employment and labor ARTICLES

Types Of Labor Contract And Enterprise Universal Termination Of Labor Contract Under New Provisions

Types Of Labor Contract And Enterprise Universal Termination Of Labor Contract Under New Provisions

“The Labor Code 2019 (“LC 2019”) was promulgated and has been in enforcement for a long time. In the process of applying the new regulations, many enterprises have encountered some difficulties in determining the duration of their labor contract (“LCO”) and building a mechanism to unilaterally terminate LCO according to these new regulations. Understanding and properly applying the spirit of the law to these two issues is crucial as it directly affects the decision of the enterprise when there is a need to extend or terminate the LCO. In this article, we will show the changes brought under the new regulations and analyze some of the impacts of these regulations on labor relations from a legal perspective.”

  1. Types of labor contract

The LC 2019 currently records only 02 types of LCO; the first is an indefinite-term LCO, which is a contract in which the two parties do not specify the term and the time of termination of the contract’s validity. The second is a type of definite-term LCO, which is understood as a contract in which the two parties determine the term and time of termination of the contract within a period not exceeding 36 months from the effective date of the contract.

Thus, the LC 2019 has abolished the regulations seasonal LCO or jobs with a term period of less than 12 months. However, there are only two types of definite contracts- one with a term period of less than 36 months, and the other, which doesn’t determine the deadline. Accordingly, employees and companies can sign contracts either with a term period of less than 36 months or with indefinite term. This provision also enables an enterprise to sign an LCO with a duration of less than 12 months with an employee and such LCO is still considered a definite-term LCO, regardless of the nature of the work.

In case there is a need to sign a short-term contract, the parties can still sign a contract normally. However, the LC 2019 also stipulates that once entered into a new contract, upon the expiration of such contract , the parties can only sign one more contract, which is a definite-term contract. Post this term, if the employee continues to work, they must sign an indefinite term LCO. As a result, the Company can only sign a fixed-term LCO with an employee for a maximum of 02 times, regardless of how short the term period of the LCO is. Later, if the Company wants to continue the LCO, the Company must sign an indefinite term LCO with its employee(s).

  1. Cases where the employer is entitled to unilaterally terminate the LCO

  • The employee regularly fails to complete the work under the LCO.
  • An employee suffering from an illness or an accident has received treatment for 12 consecutive months while working under an indefinite term LCO or has received treatment for 6 consecutive months while working under an definite term LCO ranging from 12 months to 36 months or while more than half of the term of the LCO with a term period of less than 12 months is complete but the he/she hasn’t recovered to ordinary working capacity .
  • Due to natural disasters, fires, dangerous epidemics, enemy sabotage, relocation, downsizing of production and business at the request of competent state agencies, or when the employer has sought all remedies but is still forced to reduce the workplace.
  • The employee is not present at the workplace after 15 days from the expiration of the period of temporary suspension of the LCO as prescribed.
  • Employees reach the retirement age as prescribed in Article 169 of the LC 2019, unless otherwise agreed.
  • The employee voluntarily quits his job without a valid reason for 05 consecutive working days or more.
  • Employees provides dishonest information as prescribed when entering into LCO, affecting the recruitment of employees.

Thus, the LC 2019 has added two more cases- where the employee voluntarily quits his job without a valid reason for 05 consecutive working days or more and the employee provides dishonest information as prescribed when entering into LCO, affecting the recruitment of employees. The addition of this regulation aims to balance the interests between the employer and the employee. The introduction of the regulation that the enterprise can unilaterally quit when the employee voluntarily quits for 5 consecutive days has given the enterprise the right to act unilaterally and without having to go through the disciplinary process in the form of dismissal. This helps in avoiding time loss as well as limiting shortcomings in the disciplinary process. Note that handling dismissal as a disciplinary proceeding applies when the Employee voluntarily quits for 5 consecutive working days.

In addition, a frequent situation that makes many businesses confused is when in the process of working, enterprises discover that the information provided by employees when applying for jobs is not true such as: information about qualifications, previous working history. The old labor code did not record a mechanism to handle this problem and this caused many difficulties for businesses. With the new regulations in place, businesses can these cases.

The new Labor Code has also specifically noted in the unilateral clause whereby the enterprise should note that in order to unilaterally terminate the LCO for the reason that the employee regularly does not complete the work, the internal Enterprises need to develop criteria to evaluate the corresponding job completion level for each position to serve as a basis for determining how ‘not completing the work/ ‘not completing the work’ should be understood.

These are new points of the LC 2019 that affect enterprises in the process of labor management. Thus, by carefully complying with these regulations, enterprises can avoid complaints and lawsuits related to labor as well as other types of disputes except for the indemnification obligation.

Time of writing: 31 May 2021

The article is based on the current law at the time of recording as above and may no longer be relevant at the time readers access this article due to changes in applicable law and specific cases that the reader wants to apply. Therefore, the article is for reference only.

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