What Swiss Employment Law Says about Covid-19 Layoffs
The current Covid-crisis is making layoffs of employees inevitable for many companies. Some aspects of Swiss employment law should be taken into account by employers.
The principle of the freedom of contract, which includes the right to terminate a contract, generally also applies to employment relationships in Switzerland.
However, when terminating an employment agreement, the contractual or statutory provisions of termination and statutory provisions on wrongful termination must be observed.
Covid-19-related layoffs
Economic reasons are typically sufficient to justify the termination of an employment agreement under Swiss law. Even though the government has put in place a number of measures to support companies affected by Covid-19 to prevent mass layoffs, such measures are unlikely to impose any obligation on employers to avoid laying off staff.
The question of wrongful termination in the context of Covid-19 may arise if an employee does not comply with employer’s instructions to prevent infections and improve health protection at the workplace. If employees refuse to adhere to such instructions, the employer will generally have the right to terminate employment.
On the other hand, dismissing staff who simply insist on strictly implementing government measures such as working from home arrangements would be unlawful.
If the main purpose of a dismissal is to frustrate the rights to which an employee is entitled by contractual or statutory law, such dismissal would qualify as wrongful termination.
Mass layoffs
If an employer lays off a large number of employees in a company within 30 days, and the reason for termination is unrelated to the employees concerned, this would qualify as mass layoff.
The threshold for mass layoff is reached if 10 employees or more are made redundant in a company with 20 to 100 employees, at least 10% of the employees in a company between 100 and 300 employees, and 30 employees or more are laid off in a company with at least 300 employees.
It does not matter if the employer's intention is to actually terminate the employment or to change the terms of the employment agreement.
If a mass redundancy is imminent, the employer must comply with special legal obligations (articles 335f and 335g Swiss Code of Obligations). The employer must inform the employees of the impending mass redundancy and carry out a consultation procedure. Moreover, if 30 or more employees are made redundant within 30 days in a company with at least 250 employees, the employer is required by law to present a so called “social plan” to mitigate the impact.
The consultation must give employees (or employee representatives) the opportunity to make proposals on how to avoid or reduce the number of redundancies and mitigate their consequences. In doing so, the employer must disclose the reasons and scope of the planned mass layoff. The cantonal labor office (kantonales Arbeitsamt) must also be consulted about the planned mass layoff.
If the employer violates the right of employees to consult in the context of a mass layoff, this qualifies as wrongful termination of respective employment relationships.
Legal consequences in case of wrongful termination
Any employee who is wrongfully dismissed can object within the statutory period and the employer may be obliged by the court to pay a compensation equivalent to six months’ wages. If the employee’s right to consultation is not adhered to in the context of a mass dismissal, the penalty is up to two months' wages.