Judgment No. 615/2018/LD-PT dated june 21, 2018 on dispute over unilateral termination of labour contract

THE PEOPLE’S COURT OF HO CHI MINH CITY

JUDGMENT NO. 615/2018/LD-PT DATED JUNE 21, 2018 ON DISPUTE OVER UNILATERAL TERMINATION OF LABOUR CONTRACT

Because the first-instance judgment No. 1405/2017/LĐ-ST dated August 01, 2017 of the People’s Court of District 1, Ho Chi Minh City, was appealed against, on June 21, 2018, the appellate trial was conducted at the courtroom of the People's Court of Ho Chi Minh City to hear in the public the handled case No. 58/2017/TLPT-LD dated October 02, 2017 regarding the “Dispute over unilateral termination of labour contract” according to the Decision to bring the case to the appellate trial No. 2540/2018/QD-PT dated June 05, 2018, between the following litigants:  

- Plaintiff:  Mr. A, born in 1980

Address: D Street, P Ward, Q District, Ho Chi Minh City.

- Defendant: Company B.

Headquarters: No. 07-06, 7th Floor, Centro Mall, 8, Jalan Batu Tiga Lama, 41300 Klang, Selangor, Malaysia.

Representative office of Company B in Ho Chi Minh City.

Address: D1 Street, P1 Ward, Q1 District, Ho Chi Minh City.

Authorized representative: Mr. C, born in 1992

Address: D2 Street, P2 Ward, Q2 District, Ho Chi Minh City (According to the Power of attorney dated July 29, 2016 bearing the consulate legalization of the Embassy of the Socialist Republic of Vietnam in Malaysia on August 01, 2016).

Person defending legitimate rights and interests of the defendant:  Lawyer D, working at Y Luat Co., Ltd., a member of Ho Chi Minh City Bar Association.

- Appellant: Mr. A - the plantiff.

CONTENTS OF THE CASE

According to the petition dated June 06, 2016, written statements and testimonies given at the court of first instance, Mr. A, the plaintiff, stated:

Mr. A has worked on probation at the Representative office of Company B in Ho Chi Minh City (hereinafter referred to as “Representative office”) from May, 2015. Until July 27, 2015, he and Chief Representative, Mrs. E, have entered into the Labour Contract for a fixed period of 01 year up to July 27, 2016. Under this contract, he worked as a Sales Executive at the Representative office with a basic salary of VND 14,000,000/month (Fourteen million dongs).

On November 20, 2015, he received a Notice in English language, bearing the signature of a person who is not the Chief Representative and the seal other than the one of the Representative office, notifying the termination of his labour contract because of his failure to perform obligations.   The Company has paid him salary of November (up to November 20, 2015) and an additional month up to December 20, 2015 in compensation for the Company’s termination of labour contract signed with him. He has received total amount of VND 20,592,258 via his bank account on November 27, 2015. He disagreed with this Notice and he still came to work at the Representative office on November 23, 2015 but he was prevented from entering the Representative office by the security guard of the building M as requested by the Company.  

The Company has sent three (03) warning notices to his email on October 09, 2015, October 29, 2015 and November 09, 2015 for the purpose of warning him for his failure to fulfill job duties but he thought that these notices was given as pretexts for the notice of termination of labour contract dated November 20, 2015 and he has also replied to these warning notices.  The Company has itself set sales quotas for employees working at its Representative office as the basis for sacking employees who fail to achieve the set sales quotas. No regulations or agreements that were made with employees and accepted by the law of Vietnam were employed when setting these sales quotas as well as the Company did not reach any agreement with employees on setting these sales quotas. Thus setting of these sales quotas is unlawful and breaks the License to establish the Representative office.  The labour contract signed between Mrs. E – Chief Representative and him does not include any provisions to evaluate whether the employee completes or fails to perform his obligations.  Mr. A believed that the Notice of termination of labour contract dated November 20, 2015 was made unlawfully and ultra vires because it does not bear the signature of the Chief Representative and thus the Company’s acts of unilaterally terminating the labour contract with the reason that he fails to fulfill obligations and preventing him from working at the Representative office are unlawful. For these reasons, he filed a petition requesting the Court to force the defendant to invalidate the Notice of termination of labour contract dated November 20, 2015, pay him an amount of VND 143,150,000 (One hundred forty three million one hundred fifty thousand) as compensation, including an amount of VND 115,150,000 as the salary for the period from November 20, 2015 to July 27, 2016 (08 months 07 days) during which he was prevented by the Company from working, and the salary of two months as VND 28,000,000, make additional contributions of social insurance, health insurance and unemployment insurance for him as regulated and close his social insurance book at July 27, 2016.

