Except for cases where the labor contract is automatically terminated such as the expiration of the contract period, the company’s operation termination, etc., the labor contract can also be terminated due to the employee’s dismissal or by one of the parties unilaterally terminating the contract. This article will summarize 7 common mistakes that enterprises often make when deciding to terminate their labor contracts, thereby helping enterprises to legally terminate their labor relations.

1. Not engaging in a labor use plan

Enterprises, when dismissing employees because of changes in structure, technology, or economic reasons that put many employees at risk of losing their jobs, have the responsibility to develop and implement a labor use plan in accordance with the law. If the enterprise is unable to continue employing employees, they will be dismissed; in case there is a new job, priority shall be given to retraining employees to continue employing them.

In case of merger, consolidation, division or separation; sale, lease, change in the type of business; when transferring ownership or right to use assets of enterprises or cooperatives, which affects the employment of many employees, the employer must make a labor use plan. The current employer and the next employer are responsible for implementing the approved labor use plan.

2. Violation of the notice period

Enterprises may only terminate labor contracts when changing organizing structure, technology, or for economic reasons after consulting with the employee representative organization at the grassroots level and notifying the Department of Labor, War Invalids, and Social Affairs and the employees 30 days in advance.

When unilaterally terminating the labor contract, the enterprise should notify the employee in advance:

  • At least 45 days for an indefinite-term labor contract;
  • At least 30 days for labor contracts with a definite term from 12 months to 36 months;
  • At least 03 working days for a definite-term labor contract with a term of fewer than 12 months and for an employee suffering from an illness or an accident who has been treated for at least 6 consecutive months but has not yet recovered in accordance with the law.

Enterprises are often confused about the case of division of management rights between the parent company and the subsidiary company with the division or separation of the enterprise; consolidation, merger of parts of the company with consolidation, the merger of enterprises. Please note that the division, separation, consolidation, and merger of enterprises is carried out in accordance with the Law on Enterprises and that the current employer, the next employer is responsible for implementing the approved labor use plan.

In case the enterprise unilaterally terminates the contract because the employee regularly fails to complete the work according to the labor contract, the enterprise needs to make criteria for assessing the level of work completed in its regulations and must consult with the representative organization of employees at the grassroots level before promulgating it. Accordingly, enterprises cannot base their decision on labor results that do not meet the expectations of enterprises to terminate labor contracts.

4. No participation of the representative organization of employees at the grassroots level

An employee representative organization at the grassroots level is an organization established voluntarily by employees for the purpose of protecting the legitimate rights and interests of employees in labor relations through collective bargaining or other forms as prescribed by labor law. Enterprises should note that in some cases, to terminate an employee’s contract, the opinion of the employee representative organization at the grassroots level is required.

At the same time, the handling of labor discipline must involve the participation of the employee’s representative organization at the grassroots level (usually the Executive Committee of the grassroots trade union) to meet the procedures as prescribed by law. Currently, businesses often ignore this factor, leading to legal risks when terminating labor contracts.

5. Severance allowance and redundancy allowance

Enterprises must pay severance allowance or redundancy allowance to employees if they meet the conditions to receive these payments, specifically including the amount of allowance, calculation time, and the salary to calculate allowance.

6. Time limit for taking disciplinary measures at work

The time limit for taking labor disciplinary measures is 6 months from the date of the violation. In case the violation is directly related to finance, property, disclosure of technology secrets, or business secrets of the enterprise, the time limit is 12 months. In some cases, it can be extended but not more than 60 days from the end of the time limit as prescribed by law. The enterprise must issue a decision on handling labor discipline within the time limit mentioned above.

7. The person having the competence to take disciplinary dismissal

The person having the competence to sign the dismissal decision is the person who has the competence to enter into a labor contract on the employer’s side or the person specified in the Internal labor regulations. The person having the competence to enter into a contract is the legal representative of the enterprise or his authorized representative in case this person is absent and must have written authorization.

The article is based on laws applicable at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable laws and the specific cases that the reader may wish to apply may have changed. Therefore, the article is for referencing only.


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