Vietnam: Guidelines for settlement of regimes and salaries for employees when an employment contract is fully invalidated

According to Articles 10 and 11 of the Decree No 145/2020/NĐ-CP of Vietnam’s Government, when an employment contract is fully invalidated, all related issues including the regime and salary for employees shall be resolved as follows:

1. Possible reasons for the invalidity of the labor contract

The total invalidity of a labor contract may arise from the following two reasons:

- The labor contract that is concluded ultra vires or against regulations on employment contract conclusion;

- The labor contract that is fully invalidated because of unlawful contents or involvement of works banned by law.

2. Solution when the labor contract is invalidated

When a labor contract is fully invalidated, employees and employers can choose one of two ways:

- Conclude a new employment contract in accordance with law;

- Terminate the employment contract.

3. Settlement of rights, obligations and benefits in general and wages for employees in particular

** Conclude a new employment contract:

Rights, obligations and interests of both parties during the period from first day on which the employee works under the fully invalidated employment contract to the day on which the contract is re-concluded shall be settled as follows:

- If the rights and interests of the parties to the invalidated employment contract are not less beneficial than those prescribed by law or effective collective bargaining agreement, the former shall apply.

- If the content about rights, obligations and interests of each party of the employment contract is not conformable with law does not affect other parts of the contracts, the ights, obligations and interests of employees are as follows:

+ Rights, obligations and interests of both parties during the period from first day on which the employee works under the partially invalidated employment contract to the day on which the contract is revised shall be settled in accordance with the effective collective bargaining agreement or, if such a collective bargaining agreement is not available, in accordance with law.

+ In case the salary under the invalidated employment contract is lower than the minimum salary prescribed by labor laws or the effective collective bargaining agreement, both parties shall negotiate the salary to ensure conformity with regulations. The employer shall pay the difference between the initial salary and the re-negotiated salary for the actual work period under the invalidated employment contract.

- The work period under the invalidated employment contract shall be included in the actual work period as the basis for provision of benefits as prescribed by law.

** Terminate the employment contract:

In case the fully invalidated employment contract is not re-concluded, rights, obligations and interests of the employee during the period from the first day on which the employee works under the invalidated employment contract to the day on which the contract is terminated shall be settled in accordance with Clause 2 of this Article. Concurrently, severance allowance shall be provided in accordance with Article 8 of the Decree No 145/2020/NĐ-CP of Vietnam’s Government.

>> View more: How to calculate working time to pay severance allowance for employees in Vietnam

Note: In case of employment contracts that are fully invalidated because of unlawful contents or involvement of works banned by law, the employer shall pay the employee an amount of money that is equal to at least a monthly region-based minimum wage for each year of work. The period of work under the invalidated employment contract as the basis for calculation of this amount shall be the actual work period under the invalidated labor contract.

4. Other issues relevant to settlement of employment contracts that are fully invalidated

Other issues relevant to settlement of employment contracts that are fully invalidated because of unlawful contents or involvement of works banned by law shall be handled by the court in accordance with the Civil Procedure Code of Vietnam.
The above are all issues related to the settlement of regimes and wages for employees when the labor contract is fully invalidated, employees need to pay attention to well protect their legal rights.

Thuy Tram

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