What should employers in Vietnam note when they restructure workforce after M&A deals?

What should employers note on M&A deals

Currently, Vietnam is ranked in the group of countries with positive mergers and acquisitions (“M&A”) deals in respect of quantity and quality. The increment of M&A deals in Vietnam comes from the Western enterprises withdrew from China to avoid risks from the US-China trade war. However, workforce after M&A deals still is a big question to buyers: how they can restructure their workforce legally pursuant to the law of Vietnam?

Thus, BLawyers Vietnam’s labor lawyers shall list out some notes that employers should consider when undergoing a restructuring on workforce pursuant to the prevailing Labor Code 2012 (“LC”).

1. In what cases employer can restructure workforce?

Per the LC, there are 02 cases that an employer could consider restructuring their workforce as follows:

  • Firstly, changes in structure, technology or due to economic reasons, in which:
    1. Changes in structure, technology including: (a) changing organization structure and/or restructuring workforce; (b) changing products and/ or product structure; and (c) changing the process, technology, machinery, and equipment for production and business associated with the production and business lines of the enterprise.
    2. Economic reasons including: (a) economic crisis or recession; or (b) implementing State policies upon economic restructuring or international commitments.
  • Secondly, merger, consolidation, division, or separation of the enterprise.

When one of the above cases occurs, the employer can undergo the restructuring of workforce. However, such employer should note two issues being making labor utilization plan and ensuring obligations to employees.

Maybe, you are interested in reading: How is illegal one-sided termination of labor contracts by employers pursuant to the law of Vietnam?

2. Labor utilization plan

An employer is responsible to make and implement a labor utilization plan in the following cases:

  1. There is a change in the structure or technology which affects the employment of several employees.
  2. There is more than one employee faces the risk of unemployment or dismissal due to economic reasons.
  3. In the event of merger, consolidation, division or separation of an enterprise, if there is not enough work for the existing workforce, the new employer is responsible to make and implement a labor utilization plan.
  4. In case of transferring property use right or ownership, the preceding employer shall make a labor utilization plan.

Of note, grassroots trade union (“GTU”) must join in the process of making a labor utilization plan.

3. Obligations to employees being a retrenchment

When restructuring, the employer must consider and protect employees’ right with some main principles as follows:

  • Firstly, the employer must give priority to keep employees continuing to work. They could be retrained for working in another section, even be arranged to work on part-time basis. In the event of merger, consolidation, division or separation, the succeeding employer is responsible for continuing the employment of the existing workforce and making amendments and supplementations to the labor contracts.

Of note, the retrenchment of several employees in the change of structure, technology or due to economic reasons (Item 1 above) must have opinion of the GTU. In addition, the employer must give a notice to the local labor management authority about the change.

  • Secondly, the employer must pay job-loss allowance beside of other financial obligations to the employees involving the retrenchment.

4. Administrative sanctions for relevant violations

Employers could be subject to a fine up to VND20,000,000 for the following violation:

  1. Retrenching several employees without discussion with GTU or giving written notice to the local labor management authority in the changes in structure, technology or due to economic reasons.
  2. Not making a labor utilization plan.

If not paying or fully paying job-less allowance to employees in a retrenchment, employers could be subject to a fine up to VND40,000,000.

In conclusion, when employers restructure workforce after M&A deals, they should note some very strict regulations of LC and comply with them.

If you have any questions or comments on this article, please revert to us at consult@blawyersvn.com.

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