Vietnamese labor law imposes strict procedural requirements on employers intending to terminate labor contracts due to structural or technological changes. Setting aside internal corporate matters, such as the issuance of resolutions or decisions on restructuring or technological transformation (which are governed by enterprise law and the company charter), from a labor law perspective, employers must strictly comply with the following steps to ensure the legality of the termination decision.
Procedures Required for Termination Due to Structural or Technological Changes
- Step 1: Formulate a labour utilization plan (“Plan”) with the participation and consultation of the organization representing employees at the grassroots level (if any) (“Trade Union”).
Note: The Plan is not subject to approval by the Trade Union. The employer may finalize and issue the plan after collecting feedback, regardless of whether the comments are supportive or dissenting.
- Step 2: Organize a workplace dialogue to discuss the Plan and publicly disclose the main outcomes of the dialogue at the workplace within three working days from the end of the dialogue.
- Step 3: Finalize the Plan after receiving feedback from the Trade Union of the Employer (“Final Plan”).
- Step 4: Publicly announce the Final Plan to employees within fifteen days from the date the plan is finalized.
- Step 5: Notify the Final Plan to the Department of Home Affairs (“DOHA”). The notice must be sent thirty days prior to the issuance of a decision on terminating employment contracts with the affected employees.
- Step 6: Notify the Final Plan to affected employees after the Final Plan is approved by the DOHA.
- Step 7: Issue the decisions on termination of employment contracts with the affected employees.
- Step 8: Complete all payments due to the employee(s) within fourteen working days from the termination date (unless extended up to thirty days in specific cases) and fulfill all other post-termination obligations.
The Labor Code 2019 and its guiding regulations have imposed strict procedural requirements. The obtainment of the opinion of the Trade Union, organization of a workplace dialogue and notification to the provincial people’s committee are required even when only a single employee is affected.
Strict compliance with the required steps is not only a legal obligation but also helps minimize the risk of labor disputes. In practice, several employers have been ordered to reinstate employees and pay compensation due to procedural violations, such as failure to conduct a dialogue, failure to consult the employee representative organization, or failure to properly notify the competent authority. Therefore, before terminating any labor contract for structural or technological reasons, employers must conduct careful evaluations, establish a clear plan, and ensure sufficient documentation for every procedural step taken.
Conclusion: A Conditional Right, Not an Absolute One
In a constantly evolving labor market shaped by technological advancements and digital transformation, organizational restructuring has become an inevitable trend for businesses to adapt and maintain their competitiveness. However, the right to terminate labor contracts due to structural or technological changes is not an “absolute privilege” of the employer. It is a conditional right, one that can only be exercised if the employer can substantiate the necessity, objectivity, and reasonableness of the change, while strictly complying with all procedural requirements prescribed by law.
In practice, the line between lawful and unlawful termination often hinges on how the employer formulates the justification and prepares supporting documentation. A vague rationale or incomplete paperwork can easily undermine an otherwise legitimate business need.
As labor laws become increasingly protective of employees, and as regulatory bodies demand greater transparency and procedural integrity, employers must approach restructuring-related terminations with both caution and clarity. This includes not only ensuring procedural compliance but also maintaining open communication with affected employees and their representatives.
Ultimately, a well-founded, legal complaint and transparently executed termination process is not only a shield against legal liability but also a reflection of the employer’s commitment to responsible and fair employment practices in a changing world.
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