Employment Law – A Brief Summary of the Most Recent Decisions of The Swiss Federal Court 2021

Separation agreement: beware of the circumstances

Decision of 21 July 2021 (4A_57/2021)

According to the law, an employment relationship can be terminated by mutual consent, without having to respect any notice period otherwise applicable, as long as the employee is not put under pressure to sign and the mutual understanding is a fair compromise. In practice, such an agreement is consigned in a separation agreement. An immediate termination for just cause, on the other hand, must be communicated to the employee without undue delay.

In the case at hand, the employee booked four tickets for a sponsored event, falsely declaring event tickets as non-private expenses and thus unlawfully enriching himself in the amount of EUR 1,875. The incident led to an internal investigation, whereupon the employee was questioned and admitted his misconduct. Subsequently, 16 days later, at a meeting, the employee was informed that the employer had decided to immediately separate from the employee. He was offered a separation agreement and told that in case he would not be willing to consent to a mutual agreement regarding the termination of the employment, the employer would terminate the employment with immediate effect. The employee signed the separation agreement on the spot. Eight months later, he claimed having been put under pressure to sign the separation agreement and the otherwise issued immediate termination unjustified. The High Court of Zurich protected his claim in substance.

The Federal Court had to assess whether the separation agreement had been validly concluded as well as whether the (hypothetical) termination without notice would have been justified.

Regarding the justification of the immediate termination for just cause, the Swiss Federal Court reminded that a termination without notice must in principle be given without delay. A period of two to three working days for reflection and obtaining legal information is considered reasonable. A longer period is only admissible if practical requirements of everyday and economic life make such a period appear justified.

In the case at hand, according to the Federal Court, the facts of the case were simple and did not require any special clarification on the side of the employer. An immediate termination for just cause should therefore have been communicated immediately. The courts did not protect the defendant’s argument that – as a global organization – internal procedures needed to be complied with. The judges also considered the separation agreement to be invalid, as the employee did not sign it based on his own free will for he was pressured with an – unjustified – immediate termination. They thus held that the statutory notice periods had been circumvented and that the separation agreement was therefore null and void.

With a separation agreement including a full-settlement clause, possible disputes might be avoided. However, such an agreement needs to be a fair compromise and the employee needs in principle be given sufficient time to consider the offer. If an employer intends to issue an immediate termination for just cause, a quick reaction is required. In case of an investigation regarding the alleged misconduct, the employer should already think of possible consequences while investigating. Combining these two possible termination options can lead to complex constellations. Proper preparation is key.

Protection of older employees and duty to hear the employee before a dismissal?

Decision of 2 June 2021 (4A_44/2021)

Based on the principle of freedom of termination, an employment relationship of indefinite duration may be terminated by either party subject to the statutory or contractual notice periods (art. 335 para. 1 CO). No specific reason is required. However, the freedom of termination finds its limits in the prohibition of abuse. Art. 336 CO contains a non-exhaustive list of reasons which make a termination appear abusive.

In principle, the protection against abusive termination is linked to the motive for the dismissal. However, abusiveness can also result from the way in which the terminating party exercises its right. Even if a party terminates for a lawful reason, it must exercise its right with consideration. In particular, it must not play a false and concealed game that blatantly contradicts good faith. A behavior that is blatantly contrary to the contract, namely a serious violation of personality rights in the context of a dismissal, can be considered abusive. In contrast, a merely indecent conduct by the employer that is unworthy of orderly business dealings is not sufficient to make the dismissal appear abusive.

In the case at hand, the employee was 60 years old at the time of the dismissal and had worked for the employer for about 37 years. The instance of appeal (High Court of Berne) found that the dismissal was abusive, namely considering the age and length of service of the employee. According to the cantonal judges, he undoubtedly belonged to the specially protected category of older employees and should have been informed and consulted about the intended dismissal. Based on previous case law of the Federal Court, the High Court considered the termination to be abusive.

This decision was overturned by the Federal Court, which held that the way the employee had been dismissed was not abusive. It further stated that in addition to age and length of service, the employee’s position within the company had to be taken into account when examining the required degree of protection. In the present case, the employee had been a managing director, had considerable decision-making powers and extensive responsibilities for the employer’s business. Considering this, the federal judges argued that the employer did not have to seek alternative solutions to a dismissal. Indeed, due to the employee’s position, continued employment in another form would have been difficult to implement for the employer.

Terminating employment contracts with older employees is delicate. There is no statutory obligation to inform and consult an employee before a dismissal. However, case law has brought forward an increased duty of care when termination employment contracts of older employees with many years of service. However, such criteria are neither precisely defined nor sacrosanct. It is to be assessed on a case-by-case basis whether there is an obligation of the employer to inform and consult an employee falling into the specially protected category of older employees before terminating the contract. All circumstances of the case, also the position of the employee, is to be taken into account.

Termination of employment: a medical certificate is not absolute

Decision of 28 May 2021 (4A_587/2020)

The employee bears the burden of proving (Art. 8 CC) that he/she is unable to work (namely due to illness or accident), usually by means of a medical certificate.

