Headlines 26/06/2019 09:54 SA

Things that enterprises need to know before early termination of employment contracts

Kim Huệ

At present, for some reason there are many enterprises usually deciding to end employment contracts with their employees prior to the agreed-upon term. However, enterprises need to pay attention to several following matters to avoid being fined or facing criminal prosecution owing to their breach of law:

1. Requirements for early termination of an employment contract

The employer may unilaterally terminate an employment contract in the following cases:

1.1 Employee frequently fails to accomplish their duties prescribed in the employment contract;

Employer is obliged to set specific criteria for assessment of performance of employees in their rules as a basis to assess whether their employee often does not fulfill their contractual obligations. The rules for assessment of employee’s performance are adopted by the employer after receipt of opinions from the intra-company labour union.

1.2 The employee who is sick; the employee working under an indefinite-term employment contract who takes 12 consecutive months’ leave to receive treatment for his/her accident; the employee working under an fixed-term employment contract who takes 6 consecutive months’ leave to receive treatment for his/her accident; the employee working under a seasonal employment contract or piecework contract that has the term of less than 12 months, has not recovered his/her work capacity yet.

If the employee's health is recovered, he/she can be considered to keep on the employment contract;

1.3 By reason of natural disasters or other force majeure events prescribed by law, despite making every effort, the employer still has to be subject to business downsizing and employment redundancy;

Force majeure events may include:

- Hostility acts or diseases;

- Relocation or narrowing of production and business facilities that occurs upon the request of competent regulatory authorities.

1.4 Employee are absent from work for a period of time specified in Article 33 in the Labor Code.

Within the maximum duration of 15 days after the permissible intermission of the employment contract ends as provided in Article 32 in the Labor Code, the employee must be present at his/her defined workplace and, in such case, the employer must allow the employee to work, except as otherwise agreed upon by both of them.

1.5 In case of any structural or technological change resulting in impacts on a great number of employees, the employer will be charged with designing and implementing the labor utilization plan prescribed in Article 46 of the Labor Code and, if the employee is compulsorily laid off because of the employer’s fail in assigning another task, then they will have to give him/her the unemployment allowance as provided in Article 49 in the Labor Code.

Structural and technological changes are defined as follows:

- Change in the organizational structure or labor restructuring;

-Change in products and product structure;

-Change in production and business processes, technologies, machinery and equipment which is in relation to the employer's scope of business and production.

1.6 In case of a great number of employees are at risk of being unemployed from economic causes, the employer will be charged with designing and implementing the labor utilization plan prescribed in Article 46 of the Labor Code and, if the employee is compulsorily laid off because of the employer’s fail in assigning another task, then they will have to give him/her the unemployment allowance as provided in Article 49 in the Labor Code.

Economic causes may include:

- Economic crisis or depression;

-Implementation of regulatory policies for restructuring of the economy or implementation of international commitments.

1.7 In case of merger, amalgamation, splitting or division of an enterprise or cooperative, the succeeding employer must be responsible to continue to use the existing number of employees and make any necessary modification of the employment contract.

If available employees are not all used, the succeeding employer will be responsible for designing and implementing the labor utilization plan in accordance with Article 46 in the Labor Code. If the employer makes the employee redundant as provided in this Article, they must give redundancy pay to the employee in accordance with Article 49 in the Labor Code.

2. Time periods during which a prior notice must be sent

- At least 45 working days with respect to indefinite-term employment contracts;

- At least 30 working days with respect to fixed-term employment contracts;

- At least 03 working days with respect to cases specified in point b of clause 1 of this Article and with respect to seasonal employment contracts or piecework contracts with the effective term of 12 months.

- In particular, if an employee is made redundant due to structural, economic changes or splitting or merger, the employing enterprise must comply with instructions given in the Decree No. 05/2015/ND-CP elaborating on the Labor Code (amended or modified by the Decree No. 148/2018/ND-CP).

3. Payment of redundancy or lay-off allowances

The employer is responsible for paying redundancy or layoff allowances referred to in Article 49 of the Labor Code to the employee who have regularly worked for at least 12 months if he/she is made redundant due to any change in the enterprise's structure or technologies or for economic reasons or due to other causes such as merger, amalgamation, splitting or division of the employing enterprise or cooperative.

In-service timelength used as a basis for calculation of redundancy or layoff allowance is total length of time during which the employee has actually worked for the employer, minus the timelength during which the employee has participated in the unemployment insurance plan in accordance with laws and the in-service timelength based on which the employer previously paid redundancy or layoff allowance (if any). It includes the followings:

- Timelength during which the employee has actually worked for the employer, including: timelength during which the employee has actually worked for the employer under the employment contract; timelength during which the employee is seconded by the employer to take training courses; timelength during which the employee is on sick or pregnancy leave in accordance with laws on social insurance; timelength during which the employee takes paid leave to receive medical treatment and recover work capacity from accidents at work or occupational diseases under law on labor safety and hygiene; weekly days-off prescribed in Article 110 and fully paid leave prescribed in Article 111, 112 and 115 and clause 1 of Article 116 in the Labor Code; timelength during which the employee takes leave for trade union activities as per law on trade unions; timelength during which the employee is on paid leave to fulfill obligations of citizenship in accordance with laws; timelength during which the employee has to stop working or leave work through no fault of the employee; timelength during which the employee is subject to temporary suspension from work under Article 129 in the Labor Code.

-Timelength during which the employee participates in the unemployment insurance plan includes the followings: Timelength during which the employer has paid unemployment insurance contributions, timelength deemed as timelength during which unemployment insurance contributions have already been paid as provided in laws on unemployment insurance, timelength during which the employer has paid an amount equivalent to the unemployment insurance contribution rate at the same time as the period of payment of salaries to employees in accordance with laws on labor and unemployment insurance;

-In-service timelength used as a basis to calculate redundancy or layoff allowance for employee is expressed in year (full 12 months); if the number of months left out is from 01 month to below 06 months, a half of working year will be added to the in-service timelength while, if the number of months left out is at least 06 months, 01 year will be added to the in-service timelength.”

Salary used as a basis to calculate redundancy or layoff allowance is the average pay agreed upon in the employment contract in 06 months before the employee is made redundant.

4. Cases where the employee is prohibited from exercising the right to unilaterally terminate employment contracts

4.1 The employee is sick or is receiving medical treatment or care after accident at work or occupational disease under the decisions of competent healthcare establishments.

4.2 The employee is taking annual, personal leave and other leave after obtaining permission from the employer.

4.3 The employer is not allowed to sack or unilaterally terminate the employment contract with the female employee for such reasons as marriage, pregnancy, maternity leave or care for infant at under 12 months of age, except when the employing person dies, is judged incapable of civil acts, missing or dead by the Court, or the employer who is not a person closes their business.

4.4 The employee takes leave covered by maternity and parental insurance benefits under law on social insurance.

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