On August 29, 2016, Mr. A filed a petition and at the first-instance trial, he still kept his statements unchanged and withdrew the request to force the Company to continue the employment with him.  Mr. A did not file the petition against the Company’s dismissal decision dated December 20, 2015 because he thought that this Decision has been issued after the Notice dated November 20, 2015 and thus it is invalid.  Because the Company’s acts of issuing the Notice dated November 20, 2015 and preventing him from working at the Representative office are unlawful and infringe on his legitimate rights and benefits, he still keeps his requests specified in the petition unchanged.

Mr. C, the authorized representative of the defendant, stated:

Company B (also called as “Company” for short) is duly established, has its headquarters located in Malaysia and has established a Representative office in Ho Chi Minh City (also called as "Representative office") according to the License No. 41-000466 initially issued by Ho Chi Minh City Department of Industry and Trade in 2004 with the 8^th modification made in 2015. Mr. A has worked at the Representative Office from May, 2015. Until July 27, 2015, the Chief Representative, Mrs. E, has acted on behalf of the Company to conclude the labour contract with Mr. A for a fixed period of 01 year. According to the signed labour contract, Mr. A has worked as a sales executive and enjoyed a basic salary of VND 14,000,000/month. According to the labour contract, Mr. A must take charge of sales promotion activities, achieve sales targets and implement assigned product promotion plans, etc. In the position of a sales executive, since starting employment with the Company, Mr. A has been monthly and quarterly notified and assigned sales quotas based on the Company’s business objectives in 2015, and team and individual gross margins (GM) and sales bonus plans have been announced to all managers and sales executives.  The monthly sales quota of Mr. A is USD 2,300. In order to achieve this sales quota, Mr. A must find, contact and introduce the company's products to clients, and facilitate the Company in conclusion of contracts with clients. However, during his employment at the Representative office, Mr. A did not achieve the job performance according to performance evaluation standards adopted by the Company.  The Representative office has send warning notices specifying the set GM as USD 2,300 and the achieved GM of Mr. A to Mr. A on October 09, 2015, October 29, 2015 and November 09, 2015. Although Mr. A has replied to such warning notices, he still made no efforts to achieve the assigned sales quota.

On November 20, 2015, the Company has sent the Notice of termination of labour contract signed with Mr. A for the assignment at the Representative office because of Mr. A's failure to achieve the required job performance with certification of Mr. G, who is the Chief Representative in replacement of Mrs. E, and Mr. K who is the legal representative of the Company.  According to the Notice, Mr. A must not work for the prescribed period of 30 days before terminating the labour contract from the date of notification to November 20, 2015 but was fully paid by the Company, and concurrently the Company also paid him the salary of an additional month up to December 20, 2015.

On November 23, 2015, Mr. A still came to work at the Representative office, disturbed the Representative office and removed all data on his table company, thus the Company requested the building security guard to take him out.

On November 25, 2015, the Company has provided Mr. A with a summary of salaries of November and December up to December 20, 2015, deducted 10.5% of social insurance contribution payable by Mr. A and transferred the remaining amount of VND 20,592,258 to Mr. A's account on November 27, 2015.

On December 20, 2015, the Representative office has issued the Decision on termination of labour contract signed with Mr. A as of December 20, 2015 and notified Mr. A but he refused to contact the Representative office for receiving this decision.

On December 21, 2015, the Representative office has sent a Notification of changes in its personnel to Ho Chi Minh City Department of Industry and Trade.  The Company has carried out procedures for closing the social insurance book of Mr. A until December, 2015.

For these reasons, the Notice dated November 20, 2015 on termination of labour contract signed with Mr. A has been issued intra vires and in accordance with the regulation on the time limit of 30 days of prior notification of labour contract set forth in Point b Clause 2 Article 38 of the Labour Code.  The Company has unilaterally terminated the labour contract with Mr. A because he failed to perform job duties as prescribed in Point a Clause 1 Article 38 of the Labour Code and the Company has issued warning notices.  He also said that Mr. A’s statements that the signed labour contract provides no provisions on job performance evaluation and the Company's acts of terminating the labour contract with him on this basis is unlawful are not true because, according to the nature of work of a sales executive, it is sure that the Company has assigned specific sales quota to Mr. A when he started employment at the Representative office.  Thus, the Company refused to accept Mr. A’s requests.

