Summary Dismissal under Art. 337 CO

General Principles

According to Art. 337 para. 1 of the Swiss Code of Obligations (CO), both the employer and the employee may terminate an existing employment relationship with immediate effect for good cause. In practice, however, it is usually employees who are affected by summary dismissal; therefore, the following discussion focuses on their perspective.

A good cause within the meaning of Art. 337 para. 1 CO is defined in para. 2 as any circumstance that makes it unreasonable for the terminating party to continue the employment relationship in good faith. Whether such a good cause exists is determined by the competent court at its discretion pursuant to Art. 337 para. 3 CO, whereby an employee’s unintentional incapacity to work may under no circumstances be recognised as a valid reason.

Time Limits for Summary Dismissal

An employer who wishes to dismiss an employee with immediate effect must do so within a short period of reflection of no more than two to three working days after becoming aware of the “good cause” in the sense of Art. 337 para. 2 CO. According to prevailing doctrine and case law, this period is considered sufficient for the employer to make a careful and responsible decision regarding the continuation of the employment relationship. If the dismissal is not issued within this period, continuation of the employment relationship is deemed reasonable.

An exception applies in cases of summary dismissal based on suspicion. In the case of a so-called suspicion-based dismissal, the employer may wait several days or even weeks before declaring the summary dismissal. In its judgment of 21 September 1989, the Zurich High Court held that a summary dismissal may still be considered timely even after several weeks or months if, for example, the employee was to be given an opportunity to demonstrate improvement (SJZ 50/1954, 100), if professional incompetence only became apparent over time (BGE 97 II 142), or if temporary continued employment was necessary to protect the life and health of third parties (BGE 104 Ia 166).

Legal Consequences of Summary Dismissal

Regardless of whether a summary dismissal is justified or unjustified, it immediately terminates the employment relationship – even if issued during an ongoing blocking period. Upon termination, all claims of both parties become immediately due.

If an employee is unjustifiably dismissed with immediate effect and the dismissal is simultaneously considered abusive within the meaning of Art. 336 CO, the employee is not entitled to both types of compensation under Art. 336a CO and Art. 337c para. 3 CO. In such cases, only the provisions applicable to unjustified summary dismissal – namely Art. 337c para. 3 CO – apply (BGE 121 III 64, p. 66 f.). However, the abusive nature of the dismissal must be taken into account as an aggravating factor when determining the penalty compensation. According to the Federal Supreme Court, this also applies if an abusive termination is followed at a later stage by an unjustified summary dismissal.