Termination Before the Start of Employment

The employment contract has been signed, but the first day of work still lies in the future – and already one party wishes to withdraw: the new employee has received a better offer, or the employer has to implement a hiring freeze imposed at short notice. May notice of termination be given at this stage at all? And if so: when does the notice period begin, which period applies, and does the position even have to be taken up? These questions arise not infrequently in practice, and they are legally less clear-cut than they may appear at first glance. In particular, the point at which the notice period begins to run has to this day not been definitively settled by the Federal Supreme Court.

Binding Effect from the Conclusion of the Contract

An employment contract is binding as soon as the parties have reached agreement – and not only as of the first day of work. As a rule, the contract requires no particular form (Art. 320 CO); a commitment confirmed orally or by e-mail is likewise binding. Anyone who has second thoughts after signing therefore cannot simply “back out”, but must bring the contract to an end by the means provided for that purpose. A mere cancellation does not suffice and leaves the contractual obligations untouched.

Termination Is Permissible – Even Before the First Day of Work

The law does not expressly regulate termination before the start of employment. According to the prevailing doctrine and cantonal case law, however, ordinary termination is possible even before the agreed start of work, and this applies to both sides. The employer may therefore give notice before the new employee takes up her duties, and she, conversely, may give notice before she has worked her first day.

Where there is good cause, even termination without notice under Art. 337 CO is conceivable – for instance, where the relationship of trust is already seriously undermined before the first day of work. The requirements for this are high, however, and the mere prospect of a more attractive position, or an operational hiring freeze, do not meet them. What is decisive in every case is that notice of termination is actually declared and that the position is not merely informally “cancelled”.

Form and Statement of Reasons for the Termination

Termination is in itself valid without any particular form; in principle, a telephone call or an e-mail is sufficient. Many employment contracts, however, stipulate written form, in which case the agreed form must be observed. For evidentiary reasons alone, notice of termination should in any event always be given in writing and in a demonstrable manner, since what is decisive for meeting the deadline is receipt by the addressee.

At the request of the other party, the termination must also be justified in writing (Art. 335 para. 2 CO). A failure to state reasons does not render the termination invalid, but it may operate to the terminating party’s disadvantage in a subsequent dispute over wrongful termination.

When Does the Notice Period Begin to Run?

Contested – and decisive in practice – is the point at which the notice period begins. Two views stand opposed.

Beginning only upon commencement of employment. According to the prevailing doctrine, the notice period begins to run only upon the actual commencement of employment. Until then, the probationary period has not yet begun either; under the case law of the Federal Supreme Court, it commences only with the effective start of work (BGE 144 III 152). Decisive is therefore the usually shorter probationary notice period of seven days (Art. 335b CO) or the probationary period agreed in the contract. The consequence: whoever gives notice before commencement must, in principle, still take up the position for the duration of that period. The person concerned must even expressly offer the employer her work for those days, failing which she forfeits her claim to salary. In practice, the employer usually waives the performance of the work, but nonetheless owes the salary for those days.

Beginning already upon receipt of the notice. Part of the doctrine and the case law of the St. Gallen courts take the opposing view that the notice period begins to run already upon receipt of the letter of termination (Cantonal Court of St. Gallen, decision BZ.2009.95 of 25 March 2010). If the notice is received early enough for the period to expire before the start of work, the position never has to be taken up at all.

The Federal Supreme Court has so far not conclusively settled the question. As long as it remains open, every unilateral termination carries a forecasting risk: whoever wishes to be on the safe side gives notice as early as possible and reckons, as a precaution, with a short period of work. Where both sides wish to end the relationship in any event, however, this uncertainty can be avoided altogether by means of a termination agreement, so that the commencement and duration of the notice period never become a matter of dispute in the first place.

Simply Failing to Appear: Compensation Under Art. 337d CO

The mere failure to take up the position must be distinguished from termination. Whoever does not give proper notice but simply fails to take up the position without good cause risks a statutory compensation payment. The employer is entitled to compensation equal to one quarter of one month’s salary, as well as to compensation for any further loss (Art. 337d CO). This claim must be asserted within 30 days of the failure to take up the position, by way of legal action or debt enforcement proceedings, failing which it is forfeited. For the employee concerned, days of suspension from unemployment insurance benefits may also be added.

Whoever, by contrast, gives proper notice generally owes no damages. Conversely, the employer falls into default of acceptance and remains liable to pay the salary if it simply does not allow the employee to take up the position without giving notice (Art. 324 CO).

The Safest Route: The Termination Agreement

However different the constellations described may be, they share a common weak point: every unilateral termination hinges on the unsettled question of when the notice period begins and can be challenged in the event of a dispute. Where both parties recognise that the start of employment is not going to work out, the written termination agreement is therefore by far the most effective route. It replaces the unilateral termination with a mutually agreed arrangement and thereby removes the uncertainty from the outset.

A carefully drafted termination agreement fixes the date of termination in a binding manner and renders the dispute over the commencement and duration of the notice period moot. It expressly regulates whether, and to what extent, work is still to be performed, or whether both sides waive it. It settles the financial consequences – salary, accrued holiday entitlement, any severance payment – and, by means of a full and final settlement clause, excludes subsequent claims. Not least, it eliminates the risks under Art. 337d CO (compensation for failure to take up the position) and under Art. 336 CO (wrongful termination), because a mutual agreement takes the place of the unilateral termination.

The only point to bear in mind is that, by the agreement, the employee may not waive mandatory entitlements that the law or a collective employment agreement grants her on a non-waivable basis. Within those limits, however, it is by far the most predictable instrument and should always be the first choice wherever an understanding between the parties is at all possible.

Conclusion

The signed employment contract is binding even before the first day of work; release from it is possible only through termination, not through a mere cancellation. Termination before the start of employment is permissible for both sides. What remains unsettled is when the period begins to run: according to the prevailing doctrine, only from the commencement of employment and with the short probationary period; according to the other view, already upon receipt of the notice. The protection against termination during blocking periods does not yet apply at this stage, whereas the protection against wrongful termination very much does. Whoever simply fails to take up the position risks compensation under Art. 337d CO and, in certain circumstances, days of suspension from unemployment insurance benefits. For practice, this means: as long as the question of when the notice period begins has not been definitively settled by the highest court, every unilateral termination carries a residual risk. Where there is even the slightest agreement between the parties that the start of employment is not going to work out, the written termination agreement is therefore by far the most effective route – in a single step, it creates legal certainty as to termination, the performance of work and the financial consequences, and it renders any dispute over deadlines superfluous from the outset.