To terminate labor contracts in Vietnam, employers and employees must navigate a regulated process designed to uphold fairness and balance. Vietnam’s laws outline specific grounds, responsibilities, and rights that both parties must consider when ending an employment relationship to avoid potential disputes or legal repercussions.
This article will guide you through the legal steps required for lawful termination as specified in the Labor Code of 2019 and related regulations, highlighting acceptable grounds for termination, notice requirements, and the rights of employees and employers.
A clear grasp of these legal requirements can help both employers and employees maintain a fair and respectful transition when ending a working relationship.
What Does It Mean to Terminate Labor Contracts in Vietnam?
Termination of a labor contract occurs when the working relationship between an employee and an employer officially ends. This can happen due to a variety of reasons, ranging from the end of a contract term to disciplinary measures or retirement.
The Labor Code 2019 outlines 13 specific cases under Article 34 where a labor contract can be lawfully terminated. These include:
- The labor contract expires.
- The employee completes the work specified in the contract.
- The employee and employer mutually agree to terminate the contract.
- The employee is sentenced to prison without probation or has been banned from performing the work listed in the contract.
- The employee is a foreigner and their work permit expires.
- The employee dies or is declared missing or incapacitated by a court.
- The employer, if an individual, dies, or the business ceases to operate.
- The employee is dismissed for misconduct.
- The employee unilaterally terminates the contract according to regulations.
- The employer unilaterally terminates the contract according to regulations.
- The employer lays off employees due to economic reasons or company restructuring.
- The employee’s work permit expires (for foreign workers).
- The probation period is unsuccessful or one party cancels the probation agreement.
These scenarios can occur naturally as part of the employment cycle. However, each reason requires specific steps and conditions, and not all types of termination are treated equally.
Employers and employees need to understand which laws apply to their situation and ensure compliance to avoid disputes.
Legal Grounds to Terminate Labor Contracts in Vietnam
The Labor Code of 2019, particularly Article 34, outlines 13 legal grounds under which a labor contract may be terminated. These are broadly divided into cases initiated by employees, employers, or mutual agreement.
Let’s explore these scenarios:
Unilateral Termination by Employees
Employees in Vietnam have the right to unilaterally terminate their contracts under certain conditions outlined in Article 35 of the Labor Code 2019. However, they must provide advance notice based on the type of contract they have and the reason for termination:
- For indefinite-term contracts: At least 45 days’ notice.
- For fixed-term contracts (12 to 36 months): At least 30 days’ notice.
- For contracts under 12 months: At least 3 days’ notice.
For some special industries, such as aviation or oil and gas, the notice period can be up to 120 days, depending on the specific nature of the work. These regulations are stipulated in Decree No. 145/2020/NĐ-CP.
However, there are certain circumstances where employees can terminate the contract without needing to provide notice, such as:
- The employee is not assigned the work or location specified in the contract.
- The employee is not paid on time or in full.
- The employer mistreats the employee (e.g., abuse or harassment).
- The employee is subject to sexual harassment in the workplace.
- The employee is pregnant and their work adversely affects their health or that of the fetus.
- The employee reaches the age of retirement.
- The employer provides false information that affects the employee’s work.
Unilateral Termination by Employers
Employers can also terminate labor contracts unilaterally, but the law is strict about when and how this can happen. Article 36 of the Labor Code 2019 outlines the legitimate reasons an employer can terminate an employee’s contract:
- The employee is consistently underperforming despite being given the opportunity to improve.
- The employee is absent without reason for 5 consecutive days.
- The employee is sick or injured and has not been able to work for a long period:
- More than 12 consecutive months for indefinite contracts.
- More than 6 consecutive months for fixed-term contracts.
- The employer has to lay off employees after all possibilities have been exhausted in the event of a natural disaster, fire, major epidemic, relocation or downsizing requested by competent authority.
- The employee reaches retirement age.
- The employee fails to provide truthful information during the conclusion of the employment contract in accordance with Clause 2 Article 16 of this Labor Code in a manner that affects the recruitment
For these types of terminations, employers must also adhere to notice periods, similar to the rules for employees, unless the employee’s behavior warrants immediate dismissal (e.g., theft, violence, disclosure of business secrets, or serious violations of company rules).
