Wrongful Termination - What Employers and Employees Need to Know
In principle, employment contracts can be terminated at any time, taking into account contractual and statutory notice periods. However, freedom to terminate is restricted by the prohibition on the abuse of rights. Although wrongful termination also normally ends the working relationship, a claim for compensation will arise.
What is wrongful termination?
Article 366 of the Swiss Code of Obligations sets out a number of circumstances in which termination is considered wrongful. The list is not exhaustive and is continually being expanded through case law. Wrongful termination can be instigated by either party. However, it is primarily employees who make a claim for wrongful termination.
Termination will be wrongful if the reason for termination is based on a personal characteristic of the person whose employment is terminated, which has no direct impact on the working relationship or work performance. An attempt to thwart legitimate claims of the other party through termination will likewise be considered wrongful.
In practice, terminations often follow conflicts between employees. In this situation, employers should always be aware that this type of termination can be wrongful, if steps are not taken to try and resolve the dispute through less drastic measures (BGE 4A_224/2018).
Employers also have a duty of care to their employees. In accordance with this, employers must exercise their rights with particular care in respect of those employees worthy of special protection. Termination after a long period of service and prior to retirement may be considered wrongful, if it is made without particular justification and without prior consultation with the employee (BGE 4A_44/2021).
In addition, the type and method of termination can be problematic if it infringes personal rights. This is the case, for example, if immediately following termination an employee is dismissed and expelled from the workplace in front of the entire workforce, without good reason (BGE 4A_92/2017).
Compensation claims
A party who wrongfully terminates the employment relationship must compensate the other party. The amount of compensation is determined by the competent court, considering all of the circumstances, but cannot exceed six months’ salary.
The compensation is a form of penalty payment, as the right to bring claims for further damages is not affected. However, any additional losses must be proved.
Various factors are taken into account in setting the amount of compensation, such as, for example, the seriousness of the fault, the extent of infringement of personal rights, the duration of the employment relationship, as well as the economic consequences for the terminated party.
Proceedings
A party wishing to bring a claim for wrongful termination must object to the termination. This must happen prior to expiry of the notice period, therefore at the latest on the last day of the employment relationship. If no agreement is reached to continue the employment relationship, the compensation claim can be brought to court within 180 days after termination of the employment contract. If either of these deadlines are missed, the right to claim compensation lapses.
In principle, the party claiming compensation must prove that the termination was wrongful. However, the court may also affirm a wrongful termination, where there is doubt about the actual basis for termination, but the reason given by the terminating party appears to be a pretext.
In this context, the reason given for termination plays a decisive role. If no written reason for termination is provided in the notice of termination, this can be requested by the terminated party.