The employment contract is the legal foundation of every employment relationship. Governed by arts. 319 to 343 of the Code of Obligations (CO), supplemented by the Labour Act (LA) and applicable collective agreements, it defines the reciprocal rights and obligations of the employer and the employee. PBM Avocats drafts, negotiates and analyses employment contracts for employers and employees in Geneva and Lausanne, ensuring compliance with mandatory Swiss law and the protection of each client's interests.
Definition and Formation of the Employment Contract (art. 319 CO)
Art. 319 para. 1 CO defines the employment contract as the agreement by which the employee undertakes towards the employer, for a fixed or indefinite period, to perform work in a relationship of subordination, in exchange for a salary. The criterion of subordination — which distinguishes the employee from the self-employed person — is determined by the totality of the specific circumstances: integration into the employer's organisation, instructions received, economic risk borne, exclusivity. The reclassification of mandate or service contracts as employment contracts is common in judicial practice and may have significant tax and social security consequences.
No particular form is required for the conclusion of an ordinary employment contract: a verbal agreement suffices. However, certain elements must, to be valid, be agreed in writing or in authentic form: the non-compete clause (art. 340 CO), the profit-sharing agreement (art. 322a CO), clauses derogating from statutory notice periods. For reasons of legal certainty and proof, PBM Avocats always recommends concluding a written employment contract detailing the essential elements and special clauses.
Types of Contracts: Fixed-Term and Indefinite-Term
The indefinite-term employment contract is the standard form under Swiss law. It may be terminated by either party by respecting the notice periods provided by art. 335c CO or by contractual agreement (with a legal minimum). Its flexibility makes it the preferred form for both employers and employees in stable employment relationships.
The fixed-term contract (art. 334 CO) is justified by occasional needs or by the nature of the assigned task. It terminates automatically at the expiry of the agreed term without the need for termination, but cannot be terminated before the term without valid grounds (art. 337 CO). The succession of several fixed-term contracts between the same parties may lead to reclassification as an indefinite-term contract if the courts consider it to be a permanently fragmented employment relationship — what case law designates as a "chain employment contract". Other special contractual forms are provided for by the CO: apprenticeship contract (art. 344 CO), temporary employment contract, home working contract (art. 351 CO).
The Essential Obligations of the Parties
The employer is required to pay the agreed salary (art. 322 CO), grant holidays (art. 329a CO), protect the personality and health of the employee (art. 328 CO), issue an employment reference (art. 330a CO) and comply with the mandatory standards of the LA regarding working hours and rest. The employee in turn is required to personally and carefully perform the agreed work (art. 321 CO), to follow the employer's reasonable instructions (art. 321d CO), to account and return (art. 321b CO), and to observe the fidelity owed to the employer, notably by refraining from any unfair competition and respecting professional secrecy (art. 321a CO).
Compliance with professional secrecy and the protection of the confidentiality of company information may be the subject of specific contractual clauses that clarify and extend the basic legal obligations. These clauses must be carefully drafted to be enforceable and not excessively restrict the employee's future economic freedom. PBM Avocats drafts these clauses taking into account the Federal Supreme Court's case law and the specificities of each sector of activity.
The Non-Compete Clause (arts. 340 to 340c CO)
The non-compete clause prohibits the employee, after the end of the contract, from carrying out a professional activity in competition with their former employer. It is governed by arts. 340 to 340c CO, which set strict conditions of validity. To be valid, the clause must: relate to actual knowledge of the clientele or business secrets likely to cause significant harm to the employer; be reasonably limited in time (in practice, rarely more than two or three years), in space (territory relevant to the activity) and in the nature of the prohibited activities; and must not excessively compromise the employee's economic future.
The clause falls automatically when the employer terminates the contract without the employee having given them valid grounds (art. 340c para. 2 CO), or when it is apparent that the employer no longer has a legitimate interest in its observance. The judge may reduce an excessive clause to a reasonable measure rather than declaring it wholly void. In the event of breach of the clause, the employer may claim damages and, if a contractual penalty has been stipulated, demand payment without having to prove specific loss. PBM Avocats analyses the validity and scope of non-compete clauses for the employers and employees concerned.
Frequently Asked Questions about the Employment Contract
Is a verbal employment contract valid in Switzerland?
Yes. Art. 320 para. 1 CO provides that no particular form is required for an employment contract: a verbal agreement is legally valid. However, a written contract is strongly advised for evidentiary reasons in the event of a dispute. Art. 330b CO moreover requires an employer who engages a full-time or part-time worker for more than one month to provide them in writing, within the month following the start of the contract, with the essential elements of the employment relationship: parties, start date, function, salary, weekly working hours. This confirmation document is not the contract itself, but it is evidence of the agreed conditions unless proven otherwise.
What is the difference between a fixed-term and an indefinite-term contract?
A fixed-term contract ends automatically at the expiry of the agreed term, without the need for termination (art. 334 para. 1 CO). It cannot in principle be terminated before the term, except in the presence of valid grounds (art. 337 CO). On the other hand, an indefinite-term contract may be ordinarily terminated by either party by respecting the statutory or contractual notice periods. Fixed-term contracts that are renewed several times may be reclassified as indefinite-term contracts by the courts if the succession of terms actually reflects the parties' intention to maintain a lasting relationship — this is what case law designates as the 'chain contract' theory.
What are the conditions of validity of a non-compete clause?
Under art. 340 CO, a non-compete clause is only valid if three cumulative conditions are met: (1) the employee must have knowledge of the clientele or of manufacturing or business secrets in the context of their activities, and this knowledge must be likely to cause significant harm to the employer; (2) the clause must be limited as to time, place and nature of the prohibited activities, within the limits of what is reasonably necessary to protect the employer's legitimate interests (art. 340a CO); (3) the clause must not excessively compromise the employee's economic future. If these conditions are not met, the judge may reduce the clause to a reasonable measure (art. 340a para. 2 CO) or declare it void.
What information may the employer process and transmit to third parties concerning the employee?
Art. 328b CO limits the processing of the employee's personal data to data that relates only to the employee's suitability for performing their job or that is necessary for the execution of the employment contract. This principle is supplemented by the provisions of the Federal Act on Data Protection (revised FADP, in force since 1 September 2023), which strengthens employees' rights: right of access, right to rectification, right to erasure and security obligation for the employer. Electronic monitoring of employees (emails, internet browsing, geolocation) is subject to strict conditions and must be disclosed. Breach of art. 328b CO may give rise to damages and an injunction action.
What is the procedure for contesting an inaccurate or unfavourable employment reference?
Art. 330a CO gives the employee the right to obtain at any time a complete, truthful and benevolent employment reference. A reference that does not meet these requirements may be contested in court. The employee may first request an amicable rectification from the employer. If the latter refuses, a court action for delivery of a compliant reference may be brought before the competent labour tribunal. The judge has broad discretion in determining the appropriate wording. There is no statutory limitation period for this action, but it is recommended to act promptly, as recollection of the facts fades over time.