Mr. D who defends legitimate rights and interests of the defendant, Company B, also agreed with statements of the defendant’s representative.  He requested the trial panel to consider documents and evidence provided by the defendant and oral arguments in the adjudication process at the trial and refuse the plaintiff’s requests.

At the first-instance trial, the representative of the People’s Procuracy of District 1, Ho Chi Minh City, has given the following opinions:

Regarding the legal compliance in civil procedure:  During the case settlement process from admitting the case until the deliberation session of the trial panel, the Judge, trial panel, court clerk and participants in legal proceedings have strictly and fully complied with regulations of the Civil Procedure Code.

Regarding the case settlement:  Company B is a foreign trader and has established a Representative office in Ho Chi Minh City according to the License No. 41-000466 issued by Ho Chi Minh City Department of Industry and Trade with the 8^th modification dated December 07, 2015. The Representative office is allowed to recruit Vietnamese employees to work at the Representative office according to Articles 16, 17, 18 of the Law on Commerce.  The labour contract No. 27072015 signed on July 27, 2015 with Mr. A is legally effective because it has been signed in accordance with law. Disputes have been arisen during the performance of the labour contract, the plaintiff has his labour contract unilaterally terminated because his failure to satisfy the required job performance. Thus, the plaintiff has initiated a lawsuit against the Company. 

According to the plaintiff’s statements, the sales quota that he must achieve is stipulated in none of the labour contract, the collective labour agreement and the company’s internal labour regulations.  Only his job position as a sales executive and salary as VND 14,000,000/month are specified in the signed labour contract. Thus, he believed that he has fulfilled all assigned duties.  The Company’s setting of sales quotas to sales executives working at the Representative office is inconsistent with the License to establish the Representative office and regulations laid down in Articles 16, 17, 18 of the Law on Commerce and Article 16 of the Decree No. 72/CP in Viet Nam providing detailed regulations on operation of representative offices.   The plaintiff has received 03 warning notices from the Company on October 09, 2015, October 29, 2015 and November 09, 2015, and has replied to these notices.  Because the Company planned to sack Mr. A, it has set the sales quota of USD 2,300/month as specified warning notices sent to him as the basis for its conclusion that he failed to achieve the assigned sales quota.  Documentary evidences submitted by the Company are quarterly job performance evaluation reports prepared by the Company itself because the email address that he used during his employment was created by the Company without private password given to him. Every day, his email inboxes have been automatically updated with the Company’s letters when he turned on his table computer. Hence, he did neither prepare nor know these performance evaluation reports. These arguments of the plaintiff are groundless.

According to Clause 1 Party A of the signed labour contract, the plantiff must take charge of sales promotion activities, achieve sales targets and implement assigned product promotion plans.  The Company has set the monthly GM for each employee based on his/her salary.  The plantiff enjoyed the salary of VND 14,000,000/month, so he must have achieved the GM of USD 2,300. This GM has been set based on the Company’s business objectives in 2015 which have been announced to all sales executives through the Company’s meeting sessions in which the plaintiff is also a participant.  The plaintiff’s statement that the Company has paid him the salary of VND 14,000,000/month without assigning the sales quota to him is irrational.  Because the plaintiff frequently failed to fulfill assigned duties, the Company has sent 03 warning notices to him but no improvement was made.  Hence, on November 20, 2015, the Company has issued the Notice of termination of labour contract and the Company agreed to fully pay him the salary up to December 20, 2015 without requesting him to continue working within the period of 30 days of prior notification. These acts of the Company cannot be considered unlawful. The Notice dated November 20, 2015 is not the Company's final decision but is as the basis for the Company’s Decision on termination of labour contract signed with the plaintiff issued on December 20, 2015, however, the plaintiff did not file the petition against this decision dated December 20, 2015. The defendant has exercised its rights, issued the Notice dated November 20, 2015 of termination of labour contract signed with the plaintiff in accordance with regulations in Point a Clause 1 and Point b Clause 2 Article 38 of the Labour Code, paid salary to the plantiff, fully paid compulsory social insurance contributions for the plaintiff and carried out procedures for closing social insurance book for the plaintiff up to December, 2015. For these reasons, the petition filed by the plaintiff is unfounded and should not be accepted.

