Termination with option of altered conditions of employment: General information, legality, and consequences

In Switzerland, an employment contract can generally only be amended with the consent of both parties, the employer and the employee. However, the tacit acceptance of the contract amendment can be effective and the amendment can come into force immediately if the respective amendment is favourable to both parties.

However, if these changes affect essential aspects of the employment relationship, such as weekly working hours, salary, place of work, function, and if they are to the detriment of the employee concerned, the employer must resort to what is known as a termination with option of altered conditions of employment. This is when an employer terminates an employment contract and at the same time offers the employee a new employment contract with changed conditions. The purpose of the termination with option of altered conditions of employment is therefore not so much to terminate the employment relationship as to maintain it under changed conditions.

If the termination with option of altered conditions of employment affects a large number of employees, the employer must carry out a collective redundancy procedure, including a consultation procedure with the employee representatives.

Acceptance or rejection of a termination with option of altered conditions of employment

If the employee rejects the terms of the new employment contract, it must be stated in the termination with option of altered conditions of employment that the employee's current contract will nevertheless be terminated. Termination with option of altered conditions of employment can be seen as a means of putting pressure on the employee to accept less favourable working conditions. However, the Federal Supreme Court has ruled that this is a statutory regulation that does not fall under the Code of Obligations, which normally regulates dismissals.

If the employee accepts the terms of the new employment contract offered to him, his new contract comes into force after a period of notice. It should be noted that the employment relationship does not start from scratch even with a new contract and that the employee's years of service with the company will continue to be recognised.

The various forms of termination with option of altered conditions of employment

There are various forms of a termination with option of altered conditions of employment. One of these is that the employer can terminate the employment relationship and present the employee with a new contract. If the employee accepts the new working conditions, these will apply after the notice period has expired. If the employee refuses to accept the new working conditions, the termination is effective by operation of law. An employer can also issue a conditional termination with option of altered conditions of employment. In this case, the dismissal is only valid if the employee does not agree to the contract amendment.

Finally, the employer can also make an initial offer to amend the contract and only terminate the contract if the employee rejects this offer. However, the threat of dismissal is often already present when the employee is presented with the new offer, so that the employee knows that a rejection can or will lead to dismissal.

The employer exerts pressure on the employee with a termination with the option of altered conditions of employment: Either the employee accepts the new working conditions, or the employment relationship ends. However, even if the Swiss Code of Obligations does not explicitly provide for terminations with the option of altered conditions of employment, Swiss case law considers this practice to be lawful.

However, the employer's use of termination with the option of altered conditions of employment must not violate certain conditions; otherwise, it is considered abusive. This is particularly applicable regarding compliance with a reasonable notice period.

In general, termination with the option of altered conditions of employment is considered lawful if it follows a deterioration in the economic situation of the company. For example, the Federal Supreme Court did not consider a termination with the option of altered conditions of employment to be abusive if it involved a reduction in an employee's workload due to the company's poor business situation and the impact on his salary in this unfavorable economic context (Federal Supreme Court decision 4A_555/2021 of 23 February 2012).

It is common knowledge that a termination with the option of altered conditions of employment exerts pressure on employees, forcing them to accept less favorable working conditions or risk losing their job. This pressure is acceptable within certain limits.

If a court is of the opinion that the pressure exerted on the employee exceeds the permissible level, the termination with the option of altered conditions of employment can be considered abusive, and the employee concerned can claim compensation of up to six months' net salary. However, the abusive termination remains valid, i.e., the employee cannot assert a claim for continuation of the employment relationship.

According to a ruling by the Federal Supreme Court (BGE 13 III 246), a termination with the option of altered conditions of employment can also be considered abusive under certain circumstances. A termination with the option of altered conditions of employment is therefore considered inadmissible, for example, if...

• the new conditions worsen the employee's situation
• a deterioration in working conditions is considered unreasonable
• there are no economic reasons relating to the company's operations or market conditions that justify a change to the contract
• the purpose of termination with the option of altered conditions is to achieve the acceptance of contractual changes before the end of the notice period
• the employee rejects an employment contract that violates the law, a collective agreement, or a standard employment contract

However, this list is not exhaustive and is only intended to give an impression of the cases in which a termination with the option of altered conditions of employment can be considered abusive. With this type of termination, it is particularly important that the notice periods are observed, as a change can only take legal effect at the time of termination of the contract. If the employer attempts to implement a change at an earlier date, this constitutes unreasonable pressure.

However, it should be noted that a company does not have to wait until its existence is jeopardized by unfavorable economic conditions before offering its employees a termination with the option of altered conditions. In general, the less significant the contractual amendment, the less important the underlying operational or market-related reasons.

Termination of the employment contract at an inopportune time

If an employer wishes to offer its employees a termination with a change of contract, it must pay attention to the timing of the change. There are certain periods during which the employer is not authorized to propose a change to the contract.

These protection periods (also known as blocking periods), during which an amendment or termination of the employment contract is not permitted, are listed in Article 336c CO. For example, an employer may not terminate an employee's contract if she is on sick leave, pregnant, on military service, or under military protection. Dismissal after refusal of a contract amendment during a protection period is therefore invalid. On the other hand, it is possible to agree to certain changes to an employee's employment contract during the protection period.

If the employer wishes to reorganize and harmonize the employment contracts within the company, it may have to amend several employment contracts. Depending on the number of employees affected by these changes, the employer may be obliged to carry out a collective redundancy procedure (Article 335d - 335k CO). This is referred to as a mass dismissal. Here too, the employer must observe the principle that it must consult the employees or their representatives beforehand in order to mitigate or avert the consequences of the collective redundancy. If you need help in asserting your rights, you can seek advice from a labor law attorney.

If you, as an employee, reject a termination with the option of altered conditions of employment, you may still be dismissed, even if the termination is not lawful. The correct assessment of the legality or unfairness of the termination will then have a significant impact on your entitlement to compensation and payments from the unemployment insurance.

Effects on unemployment insurance

If you wish to apply for payments from unemployment insurance following a termination, the unemployment insurance fund must first examine the reason for the termination to determine whether it was really wrongful (Article 81, paragraph 1a of the Unemployment Insurance Act). If you, as an employee, are not at fault for the termination, you are entitled to unemployment payments in proportion to your years of service.

Possibility of compensation following unfair termination

In accordance with Article 336b CO, you can also lodge an objection to the termination up to the last day of the notice period if you consider it to be unfair. You and your employer then have the opportunity to try to reach an out-of-court settlement of the dispute and possibly continue the employment relationship or agree on compensation. However, if no agreement can be reached, you have 180 days from the end of the contract to file a claim with the court to assert your right to compensation. According to Article 336a CO, this can amount to a maximum of six months' salary; in practice, however, an amount of two to three months' salary is usually agreed upon.

Tip: If you decide to contest an unfair termination, it is highly advisable to seek the help of a specialist employment lawyer. They can work with you to implement a timely objection to the termination, advise you on your rights and claims, and, if necessary, represent you in a lawsuit with their expertise.