Termination of Employment Contracts by the Employer in Times of Covid-19


The economic crisis in Switzerland in connection with the Covid-19 pandemic will inevitably lead to the termination of employment contracts. In this newsletter, we analyse eight situations triggered by Covid-19 and answer the question whether a termination by the employer is possible and permissible.

Introduction

The global situation triggered by the Covid-19 pandemic and in particular the measures taken by many countries in this context lead to a very difficult economic situation for many companies. In Switzerland, over 187,000 companies accounting for more than 1.91 million employees have applied for short-time work. As of 4 May, only in the canton of Zurich, the cantonal labour authority has approved short-time work for more than 30,500 companies respectively for more than 360,000 employees. In view of this crisis, it will be inevitable for some employers to terminate employment relationships eventually.

In the following, we will discuss some situations caused by the Covid-19 pandemic and/or the related governmental measures and analyse whether in these situations ongoing employment relationships can validly be terminated and what needs to be observed by the employer. On the question of termination prior to start of employment, please refer to our separate article, which can be found here.

Termination principles under Swiss law

Before turning to the concrete questions, we shortly want to recall the termination principles under Swiss law.

Swiss law applies the principle of freedom of termination. Accordingly, both parties to the employment contract are free to terminate their relationship, as long as they respect the notice period applicable to the respective employment relationship. There are – however – two restrictions to this principle:

  • First, a termination notice is void if it is given during one of the proscribed periods stipulated in the law (restriction in time).
  • Second, a valid termination may prove to be abusive and result in a penalty payment (up to six months of salary) if it is given for a reason which the law or the jurisdiction consider abusive (material restriction).

These principles continue to apply, also in the times of Covid-19.

Covid-19 specific termination questions

1.                Can the employment relationship be terminated if the employee has fallen ill with the coronavirus?

If the employee is infected with the coronavirus and is therefore ill, article 336c para 1 (b) of the Swiss Code of Obligations (CO) applies. After the probation period has expired, the employer may not terminate the employment relationship while the employee is prevented from working due to the illness for up to 30 days in the first year of service, 90 days in the second to fifth years of service and 180 days in the sixth and subsequent years of service. A termination notice during the illness respectively during such proscribed period would therefore be void.

2.                Can the employment relationship be terminated because the employee is in quarantine and home office is not possible due to the nature of employment?

2.1              Ordered quarantine

In the event the authorities have or a doctor has ordered a quarantine for an individual employee, the employee is prevented from working for reasons for which he/she is not responsible. The employee is in possession of a medical certificate or an order certifying that he must remain in quarantine. Although the employee in this situation is not (yet) ill, there are opinions in the doctrine arguing that since the inability to go to work is health-related, the case of the ordered quarantine should be treated the same as the case in which the employee is ill. Consequently, the proscribed periods of article 336c para 1 (b) CO as mentioned under point 1 above would also apply in the case of the ordered quarantine.

However, article 336c para 1 (b) CO clearly states that it shall only be applicable in the event an employee is prevented from working due to illness or accident. The wording of article 336c para 1 (b) CO is exhaustive. Since the employee in the ordered quarantine is not (yet) ill, this case does in our view not fall within the scope of article 336c para 1 (b) CO. Due to the clear and conclusive wording of this provision, an analogous application does not seem appropriate.

Consequently, a termination of the employment relationship during the ordered quarantine of an employee is in our view valid.

It could – however – prove to be abusive. In case of the ordered quarantine, the employee must stay home due to an official or medical order. This could e.g. be subsumed under article 336 para 1 (e) CO (performance of a non-voluntary legal obligation).

2.2              Voluntary self-quarantine

If the employee is in voluntary self-quarantine because he/she was in close contact with a person manifesting the typical symptoms of the coronavirus, the employee chooses to follow the recommendations (not orders) of the Federal Council. The employee is not prevented from working due to illness and in contrast to the ordered quarantine, there is no objective reason which prevents the employee from working. We are therefore of the opinion that in this scenario a termination of the employment relationship would be valid and permissible.

However, the employer should seriously consider whether he really wants an employee to come to work in such a situation, given that the risk of infection is very high and given the employer’s duty to protect the health of the other employees. If the employer instructs the employee to stay at home in self-quarantine or consents to this measure, he shall not terminate the employment relationship on the grounds that the employee stayed away from work. This would be contradictory and therefore abusive.

