INSIGHTS

Is it advisable to expand the right of employers to unilaterally terminate the labor contract?

July 11, 2018 Labor & Employment

Over the last few years, the Ministry of Labor – Invalids and Social Affairs has been in the process of amending the 2012 Labor Code.  One of the recent proposals for amendment, contained in the application file proposals of the 3rd Labor Code amendment is to expand the employee’s right to unilateral termination of the labor contract.  There are two proposed alternatives:

Option 1: The employee will be allowed to lawfully terminate the labor contract without specifying reasons, with only the requirement to give advance notice.

Option 2: The employee will be allowed to lawfully terminate the labor contract without specifying reasons under the law and without providing advance notice to the employer.

If one of these two options is passed, it will greatly enhance the rights of employees in the labor relationship.

However, the application file proposals of the 3rd amendment of the Labor Code does not mention any proposals concerning expanding the employer’s right to unilaterally terminate the labor contract.  Referring to the 2nd Draft amendment of the Labor Code, the 2nd Draft proposes several adjustments to the unilateral termination rights of the employer.  For example:

Supplementing several cases in which employers are allowed to unilaterally terminate the labor contract, such as: (i) when the employee has reached retirement age; (ii) when the employee submits false information related to identification upon signing the labor contract, which affects the employer’s recruitment decision; (iii) when the employee spontaneously leaves their job for 05 accumulated days in 01 month or 20 accumulated days in 01 year without proper reason.

Allowing the employer to unilaterally terminate the labor contract earlier in the event that the employee has received treatment for sickness or an accident, but has not recovered their working capabilities.  Specifically, this applies to cases in which (i) an employee working under a labor contract with indefinite term has received treatment for 06 consecutive months (instead of 12 consecutive months as in the current regulations) or (ii) an employee working under a labor contract with definite term has received treatment for 03 consecutive months (instead of 06 consecutive months as in the current regulations.

Until the 3rd detailed Draft is issued, it is not known whether these changes in the unilateral termination rights of the employer will be approved.  However, when assessing the matter of expanding the employer’s rights in this area, from the perspective of the legislature and public policy, we can see that the approval of additional unilateral termination rights for the employer faces extreme difficulties.  The reasons for this are:

Most employees in Vietnam can currently be classified as common laborers (group 1), which means that their living income is not high.  It is possible that the unemployment rate will increase following approval of a policy that allows employers to more easily terminate labor contracts.  Facing a higher unemployment rate, would the Government have enough capabilities to deal with such a development?  In particular, would the State budget be sufficient to support large numbers of unemployed laborers, and would the police be able to handle the potential for increased crime rates and social unrest?  For this labor group (group 1), their biggest concern is the very burden of daily living expenses, not the laws or reasons behind the regulations.  Nor do they have enough financial capability to afford the legal services provided by lawyers.  Evidence of this can be clearly seen in the unlawful strikes which often occur at factories.

Apart from the common laborers, mentioned above, who sign lawful labor contracts, there is still a massive group of people who work as freelancers under no labor contract (freelancers – group 2).  This group is not under control of the labor law.  If the State wishes to control this group and encourage greater social stability, there must be some way for these people to easily participate in the lawful labor relationship. As such, from the viewpoint of the Government and in the interests of long term stability, the law must facilitate the rights of the laborer (to the detriment of employer rights).  An easily observable example is the recent rise of new business models like Uber, Grab, DeliveryNow, etc.   The great number of laborers participating in the business networks of Uber, Grab, and DeliveryNow has recently helped to reduce unemployment.  Despite opinions on whether the business of Uber, Grab, and DeliveryNow is legitimate, the immediate benefit is that many people are no longer unemployed.  It is very difficult to create lawful jobs for laborers, and it is even more difficult to convince the laborers to participate in lawful long-term labor relations.

The remaining labor group is the group of office workers (group 3) with a higher and more stable income than that of the above two groups.  This group has enough education to understand and obey the law, as well as protect themselves under the provisions of the law.  They usually do not behave improperly or create any unrest in society, so the State doesn’t need to be overly concerned about this group.  However, if group 1 and group 2 create social unrest, group 3 will be greatly affected.  Therefore, from the Government’s viewpoint, the State needs to concentrate on facilitating a better legal environment for the common laborer (and tightening the legal rules for employers) in order to better manage and stabilize the employment circumstances for groups 1 and 2.

And so, this is a very comprehensive answer as to why employers will likely not be granted greater legal advantages when it comes to unilaterally terminating labor contracts.

–   Written by LE & TRAN | Vietnam’s Premier Business Litigation Firm


This insight is quoted from the Vietnam Labor Law Review (April – May 2018), you can download and read the full file of Vietnam Labor Law Review (April – May 2018) here