Reasons for unilateral termination of labor contract as stipulated in Article 38 of the Labor Code of Vietnam

Article 38 of the 2012 Labor Code stipulates:

"1. The employer has the right to unilaterally terminate the labor contract in the following cases:

The employee frequently fails to complete the work according to the labor contract; The employee is ill or has an accident and has been treated for 12 consecutive months for an indefinite-term labor contract, treated for 6 consecutive months for a definite-term labor contract, or for more than half of the seasonal labor contract or a specific job contract with a term of less than 12 months, and his/her working capacity has not yet recovered; Due to natural disasters, fires, or other force majeure reasons as prescribed by law, the employer has sought all remedies but still has to narrow production and reduce jobs; The employee is not present at the workplace as prescribed in Article 33 of this Code. When unilaterally terminating the labor contract, the employer must notify the employee in advance: At least 45 days for an indefinite-term labor contract; At least 30 days for a definite-term labor contract; At least 3 working days for cases specified in point b, clause 1 of this Article and for seasonal labor contracts or specific job contracts with a term of less than 12 months.”

Clause 10, Article 36 of the Labor Code stipulates: “The employer unilaterally terminates the labor contract according to the provisions of Article 38 of this Code; the employer dismisses the employee due to changes in organizational structure, technology, or economic reasons or due to mergers, consolidations, or divisions of enterprises or cooperatives.”

Thus, according to the spirit of this law, the employer may only unilaterally terminate the labor contract in the cases (reasons) mentioned above. Regarding the reason “other force majeure reasons as prescribed by law” specified in point c, clause 1, Article 38 of the Labor Code, the Government of Vietnam has provided guidance as follows:

In clause 2, Article 12 of Decree No. 44/2003/ND-CP dated May 9, 2003, of the Government of Vietnam on detailing and guiding the implementation of a number of articles of the Labor Code on labor contracts, it is stipulated that the employer has the right to unilaterally terminate the labor contract in the cases specified in point a and point d, clause 1, Article 38 of the Labor Code, as amended and supplemented as follows: “2. Other force majeure reasons are cases where requirements of competent state agencies from provincial levels or higher, war disasters, or uncontrollable epidemics lead to changes, or narrowing of production and business activities.”

In clause 2, Article 12 of Decree No. 05/2015/ND-CP dated January 12, 2015, of the Government of Vietnam on detailing and guiding the implementation of a number of contents of the 2012 Labor Code, it is stipulated: The employer’s right to unilaterally terminate the labor contract at point a and point c, clause 1, Article 38 of the Labor Code is prescribed as follows: “2. Other force majeure reasons belong to one of the following cases:

a. Due to war disasters, epidemics;

b. Relocation or narrowing of production and business locations according to the requests of competent state agencies.”

Thus, based on the provisions of the Labor Code, Decree No. 44/2003/ND-CP, and Decree No. 05/2015/ND-CP, we can see that the law has clearly and specifically stipulated the cases of “other force majeure reasons.” However, in the practical application of the law to resolve labor disputes, for various reasons, there have been cases of improper application of the law. We would like to provide some examples as follows:

Example one: In November 2006, Mrs. Vu Thi K was employed by the Women’s Union of district-level town D (which later became a Provincially governed City) under a proposal of the District Party Committee (then a Town). After 3 months of probation, on February 15, 2007, Mrs. K signed a one-year labor contract with the employer, the Women’s Union of district-level town D, with a one-year probation period. Upon the contract’s expiration, Mrs. K continued to renew labor contracts from February 1, 2009, to December 31, 2010. From 2011 to 2013, Mrs. K annually signed labor contracts. On December 31, 2013, after the expiration of this contract, Mrs. K directly met the standing committee of the Women's Union of City D to request to continue working and was agreed upon by the city’s Women's Union President without mentioning the signing of a labor contract. During that time, Mrs. K continued working, received a salary, medical insurance card, and social insurance until April 2014 at the Women’s Union of City D.

On April 21, 2014, Mrs. K received a notice from the Women’s Union of City D about the termination of her employment. On May 5, 2014, at a staff meeting, the President of the Women’s Union of City D announced to the whole organization about not assigning work, not paying salary, not contributing social insurance, and collecting the health insurance card, with the reason: Mrs. K had not signed a labor contract for 6 months from January to June 2014.

The Women’s Union of City D argued that from November 2006 to December 31, 2013, Mrs. K continuously worked at the Women’s Union of City D under definite-term labor contracts. During her working time, Mrs. K enjoyed all the rights of employees as prescribed by labor laws. Based on the policy on contracted staff in 2014 and the notification of the City Party Committee, after the results of the official recruitment for the Front Block and Mass Organizations, the contract will be terminated. After announcing the official recruitment results, on April 21, 2014, the Women’s Union of City D issued a notice to terminate the labor contract with Mrs. K.

Mrs. K argued that the termination of the labor contract by the Women’s Union of City D was against legal regulations and thus filed a lawsuit at the People's Court of City D.

The first-instance court applied clause 10, Article 36; point c, clause 1, clause 2, Article 38 of the Labor Code and held that the termination of Mrs. Vu Thi K’s labor contract by the Women’s Union of City D was compliant with the Labor Code.

