1. What is a labor contract?

Clause 1, Article 13 of the Labor Code 2019 stipulates the labor contract as follows: 

"A labor contract is a contract between the employee and the employer regarding paid work, salaries, working conditions, and the rights and obligations of each party within the labor relationship;

In cases where both parties agree under a different name but the content reflects paid work, salaries, and the management, operation, and supervision by one party, it is recognized as labor contract."

Thus, it can be understood that a labor contract is a legally binding document between the employee and the employer, which includes information clearly defining the obligations and rights of both parties during the working process, thereby creating a mechanism for resolution if issues arise.

2. What is termination of a labor contract in accordance with the law?

The termination of a labor contract in accordance with the law is the conclusion of the employment relationship between the employee and the employer based on existing labor law provisions, ensuring that the rights and obligations of both parties are legally fulfilled. According to the Labor Code 2019, to terminate a labor contract legally, the following conditions must be met:

• Must fall under the 13 cases stipulated in Article 34 of the Labor Code 2019, which include:
  • Expiration of the labor contract, except for the employee who is a member of the executive board of the employee representative organization at the establishment and is still in office at the time of contract expiration;
  • Completion of the work specified in the labor contract;
  • Mutual contract between both parties to terminate the labor contract;
  • The employee is sentenced to imprisonment without suspension or is not eligible for release according to the duration of the prison sentence that is equal to or shorter than the period of pre-trial detention, is sentenced to death, or is prohibited from performing the work specified in the labor contract by a legally effective court judgment or decision;
  • The foreign employee working in Vietnam is expelled under a legally effective court judgment or decision, as well as a decision from a competent state agency;
  • The employee dies, is declared to have lost civil capacity, missing, or deceased by the court;
  • The employer, if an individual, dies; is declared to have lost their civil capacity, missing, or deceased by the court. If the employer is an organization, it ceases operation or is notified by the business registration authority under the provincial People's Committee that there is no legal representative, or the authorized person to perform the rights and obligations of the legal representative;
  • The employee is subject to disciplinary action resulting in dismissal;
  • The employee unilaterally terminates the labor contract in accordance with labor law regulations;
  • The employer conducts a workforce reduction due to organizational or technological changes, economic reasons, or during division, separation, merger, acquisition; sale, lease, conversion of business type; transfer of ownership rights, or usage rights of the enterprise's assets, cooperatives;
  • The work permit of foreign employees working in Vietnam expires;
  • In the case of an contract on probation content stated in the labor contract, if the probation does not meet the requirements or one party cancels the probation contract.
• Must comply with the procedures and advance notice periods for contract termination as stipulated in Articles 35 and 36 of the Labor Code 2019. 
• Must ensure the fulfillment of financial obligations and the rights of both parties.

3. Why is it necessary to terminate labor contract in accordance with the law?

The regulations on lawful termination of labor contracts provide significant benefits to both employees and employers:

• Employees will be protected in terms of benefits, such as severance pay, job loss compensation, social insurance, health insurance, unemployment insurance, and will not be liable for damages to the employer;
• Employers will mitigate legal issues, will not be responsible for compensating damages to employees, and will not face lawsuits or administrative penalties for labor law violations. This helps maintain reputation and good relationships with employees;

Moreover, the regulations on lawful termination of labor contracts also contribute to the development of the labor market, facilitating both workers and employers to identify employment opportunities and suitable candidates. This is an important factor in improving productivity and labor quality, while also contributing to the socio-economic development of the country.

4. In what cases is the employer entitled to unilaterally terminate the labor contract? 

Article 36 of the Labor Code 2019 stipulates that the employer has the right to unilaterally terminate the labor contract in the following cases: 

• The employee consistently fails to complete the work according to the labor contract, as determined by the criteria for assessing the level of job completion in the employer's regulations; 
• The employee suffers from illness or injury and has undergone treatment for 12 consecutive months for those working under an indefinite-term labor contract, or has undergone treatment for 6 consecutive months for those working under a definite-term labor contract of 12 to 36 months, or over half the duration of the labor contract for those working under a definite-term labor contract under 12 months, but their ability to work has not yet recovered;
• When the employee health recovers, the employer will consider continuing to enter into a labor contract with the employee; 
• Due to natural disasters, fires, dangerous epidemics, act of war, or relocation, downsizing of production and business as requested by competent state agencies, where the employer has tried all remedial actions but still has to reduce workforce; 
• The employee is absent from the workplace after 15 days from the expiration of the temporary suspension of the labor contract, unless otherwise agreed upon by both parties or stipulated by law;
• Employees of retirement age as prescribed, unless otherwise contractually agreed;
• Employees unilaterally leaving work without justifiable reasons for 5 consecutive working days or more;
• Employees provide untruthful information as per labor law regarding the obligation to provide information when concluding an labor contract that affects the recruitment of employees.

