Vietnam: How do manufacturing enterprises lay off employees in case of changes in structure, technology or changes due to economic reasons?

A manufacturing enterprise in Ho Chi Minh City (the “Employer”) has approached us regarding this matter. Due to the decline in many export orders, the employer wants to consider the process of laying off employees in accordance with the current law.

Accordingly, BLawyers Vietnam  pointed out 04 issues for the Employer to consider:

structure

1. Does the prevailing law allow the Employer to lay off employees?

The answer is yes. This is an option to exercise the Employer’s right to unilaterally terminate the labor contract (the “LC”). However, the Employer must strictly comply with the Labor Code 2019 (the “Labor Code”) regarding the reason for termination and the implementation process.

2. What is the case when there are changes in structure, technology or changes due to economic reasons that the Employer is allowed to lay off employees?

The Labor Code stipulates cases that are considered structural and technological changes as follows:

  • Changing organizational structure, personnel rearrangement;
  • Changing in processes, technology, and equipment associated with the Employer’s business lines; or
  • Changing in products or product structure.

The Labor Code stipulates cases that are considered economic reasons changes as follows:

  • Economic crisis or economic depression; or
  • Changes in law and state policies upon restructuring the economy or implementing international commitments.

3. What are the obligations of the Employer in the case of changes in structure, and technology?

In case of changes in structure or technology affect the employment of a large number of employees, the Employer shall develop and implement a labor utilization plan. In case of new vacancies, priority shall be given to retraining of the existing employees for continued employment.

In case the Employer is unable to create and provide employment and must resort to dismissing employees, the Employer shall pay them redundancy.

The dismissal of the report for this option is only conducted after consulting with the executive committee of the grassroots trade union and giving prior notice of 30 days to the People’s Committee of the province and the employees.

Regarding the labor utilization plan, the Employer must ensure the following contents:

  • The names and number of employees to be retained, employees to be retrained for further employment, and employees to be working on part-time basis;
  • The names and number of employees to retire;
  • The names and number of employees whose employment contracts have to be terminated;
  • Rights and obligations of the Employer, employee and relevant parties regarding the implementation of the labor utilization plan; and
  • The measure and financial sources to implement the plan.

4. What practical issues should the Employer pay special attention to?

There are 03 issues that the Employer should pay attention to:

  1. In addition to the Labor Code, there has been no other document guiding the employment plan in Item 3 above, and the content of the Labor Code is quite simple about the steps to be taken. Thus, there will be a hidden risk that the Employer does not fully ensure the rights of the employees regarding this lay off employees plan (perhaps according to the assessment of the authorities), leading to this plan is not in accordance with the law.
  2. Employees from different departments or with different qualifications need a clear training plan. If the Employer lay off an employee, it must show why it is not continuing to employ this employee after training.
  3. Even though the Employer only lay off an employee, the Employer still must develop the labor utilization plan in accordance with the law.

Of note, the mentioned-above information is for reference only for a specific case, not generally applicable to all cases with like information.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. We would love to hear from you.

Date: 24 February 2023

Writers: Tuyen Pham & Minh Ngo

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