What Are 5 Reasons for Termination in Liechtenstein (2026): Fair vs Unfair Grounds, Notice, Probation & Severance

Employers and HR teams operating in Liechtenstein frequently ask: what are 5 reasons for termination that will withstand legal scrutiny? The principality’s employment framework closely mirrors the Swiss Code of Obligations (Art. 319 ff. ), which Liechtenstein has substantially adopted into its own civil law, making it essential to understand both the statutory text and local practice. This guide sets out the five recognised lawful grounds for employment termination in Liechtenstein, explains how to distinguish fair from unfair dismissal, and walks through the notice periods, probation rules and severance obligations that employers must respect in 2026.

It draws on official guidance from the Liechtensteinische Landesverwaltung (LLV), the Swiss Code of Obligations as applied in Liechtenstein, and practitioner commentary from local law firms.

In brief, the five principal reasons for termination are:

• Misconduct or gross misconduct
• Capability or poor performance
• Redundancy or business-related restructuring
• Statutory restriction or illegality (e.g., loss of a required work permit)
• Some other substantial reason (SOSR) of an operational or organisational nature

Each ground carries its own evidentiary requirements and procedural steps. The sections below unpack these in detail, providing comparison tables, checklists and template language that employers can put to use immediately.

Top 5 Reasons for Termination in Liechtenstein, Legal Context for Employers

Liechtenstein employment law does not prescribe a rigid statutory list of “permitted reasons” in the way some civil-law jurisdictions do. Instead, the system recognises a general freedom to terminate, referred to as ordentliche Kündigung (ordinary termination), provided the employer observes the correct notice period and does not act on a prohibited ground. Nonetheless, case law and administrative practice have crystallised five categories that courts consistently accept as lawful and substantive reasons for ending an employment relationship. Understanding these categories is the first step toward compliant employment termination in Liechtenstein.

1. Misconduct or Gross Misconduct

Misconduct covers behaviour that breaches the employee’s contractual or legal duties, from persistent lateness and insubordination to theft, fraud, harassment or violence in the workplace. Where the misconduct is serious enough to destroy the trust necessary for the employment relationship to continue, it may also justify summary dismissal (immediate termination without notice) under the extraordinary-termination provisions mirroring Art. 337 of the Swiss Code of Obligations. Employers should conduct a prompt internal investigation, document findings in writing, and, where the misconduct is not gross, first issue a formal written warning before proceeding to terminate. Failure to investigate is a common reason terminations are later challenged as abusive.

2. Capability or Poor Performance

An employee’s sustained inability to meet the reasonable requirements of the role, whether due to lack of skill, declining productivity, or a long-term health condition that prevents performance, is a recognised ground for ordinary termination. Industry observers expect employers to demonstrate that they have set clear objectives, provided adequate training or support, and allowed a reasonable improvement period before relying on capability as the reason for dismissal. Documenting performance reviews and improvement plans is critical: without a paper trail, a court may characterise the termination as abusive under the general prohibition against terminations that are missbräuchlich (abusive), a concept drawn directly from Art. 336 of the Swiss Code of Obligations as adopted in Liechtenstein.

3. Redundancy or Business-Related Restructuring

Economic downturns, organisational restructuring, or the closure of a business unit may necessitate workforce reductions. Redundancy is widely recognised as a legitimate employer ground, provided the decision is genuine and not a pretext for targeting a specific individual. Employers should be prepared to show objective selection criteria (seniority, skill set, departmental need) and demonstrate that no suitable alternative position exists within the organisation. Where collective redundancies affect a larger workforce, early notification to the LLV’s Office of Economic Affairs may be required under Liechtenstein’s public labour-law framework.

4. Statutory Restriction or Illegality

If continuing to employ someone would cause the employer to breach a legal obligation, termination is justified. The most frequent scenario is the loss or non-renewal of a work or residence permit, a practical reality in Liechtenstein, where cross-border employment from Austria, Switzerland and Germany is common and permit quotas are tightly managed. Similarly, if a regulatory licence required for the employee’s role is revoked, continued employment may be unlawful. Employers should verify the legal position before issuing notice and retain evidence of the statutory bar (e.g., a copy of the permit refusal).

