relationship, the notice period is extended until the next following date.

After the expiry of the probationary period, the employee may terminate the employment relationship if the supervisor or employer is prevented from doing so for the reasons set out in Art. 336c CO and the employee has to take over his or her duties (Art. 336d CO). This provision has little practical significance.

→ Inopportune Termination

Wrongful termination

A termination is wrongful when given by the employee or employer for certain reasons (Art. 336 CO). In practice, a so-called revenge termination often occurs, i.e. a termination because the other party asserts a claim arising from the employment relationship in good faith. In most cases, the termination in retaliation concerns the employee. → Wrongful Termination

A wrongful termination does not result in its cancellation and the continuation of the employment relationship. The employment relationship is deemed to be terminated.

The employee who has been unfairly dismissed is only entitled to compensation. The compensation amounts to a maximum of six months’ salary, unless it is a case of mass dismissal, in which case the compensation amounts to a maximum of two months’ salary (Art. 336a CO). In practice, compensation is determined according to the duration of the employment relationship, the severity of the interference with the personality, the degree of abusiveness and other criteria. The shorter the employment relationship, the lower the compensation. Compensation of more than four months’ wages is rare.

If the compensation has to be enforced in court, the plaintiff must prove the unfairness and all circumstances for the assessment of the compensation. This proof is not always easy to provide.

The list of abusive circumstances in the law is not exhaustive. A termination is considered abusive, among other things, if it is pronounced

• because of a characteristic to which the other party is entitled by virtue of his or her personality (gender, skin colour, ethnicity, religion, etc.), unless this characteristic is connected with the employment relationship or substantially impairs cooperation in the enterprise
• solely in order to prevent the other party from accruing claims arising from the employment relationship (e.g. to prevent the employee from accruing a claim to a seniority bonus)
• because the other party asserts claims arising from the employment relationship in good faith (so-called revenge termination; e.g. because the employee asserts a wage claim)
• in the context of a mass dismissal without consulting the employee representatives or, if there are none, the employees (Art. 335f CO).

Termination during the probationary period

During the probationary period, the employment relationship may be terminated with seven days’ notice; the first month is considered the probationary period (Art. 335b CO).

A longer (maximum three months) or shorter probationary period and a longer or shorter notice period may be agreed in writing or provided for in a standard or collective employment contract.

In the case of fixed-term employment contracts, a probationary period must be expressly agreed.

If the employee is prevented from working during the probationary period due to illness or accident, the protection against dismissal under Art. 336c CO does not apply. Termination is permissible.

Termination before taking up employment

Termination before taking up the job is not regulated by law, but is considered permissible in practice.

The employer will usually have no interest in employing the employee during the notice period of the probationary period and the employee will usually have no interest in working during the notice period of the probationary period.

Under certain circumstances, the terminating party may be liable for damages under culpa in contrahendo.

Termination agreement and garden leave

Employment relationships may be terminated by mutual agreement on any date and without notice (Art. 115 CO). This may be the case if both parties realise that it is better for both of them to terminate the employment relationship. It is also possible, for example, that the employee wants to take up another job and wants to be dismissed from the employment relationship prematurely.

By terminating the employment contract without observing the notice period, the employee waives the salary (and holiday entitlements) due during the notice period. If the employee is subsequently unemployed, such a waiver may have consequences for him/her (reduction of daily allowance entitlement due to self-inflicted termination of the employment relationship). If the motivation to terminate the employment relationship comes from the employer, this should be clearly stated in the termination agreement for these reasons.

When terminating the employment relationship, it should be noted that the employee cannot waive claims arising from mandatory provisions of the law or a collective labour agreement before the expiry of one month after termination of the employment relationship (Art. 341 CO). These include continued payment of wages in the event of illness, holidays, overtime, etc.

The situation in the individual case must be examined and the claims must be regulated in the termination agreement.

Employees are often placed on Garden Leave with the termination agreement. The employer thus waives the employee’s duty to work and undertakes to continue paying the salary until a certain date. In the case of Garden Leave, holidays are considered to be taken, subject to special situations.

Confirmation of employment, reference letter, interim reference

Employees are entitled to a confirmation of employment or a reference. They may request an interim reference at any time (Art. 330a CO).

Employment certificates only provide information on the employer, the employee, the duration of the employment relationship, the employee’s workload and his or her function.

In addition to the employee’s personal data and the employer’s identification, reference letters contain information on the type and duration of the employment relationship as well as on the employee’s performance and conduct.

The employer formulates the the reference letter; the employee is not entitled to specific formulations. The employer must draw up the reference letter in accordance with the following principles:

• Benevolence
• Truthfulness
• Principle of clarity
• Completeness

Procedural law

Local jurisdiction

For actions brought by the employee or the employer, the plaintiff may choose between the court at the registered office or domicile of the defendant or the place where the employee habitually performs the work (Art. 34 CPC).

For jobseekers and employees who rely on the Employment Agencies Act, there is an additional place of jurisdiction at the place of business of the recruitment agency or the employment agency.

Employees and jobseekers may not waive these jurisdictions either in advance or by entering appearance. A deviation of the place of jurisdiction in the employment contract is therefore not permissible. However, after the dispute has arisen, it is permissible to agree on a different place of jurisdiction.

In international relationships, the place of jurisdiction is determined by the international treaty (Lugano Convention) and, in the absence of such a treaty, by the PILA.

Conciliation proceedings

If the parties cannot reach an out-of-court agreement, a conciliation procedure can be initiated. The conciliation authority attempts to mediate between the parties. If no agreement can be reached, the conciliation authority issues the authorisation to sue.

Up to an amount in dispute of CHF 2,000.00, the conciliation authority may issue a ruling at the request of the applicant.

Up to an amount in dispute of CHF 5,000.00, the conciliation authority may issue a proposed judgement at the request of the applicant. If this is not rejected within 20 days, it is deemed to be accepted and the proposed judgment becomes a judgment. If it is rejected, the conciliation authority shall issue the authorisation to sue.

Court proceedings

If no agreement is reached before the conciliation board, the complaining party may file a lawsuit with the court that has subject-matter jurisdiction. Which court has subject-matter jurisdiction is determined by cantonal law. The lawsuit must be filed within three months of the date on which the decision to file a lawsuit was issued.

Arbitration

A prerequisite for the admissibility of arbitration proceedings for labour disputes is that the dispute is arbitrable. Arbitrable claims are only those over which the parties may dispose freely(Art. 354 CPC).

In labour law there are some claims that are based on mandatory and partially mandatory provisions (Art. 361 and Art. 362 CO). Employees cannot waive these claims before the expiry of one month after termination of the employment relationship (Art. 341 CO) and thus cannot freely dispose of them.

In the case of claims arising from mandatory or partially mandatory provisions, the agreement of an arbitration tribunal is not permissible before the expiry of one month after the termination of the employment relationship. The Federal Supreme Court confirmed the case law on this in a ruling of 18 April 2018 (BGE 144 III 235).

In international relationships, arbitrability is defined differently. All that is required is that the matter concerns an economic interest (Art. 177 PILA).