5. In what cases is employee entitled to unilaterally terminate labor contract? 

Article 35 of the Labor Code 2019 states that employees have the right to unilaterally terminate their labor contract without prior notice in the following cases: 

• They are not assigned work or workplace, or the working conditions do not align with the agreed-upon, except in cases where workers are transferred to other positions as per the contract according to regulations; 
• They are not paid fully or paid late, except in cases of force majeure where the employer has taken all necessary measures but cannot pay on time as required by labor law; 
• They are abused, physical assault, or subjected to verbal or behavioral humiliation that affects their health, dignity, or honor; or forced into labor; 
• They experience sexual harassment in the workplace; 
• Pregnant female employee must stop working if certified by a competent medical facility that continuing work would adversely affect the fetus; 
• They reach retirement age as per regulations, unless otherwise agreed by the parties; 
• The employer provides false information as required by labor law regarding the obligation to provide information when entering into an labor contract, affecting the performance of the labor contract.

6. What is the procedure for employer to terminate a contract in accordance with the law?

Step 1: Notify the employee in advance

It is necessary to provide written notice to the employee regarding the termination of the labor contract, except in cases where the Labor Code specifies that prior notice is not required.

Note: Employers are not required to give prior notice in the following circumstances:

• The employee is absent from the workplace after the specified deadline;
• The employee voluntarily leaves without a valid reason for 5 consecutive working days or more.

Step 2: Fully settle all amounts related to the rights of each party

Within 14 working days from the date of termination of the labor contract, all amounts related to the employee rights must be fully settled.

Step 3: Complete the procedures

• Completing the procedure for confirming the period of social insurance, unemployment insurance, and return any other original documents held from the employee;
• Providing copies of documents related to the employee working process if requested by the employee. The cost of copying and sending documents is to be borne by the employer.

Step 4: Store the dossier

Store resignation dossier including: Application for resignation, Handover minutes, Decision to terminate the labor contract, Disciplinary records, Termination contract (if any), Contract liquidation minutes,…

7. What is the procedure for the employee to terminate the labor contract in accordance with the law?

Step 1: Notify the employer in advance.

Note: The employee does not need to provide prior notice in the following cases:

• The employer fail to arrange for the work, workplace, working conditions as agreed in the labor contract, except in the following cases:
  • When facing sudden difficulties due to natural disasters, fires, dangerous diseases, implementing measures to prevent and address occupational accidents, occupational diseases, electrical or water incidents;
  • Due to production and business needs;
  • When temporarily transferring the employee to a different job than that stipulated in the labor contract.
• The employer fails to pay full salaries or late payment of salaries, except in cases of force majeure where the employer has taken all necessary measures but is still unable to pay salaries on time;
• The employee is subjected to mistreatment, beatings, verbal or physical abuse,, or actions that harm their health, dignity, or reputation; being forced to work;
• The employee experiences sexual harassment in the workplace;
• Pregnant female employee must stop working when there is confirmation from an authorized medical examination and treatment facility that continued to work would negatively affect the fetus;
• The employee has reached retirement age, unless otherwise agreed by the parties;
• The employer provides false information affecting the performance of the labor contract.

Step 2: Full payment of amounts related to the rights of each party

Within 14 working days from the date of termination of the labor contract, the employer must fully pay all amounts related to the employee rights.

Step 3: Complete the procedures

• Completing the procedures to confirm the period of social insurance, unemployment insurance contributions and return along with the original documents if the employer has retained them from the employee;
• Providing copies of documents related to the employee work process if requested by the employee. The cost of copying and sending documents shall be borne by the employer.

8. FAQ

a. What responsibilities does the employer have if they unilaterally terminate the labor contract unlawfully? 

When the employer unilaterally terminates the labor contract unlawfully, the employer is liable as follows: 

• They must reinstate the employee to work according to the signed labor contract; must pay salaries, contribute to social insurance, health insurance, and unemployment insurance for the days the employee was unable to work and must pay the employee an additional amount equivalent to at least 02 months' salary according to the labor contract; 
• After being reinstated, the employee must return to the employer any severance pay and redundancy benefits received from the employer; 
  • In case the position or job stipulated in the labor contract no longer exists and the employee still wishes to work, both parties shall negotiate to amend or supplement the labor contract;
  • In case of violation of the notice period regulations, the employer must pay an amount corresponding to the salary according to the labor contract for the days not notified in advance; 
• If the employee does not wish to continue working, apart from the amounts mentioned above, the employer must pay severance pay to terminate the labor contract;  
  • In cases where the employer does not wish to rehire the employee and the employee agrees, in addition to the amounts that the employer must pay as mentioned above, the employer and employee shall negotiate an additional compensation amount for the employee, which shall be at least equivalent to 02 months’ salary as per the labor contract for the termination of the labor contract.

b. What responsibilities does an employee have if they unilaterally terminate the labor contract unlawfully? 

An employee who unlawfully unilaterally terminates the labor contract must compensate the employer as follows: 

• Must compensate the employer with half a month's salary according to the labor contract and an amount equivalent to the salary according to the labor contract for the days not notified in advance; 
• Must reimburse the employer for training costs specified in Article 62 of the Labor Code 2019. 

Note: When an employee unlawfully unilaterally terminates the labor contract, they will not receive severance pay.