Court’s power to imply a principle of a good faith into employment contracts

Estimated reading time 4 minutes

Implying an obligation of good faith on the employee, the Swiss Federal Supreme Court ruled that an employment could be terminated on the statutory notice period of one month rather than the contractual three months.

On May 7, 2008 the employee and a Swiss resident real estate management company entered into an employment contract.  The parties to the employment contract agreed on a termination of the employment contract by giving the other party a three months’ notice period as per the end of a given month.  The commencement date of the employment relationship was November 1, 2008.  When the end of the statutory three months’ probation period was approaching, the employer informed the employee that it was not satisfied with the services performed by the employee.  This conversation took place on January 23, 2009.  The employee argued that a three month period was not long enough for the employer to judge the quality of his services.  In consideration of the employee’s argument and in order to grant the employee sufficient time to look for a new job, the employer decided not to terminate the employment contract before June 30, 2009.  The employer and employee agreed in writing to review the employee’s performance at the beginning of May 2009.  They further agreed that during the initial period ending on June 30, 2009, the employment contract could be terminated by one month’s notice corresponding to the statutory minimum notice period for the first year of employment.

The parties also agreed in the interest of the employee that the shorter one month’s notice could only be given and only between May 8, 2009 and May 31, 2009, failing which the original contractual three month notice period would apply.

On April 21, 2009 the employee gave the employer a termination notice with a three months’ plus notice expiring July 31, 2009.  However, on May 5, 2009 the employer then gave the employee a termination notice with a one month notice period ending on June 30, 2009.

The employee argued that his termination notice of April 21, 2009 was subject to a three months’ notice period, because the one month’s notice period set forth in the letter agreement of January 23, 2009 only applied to a termination notice given between May 8, and May 30.  In the view of the employee a termination notice given before May 8 and after May 30 was subject to a three months’ notice period.  The employer, on the other hand, argued that not only a termination notice given between May 8 and May 30, 2009 was subject to the one month notice period, but also a termination notice given before May 8, 2009.  The employer further argued that the parties to the employment contract had agreed not to submit a termination notice before May 8, 2009 solely in the interest of the employee.  By submitting a termination notice on April 21, 2009, the employee had waived this protection.  The employer was therefore entitled to give a termination notice on May 5, 2009.  The employer was of the view that based on the letter agreement of January 23, 2009 it had to give a notice period of only one month.

The Federal Supreme Court decided that the employment relationship (respectively the underlying agreements) had to be interpreted in consideration of the principle of good faith to determine an objective mutual intent of the parties, failing which the court would apply the principle of “in dubio contra stipulatorem” (construing against, in this case, the employer).

Considering the principle of good faith the Federal Supreme Court concluded that, in view of all the circumstances, it would have been illogical, had the employer and the employee intended to apply the one month notice period only between May 8, and May 30, 2009.  It made far more sense to apply the one month notice period from the end of the probation period until May 30, 2009 and, thereafter, the contractual three month notice period.  In the view of the Federal Supreme Court it did not matter that the parties to the employment contract did not have a second discussion at the beginning of May 2009.  The Federal Supreme Court concluded that such a discussion was not a condition to the application of the one month notice period.  As the Federal Supreme Court had been able to determine the objective mutual intent of the parties to the employment contract, there was no room for an interpretation in consideration of the principle “in dubio contra stipulatorem”.

Commentary

Employers and employees in Switzerland are well advised to document in detail their discussions and the agreements to amend or derogate from the existing employment contract.

Resources

Decision of the Swiss Federal Supreme Court of February 28, 2011 (4A_663/2010).

For further information or to discuss any of the issues raised, please contact Walter H. Boss or Stefanie Monge on + 41 44 220 12 12.