Is it legal to dismiss an employee due to inefficient business operations in Vietnam?

Is it legal to dismiss an employee due to inefficient business operations in Vietnam?

Article 125 of the Labor Code 2019 provides for dismissal for disciplinary reasons as follows:

An employer may dismiss an employee for disciplinary reasons in the following circumstances:

1. The employee commits an act of theft, embezzlement, gambling, deliberate infliction of injuries or uses drug at the workplace;

2. The employee discloses technological or business secrets or infringing the intellectual property rights of the employer, or commits acts which are seriously detrimental or posing seriously detrimental threat to the assets or interests of the employer, or commits sexual harassment in the workplace against the internal labor regulations;

3. The employee repeats a violation which was disciplined by deferment of pay rise or demotion and has not been absolved. A repeated violation means a violation which was disciplined and is repeated before it is absolved in accordance with Article 126 of this Code.

4. The employee fails to go to work for a total period of 05 days in 30 days, or for a total period of 20 days in 365 days from the first day he/she fails to go to work without acceptable excuses.

Justified reasons include natural disasters, fires; the employee or his/her family member suffers from illness with a certification by a competent health facility; and other reasons as stipulated in the internal labor regulations.

Thus, the company's inefficient business operation is not in the case of having to dismiss employees. Therefore, the Company's dismissal of employees due to inefficient business operations is against the law in Vietnam.

How much is penalty for illegal dismissal of employees in Vietnam?

In Clause 3, Article 19 of Decree 12/2022/ND-CP on violations against regulations on labour discipline and material responsibility as follows:

3. A fine ranging from VND 20.000.000 to VND 40.000.000 shall be imposed upon an employer for commission of one of the following violations:

a) Harming the employee's health, life, honor or dignity when imposing disciplinary measures in the workplace if not liable to criminal prosecution;

b) Applying monetary fines or deducting the employee’s salary wage instead of disciplinary measures;

c) Imposing a disciplinary measure against an employee for a violation which is not stipulated in the internal labour regulations or employment contract or labour laws;

d) Imposing more than one disciplinary measure for one violation;

dd) Imposing disciplinary measures against an employee during the period when he/she is taking leave on account of illness or convalescence, or on other types of leave with the employer’s consent; he/she is being held under temporary custody or detention; he/she is waiting for verification and conclusion of the competent authority for acts of violations specified in Clause 1 and Clause 2 Article 125 of the Labour Code.

At Point a, Clause 4, Article 19 of Decree 12/2022/ND-CP stipulates as follows:

4. Remedial measures

a) The employer that commits the violation in Point dd Clause 2 or Point c Clause 3 of this Article is compelled to reinstate the employee and pay full salary as agreed in the employment contract to employee for the period during which the employee is dismissed by the employer for disciplinary reasons.

Besides, in Clause 1, Article 6 of Decree 12/2022/ND-CP stipulates as follows:

1. The fines for administrative violations prescribed in Chapter II, Chapter III and Chapter IV of this Decree shall be imposed upon violating individuals, except the fines in Clauses 1, 2, 3, 5 Article 7, Clauses 3, 4, 6 Article 13, Clause 2 Article 25, Clause 1 Article 26, Clauses 1, 5, 6, 7 Article 27, Clause 8 Article 39, Clause 5 Article 41, Clauses 1 through 12 Article 42, Clauses 1 through 8 Article 43, Clauses 1 through 6 Article 45, Clause 3 Article 46 of this Decree. The fine imposed upon an organization is twice as much as that imposed upon an individual for committing the same administrative violation.

According to this Article, if your company dismisses an employee against the law in Vietnam, the company may be fined from VND 40,000,000 to VND 80,000,000 according to the provisions of the law. At the same time, if the company has unlawfully dismissed you, it will force the company to accept you back to work and pay you full salary according to the labor contract corresponding to the days off when the company applies the form of employment. 

What are procedures for dismissal of employees in Vietnam?

In Article 70 of Decree 145/2020/ND-CP, disciplinary procedures for dismissal are as follows:

Disciplinary procedures prescribed in Clause 6 Article 122 of the Labor Code are specified below:

1. In case an employee’s violation is discovered when it is committed, the employer shall prepare a violation record and inform the internal employee representative organization of which the employee is a member, the employee’s legal representative if the employee is under 15. In case an employee’s violation is discovered after it is committed, evidence of such violation must be gathered.

2. Within the time limit for disciplinary procedures specified in Clause 1 and Clause 2 Article 123 of the Labor Code, the employer shall hold a disciplinary hearing as follows:

a) At least 05 working days before the disciplinary hearing is held, the employer shall notify the mandatory participants prescribed in Point b and Point c Clause 1 Article 122 of the contents, time and location of the hearing, full name of the employee facing disciplinary procedure and his/her violations. Make sure the participants receive the notification before the hearing takes place;

b) Upon receipt of the employer’s notification, the mandatory participants prescribed in Point b and Point c Clause 1 Article 122 of the Labor Code shall send the employer confirmation of their participation. In case any of the mandatory participants cannot participate in the hearing, the employee and the employer shall reach an agreement on change of time and/or location of the hearing. In case such n agreement cannot be reached, the employer shall make the final decision;

c) The employer shall conduct the disciplinary hearing at the time and location mentioned in Point a and Point b of this Clause. In case any of the mandatory participants mentioned in Point b and Point c Clause 1 Article 122 does not confirm his/her participation or is not present, the employer shall still conduct the hearing.

3. Minutes of the disciplinary hearing shall be taken and ratified before the end of the hearing. The minutes shall bear the signatures of the participants as prescribed in Point b and Point c Clause 1 Article 122 of the Labor Code. In case a person refuses to sign the minutes, the minutes taker shall specify his/her full name and reasons for refusal in the minutes.

4. Within the time limit for disciplinary procedures specified in Clause 1 and Clause 2 Article 123 of the Labor Code, the person having the power to initiate disciplinary procedure shall issue a disciplinary decision and send it to the mandatory participants specified in Point b and Point c Clause 1 Article 122 of the Labor Code.

Above are the legal regulations on the procedures when the company applies the dismissal discipline to employees in Vietnam.

Best Regards!