The employer may challenge the validity of the medical certificate by other means, namely invoking the employee’s behavior (e.g. an employee who repairs a roof while being unable to work due to knee pain) or the circumstances following which the incapacity to work was alleged (e.g. sudden illness following a dismissal or refusal to grant holidays at the time desired by the employee; repeated absences; medical certificates issued by doctors known to be complacent; contradictory certificates; certificates which were drawn up several months after the onset of symptoms…etc.).

Conversely, in case of a dispute on his/her ability to work, the employee may also demonstrate his/her incapacity by other means.

In the case under review, the Federal Court held that the sole fact that the employee provided a medical certificate a few hours after his/her dismissal is not sufficient for the termination to be deemed valid, especially since the employee indicated verbally to the employer that he/she was unwell prior to receiving termination. Moreover, the employee provided substantiated certificates issued by his doctor detailing his symptoms and their incompatibility with the work to be performed. This was deemed sufficient to override the employer’s daily sickness insurance’s (unsubstantiated) decision that the employee was fit to work based on its own medical examiner’s observations, thus confirming that the termination was null and void.

Therefore, where the employer relies on a decision of its daily sickness insurance to consider that the employee is fit to work, the Federal Court noted that the employer should be careful to (i) request the production from the insurance company of the detailed documents supporting this decision in the court proceedings and (ii) request that the employee releases the insurance’s medical advisor from his/her duty of confidentiality.

Data protection and personality rights: access to employee e-mails and messages

Decision of 25 August 2021 (4A_518/2020)

Accessing the employee’s messages (whether professional or personal) on the company phone and/or laptop constitutes a processing of data under Art. 3 of the Federal Act on Data Protection (FADP).

Where the employer reads and shares an employee’s private messages – collected from the company phone or laptop – with third parties (e.g. in court) said employer infringes the employee’s personality.

However, the Federal Court stated in this decision that the processing of data by the employer within the conditions of Art. 328b CO is presumed lawful, although it infringes the employee’s personality, provided the general principles of the FADP (in particular the principle of proportionality) are respected. In other terms, data processing by the employer is lawful if it is directly related to the conclusion or performance of an employment contract and remains proportionate. Conversely, if the processing of such data does not fall within the scope of Art. 328b CO, it is presumed unlawful unless it is justified by the consent of the employee, by an overriding private or public interest or by law (Art. 13 FADP).

In the present case, the employer argued that it had only accessed the employee’s emails and messages in order to prepare for the impending court proceedings, namely to prove the employee’s behavior of sexual harassment and verify whether the employee worked supplementary hours. In this respect, the Federal Tribunal confirmed that the collecting of evidence in anticipation of court proceedings relating to the employment relationship is covered by the scope of Art. 328b CO and therefore lawful in principle.

The employer further argued that it was entitled to access said messages given that its internal regulations provide that company computers and cell phones are to be used exclusively for business purposes. However, the Federal Court held that since the employer had tolerated the private use of such electronic devices (evidenced by the fact that the employee was asked to delete his private data from the company phone before returning to the employer), it could not rely on the provisions of its internal regulations to justify the data processing.

At any rate, the Federal Court confirmed that where it would have been possible for the employer to obtain the data on the employee’s work performance by less intrusive means, such as interrogating other employees and/or having them testify as witnesses in the court proceedings, the employer’s interests to defend itself in court proceedings could not be considered as overriding the employee’s interests nor justify the intrusion into the employee’s private life. In such case, the data processing is disproportionate, and the employee is entitled to moral damages. In the case at hand, the employee was awarded an indemnity of CHF 5,000.

Finally, the federal judges decided that the employee’s private messages – if unlawfully collected – are unusable in court and should therefore be discarded from the proceedings (Art. 152 para 2 CPC). In their analysis, they considered the fact that (i) the company tolerated the private use of the phone by the employee, which therefore prohibited the employer from accessing the personal data on the phone without the employee’s consent and (ii) the messages read by the employer were evidently private, even though they were not labelled as such and (iii) there were other means of proving the employer’s allegations.

Therefore, with this decision, the Federal Court confirmed the importance for the employer to keep in mind the rules of the FADP when processing data pertaining to the employee, even after termination. This is irrespective of the possible violation by the employee of a contractual rule whereby the private use of company devices is prohibited.

Information given about an ex-employee

Decision of 31 August 2021 (4A_231/2021)

According to article 328 para. 1 CO, the employer must respect and safeguard the employee’s personality rights. This duty continues to apply beyond the termination of the employment contract.

Where a former employer contacts an employee’s (potential) new employer on its own initiative to advise the new employer against working with the employee, said former employer violates the employee’s personality. Consequently, if the (potential) new employer terminates the employment contract or refuses to hire the employee, the former employer may be liable to pay damages to the employee.

In this case, the Federal Court confirmed that the former employer was liable to pay the difference between the gross insured earnings and the unemployment benefits paid to the employee for the duration of the unemployment period (17 months).

In practice, this decision serves as a reminder that any former employer should refrain from contacting an employee’s new employer on its/his/her own initiative. On the one hand, should the former employer be contacted by a (potential) new employer, the information given should be limited to what the reference letter states. On the other hand, we further recommend that the question of references, which may be given by the employer after the employee’s departure, be clearly defined beforehand.

