Issue regarding unilaterally terminating the contract due to changes in business structure in Vietnam

For your questions, Lawnet would like to answer as follows:

According to the provisions of Clause 1, Article 42 of Vietnam's Labor Code 2019, changes in structure and technology include:

- Changes in the organizational structure, personnel rearrangement;

- Changes in processes, technology, equipment associated with the employer’s business lines;

- Changes in products or product structure.

At the same time, Clause 1, Article 44 of the Labor Code 2019 also stipulates that before terminating a contract with an employee due to a change in technology structure, a labor utilization plan must be prepared with basic contents.

Thus, a labor utilization plan shall have the following contents:

- The names and number of employees to be retained, employees to be retrained for further employment, and employees to be working on part-time basis;

- The names and number of employees to retire;

- The names and number of employees whose employment contracts have to be terminated;

- Rights and obligations of the employer, employee and relevant parties regarding implementation of the labor utilization plan;

- The measure and financial sources to implement the plan.

During development of the labor utilization plan, the employer shall discuss with the representative organization of employees (if any). The labor utilization plan shall be made available to the employees within 15 days from the day on which it is adopted.

 Thus, the dismissal of employees shall only be implemented after a discussion with the representative organization of employees (if any) and after giving prior notice of 30 days to the People’s Committee of the province and the employees.

In case the employer unilaterally terminates the contract, it must pay allowances to the employee according to the provisions of the Labor Code 2019. Specifically:

- Severance allowance: When the labor contract is terminated in case of change in technological structure or economic reasons, the employer is responsible for paying severance allowance to the employee who has worked on a regular basis for a period of at least 12 months. Each year of work will be worth half a month’s salary. 

- Redundancy allowance: Employers are responsible for paying redundancy allowanceas prescribed in Article 47 of the Labor Code to employees who has worked on a regular basis for the employer for at least 12 months in case the labor contract is terminated due to changes in structure, technology or economic reasons or due to merger, consolidation, division or separation of enterprises or cooperatives...

Below are some judgments on termination of employment contracts due to changes in business structure, you can refer to:

1. Judgment on unilateral termination of labor contract No. 20/2018/LD-PT

- Judgment level: Appellate

- Judicial body: People's Court of Ca Mau province

- Quoting the content: "Although in the plan and lists of labor contract terminations signed by Ms. Th and stamped by the Executive Committee of the Trade Union, there are no records showing when building the labor use plan with the participation of the Executive Committee of the Trade Union. In the working minutes dated May 24, 2018 of the People's Court of Ca Mau province working with the Trade Union Executive Committee of the Company, the members of the Executive Committee of the Trade Union all said that when the Company built the plan of restructuring the organization on May 9, 2016, the Company invited the Executive Committee of the Trade Union to discuss and agree on the number of people allowed to continue working and the number of people who had to quit, but when the Company developed the plan, the Company did not invite the Executive Committee to participate, so the Executive Committee of the Trade Union did not know which employees were dismissed by the company.

2. Judgment on unilateral termination of labor contract No. 21/2017/LD-PT

- Judgment level: Appellate

- Judicial body: People's Court of Binh Duong province

- Quoting the content: "On February 17, 2016, the company informed Ms. L about the arrangement of the personnel structure at the company. The company requires Ms. L to write her resignation letter; otherwise, the company will make a decision to quit her job for the reason of restructuring or reducing personnel. On February 24, 2016, Ms. L received Notice No. 01 HCNS/T2-2016 from the human resources department requesting Ms. L to sign and receive the notice of staff reduction due to restructuring and rearrangement of staff. the. Therefore, Ms. L will work until the end of April 25, 2016. However, on February 26, 2016, Ms. L received Notice No. 02/HCS/T2-2016 from the Human Resources Department. Ms. L was asked to stay at home and still receive her salary until April 25, 2016. On May 1, 2016, the company issued a decision to unilaterally terminate the labor contract with Ms. L. Thus, the decision to unilaterally terminate the labor contract No. 21/2016/QDTV dated May 1, 2016 of the company is against the law, affecting the interests of Ms.

3. Judgment on unilateral termination of labor contract No. 08/2018/LD-PT

- Judgment level: Appellate

- Judicial body: People's Court of Ba Ria-Vung Tau province

- Quote from the content: "The company presented the reason for terminating the labor contract as that Hotel B V was inefficient, so it had to sublease the entire hotel to Company T. At that time, the economy was difficult and terrible. During the crisis, the business results of Hotel B according to the audited financial statements were poor. In 2014, Hotel B only made a profit of 71 million VND, forcing the company to recalculate its business efficiency and change its business structure. The hotel's rental structure is reasonable and not illegal. The trial panel found that the law does not prohibit employers from changing the structure accordingly so that it can bring greater efficiency.

4. Judgment on unilateral termination of labor contract No. 04/2018/LD-PT

- Judgment level: Appellate

- Judicial body: People's Court of Ca Mau province

- Quoting the content: "Considering the time of formulating the organizational restructuring plan, there is no list of people whose labor contracts have been terminated (May 9, 2016). However, on May 16, 2016, the Board of Directors, Executive Board, and Head of Organizational Department worked with the Heads of Departments and affiliated units to finalize the list of employees of departments and units to build the plan of using labor after restructuring the organizational apparatus (BL 98) without the participation of the representative organization of the labor collective. Thus, when developing a plan to restructure the organizational apparatus, the company followed a strict order to have a meeting of the Executive Committee of the Trade Union on May 9, 2016 to approve the plan. However, when it comes to the important step of developing a labor use plan, there is no document showing that the company exchanged with the representative organization of the labor collective at the grassroots. "

Best regards!

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