Global employment briefing: Switzerland, June 2017

• Switzerland

• Employment law

01-06-2017

Damages payable for disparaging former employee

The Swiss Supreme Court has given a landmark decision on the payment of damages to a former employee (decision 4A_90/2016).

The case came about after a bank terminated the employment agreement of an asset manager, who was 52 years old. The bank initially suspected money-laundering activity, but then became aware that the employee had not done anything illegal. The employee quickly found a position with another financial institution. However, the first employer then told the new employer that the asset manager would encounter “serious problems”. In addition, the bank informed clients and the Swiss regulator FINMA that the employee was (allegedly) dishonest and filed a criminal complaint against the employee. The new employer terminated the asset manager’s employment because of the pending criminal investigation against him. The regulator and the police each conducted an investigation and found no wrongdoing by the employee. But because of the bank’s allegations the employee’s reputation was seriously damaged and he was unable to find new employment in his field.

The employee claimed damages for disparagement. The lower courts found that by filing a criminal complaint against its former employee for facts, which it knew to be inaccurate, by denouncing him to the regulator for the same acts and by denigrating him towards his customers, the bank seriously undermined the reputation of its former employee, internally as well as towards third parties. An infringement of personality is, in principle, unlawful because of the absolute character of personality rights. The infringement may only be justified by the consent of the victim, by the law or by an overriding private or public interest. In the case at hand, no overriding public interest could justify the infringement of the employee’s personality.

Because of the bank's unlawful actions, the applicant could no longer find employment in his chosen field. His professional reputation with the banking community and his former clientele had been destroyed. Therefore, the court awarded damages to the employee of more than USD 4m, taking into account the salary the employee would have earned up to the age of 65 (Swiss retirement age). The bank’s appeal to the Federal Court was rejected.

It is clear from this case that all fraud investigations must remain absolutely confidential. Any communication with third parties must be avoided, at least before the facts are established with certainty.