5. Some Other Substantial Reason (SOSR), Operational or Organisational Grounds

This residual category covers situations that do not fit neatly into the first four but are nonetheless serious enough to justify termination. Examples include an irretrievable breakdown of trust between the employee and management, a fundamental and permanent change to operational requirements (such as digitalisation eliminating a manual role), or the employee’s refusal of a reasonable contractual variation. Courts assess SOSR on a case-by-case basis, weighing the employer’s legitimate business interest against the employee’s interest in continued employment. The likely practical effect is that employers relying on SOSR need particularly thorough documentation to survive judicial review.

Fair-Reason Likelihood: Quick-Reference Table

Fair vs Unfair Grounds for Dismissal: Discrimination, Protected Characteristics and Procedural Fairness

Not every reason an employer might have for ending a contract will be treated as lawful. The concept of missbräuchliche Kündigung (abusive termination) is central to understanding unfair dismissal in Liechtenstein. Under the provisions adopted from Art. 336 of the Swiss Code of Obligations, a termination is abusive if it is motivated by a reason that the law specifically prohibits, even though the employer may have technically observed all notice-period requirements. The consequence of an abusive termination is not reinstatement but financial compensation, which can amount to up to six months’ salary.

Protected Characteristics Under Liechtenstein Law

Liechtenstein’s anti-discrimination framework, informed by EEA/EFTA obligations and domestic equal-treatment legislation, prohibits termination on the basis of protected characteristics including gender, race, ethnicity, religion, disability, age, sexual orientation, pregnancy and family status. The LLV’s Office of Economic Affairs oversees compliance with public labour-law requirements and provides guidance for employers on equal-treatment obligations. Terminating an employee because they exercised a legal right (e.g., filing a workplace complaint, joining a trade union, or refusing to perform an unlawful act) is likewise considered abusive.

Key examples of grounds that will typically render a termination abusive:

• Discrimination: dismissal linked to gender, nationality, religion, disability or other protected characteristic.
• Retaliation: termination in response to the employee raising a grievance, whistleblowing or asserting a statutory entitlement.
• Exercise of constitutional rights: dismissal because of political activity, union membership, or the exercise of free expression (where unrelated to the role).
• Timing abuse: serving notice solely to prevent a benefit from vesting (e.g., just before a bonus date or length-of-service threshold).

Procedural Fairness, Investigation and Right to Be Heard

Even where the substantive reason is legitimate, an employer’s failure to follow a fair procedure can render the dismissal abusive or significantly increase the compensation awarded. Early indications from Liechtenstein court practice suggest that employers who skip a proper investigation or deny the employee any opportunity to respond to the allegations face a materially higher risk of an adverse ruling. Practical steps to safeguard procedural fairness include holding a fact-finding meeting, giving the employee written notice of the allegations, allowing them to respond (ideally with a representative present), and recording all steps in writing.

Notice Periods and the Proper Employment Termination Process in Liechtenstein

The notice period in Liechtenstein is one of the most critical compliance elements in any termination. The statutory minimum notice periods mirror those in the Swiss Code of Obligations (Art. 335c) and increase with the employee’s length of service. Contractual and collective agreements may extend, but typically cannot reduce, these minimums.

Statutory Notice Period Table

Source: Swiss Code of Obligations, Art. 335b–335c, as adopted in Liechtenstein; confirmed by Grant Thornton and LLV guidance.

Individual employment contracts or applicable collective bargaining agreements frequently stipulate longer notice periods, and these contractual terms take precedence over the statutory minimum. Employers should always check the specific contract before issuing a written notice of termination in Liechtenstein.

How to Calculate the Notice Period and Last Day of Employment

Outside of probation, notice is typically effective only at the end of a calendar month. This means that if an employer serves notice on 15 March, the one-month notice period does not expire on 15 April; instead, the employment relationship continues until 30 April. Miscalculating the effective date is a common and costly error. The practical employer action is to count the full notice period forward from the date of delivery and then round forward to the last day of the relevant calendar month.