3.                Can the employment relationship be terminated because an employee who does not belong to the category of persons at high risk refuses to come to work because he/she fears an infection with the coronavirus?

Yes, provided the employer has implemented the necessary precautionary measures in order to protect the employee.

The employer has a legal duty of care towards his employees. This also includes the duty to protect the health of the employees. In the current situation, the employer is obliged to follow the instructions of the Federal Office of Public Health (i.e. home office where possible, staffing planning in such a way that the use of public transport at least at rush hour can be avoided etc.) and must furthermore take all reasonable precautions at the workplace to minimize the risk of infection. What this involves varies from workplace to workplace.

If the employer fulfils these obligations, the employee who is healthy and does not come to work because he/she fears an infection from Covid-19 stays away from work without justification. A termination of the employment relationship by the employer is justified. The refusal to work may even justify a termination without notice. However, whether such requirements are met must be carefully examined in each individual case. A prior warning might be necessary at least in most cases of immediate termination.

4.                Can the employment relationship of a person at high risk be terminated because he/she is on paid leave in accordance with article 10c para 7 of the Covid-19 Ordinance 2?

According to article 10c of the Covid-19 Ordinance 2, employers have a duty to allow employees at high risk to work from home, if necessary by allowing them to perform appropriate alternative tasks. Employees at risk are any employees older than 65 years of age as well as employees suffering from diseases such as high blood pressure, diabetes, cardio-vascular diseases, chronic respiratory diseases, diseases and treatments that weaken the immune system and cancer.

If it is imperative for an employee at high risk to be physically present, the employer must take steps to protect that person by adapting procedures or the working environment. A person at high risk may refuse work if the employer does not live up to his obligations according to article 10c or if the person at high risk considers the risk to his/her health to be too high for special reasons (article 10c para 6). According to article 10c para 7, the employer must place the employee at high risk on leave while continuing to pay his/her salary, if it is not possible for the person to work at home or at the workplace or if the employee refuses work in the sense of article 10c para 6.

This case is comparable to the case of the ordered quarantine (see point 2.1 above). In fact, persons at high risk who are on paid leave according to article 10c para 7 of the Covid-19 Ordinance 2 find themselves in a situation comparable to an ordered quarantine: the employee is not prevented from working due to illness or accident. In our view, the proscribed periods of article 336c para 1 (b) CO are therefore not applicable and a termination of the employment relationship is possible (see also point 2.1 above).

However, a termination of the employment relationship in this case is delicate. There are opinions in the doctrine advocating that the protection against dismissal in article 336c para 1 (b) CO should be extended to the case of an employee at high risk on paid leave. Consequently, a termination given during the paid leave would be void. Given the exceptional current situation, there are no court decisions of similar cases that would provide guidance. The legal situation is thus unclear.

Furthermore, if the termination would be valid, there is a risk that a court would consider it to be abusive. A person at high risk either is of a certain age or suffers from a certain disease (or both). It is therefore possible that a court could qualify a termination of the employment relationship during the paid leave as an abusive termination pursuant to article 336 para 1 (a) CO. According to that provision, a termination is unlawful if it is given by one party on account of an attribute pertaining to the person of the other party, unless such attribute relates to the employment relationship or substantially impairs cooperation within the business.

In the event the employee refuses the assigned work because he/she considers the risk to his/her health to be too high for special reasons according to article 10c para 6 of the Covid-19 Ordinance 2 and the employer thereafter terminates the employment relationship, it is possible that such termination could be considered abusive (so called revenge termination according to article 336 para 1 (d) CO) and thus give rise to an obligation of the employer to pay a penalty to the employee.

The risk-analysis for the termination of an employee at high risk must therefore be made very carefully, at the relevant time and on a case-by-case basis; this especially in the light of the current case law of the Swiss Federal Tribunal that specifically protects older employees.

5.                Can the employment relationship be terminated because the employee was recruited into the military/civil service because of the Covid-19 situation?

After the probation period has expired, the employer may not terminate the employment relationship while the employee is performing Swiss compulsory military or civil defence service or Swiss alternative civilian service. In the event such service lasts for more than eleven days, the employer may not terminate the employment relationship during the four weeks preceding or following it (article 336c para 1 a. CO). A termination notice issued during this proscription period would be void.