According to the first-instance labour judgment No. 1405/2017/LD-ST dated August 01, 2017 of the People’s Court of District 1, Ho Chi Minh City, the court decided as follows:

Pursuant to Point a Clause 1 Article 32, Clause 1 Article 35, Point a Clause 1 Article 39, Clause 1 Article 147, Clause 2 Article 244 and Articles 203, 264, 271, 273 of the Civil Procedure Code in 2015 in Viet Nam;

Pursuant to Clause 3 Article 16 and Clause 3 Article 17 of the Law on commerce in Viet Nam;

Pursuant to Point a Clause 1 and Point b Clause 2 Article 38 of the Labour Code in Viet Nam;

Pursuant to the Resolution No. 326/2016/UBTVQH14 in Viet Nam dated December 30, 2016 of the Standing Committee of the National Assembly providing guidelines for implementation of the Law on the court fees and charges;

Party A’s request that Company B must invalidate the Notice of termination of labour contract dated November 20, 2015, pay him the salary for the period during which he was prevented from working by the Company, make compulsory social insurance, health insurance and unemployment insurance contributions, carry out procedures for closing his social insurance book up to July 27, 2016, and pay him the salary amount of 02 months as compensation, is not accepted.

The consideration of party A’s request that Company B must allow him to return to work under the signed labour contract is terminated.

Party A must not pay the court fees for solving the first-instance labour case.

The litigants are entitled to appeal against this judgment within 15 (fifteen) days from the date on which the judgment is announced by this Court.  

In case the judgment is enforced as per regulations in Article 2 of the Law on enforcement of civil judgments in Viet Nam, the judgment creditor and judgment debtor are lawfully allowed to reach an agreement on the judgment enforcement, request judgment enforcement, be subject to voluntary execution or coercive judgment enforcement in compliance with regulations in Articles 6, 7 and 9 of the Law on enforcement of civil judgments; the effective period of judgment enforcement shall comply within provisions in Article 30 of the Law on enforcement of civil judgments.  

On August 08, 2017, Mr. A, who is the plaintiff, has appealed against the entire first-instance judgment.

At the appellate trial:

The plaintiff, Mr. A, surely kept his appeal against the entire first-instance judgment unchanged.  He requested the appellate court to alter the first-instance judgment to entirely accept his petition and force the Company to pay him a sum of VND 143,000,000. Mr. A thought that the first-instance trial did not fully and thoroughly examined evidences of the case; he affirmed that the Company has unilaterally terminated the labour contract inconsistently with the laws because the Company has issued the notice of termination of labour contract on November 20, 2015 and prevented him from working. This meant that the Company has issued the notice ultra vires as well as violated the regulation on the time limit of prior notification before terminating the labour contract.  Moreover, the Company has issued notice and terminated the labour contract signed with him based on the reason that he failed to achieve the assigned GM. This was an unconvincing argument because this GM has been set by the Company itself without reaching an agreement with him when concluding the labour contract or obtaining a certification from a regulatory authority.  The first-instance trial not only failed to protect legitimate rights and benefits of the employee but also solved the case in favor of the employer. Thus, the first-instance trial did not comply with laws.  Hence, Mr. A requested the appellate trial to alter the first-instance judgment to accept all requests specified in his petition as well as force the Company to enforce the judgment immediately after it takes legal effect. 

At the appellate trial, both the person defending legitimate rights and interests and the authorized representative of the defendant affirmed that the defendant did not appeal against the first-instance judgment and believed that the Company has terminated the labour contract signed with Mr. A in accordance with laws. Thus, they disagreed with the plaintiff’s appeal and requested the trial panel to keep all contents of the first-instance judgment unchanged.

The representative of the People’s Procuracy of Ho Chi Minh City attending the trial has expressed opinions of the Procuracy about the compliance with the Civil Procedure Code during the case settlement by following the appellate procedure as follows: The judge, members of the trial panel, and the litigants of the case have strictly and fully complied with law regulations regarding civil procedure.  The representative of the People’s Procuracy of Ho Chi Minh City has also suggested solving the case as follows:

Regarding the court procedures:  On August 01, 2017, the first-instance trial has heard the case and pronounced its judgment.  On August 08, 2017, the plaintiff, Mr. A, filed an appeal. Thus, the appeal has been lawfully filed within the prescribed time limit and should be considered according to the appellate procedure.

