Landmark decision on reasons for dismissal

Under Swiss law, the termination of an employment relationship with immediate effect is permitted only if the terminating party has a valid reason (Article 337 of the Swiss Code of Obligations). A valid reason means, specifically, any circumstance which renders the continuation of the employment relationship in good faith unconscionable for the party giving the notice. Importantly, the valid reason has to exist at the time of notice of termination.

One question that has been the subject of much debate and controversy is whether an employer which has terminated an employment relationship without notice can rely on matters it only discovered after termination to justify the summary dismissal.

In FTD 4A_109/2016, the Swiss Federal Tribunal reached a landmark decision, putting an end to this controversy. The Tribunal held that it is possible to invoke reasons which became clear after giving notice of termination, provided that the additional circumstances already existed at the moment when the notice of termination was given and that the terminating party did not know, and could not have known, about those circumstances at the time of termination.

By way of example, this means that if an employer dismisses an employee without notice due to drug consumption, and then subsequently discovers that the employee also manipulated the time recording system, the employer may also rely on the abuse of the time recording system to justify the dismissal in court.