Is it necessary to re-sign the labor contract when the company is equitized?

Mr. Hung inquired whether the company's requirement is conformable. If he does not agree to sign a new labor contract, can the company unilaterally terminate the labor contract with him?

Lawyer Tran Van Toan, Khanh Hung Law Office - Hanoi Bar Association addresses this issue as follows:

Section 4, Article 196 of the 2014 Enterprise Law stipulates that when converting a State-owned enterprise or a limited liability company to a joint-stock company, the converted company naturally inherits all legal rights and interests and is responsible for debts, including tax debts, labor contracts, and other obligations of the converted company.

Article 35 of the 2012 Labor Code governs the amendment and supplementation of labor contracts as follows: During the execution of a labor contract, if either party requests an amendment or supplementation of the labor contract's content, that party must notify the other party at least 3 working days in advance of the content to be amended or supplemented.

If the two parties reach an agreement, the amendment, or supplementation of the labor contract is carried out by signing an annex to the labor contract or entering into a new labor contract.

If the two parties do not agree on amending or supplementing the labor contract's content, the previously concluded labor contract continues to be executed.

Regarding Mr. Huynh Le Hung's question, based on the provisions of Section 4, Article 196 of the 2014 Enterprise Law, the converted joint-stock company must continue to fulfill the labor contract signed with the employee by the previously converted limited liability company, until the two parties (the company and the employee) agree to amend or supplement it; or agree to terminate the labor contract; or the labor contract expires.

Furthermore, according to Article 35 of the 2012 Labor Code, when the employer proposes any changes or additions to the labor contract, they must inform the employee at least 3 days in advance.

If the two parties agree to amend or supplement the labor contract's content, they can proceed by signing an annex to the labor contract without canceling the previously signed labor contract with the State-owned one-member limited liability company (now the joint-stock company inherits the rights, obligations, and responsibilities).

The two parties can also agree to terminate the old labor contract and enter into a new labor contract with the amended or supplemented content.

If the converted joint-stock company (where Mr. Hung is working) forces the employee to cancel the labor contract, which the company naturally inherits from the previously converted State-owned one-member limited liability company, to sign a new labor contract with amended or supplemented content, it is against the regulations.

A new labor contract can only be signed when the previously concluded labor contract is terminated in case of contract expiration; the completion of the work as per the contract; or both parties agree to terminate the signed contract.

If Mr. Hung does not agree on amending or supplementing the previously concluded indefinite-term labor contract, the company and Mr. Hung must continue to execute the previously concluded labor contract.

If the company unilaterally terminates the concluded labor contract with Mr. Hung because he does not agree to a new labor contract with amended content, it is against the law.

Lawyer Tran Van Toan

Khanh Hung Law Office, Hanoi Bar Association

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