Late summary dismissal and forfeiture of the right to terminate with immediate effect for a senior executive

Facts

The appellant, [A. SA] , a public limited company of the [A.] group (approximately 3,000 employees, turnover exceeding CHF 1 billion), active in particular in the production of security inks for banknotes, is held by [A.] Holding SA, which is controlled by the respondent [B.] and two members of his family. The respondent was a director of the company from 2000 to 2015 and co-chief executive officer since 1 April 2006.

The employment contract, with an initial term of five years and renewable, provided for an annual gross salary of CHF 2,000,000, an ordinary bonus of CHF 1,500,000 and an additional bonus. Its clause 7.2, entitled 'Termination', governed the consequences of an immediate termination without notice, for good cause within the meaning of Art. 337 CO by the employee, or without good cause within the meaning of that provision by the employer: salary until the end of the contractual period, twice the last annual salary and twice the average ordinary bonus of the last three years.

A senior executive, [E.] , had to resign in 2014 from the non-executive chairmanship of [F.] Ltd (formerly [H.] Ltd), a Singaporean electronic payments company, due to a conflict of interest with the group's activities. At the meeting of the board of directors of [A.] Holding SA on 30 June 2014, it was noted that the respondent had succeeded him as non-executive chairman of that company, in which he was a minority shareholder, while he himself was a director and executive of the group.

Between December 2014 and January 2015, [F.] Ltd concluded an agency contract with [K.] Ltd and announced the certification of its platform for the Nigerian market. The respondent attended the World Economic Forum in Davos as executive vice-president of [A.] Holding SA and chairman of [F.] Ltd, the expenses being borne by the appellant.

On 18 February 2015, the appellant dismissed the respondent with immediate effect, invoking a serious conflict of interest and a breach of the duties of loyalty and fidelity owed as an employee and as a director.

By judgment of 20 February 2018, the Vaud Cantonal Chamber for Civil Matters held that the respondent's activities constituted a breach of the duty of loyalty justifying immediate termination, but that the appellant, having known of the ground since 30 June 2014 and having waited more than seven months, had waived the right to rely on it; the dismissal was therefore unjustified. It held that the parties had validly agreed on the regime of clause 7.2 and ordered the appellant to pay CHF 2,774,380 gross and CHF 7,917,703 net, with interest at 5% from 20 April 2015. By judgment of 7 March 2019, the Vaud Civil Court of Appeal dismissed the appellant's appeal.

The appellant filed a civil law appeal with the Federal Supreme Court, principally requesting the dismissal of the respondent's claims (subject to CHF 161,623 net as pension shortfall), subsidiarily the deletion of point II of the judgment, and more subsidiarily the remittal of the case. The respondent requested the dismissal of the appeal. The application for suspensive effect was rejected.

Considerations

The Federal Supreme Court notes that the civil law appeal is admissible, the amount in dispute reaching CHF 15,000 in a pecuniary labour law matter (Art. 74 para. 1 let. a FSCA) and the decision emanating from a cantonal superior court ruling on appeal (Art. 75 FSCA). The appeal complies with the formal requirements and time limits. It recalls that its review is limited to the grievances raised and substantiated (Art. 42 para. 2 FSCA), that it decides on the basis of the facts established by the lower authority (Art. 105 para. 1 FSCA), and that the principle of exhaustion of grievances (Art. 75 para. 1 FSCA) excludes new arguments.

As regards the first ground, based on Art. 9 Cst. and arbitrariness in the establishment of the facts, the appellant argues that clause 7.2 of the contract merely refers to the concept of good cause under Art. 337 CO and not to the requirement of immediacy. The Federal Supreme Court holds that this grievance was not raised before the cantonal court and is therefore inadmissible. Moreover, the appellant had expressly admitted paragraph 14 of the claim, which described the clause as covering any unjustified immediate termination by the employer; it cannot retract that admission without having alleged and proven a different common intention, which it did not do. The interpretation of the clause adopted by the cantonal court is not arbitrary.

On the second ground, the appellant complains of a violation of Art. 337 CO and a mechanical application of the principle of immediacy. The Federal Supreme Court recalls that the employer may terminate immediately for good cause (Art. 337 paras. 1 and 2 CO), that the judge freely assesses their existence (Art. 337 para. 3 CO) taking into account the position and responsibility of the employee, and that the party intending to terminate with immediate effect must act without delay upon learning of the ground, failing which it forfeits the right. A reflection period of two to three working days is in principle sufficient, a further period being admissible where the decision falls to a body with several members or where the facts require clarification, provided that the employer took the necessary measures immediately.

In the present case, the cantonal court held that the time limit began to run on 30 June 2014, the date on which the appellant knew…