What is an employment contract?

An employment contract is a contract between an individual (employee) and a company (employer) pertaining to their relations, rights and obligations. The employee commits himself to work for the employer for pay.

If an employee is employed for longer than one month and longer than 8 hours per week on average, a written employment contract must be made or the engagement confirmed in writing. If an employee discontinues work before the two-month time limit ends, without a written contract having been made or employment confirmed in writing, such a confirmation must be submitted upon termination of employment.

Changes in employment terms

Changes in employment terms beyond that which result from acts of law or collective wage agreements must be confirmed in the same manner [cf. 1.11.2] no later than one month after their implementation.

Contract of temporary employment and employment of indeterminate duration

Employment contracts may be either temporary or of unspecified duration. A contract is of unspecified duration if not specifically otherwise stated. If a contract is temporary, its term of effect must be specified, i.e. from what time and until what time it is in effect. A temporary contract may also be limited to a specific project, e.g. substitution during paternal leave of a specific party, etc.

Temporary employment contracts are different from contracts of unlimited duration in that the parties do not have to terminate such contracts, the termination of employment has already been provided for prior to the entry into effect of the contract. The contract simply expires on a specific date or by the end of a specific project. By this time limit, the judicial effect of the employment expires.

During a temporary employment contract, employees have all general rights, such as sick leave rights, vacation rights etc., in accordance with stipulations of collective wage agreements.

Work abroad and employment contract

If an employee is assigned to work in a different country for one month or longer, he must receive a written confirmation of employment prior to departure. In addition to general information, as stated here above, the following must be stated:

  • Estimated work time abroad
  • Currency of wages paid
  • Bonuses or privileges related to work abroad
  • As applicable, the conditions for the employee being able to return to the home country

Competition provisions in employment contract

Provisions in employment contracts which prohibit employees to accepting employment with the employer’s competitors are non-binding if they are more extensive than necessary for the purpose of preventing competition or unfairly diminishing the employee’s freedom to work. Whether this is so must be determined in each individual case after considering all circumstances. Competition provisions may not, therefore, be too generally worded.

By assessment of how extensive competition provisions in an employment contract can be, especially regarding scope and time limits, the following factors must be considered:

  • What type of work the employee performs, e.g. whether he is a key employee, is in direct contact with clients or holds a high level of confidentiality. Also, what knowledge or information the employee may have about the company’s or clients’ operations.
  • How rapidly the employee‘s knowledge becomes obsolete and whether normal equality between employees is ascertained.
  • What type of operations are involved and who are the competitors in the market in which the company operates and the employee‘s knowledge covers.
  • That the employee‘s freedom to work is not unfairly diminished.
  • That the competition provision is defined and focused to protect specific competition interests.
  • The type of reward which an employee receives, has an effect as well, e.g. what his wages are.

Competition provisions of employment contracts do not apply if the employee is dismissed from his job without sufficient cause.