To let an employee quit his/ her job before the term of the labor contract (“LC”) expires is not always easy for an enterprise, especially in the context where the labor law of Vietnam has laid down several strict regulations to protect employees’ legitimate rights and interests. There have been many cases in which employees won judgments from the Courts against the unilateral termination of LCs conducted by their employers.
Through this article, BLawyers Vietnam would like to point out some key issues for enterprises to consider, in order to minimize the risks from the unilateral termination of LC signed with their employees and avoid “dispensable lawsuits”.
1. Seeking an agreement from the employee
The safest way for an enterprise is to reach a mutual agreement with its employee on terminating the LC. With the consent of the employee, the enterprise has almost eliminated potential legal risks.
To successfully conclude an agreement with the employee on terminating the LC, the enterprise needs to estimate the amounts to be paid to the employee in accordance with the laws and its policies. Those could equate to or exceed the wages of the employee in a few months according to the LC so as to support him/ her in looking for a new job.
The enterprise can also require the employee to keep its confidential information, trade secrets, technology secrets, or other relevant issues in the agreement above or through a separate document. That is to protect the enterprise because it will face more difficulties in keeping the confidential information when the dispute with the employee is brought to Court.
2. Causes for terminating the LC
In fact, some enterprises often overlook the causes for terminating the LCs with their employees, especially in the cases where the termination is caused by a private conflict between the enterprise’s manager and the employee.
Under the Vietnamese laws, the enterprise shall only unilaterally terminate the LC with its employee under the causes permitted by the labor law. For example, the enterprise is allowed to unilaterally terminate the LC when the employee repeatedly failed to perform the work under the terms of the LC. However, the enterprise must determine and prove the employee’s repeated failures to complete his/ her work by comparison with the specific criteria for assessing the level of work completion of the employee which is set forth in the internal rules. The enterprise shall issue these rules only after obtaining the opinion from the representative organization of a grassroots-level employees’ collective if any.
3. Procedures of the unilateral termination of the LC
After determining the cause, the enterprise shall notify the termination of the LC to the employee in advance, in particular:
- As for an indefinite-term LC: at least 45 days;
- As for a definite-term LC with the term between 12 and 36 months: at least 30 days;
- As for a definite-term LC with the term of fewer than 12 months or as for the cases where the employee has been ill or injured and is unable to work after having been treated for a long time that the law permits the enterprise to terminate the LC: at least 3 working days.
The enterprise should distinguish the unilateral termination of the LC from the dismissal of the employee. Dismissal is the highest labor disciplinary action applied to the employee breaching the enterprise’s registered internal labor rules. The dismissal will result in terminating the LC immediately upon the decision on dismissal. A procedure for dealing with dismissal is quite complicated and shall involve the opinion of the representative organization of a grassroots-level employees’ collective.
The labor law does not allow an enterprise to unilaterally terminate the LCs with certain types of employees, which requires a careful check from such enterprise.
4. Obligations of the enterprise over the termination of the LC
The enterprise shall pay all relevant amounts to the employee within 14 working days from the date of terminating the LC, including severance allowance if any. As the employee is laid off due to changes in the enterprise’s structure, technology or economic reasons, or occurrence of natural calamities, fire, enemy sabotage, infectious diseases, etc., the enterprise may prolong this payment but it shall not exceed 30 days from the date of terminating the LC. In addition, the enterprise shall also complete procedures of confirming information in the social insurance books and returning it along with other documents of the employee that the enterprise has kept to him/ her.
5. Legal consequences when the enterprise illegally conducted the unilateral termination of the LC
If the enterprise terminates the LC with the employee without a legitimate cause or fails to notify the employee punctually, the termination shall be considered illegal. The enterprise shall:
- Reinstate the employee to his/ her position under the LC signed;
- Pay the wages, social insurance, health insurance, unemployment insurance for the period during which the employee was not allowed to work and a “compensation amount” to the employee; and
- Pay the Court’s fees in case the dispute is settled at Court.
On top of that, the enterprise shall suffer from a detriment in its reputation, prestige, and ability to attract the talented as a result of the illegal unilateral termination of the LC.
Should you have any questions about the above contents, please revert to BLawyers Vietnam at firstname.lastname@example.org. We are more than happy to hear from you!
Date: 12 July 2022
Writers: My Trang & Minh Ngo
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