Termination of Employment Contract on the Grounds of “Frequent Failure to Complete Work” – Legal Requirements and Consequences of Unlawful Termination
Under the 2019 Labor Code of Vietnam, an employer is entitled to unilaterally terminate an employment contract if the employee “frequently fails to complete the work as agreed in the employment contract” (Article 36.1(a)). However, what constitutes “frequent failure to complete work” must be defined in a clear, objective, and lawful manner as this is a matter of significant controversy.
- Criteria for Assessing “Frequent Failure to Complete Work”
- The employer must have a Job Description and a written Employment Contract specifying the employee’s duties and responsibilities from the outset, together with an Internal Regulation/Policy on performance evaluation.
- The performance criteria must be developed in consultation with the employee representative organization at the workplace, ensuring fairness, legality, and reasonableness.
- The evaluation policy must be clearly communicated, explained, and acknowledged by both employer and employee to avoid future disputes.
- The criteria must be formally promulgated by the company and periodically reviewed (daily, weekly, monthly, quarterly, or annually) so that employees are aware and have the opportunity to improve their performance.
- Before making a termination decision, the employer must conduct a performance evaluation meeting with the employee concerned.
- The employer must comply with statutory notice periods, namely:
- At least 45 days for an indefinite-term employment contract;
- At least 30 days for a definite-term employment contract with a term of 12–36 months.
- After such procedures, the employer may issue a formal Decision on Unilateral Termination of Employment.
- Within 14 working days from the date of termination, the employer must settle all obligations to the employee, including:
- Payment of salary and other entitlements (if any);
- Severance allowance (if applicable);
- Confirmation and return of the employee’s social insurance book and other relevant documents (if any).
- Consequences of Unlawful Unilateral Termination by the Employer
If an employer unilaterally terminates the employment contract in contravention of the law, the employer shall bear the following obligations (Article 41 of the 2019 Labor Code):
- Reinstate the employee in the position agreed in the employment contract;
- Pay salary, make social insurance, health insurance, and unemployment insurance contributions for the period the employee was not allowed to work;
- Additionally, pay the employee an amount equal to at least two months’ salary under the employment contract;
- If the employee does not wish to return to work, in addition to the above compensation, the employer must also pay severance allowance;
- If the employer does not wish to reinstate the employee and the employee agrees, the parties may reach an agreement on additional compensation, but in any case, it must be at least equal to two months’ salary under the employment contract.
- Legal Basis
- Article 36, Article 41 of the Labor Code of Vietnam 2019.