In our view, firstly, to resolve labor contract disputes, it is necessary to determine the type of contract according to the provisions of Article 22 of the Labor Code. In this case, on January 01, 2014, the work term of Mrs. Vu Thi K at the Women's Union of City D under labor contract No. 01/HDLD/PN dated January 10, 2013, ended. From January 01, 2014, Mrs. Vu Thi K continued working at the Women's Union of City D without signing a new labor contract. According to point b, clause 1, clause 2, Article 22 of the Labor Code, within 30 days from January 01, 2014, the Women’s Union of City D and Mrs. Vu Thi K should have signed a new labor contract. However, as they did not sign a new labor contract within this time, labor contract No. 01/HDLD/PN dated January 10, 2013, became an indefinite-term labor contract. Therefore, when terminating the labor contract, the employer must give the employee at least a 45-day notice, as stipulated in point a, clause 2, Article 38 of the Labor Code.

Secondly, it should be clarified whether the termination of the labor contract by the Women's Union of City D with Mrs. Vu Thi K is compliant with point c, clause 1, Article 38 of the Labor Code. Revisiting the case, the Notification No. 358 TB/TU dated February 20, 2014, of the City Party Committee D on the staffing policy for 2014 states, “For two contracted staff working at the Front Office and the City Women's Union, after the official recruitment results of the Front Block and Mass Organizations of the Province in 2014, the contract will be terminated.” On March 13, 2014, the Women's Union of City D met and notified Mrs. Vu Thi K about this notification No. 358. On March 31, 2014, the official Front Block and Mass Organizations recruitment results were announced. On April 21, 2014, the Women’s Union of City D issued Notice No. 03/TB-TU about the termination of Mrs. Vu Thi K’s labor contract. On May 1, 2014, Mrs. Vu Thi K officially ceased working. The first-instance court ruled that the termination of Mrs. Vu Thi K’s labor contract by the Women’s Union of City D due to “force majeure reasons” was lawful, compliant with clause 10, Article 36, and point c, clause 1, Article 38 of the Labor Code.

We deem that point c, clause 1, Article 38 of the Labor Code explicitly stipulates the reasons for unilaterally terminating the labor contract, which include “Due to natural disasters, fire, or other force majeure reasons as prescribed by law.” The force majeure reasons are elaborated by the Government of Vietnam in clause 2, Article 22 of Decree No. 44/2003/ND-CP as “…cases where requirements from competent state agencies from provincial levels or higher, war disasters, or uncontrollable epidemics lead to…” Comparing these provisions, the unilateral termination of Mrs. Vu Thi K’s labor contract by the Women’s Union of City D does not fall under point c, clause 1, Article 38 of the Labor Code and the guidance in Decree No. 44/2003/ND-CP. We concur with the appellate court’s judgment that the unilateral termination of Mrs. Vu Thi K’s labor contract by the Women’s Union of City D is illegal.

Example two: Mr. Tran Q and Association V signed a labor contract specifying Mr. Tran Q undertakes an indefinite-term employment starting from January 1, 2004, at Association V with accounting, clerical, and office tasks to monitor labor production for the Association. During his employment, Mr. Q fulfilled his duties well and received several commendation certificates from competent authorities. In March 2014, Association V informed Mr. Q to cease working and handed over the tasks to another person citing Mr. Tran Q’s health adversity. Mr. Q handed over the tasks and took sick leave for treatment in April 2014. Upon recovering, Mr. Tran Q returned to Association V several times to inquire about work only to find out that Association V had issued decision No. 07/QD-HNM dated March 15, 2014, to terminate his employment from April 2014.

Believing the decision to terminate his labor contract was unlawful, Mr. Tran Q filed a lawsuit. Association V argued that they had informed Mr. Tran Q about the termination according to the minutes of the Executive Committee meeting dated February 12, 2014, citing reasons for not completing work and poor health. Upon review, it is found that Association V violated the notice period. The notice was given on February 12, 2014, and the decision was made on March 15, 2014, while point a, clause 2 Article 38 of the Labor Code stipulates: When unilaterally terminating the labor contract, the employer must notify the employee at least 45 days in advance for an indefinite-term contract.

Regarding the reasons "not completing work, poor health," it is noted that during work, Mr. Tran Q received commendation certificates from the District People's Committee for achievements in the 2007-2012 term and a certificate of merit from the President of Association V in 2012. Moreover, after temporarily leaving, Mr. Tran Q was treated (both inpatient and outpatient) until July 2014. Association V was aware and had visited Mr. Tran Q, but still issued the termination decision, which was non-compliant with Article 39 of the Labor Code. Consequently, the court ruled that the unilateral termination of Mr. Tran Q's labor contract by Association V was unlawful.

Unilateral termination of the labor contract is the employer's right, but it must be done based on legal grounds and in compliance with the law to avoid affecting the legitimate rights and interests of employees. The spirit of labor law is to protect the rights and interests of the parties in labor relations, with particular attention to the rights and interests of employees. Proper resolution of labor disputes contributes significantly to protecting the legitimate rights and interests of the parties. Thus, the competent authorities need to strengthen the dissemination of general legal knowledge and labor law in particular. Labor disputes should be resolved promptly and in accordance with the law.

Nguyen Cuong - People’s Court of Quang Tri Province

According to the Journal of the Court

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