Termination of an unlimited employment contract with a minimum duration
The Swiss Federal Supreme Court recently published a decision concerning an unlimited employment contract with a minimum duration and an extraordinary dismissal (4A_395/2018). The Federal Court ruled that unlimited employment contracts with minimum duration are regarded as fixed-term contracts until the minimum duration has lapsed. Consequently, they can only be terminated by an extraordinary dismissal during the minimum duration. The granting of a social period does not preclude an extraordinary termination.
Psychologist A. was employed as of 1 December 2013 by Clinique B. Sàrl. The employment contract contained a minimum duration clause of one year starting after completion of a two month probation period. With the lapse of the minimum duration on 31 January 2015, the contract should be extended tacitly. Thus, as a whole, the contract formed an unlimited employment contract.
Following a dispute concerning the monthly salary, B. terminated the work relationship on 13 Mai 2014 effective as of 30 June 2014 in accordance with the applicable collective bargaining agreement. A. was released from her duties under the employment contract. She objected to the dismissal and particularly brought forward that the employment relationship could only be terminated after the lapse of the minimum duration on 31 January 2015. Later in July 2014, B. requested A. to reappear at work.
A. brought action against B. for payment of wages, i.e. especially for the period of July 2014 until January 2015, and compensation for abusive dismissal. The labour court of first instance upheld A.’s lawsuit, whereas the cantonal court of second instance upheld B.’s appeal.
The Swiss Federal Supreme Court was faced with the question how to legally assess the dismissal. In theory, one of the following solutions could be chosen:
- Ordinary dismissal effective as of 30 June 2014 in accordance with the applicable collective bargaining agreement
- Ordinary dismissal effective as of the end of the minimum duration on 31 January 2015
- Extraordinary dismissal
- No dismissal
Considerations of the Federal Court
The Federal Court decided that an employment contract with a minimum duration is to be treated as a fixed-term contract until the minimum duration has lapsed. Consequently, the work relationship can only be terminated by an extraordinary termination pursuant to Art. 337 CO. There is no possibility for an ordinary termination.
In the present case, B. gave notice of the dismissal during the minimum duration of the contract, which is why the termination is deemed extraordinary. The fact that B. granted A. a social period (Sozialfrist) of 1.5 months and terminated the employment relationship in accordance with the collective bargaining agreement does not change that a fixed-term contract can only be terminated by an extraordinary termination. The granting of a social period is not discussed in this decision, however, the Swiss Federal Supreme Court refers to an earlier judgement (BGE 140 I 320), where the court ruled that social periods are also allowed in the context of extraordinary dismissal if (i) the social period is shorter than the ordinary cancellation period and (ii) if the social period is primarily in the employee’s interest. The termination thus became effective on 31 June 2014. B.’s revocation, which was expressed in July 2014 and therefore after the employment relationship was already terminated, consequently was no longer possible.
Due to the fact that the employment relationship had not been ended for important reasons, the Swiss Federal Supreme Court qualified the dismissal as abusive. In line with Art. 337c para. 1 CO compensation claims for lost wages were approved for the period of July 2014 until January 2015. Further, the Federal Court also saw fit a compensation for abusive dismissal in the amount of approximately one month’s salary. A. had brought action for compensation for abusive dismissal on the base of Art. 336 para. 1 lit. d CO, however, the claim is of the same legal nature as Art. 337c para. 3 CO. Accordingly, the Swiss Federal Federal Court upheld the employee’s appeal.
Marco ToniPartner Attorney at law
Marco Toni, attorney at law, is a partner in our Zurich office. He focuses on domestic and international M&A transactions, private equity, corporate governance and general corporate, stock exchange and capital markets laws.T: +41 43 434 67 15 M: +41 79 557 62 15 E: email@example.com