Regarding contents of the case:

According to his petition and at this trial, Mr. A surely affirmed his petition filed against Company B, a foreign company whose headquarters is located in Malaysia.  Pursuant to Clause 3 Article 35 of the Civil Procedure Code in 2015, the People’s Court of District 1, Ho Chi Minh City, has no jurisdiction in this case.  This case falls within the jurisdiction of the People's Court of Ho Chi Minh City. Thus, the trial panel of the court of first instance has seriously broken legal proceedings. Pursuant to Clause 3 Article 308 of the Civil Procedure Code, the trial panel is requested to annul the first-instance judgment and keep the case file at the People’s Court of Ho Chi Minh City for re-hearing the case according to first-instance procedure.

JUDGMENTS OF THE COURT 

After investigating documents in the case file, which have been verified at the trial, and based on the arguments at the trial, the Trial panel finds that: 

According to the petition dated June 06, 2016, Mr. A proceeded against Company B because he believed that this Company has unilaterally terminated the labour contract signed with him inconsistently with laws.  Company B has its headquarters located at No. 07-06, 7th Floor, Centro Mall, 8, Jalan Batu Tiga Lama, 41300 Klang, Selangor, Malaysia. Pursuant to Point b Clause 1 Article 40 of the Civil Procedure Code in 2015, the employee is entitled to file a lawsuit to the Court at the place where the Company’s representative office is located.  Company B has its representative office located at D1 Street, P1 Ward, Q1 District, Ho Chi Minh City, so Mr. A is not required to bring a lawsuit against the Company to the Court overseas.  Pursuant to Clause 3 Article 35 of the Civil Procedure Code in 2015, any dispute involving a litigant abroad does not fall within the jurisdiction of district-level People’s Courts.  Because Company B is located in a foreign country, the case does not fall within the jurisdiction of the People’s Court of District 1, Ho Chi Minh City, but falls within the jurisdiction of the People's Court of Ho Chi Minh City.  The People’s Court of District 1, Ho Chi Minh City, has admitted and heard the case according to the first-instance procedure. So it has infringed the regulation on jurisdiction over the case. Moreover, while admitting and hearing the case, the first-instance trial panel has broken legal proceedings because it did not include the Representative office of Company B in Ho Chi Minh City in legal proceedings as a party having duties and interests from the lawsuit; this representative office has directly concluded and performed the labour contract with the plantiff.

Based on the abovementioned analysis and examination of evidences of the case as well as suggestions given by the representative of the People’s Procuracy of Ho Chi Minh City at the trial, the Trial panel judged that the entire first-instance judgment should be annulled and the case file should be kept by the People’s Court of Ho Chi Minh City for hearing according to its jurisdiction.

Mr. A must not pay the court fees for solving the appeal labour case. For the said reasons,

THE COURT DECIDES

Pursuant to Clause 3 Article 35, Point b Clause 1 Article 40, Clause 3 Article 308 of the Civil Procedure Code in 2015; It’s judged:

1. The following judgment is hereby annulled: the first-instance judgment No. 1405/2017/LD-ST dated August 01, 2017 of the People’s Court of District 1, Ho Chi Minh City, regarding the "Dispute over unilateral termination of labour contract" between:

- Plaintiff:  Mr. A, born in 1980; Address: D Street, P Ward, Q District, Ho Chi Minh City.

- Defendant: Company B.

Headquarters: No. 07-06, 7th Floor, Centro Mall, 8, Jalan Batu Tiga Lama, 41300 Klang, Selangor, Malaysia.

Company B has a Representative office in Ho Chi Minh City.

Address: D1 Street, P1 Ward, Q1 District, Ho Chi Minh City.

Authorized representative: Mr. C, born in 1992; Address:  D2 Street, P2 Ward, Q2 District, Ho Chi Minh City. (According to the Power of attorney dated July 29, 2016 bearing the consulate legalization of the Embassy of the Socialist Republic of Vietnam in Malaysia on August 01, 2016).

Person defending legitimate rights and interests of the defendant:  Mr. D, born in 1983, a lawyer of Ho Chi Minh City Bar Association.

Address: D3 Street, P3 Ward, Q1 District, Ho Chi Minh City.

The case file shall be kept by the People's Court of Ho Chi Minh City for hearing according to the first-instance procedure.

2. Regarding the court fees for solving the appeal labour case:  Mr. A is exempted from payment of the court fees.

3. The judgment of the appellate court comes into force from the date on which it is pronounced./.