According to Article 13 of the Labor Code 2019 (hereinafter referred to as the Labor Code), a labor contract is an agreement between an employee and an employer on paid employment, wages, working conditions, rights and obligations of each party in labor relations. If the above agreement is not in accordance with the law, it may result in partial or complete invalidity. Therefore, businesses and employees need to review the agreements signed to ensure their legal rights.
1. Cases of invalid labor contracts
Pursuant to Article 49 of the Labor Code, the labor contract may be partially or completely invalid. It stipulates:
The labor contract is completely invalid in one of the following cases:
- The entire content of the labor contract violates the law. This implies that all the provisions in the above labor contract are not in accordance with the law.
- The person entering into the labor contract is not competent or violates the principles of entering into the labor contract specified in Clause 1, Article 15 of the Labor Code;
- For example, a person who is not authorized by the legal representative of the enterprise but enters into a labor contract with the employee will be considered as not competent.
- The work specified in the labor contract is a job prohibited by law.
- For example, Company A signed a labor contract with Mr. B, which stipulates that Mr. B’s main job is debt collection service – one of the industries and trades banned from business investment under Article 6 of the Law on Investment 2020.
- The labor contract is partially invalid for each part whose content violates the law but does not affect the rest of the contract.
- For example, in case the labor contract has an agreement that a female employee is not allowed to become pregnant during the contract, the labor contract is considered partially invalid, specifically invalidated by the clause itself (the clause prohibiting female employees from becoming pregnant). Other provisions remain legally enforceable.
2. Authority to declare the labor contract invalid
Enterprises and employees note that only the People’s Court has the right to declare the labor contract invalid. This is also a difference between the current Labor Code and the old Labor Code of 2012, where the current Labor Code has removed from the former Labor Code an entity which had the authority to declare a labor contract invalid, namely the Labor Inspector.
The court where the labor contract is entered into or implemented has the authority to settle the request to declare the labor contract invalid based on the Civil Procedure Code 2015.
3. How to proceed in case of invalidity of the labor contract
The handling of invalid labor contracts is prescribed by Decree No. 145/2020/ND-CP as follows:
- When a labor contract is partially invalidated, the enterprise and the employee shall amend and supplement the part of the labor contract which is declared invalid;
- When a labor contract is declared invalid in its entirety because the signatory is not competent or violates the principles of entering into a labor contract, the enterprise and the employee shall re-sign the labor contract in accordance with law;
- When a labor contract is declared invalid in its entirety because the entire content of the labor contract violates the law or the work described in the labor contract is a job prohibited by law, the enterprise and the employee shall enter into a new labor contract in accordance with law.
With the above cases, if the two parties still cannot agree on amending and supplementing the contents which have been declared invalid, in the case of partial invalidation or failure to re-sign the labor contract or enter into a new labor contract, in the case of being declared completely invalid, the labor contract may be terminated. Enterprises and employees settle the rights, obligations and interests of the two parties, severance allowance according to the provisions of law.
Other issues related to the handling of invalid labor contracts fall under the jurisdiction of the Court in accordance with the Civil Procedure Code.
In fact, the labor contract is declared invalid in part or in whole is not a rare case. Normally, that labor contract is only canceled in cases where it cannot be remedied or repaired, but in cases that can be remedied, the law often allows the parties to revise the labor contract. Therefore, enterprises and employees need to carefully review the signed agreements to ensure their legal rights, and at the same time minimize the occurrence of disputes between the parties.
