Vietnamese law on compensation for unlawful termination of employment contracts

Vietnamese law on compensation for unlawful termination of employment contracts. When one party in an employment relationship unilaterally terminates the employment contract unlawfully, they are responsible for compensating the other party. So, what constitutes an unlawful unilateral termination of the employment contract, and what is the specific amount of compensation?

What is unilateral termination of an employment contract?

What is an employment contract?

An employment contract is an agreement between the employer and the employee regarding the job, salary, working conditions, and the rights and obligations of both parties within the employment relationship.

An employment contract includes:

• A fixed-term employment contract, with a duration not exceeding 36 months.
• An indefinite-term employment contract.

What is unilateral termination of an employment contract?

Unilateral termination of an employment contract occurs when one party in the employment relationship unilaterally decides to end the contract without the consent of the other party.

Thus, both the employee and the employer have the right to unilaterally terminate the employment contract.

When is unilateral termination of an employment contract allowed?

Employee’s right to unilaterally terminate the employment contract

The employee has the right to unilaterally terminate the employment contract but must give prior notice to the employer within the timeframe prescribed by law. In certain specific cases, the employee has the right to unilaterally terminate the employment contract without prior notice to the employer.

Details regarding the cases where the employee must give notice and those where notice is not required when unilaterally terminating the employment contract will be discussed in the following section of this article.

Employer’s right to unilaterally terminate the employment contract

The employer has the right to unilaterally terminate the employment contract in the following cases:

• The employee frequently fails to complete the tasks outlined in the employment contract. The employer must establish regulations that clearly define the criteria for evaluating the employee’s job performance as a basis for determining whether the employee has failed to meet the job requirements. This regulation must be consulted with the employee’s representative organization at the workplace before being issued, where such an organization exists.

• The employee has been ill or injured and has undergone continuous treatment for 12 months (for employees working under indefinite-term contracts), or 6 months (for employees working under fixed-term contracts of 12 to 36 months), or for more than half of the contract term (for employees working under fixed-term contracts of less than 12 months) without recovering their working capacity.

• Due to natural disasters, fires, dangerous epidemics, enemy actions, or relocation/reduction of production or business at the request of competent state authorities, and despite all efforts to overcome the situation, the employer is still forced to reduce the workforce.

• The employee fails to return to work after the expiration of the period of suspension of the employment contract.

• The employee reaches the retirement age, unless otherwise agreed between the employer and the employee.

• The employee voluntarily leaves work without a legitimate reason for 5 or more consecutive working days.

• The employee provides false information during the recruitment process as required by the Labor Code, affecting the employer’s decision to hire the employee.

How many days’ notice is required for unilateral termination of an employment contract?

1/ How many days’ notice must an employee provide when unilaterally terminating an employment contract?

When unilaterally terminating an employment contract, the employee must notify the employer in advance as follows:
– At least 45 days for an indefinite-term employment contract.
– At least 30 days for a fixed-term employment contract of 12 to 36 months.
– At least 03 working days for a fixed-term employment contract of less than 12 months.
– For employees working in certain industries, occupations, or specific jobs, the notice period is regulated by the Government.

In the following cases, the employee is not required to give prior notice to the employer when unilaterally terminating the employment contract:
– The employee is not assigned the correct job, workplace, or working conditions as agreed, except in cases where the employer faces sudden difficulties due to natural disasters, fires, dangerous epidemics, application of preventive measures, or production/business needs that require temporary reassignment under the Labor Code.
– The employee is not paid in full or on time, except when the delay is no longer than 30 days due to force majeure, and the employer has made every effort to remedy the situation but is still unable to pay on time.
– The employee is mistreated, beaten, insulted, or subjected to other acts that affect their health, dignity, or honor by the employer; or the employee is forced into labor.
– The employee is sexually harassed at the workplace.
– A female employee who is pregnant has confirmation from a competent medical authority that continuing to work would adversely affect the fetus.
– The employee reaches retirement age as prescribed by the Labor Code, unless otherwise agreed between the parties.
– The employer provides dishonest information as required by the Labor Code, affecting the performance of the employment contract.

2/ How many days’ notice must an employer provide when unilaterally terminating an employment contract?

In the following cases, the employer has the right to unilaterally terminate the employment contract without prior notice to the employee:
– The employee fails to return to work after the expiration of the period of suspension of the employment contract.
– The employee voluntarily leaves work without a legitimate reason for 05 or more consecutive working days.

In all other cases, when the employer unilaterally terminates an employment contract, they must notify the employee in advance as follows:
– At least 45 days for an indefinite-term employment contract.
– At least 30 days for a fixed-term employment contract of 12 to 36 months.
– At least 03 working days for a fixed-term employment contract of less than 12 months.
– At least 03 working days for employees who have been ill or injured and have undergone continuous treatment for 12 months (for indefinite-term employees) or for 06 months (for employees with a fixed-term contract of 12 to 36 months) or for more than half of the contract term (for fixed-term employees of less than 12 months) without recovering their working capacity.
– For employees working in certain industries, occupations, or specific jobs, the notice period is regulated by the Government.

How is compensation determined for unlawful termination of an employment contract?

What constitutes unilateral unlawful termination of an employment contract?

Unilateral unlawful termination of an employment contract occurs when an employee or employer unilaterally terminates the contract in violation of the legal conditions for unilateral termination or fails to meet the notice period required by law (in cases where prior notice is mandatory).

Examples of unilateral unlawful termination of an employment contract:

• An employer unilaterally terminates the contract while a female employee is pregnant or on maternity leave.
• An employer unilaterally terminates the contract with an employee who has reached retirement age without giving notice.
• An employee unilaterally terminates the contract without giving prior notice and without a valid reason.

What compensation is required for unilateral unlawful termination of an employment contract?

1/ Responsibilities of the employee in cases of unilateral unlawful termination:

• The employee is not entitled to severance pay.
• The employee must compensate the employer with half a month’s salary under the employment contract.
• The employee must compensate the employer an amount equal to the salary for the days they did not give notice, as required by law.
• The employee must reimburse the employer for training costs if the employee attended training courses funded by the employer.

2/ Responsibilities of the employer in cases of unilateral unlawful termination:

When the employer unlawfully terminates an employment contract, the compensation due to the employee depends on the specific case:

Case 1. The employer reinstates the employee:

• The employer must pay the employee their salary and contribute to social insurance, health insurance, and unemployment insurance for the days the employee was not allowed to work.
• The employer must compensate the employee for the salary corresponding to the days they failed to give prior notice, if applicable.
• The employer must pay the employee an amount equal to at least two months’ salary under the employment contract.
• If the original position or job in the contract no longer exists, and the employee still wishes to continue working, both parties must agree to amend or supplement the contract.

Case 2. The employee does not wish to return to work:

• The employer must pay the amounts specified in Case 1.
• The employer must pay severance to the employee according to regulations.

Case 3. The employer does not wish to reinstate the employee, and the employee agrees:

• The employer must pay the amounts specified in Case 1.
• The employer must pay severance to the employee according to regulations.
• Additionally, the employer must pay the employee at least two extra months’ salary under the employment contract.

3/ In addition to the above compensation, the amount in some specific cases may depend on the content of the employment contract and other agreements between the employee and the employer.

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