6.                Can the employment relationship be terminated because the employee is not able to work anymore or works less because he/she has to take care of his/her children?

The termination of the employment relationship in this case would be valid, since it cannot be subsumed under a prescribed period under the law. The termination could – however – prove to be abusive.

On 13 March 2020, the Federal Council decided to close all schools until at least 19 April 2020. By decision of the Federal Council of 8 April 2020, these measures have been prolonged until at least 26 April 2020 and by decision of 16 April 2020 until 11 May 2020. Thereafter the schools for children of compulsory school age should be able to reopen. Grandparents at the age of 65 and over cannot provide for childcare anymore. Consequently, working parents find themselves in a difficult position. On the one hand, they are obliged to work in accordance with the employment contract. On the other hand, they have a legal (and of course moral) duty to take care of their children.

If the measures taken by the Federal Council (e.g. school closure) lead to the situation that an employee is no longer able to work according to the employment contract because he/she has the additional responsibility to take care of his/her children, we are of the opinion that the employer, due to his duty of care for the employee, has to grant the employee reasonable time to reorganize him-/herself, for example by granting the employee unpaid leave or agreeing with him/her to take holidays.

What period can be regarded as reasonable depends on the individual case at hand. As a matter of principle, the cantons are obliged to organize childcare services instead of school and daycare for parents who have no other option. However, the time needed by the cantons to set up such alternative childcare services varies. Furthermore, such offers may not cover the entire need of the parents for childcare. As a very rough rule of thumb, a period between five and fifteen days seems to be reasonable.

If the employee is not able to find a solution within reasonable time, a termination of the employment relationship is in our view permissible. However, the circumstances of the individual case must always be taken into account and carefully analysed. Again, the risk is that the termination could be considered abusive and entitle the employee to claim for payment of an indemnity from the employer.

7.                Can the employment relationship be terminated although the employee is subject to short-time work?

Yes. The fact that an employee is subject to short-time work has no influence on the possibility to terminate the employment relationship.

For the sake of completeness, it shall be mentioned that employees in a terminated employment relationship are not entitled to short-time work compensation (anymore). Even though other opinions exist among scholars, we take the view that the employee is not entitled to reclaim the loss of earnings suffered during the previous short-time work period.

8.                Can the employment relationship be terminated because the employee does not agree to short-time work?

The implementation of short-time work represents a change to the current employment contract. This change can only be made if the employee consents to it. The employee has the right to refuse short-time work. The employee therefore might argue that such termination is abusive in the sense of article 336 para 1 (d) CO. According to this provision, a termination is abusive, if it is given because the employee asserts claims under the employment relationship in good faith (so called revenge termination).

However, we take the view, that a termination of the employment contract based on the grounds that the employee did not consent to short-time work is principally permissible. The implementation of short-time work is in most cases linked to economic difficulties of the company. If the employee refuses short-time work, the employer often has no choice but to terminate the employment relationship. Thus, if the dismissal of the employee refusing short-time work can also be based on economic and financial reasons, the termination is in our view not abusive.

Nevertheless, a careful analysis and reasoning is required in this regard and a residual risk that a court could qualify the termination as abusive remains.

9.                I have to dismiss many employees due to economic reasons. Is that possible and what do I have to observe?

As a matter of principle, a termination of the employment relationship due to economic reasons is valid and permissible. If many notices of termination must be given within a short period, it must be examined whether the rules on mass redundancies apply (article 335d CO et seq.).

According to the law, mass redundancies are notices of termination given within 30 days of each other for reasons not pertaining personally to the employees and which affect (i) at least 10 employees in a business normally employing more than 20 and fewer than 100 employees, (ii) at least 10% of the employees of a business normally employing at least 100 and fewer than 300 employees or (iii) at least 30 employees in a business normally employing at least 300 employees (article 335d CO).

Collective labour agreements may contain different provisions.

In the event of mass redundancies, a legally prescribed procedure must strictly be followed, otherwise the terminations may be abusive and lead to an obligation of the employer to pay indemnities to the terminated employees. If mass redundancies become necessary, we strongly recommend seeking legal advice in advance. For more information on the mass redundancy procedure please refer to our specific article (in German) which is available here.