Ho Chi Minh City, 28 July 2026
In our previous Weekly Debrief, we examined the circumstances in which an Enterprise Manager may also qualify as an Employee, the distinction between an appointment decision and a labour contract, and the authority to enter into a labour contract with an Enterprise manager.
In Part 2, we focus on the relationship between an Enterprise manager’s term of office and the term of their labour contract, the legal consequences of the expiry of the term of office or removal from office, and the practical options available to enterprises where an employment relationship continues to exist. Understanding these issues is essential to ensuring compliance with labour law to while maintaining effective corporate governance.
Must the term of office and the term of the labour contract coincide?
This is one of the issues frequently misunderstood by enterprises when appointing, reappointing or removing an Enterprise manager. In practice, many enterprises assume that a labour contract automatically terminates upon the expiry of the Enterprise manager’s term of office expires. Conversely, others believe that each reappointment allows the enterprise to enter into a new fixed-term labour contract corresponding to the new term of office. Neither assumption accurately reflects the applicable legal framework. The confusion arises because the term of office and the term of the labour contract are governed by two separate legal regimes and serve different applicable legal framework.
An Enterprise manager’s term of office is a matter of corporate governance and is determined in accordance with the Law on Enterprises and the company’s charter. The duration of the term may vary depending on the type of enterprise, the managerial position and the company’s internal governance regulations. Any appoinment and reappointment must be therefore comply with the applicable corporate governance procedures and legal requirements.
By contrast, the term of a labour contract is governed by the Labour Code. A labour contract may only be concluded as either an indefinite-term labour contract or a fixed-term labour contract with a term not exceeding 36 months. Accordingly, where an Enterprise manager is a Vietnamese national who also qualifies as an Employee, their appointment or reappointment to a managerial position does not automatically entitle the enterprise to enter into successive fixed-term labour contracts corresponding to each term of office. Once two consecutive fixed-term labour contracts have been concluded, and the Employee continues working, the enterprise must enter into an indefinite-term labour contract, except in the limited circumstances expressly permitted by law.
Does expiry of the term of office, removal from office or non-reappointment automatically terminate the labour contract?
This is another issue that frequently give rise to disputes in practice. An enterprise may encounter a situation where an Enterprise manager’s term of office extends beyond the term of the labour contract, or where the labour contract continuos in effect after the term of office has expired. In either case, the expiry of the term of office or removal from office, or non reappoitnment only affects the individual’s corporate status as an Enterprise manager under the Law on Enterprises and the company’s charter. It does not, by itself, constitute a independent statutory ground for terminating the labour contract under the Labour Code. In other words, where the labour contract continues in effect, the rights and obligations arising from the employment relationship continue to bind the party. If the enterprise intends to terminate both the managerial position and the employment relationship, it must separately identify and rely on alawful statutory ground for terminating the labour contract and fully comply with the applicable substantive and procedural requirements under labour law.
Enterprises should also exercise caution when including a provision stating that the labour contract will “automatically terminate” if the Enterprise manager is removed from office or is not reappointed. As the decision to remove or not reappoint an Enterprise manager generally falls within the authority of the enterprise or its competent corporate body, such provisions do not, in themselves, establish a lawful ground for terminating the labour contract unless the applicable requirements of labour law are also satisfied.
This approach is also reflected in judicial practice. In Appellate Labour Judgment No. 838/2023/LĐ-PT dated 11 August 2023 of the People’s Court of Ho Chi Minh City, Company A argued that the labour contract entered into with its General Director merely documented the shareholders’ appointment of that individual and therefore did not establish an employment relationship. Company A further relied on the General Director’s alleged misconduct in the performance of his managerial duties to justify the termination of the labour contract. The appellate court upheld the first-instance court, finding that an employment relationship did exist between the parties and that Company A had unlawfully unilaterally terminated the labour contract. Consequently, Company A was ordered to pay more than VND5.4 billion in salary and compensation. This judgment illustrates that a decision relating to an individual’s managerial appoinment, or alleged breaches committed in the performance of managerial functions, does not, without more, constitute lawful grounds for terminating a labour contract. Where an Enterprise manager also qualifies as an Employee, the enterprise must distinguish between the matters relating to the corporate governance relationship, which are governed by labour law. Any termination of the labour contract must be therefore supported by appropriate statutory ground and carried out in strict compliance with labour law.
Notice periods
Another issue that enterprises frequently overlook is the applicable notice period when unilaterally terminating the labour contract with an Enterprise manager.
Under the Labour Code, Enterprise managers fall within the category of employees performing specific occupations and jobs. Accordingly, where an enterprise unilaterally terminates a labour contract and prior notice is required by law, the applicable notice period is: (i) at least 120 days for an indefinite-term labour contract or a fixed-term labour contract with a term of at least 12 months; and (ii) at least one-quarter of the term of a fixed-term labour contract with a term of less than 12 months.
Practical recommendations
To mitigate the risk of disputes where an Enterprise manager also qualifies as an Employee, enterprises should consider the following practical measures:
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Clearly distinguish between the two legal relationships: The appointment decision and the labour contract should clearly define the position, duties, authority, term of office and employment, corresponding rights and obligations applicable to each legal relationship.
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Do not rely solely on an automatic termination provision: The enterprise must still identify and rely on an applicable statutory ground and comply with relevant substantive and the corresponding procedure under labour law.
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Establish objective performance assessment criteria: Where the enterprise intends to terminate the labour contract on the basis that the Enterprise manager repeatedly fails to perform their work, it should establish clear performance assessment criteria and maintain sufficient supporting records. A loss of confidence or breach of corporate governance duties does not automatically demonstrate a failure to perform the work under the labour contract.
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Separate corporate governance procedures from employment procedures: Decisions relating to the removal of an Enterprise Manager should be documented and implemented in accordance with the Law on Enterprises and the company’s charter. Any reassignment, amendment or termination of the labour contract should be addressed through separate documentation and procedures in complaince with labour law.
Where an Enterprise manager also qualifies as an employee, the corporate governance relationship and the employment relationship coexist but are governed by different legal frameworks. Enterprises should therefore avoid treating the expiry of a term of office, removal from office, or non-reappointment as automatically terminating the employment relationship. Careful structuring of appointment documents, labour contracts, and termination procedures will help minimise legal risks and reduce the likelihood of employment disputes.
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See the previous part here: Part 1 | Part 2a
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For advice on corporate governance, employment compliance, executive employment arrangements, and other labour law matters in Vietnam, please visit our Labour & Employment or contact our team:
info@indochinecounsel.com
(+84) 28 3823 9640