Written notice termination in Liechtenstein does not strictly require a specific statutory form, but best practice, strongly recommended by local practitioners, is to deliver a signed, dated letter clearly stating the termination date. Below is a sample template:

Sample written notice (template):

[Company letterhead]

[Date]

Dear [Employee name],

We hereby give notice of termination of your employment contract dated [date], effective [last day of employment, calculated per statutory/contractual notice period].

During the notice period, you are expected to [continue working / you are released from duty with immediate effect, with full pay]. Outstanding holiday entitlement of [X] days will be [taken during the notice period / paid out].

We will prepare your employment certificate (Arbeitszeugnis) and ensure final-pay settlement by [date].

Yours sincerely,
[Authorised signatory]

When Notice Is Blocked, Protected Periods

Liechtenstein law recognises several blocked periods (Sperrfristen) during which an employer may not serve notice of ordinary termination. If notice is given during a blocked period, it is void and must be re-issued after the period ends. The principal blocked periods, derived from Art. 336c of the Swiss Code of Obligations as adopted, include:

• Illness or accident: 30 days during the first year of service, 90 days from the second through fifth year, and 180 days from the sixth year onward.
• Pregnancy and maternity: the entire pregnancy plus 16 weeks after birth.
• Military or civil service: the period of service plus four weeks before and after.
• Participation in official emergency or humanitarian aid abroad: for the duration of the assignment (up to statutory limits).

Notice served during a blocked period does not merely delay termination, it is treated as having no legal effect. Employers must monitor these periods carefully and, where illness or maternity intervenes after notice has been properly served, be aware that the notice period is typically suspended and resumes only once the blocked period ends.

Probation, Summary Dismissal and Immediate Termination in Liechtenstein

Probation Period Rules

The probation period in Liechtenstein defaults to one month unless the employment contract specifies otherwise. Contracts may extend the probation period to a maximum of three months. During probation, either party may terminate the relationship on seven days’ notice, with the termination effective on any day, the month-end rule does not apply. Employers should note that blocked periods (illness, pregnancy) still apply during probation, meaning notice served while the employee is incapacitated may be void. The flexibility of the probation period makes it a valuable tool for assessing suitability, but it must be expressly stated or confirmed in the employment contract to apply beyond the default one month.

Summary Dismissal: When Employers Can Dismiss Without Notice

Summary dismissal in Liechtenstein, fristlose Kündigung, is the most drastic step an employer can take and is reserved for situations where the employee’s conduct makes continued employment, even for the duration of the notice period, objectively intolerable. The standard mirrors Art. 337 of the Swiss Code of Obligations: there must be a “good cause” (wichtiger Grund) that has destroyed the foundation of trust in the employment relationship.

Examples that may justify summary dismissal include:

• Theft, embezzlement or serious financial dishonesty
• Violent behaviour or credible threats of violence in the workplace
• Gross insubordination after a clear and documented instruction
• Disclosure of trade secrets to a competitor
• Working for a direct competitor in breach of an exclusivity obligation

Employers must act promptly, industry observers expect that delays of more than a few working days between discovering the misconduct and issuing summary dismissal will be interpreted as the employer having tolerated the behaviour, potentially invalidating the dismissal. An evidence-preservation checklist for employers considering summary dismissal should include:

• Document the facts: date, time, witnesses, physical or digital evidence.
• Give the employee a brief opportunity to respond (except where safety concerns make this impracticable).
• Seek legal advice before issuing notice, an unsuccessful summary dismissal exposes the employer to compensation claims.
• Deliver written notice immediately, stating that termination is effective forthwith and referencing the conduct in general terms.
• Secure company property and IT access as part of the offboarding process.

Severance Pay, Damages and Remedies for Unfair Dismissal in Liechtenstein

A common misconception is that severance pay is automatically owed on termination. Under Liechtenstein law, there is generally no statutory entitlement to severance pay upon ordinary termination. This aligns with the Swiss position and is confirmed by multiple employer guides and local practitioners. However, severance obligations may arise through other channels, and understanding these is essential.