In these cases, the employer must follow the required notice periods unless the employee’s conduct justifies immediate dismissal, such as in the case of gross misconduct.
Mutual Agreement
Both the employee and employer may mutually agree to terminate the contract at any time. This is often the smoothest and least contentious form of contract termination.
Formal Procedures for Lawful Termination
To legally terminate a labor contract, certain formal steps must be taken to ensure both parties comply with the law.
Written Notice
In most cases, the party initiating the termination must provide written notice to the other party, specifying the reasons for termination and ensuring compliance with the required notice period.
This can be done via email or written letter, and it is advisable to get acknowledgment from the other party as proof of notification.
Contract Termination Documents
Both parties should prepare and sign termination agreements or documents to ensure clarity and avoid future disputes.
- Resignation letter or termination notice, or mutual termination agreement;
- Job handover documents (if required).
- Final salary calculation, including severance and other allowances.
- Confirmation of social insurance and health insurance contributions.
Employers should also provide a copy of any final settlement or payment receipts to the employee. Keeping these records is necessary in case of future disputes or audits.
Severance Pay and Unemployment Benefits
Under Article 46 of the Labor Code of 2019, employees who have worked for 12 months or longer are entitled to severance pay. The severance pay is calculated as half a month’s salary for each year of service.
However, if the employee has been paying unemployment insurance for more than 12 months, they will receive unemployment benefits instead.
Upon termination, employees in Vietnam can access unemployment benefits as long as they meet the requirements set out by the Social Insurance Law. These benefits include financial assistance based on their contribution to social insurance, as well as support in finding a new job through vocational training programs.
To qualify for unemployment insurance, the employee must have made unemployment insurance contributions for at least 12 months over the last 24 months and register with the local labor office within three months of termination. The maximum duration for receiving unemployment benefits is 12 months.
Unlawful Termination and Consequences
Terminating a labor contract without adhering to the legal requirements outlined in the Labor Code of 2019 can lead to significant consequences for both the employer and the employee.
For example, Article 41 of the Labor Code states that if an employer unlawfully terminates a contract, they are required to:
- Rehire the employee.
- Compensate for lost wages during the period of unlawful termination.
- Pay compensation equivalent to at least 2 months of the employee’s salary.
Likewise, employees who unlawfully terminate their contract may be required to compensate the employer for damages, especially in cases of sudden resignation that cause operational disruptions.
Both parties should seek to resolve disputes amicably and, where necessary, consult with legal professionals to ensure compliance with the Labor Code 2019.
Special Considerations for Foreign Workers
Foreign employees working in Vietnam are subject to the same termination rules as local employees, but their work permits play a critical role.
If a foreign worker’s work permit expires and is not renewed, their labor contract is automatically terminated. Additionally, foreign workers who violate Vietnamese labor laws or have their work permits revoked due to legal issues may face immediate termination.
Employers are required to notify foreign workers about the status of their work permits well in advance to avoid any complications.
Employers should also ensure that foreign workers are aware of their rights under Vietnamese labor law.
Termination Disputes and Legal Recourse
Labor disputes surrounding contract termination are common in Vietnam. Employees who believe their contracts were unlawfully terminated can take legal action, as outlined in Article 187 of the Labor Code of 2019.
Dispute resolution can be done through labor mediators, labor arbitration councils, or courts. Both parties should attempt to resolve the dispute through mediation before taking it to court.
If mediation fails, the case can be escalated, and if the employee wins the case, they may be entitled to compensation, reinstatement, or both.
Expert Legal Support from Russin & Vecchi
Navigating the process to terminate labor contracts in Vietnam can be challenging for both employees and employers.
That’s where Russin & Vecchi comes in. With years of experience in labor law, we offer expert legal help to resolve disputes quickly and in line with Vietnamese law.
Whether you’re an employee fighting an unfair termination or an employer looking to avoid legal headaches, their skilled attorneys can guide you through mediation, arbitration, or court.
You can count on Russin & Vecchi to protect your rights and provide smart advice to get things sorted smoothly.
For reliable assistance, contact Russin & Vecchi today.