Payment of holidays to high-level executives

Decision of 16 July 2021 (4A_30/2021)

In principle, the Labour Act does not apply to workers who perform a higher executive position (art. 3 lit. d LA). In this respect, in particular, the overtime regulations do not apply to the workers concerned (art. 9, 12 and 13 LA). Likewise, the statutory maximum weekly working hours, prohibitions on night work and Sunday work as well as minimum rest periods are not applicable.

In the case to be assessed by the Federal Court, an employee asserted claims for overtime and Sunday work after being dismissed, which were denied by the employer on the grounds that the employee had assumed a higher executive position. The employee had been employed as a “water sports project manager” with a gross annual salary of CHF 156,000. Based on the facts of the case, the High Court of the canton of Zug had concluded that the employee could indeed exercise a decisive influence on important decisions of the employer.

In its decision, the Federal Court once again summarized what is to be understood by a “higher executive position”. It stated that the decision-making powers based on the position and responsibility in the company are decisive. Individual aspects that may indicate a managerial function, such as the amount of the salary, are not decisive per se. What is important is the overall picture of the activity actually carried out in view of the company structure.

In the present case, the employee’s position as a higher executive was confirmed, taking into account the employee’s effective decision-making powers and competences.

c Case law is very restrictive, and an employee needs to have significant decision power to be considered as being employed in such higher executive position. A wrong assumption on the side of the employer might lead to adverse consequences.

Lapse of a non-competition clause in case of resignation of the employee

Decision of 20 July 2021 (4A_109/2021)

Post-contractual non-competition clauses whereby an employee undertakes to refrain from competitive activities for a certain period after the end of the employment agreement are widespread in Switzerland; very often, they are difficult to enforce.

A non-compete undertaking comes into force when the employment is terminated by the employee. However, such clause can lapse if the employee terminates the employment relationship for a justified reason for which the employer is responsible (art. 340c CO).

In the case at hand, a twelve-month non-competition clause had been agreed in the employment agreement of an agency manager and member of the management, prohibiting the employee from assuming a role or participation in a company in the recruitment sector in certain cantons or from working in this sector on a self-employed or employed basis.

The employee claimed three circumstances that had given him justified grounds for dismissal: firstly, a new commission model had been introduced which had led to a lower salary; secondly, expenses had been reduced unilaterally and retroactively by the employer; and thirdly, his work folder had been secretly searched. However, the employee could not prove this last allegation, and the other two motives were also qualified as pure self-serving declarations by the High Court of the Canton of Aargau. On the other hand, the employer had been able to demonstrate that the employee had been involved in the founding of the competing company during his ongoing employment relationship with the employer and that he had been in regular exchange with the chairman of the board of directors of the competing company, had helped to design its homepage and prepare documents and had created PDF forms for it. In addition, he had sent various documents pertaining to the employer to two of his private email addresses.

The Federal Court stated that the term “justified reason” includes any event attributable to the other party that, when reasonably considered, may give substantial cause for termination. An actual breach of contract is not required. For example, the non-competition clause would lapse in the case of a termination by the employee if the resignation was due to a remuneration significantly below the market rate, a chronic overload of work despite a warning, because of constant reproaches or a generally bad working atmosphere. A restriction of the employee’s scope of activity could also constitute a justified reason, subject to sufficient intensity.

In the present case, the Federal Court confirmed the decision of the previous instance that the employee’s resignation was not based on a justified reason attributable to the employer and that the non-competition clause had therefore not lapsed.

The enforcement of post-contractual non-compete undertakings is in general difficult. However, employers can increase their chances by appropriately restricting the prohibition regarding place, time, and scope. Further, the employer shall not set justified grounds for the employee to resign. In general, we recommend including contractual penalties in such post-contractual non-compete clauses as well as the possibility for rectification of the breach.

Work certificate: which statute of limitations applies?

Decision of 28 December 2020 (4A_295/2020)

The employee’s claims relating to his/her holiday entitlement and/or to the payment of unused vacation time following the end of the employment relationship are subject to a time-limitation period of 5 years according to Art. 128 para. 3 CO.

However, the employee’s claims concerning the work certificate (whether relating to its issuance or its rectification) are subject to a time-limitation period of 10 years according to Art. 127 CO. Indeed, in the above-mentioned decision, the Federal Court held that an employee’s position would be unfairly disadvantaged compared to that of the employer if the shorter period of Art. 128 CO – which constitutes an exception to the general regime – were to be retained for all of his/her claims arising from the employment contract, whereas this is not the case for the employer’s claims against the employee.

Nonetheless, cases of abuse of rights should be reserved, e.g. if the employee expressly waits for the departure of the competent person or the destruction of the relevant documents before requesting a work certificate or its rectification. The same does not apply where the employee does not pay attention to the lack of work certificate or to an error in the document until a few years later when he/she finds him/herself in need of it.

If you have any questions about the topics mentioned above, do not hesitate to contact us. Our teams in Geneva and Zurich are at your disposal to assist you with any queries pertaining to the field of employment law.