When Severance Arises

Severance pay in Liechtenstein typically becomes payable in three scenarios:

• Contractual provision: the individual employment contract includes a severance clause.
• Collective bargaining agreement: a sector-level or company-level collective agreement stipulates severance benefits.
• Long-service statutory exception: in limited circumstances, notably for older employees with long tenure, a form of statutory compensation (analogous to the Swiss Abgangsentschädigung under Art. 339b–339d of the Code of Obligations) may apply. This typically requires at least 20 years of service and the employee being aged 50 or older at termination.

Compensation for Abusive (Unfair) Dismissal

Where a court determines that the termination was abusive (missbräuchlich), the remedy is compensation, not reinstatement. The maximum compensation is capped at six months’ salary under the provisions adopted from Art. 336a of the Swiss Code of Obligations. The precise amount is at the court’s discretion and considers the severity of the abuse, the employee’s length of service, and the employer’s behaviour during and after the termination process. The employee must object to the termination in writing before the end of the notice period and file a claim within 180 days of the employment relationship ending.

Practical Settlement Negotiation Tips

In practice, many disputed terminations in Liechtenstein are resolved through negotiated settlements rather than court proceedings. Employers should consider the following when entering settlement discussions:

• Offer a settlement amount that reflects realistic litigation risk (typically one to four months’ salary for borderline cases).
• Include a mutual release of claims and, where relevant, a confidentiality clause.
• Agree on the wording of the employment certificate (Arbeitszeugnis), which is a significant point for employees in the DACH region.
• Ensure the settlement agreement is in writing and, ideally, reviewed by both parties’ legal advisors.

Employer Checklist: Steps Before, During and After Termination

A structured checklist reduces risk and ensures that employment termination in Liechtenstein is both lawful and defensible. The following steps represent best practice:

• Legal check: review the employment contract, any applicable collective agreement, and statutory requirements (notice period, blocked periods, probation status).
• Conduct an investigation: for misconduct or capability cases, document the facts, interview witnesses, and give the employee an opportunity to be heard.
• Prepare written notice: use a clear template (see sample above), state the termination date, and deliver by hand or registered post.
• Calculate final pay: include salary through the end of the notice period, pro-rata holiday pay, any outstanding bonuses, and overtime owed.
• Prepare the employment certificate: Liechtenstein law requires employers to issue an Arbeitszeugnis, a detailed reference covering the nature and duration of the work and the employee’s conduct and performance.
• Avoid discriminatory language: in all written communications and meeting notes, reference only the legitimate business reason; never reference protected characteristics.
• Notify authorities if required: for collective redundancies or where the employee holds a specific permit, notify the LLV’s Office of Economic Affairs.
• Retain documentation: keep all termination-related records (investigation notes, correspondence, the signed notice letter, final pay calculation) for a minimum of five years.

Red flags for HR, situations requiring immediate legal advice:

• The employee is pregnant, on maternity leave, or currently ill (blocked-period risk).
• The termination follows shortly after the employee raised a formal complaint or whistleblew.
• Investigation records are missing, incomplete, or contradictory.
• The proposed reason falls outside the five recognised categories discussed above.
• A summary dismissal is being considered but the employer has known about the misconduct for more than a few days.

Conclusion: What Are 5 Reasons for Termination in Liechtenstein and What Employers Must Remember

To summarise, the five reasons for termination that Liechtenstein courts and practitioners consistently recognise are misconduct, capability, redundancy, statutory restriction, and some other substantial reason. The biggest employer risks lie in inadequate documentation, termination during a blocked period, and any appearance of discriminatory or retaliatory motive. By following the statutory notice requirements, maintaining a robust paper trail, and seeking specialist legal advice in borderline cases, employers can manage workforce changes with confidence and compliance in 2026.

Sources

1. Liechtensteinische Landesverwaltung (LLV), Public Labour Law
2. Swiss Code of Obligations, Employment Termination Provisions (Art. 319 ff.)
3. Grant Thornton Switzerland / Liechtenstein, Termination of Individual Employment Contracts
4. Lawyers Liechtenstein, Dismissal of Employees in Liechtenstein
5. GlobalExpansion, Liechtenstein Global Employer Guide
6. Remoly, Liechtenstein Employment Guide
7. Slasify, Liechtenstein Employment Guide